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tv   Squawk on the Street  CNBC  May 29, 2012 9:00am-12:00pm EDT

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and other thing we have to do is promote energy innovation. >> make sure you join us tomorrow, "squawk on the street" begins right now. >> good tuesday morning. hope you had a great memorial day weekend. welcome to "squawk on the street." we're live at the nyse kicking off the week with some home price numbers at the bottom of your screen. we'll talk to carl case, robert shiler and s&p's david. a relative risk on situation. europe, a similar picture with the exception of spain still a lot of concerns as the it's down about 20% since march. >> a continuation of last week's first gain, weekly gain, since april. spain issued new bonds to fund
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banks despite yeelgds there 7%. >> have you heard of buffy yet? that's the smart phone project from apple's iphone division. that's what zuckerberg is talking about as he treats his wife to mcdonalds in rome. >> chesapeake shares hopping. >> apple tv reporting that foxyon has received trial production. but, first, u.s. markets on track to open on the upside. also, spanish retail sales dropped a record 9.8% in april compared to a year earlier. meantime, greece is supporting its four largest banks with an 18 billion dollar euro injection.
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guys, over the weekend, a lot of the risk came from poll numbers showing that they may not be able to form a coalition as effectively as some others. >> that was the good news in europe. and, of course, spain is the kbad news. we don't have a conclusion yet. a $19 billion plan where the government would give them bonds which then they would turn around and deposit for liquidity and that would help them close their capital gap. interesting plan. isn't yet done. but this is where the concern is in the market. but greece, a good sign, at least, perhaps the pro-bail out forces are there on the 17th. >> it's the sequence of events. if greece is okay and money gets
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relea released, of course, by the way, it's all carrot stick there. it's not like someone is doing some giant growth plan. can i just say that this bank is about as bankrupt as i've ever seen. these baa banks would have been seized by the fdic years ago. it would not exist. i'm looking at this bank and thinking bankia is just a nonbank. why it still trades is beyond me. where is there fdic? >> and another problem is the retail investors left holding the bank to the tune of 24.7 billion euros. the problem here is the senior bank holders who come before being paid out --
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>> it's another story of what is a very sad and disturbing start. your point is a good one, melissa. a lot of average mom and pops thought this was something they had to do, buy shares in bankia. they've been almost wiped out. but the key question is what we're looking at. what are they borrowing at? it's never been higher since the euro was established to what germany is able to borrow at. by the way, they're all supposed to be part of this union where it's all supposed to be equal. we're still in the middle of this. where he just don't know where we're going to go from here. one day you wake up and they've got to wipe out everybody. >> and where is the money going to come from? that's the larger question. >> germany. >> it ee's actually not a hard
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question to answer. >> we know the answer. >> by the way, we always forget. spain is a collection, like anyone who read ammish to california. spain is a collection of dispaired state that is really don't care about each other. you know, catalonia is a separate area. go back and read the spanish civil war. >> and then that graet piece about how some of these bank mergers are is somebody they've never bet before. don't care about that part of the country. so they're willing o having to deal with suppliers. >> and back to the property bubble. we've talked about this many times. they had a bigger howing bubble than we did. but they never took the marks on those loans. that has been what has stopped so many investors from saying
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spain has not dpelt wiealt with real problem. >> i saw more abandoned houses, beautiful housing developments in ireland with nobody there. just nobody. >> last week, the first weekly gain since april. what's your take on the gains we're seeing in the u.s. futures this morning? >> i think there is a bis troll myers home depoet effect going on here. home depot. it was a beautiful weekend. let's take home depot to 50. these american kpeens, ones that have no exposure over to europe, are getting a gigantic a amount of money toward them. >> i remember that. it was such a brutal time.
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>> you were a young trader back then. >> i was doing a corporate trade in europe out of london. and all the people i was involved with didn't understand it. but it didn't work out in the end. no, that's jp morgan. >> but does that mean that short term there's a bullish bounce here? there's a call out of goldman of the oils which have been a total black hole. if they can come back, that would look good. goldman is very interesting that luxury is not doing well. but ross stores is not luxury. >> facebook options begin trading today. also, the social media giant in talks for a popular web fwruzer. this is a deal that could
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exceed a billion dollars, potentially if google steps in and is interested as well. so the stocks are moving here. sk >> i spent the union at my harvard reunion, my 25th. there was more people who lost money with facebook. this gaffed people. a whole general ration was wiped out bid this thing. >> a general raetigeneration? isn't that a little excessive? >> michael grimes. people said hey, do you know this guy giems? i said just because i work on wall street, i don't know grimes. he's the man to see. the anger over face wook. . i went to the celtics, 76ers game 7.
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>> zuckerberg is handing from the rafters, too. >> jim, this retail investor, i'm just trying to get out of stocks. i. >> love that story. it does try to capture the disgust people feel. ech even in the height of 2002, i've never seen anybody say all right, everybody is bad. mcdonalds, good, keep eating at mcdonalds. everybody else feels like they're at the dollar meal. and then it's the backlash. it's all everybody's fwault. fault. no. hey. people were trying to make a buck. who blames them. >> it was fully disclosed this the pricing increased.
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so those were total head winds against this new issue. the glitch. did they not make money because they didn't see that it was a bigger issue? >> well, i think was kind of like the number of obstacles that kept people from making money is in people's fact. they regard the glitch, they regard michael grimes, i just like mentioning his name because he's such a snug guy. the guy is under sfier. and i think that the deal was priced too high. i think that a lolt of people people feel that the insider got out. all of this is just part of a piece that says you guys on wall street, you have rigged this thing bad. michael grimes, aapologize again. you're probably the greatest guy
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ever. terrific. people are angry. they want names and they want people who did this to them. they could all be wrong. everybody could all be wrong. but all i care about is people hate us. us meaning anything connected with stocks. >> despite hope that facebook was going to be theerer ver sal poi of all of that, didn't happen. >> meantime, ebb chesapeake, another one to watch. carl icon has taken a 17.6% ste stake in the company. nerp in new york and they get along really well. he apparently only owns about 1% of the company. of course, over 50 million shares, bought at varying prices since the 19th of april.
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he did own it when we had him on that day and asked him about it. but he said at dinner, from what i hear, oh, maybe one or two board seats. but apparently changed his mind and wants four. two for himself and two for southeastern to apoint. should point out southeastern, icahn doesn't want to get rid of him. the annual meet sg next week. he missed the proxy long ago. two board members are up. they're goix to be in the running unopposed. are you followings aulg of this? >> so in other words, he's nothing. >> he's carl icahn. and he carries an awfully big stick. you don't know what we's goirk to be with his letters.
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they're feeling the pleasuressu from a lot of different areas. >> if carl icahn could go and take oil to 4 bucks, he could get something cooking. i don't know if that means he tried to make a run at it. it's awfully big. one wonders why a strategic would not be taking a look at this. >> the chinese should buy it. but we know you can't do that. the koreans would like to buy it vmt i mean, the koreans are willing to fund whole natural gas. there are a lolt of countryinie that want to buy chesapeake. make icahn can talk to large country natural gas companies. they would love to pay a lot more for chesapeake. >> and maybe withic in and some
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pressure who might withhold nose, they could encourage the board to take a look at alternatives. >> it doesn't have a chairman right now. but they hope to soon. although, what kind of chairman is going to want to come in. >> simpson u he got endorsed. >> no, i just wouldn't go i want to be attacked by carl icahn. >> yar. >> the only chairman that could come in is frapg sinatra. and he's long since passed. he's the only chairman of the board that koumd have stayed at icahn at this point and he passed. it's gonna be a casual thing.
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♪ let's go back to the key housing numbers out this morning. all three headline composites did end the first quarter of the
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year at new first quarter lowest. here's the co-founder of the index. gentlemen, good morning to all of you. rober roberts, this isn't terribly encouraging? >> well, i think we have encouraging signs in the market. we've come up since last month. this monts was just flat. last month was down. there's a lot of ambiguity. but we are seeing some kinds of hope. >> mr. case, fewer cities seeing declines? >> absolutely. 14 of the 20 are uch this month. we lag, of course. we're on january, february, par moving average. so we look like a bottom. you have to define real negatives. 14 cities are 14 cities out of 21.
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>> and i guess if you were looking for a bright spot, you'd have to go with phoenix? >> phoenix has come back. there's reports in las vegas for some constriction. the rest of the housing data looks very good. digging into the detail,it's a whole lot better than headlines. >> some of the realtor's association has a range? what's the top? four? four? something like that for the year? 4 million? >> they're six now. the median price took a huge jump up. but their numbers are always opt misic. and now this's from chsome futus training. >> it's projecting something
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like 22% per year. if you correct for inflation, they're predicting no action. we are still down if you correct for inflation. >> new laws in portland, new york, las vegas, chicago and atlanta. >> it's also rampant foreclosu e foreclosures. >> atlanta also has urban problems. sierra club ranked them as the most sprawled city in america. they know these problems. but right now, atlanta is not the mecca for real estate. >> the shox to me that the yeefr over year down is tes pating sick.
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>> three years ago you would have killed somebody. >> yes. so you're saying you've forgotten where wi eve been. >> we've got such variation across these cities. these are macro numbers. >> there's cities below where they were in 2000 and there's cities like d.c. that are up 80%. >> last question robert. is there a data point other than your index that you're looking for first to tell you where we're headed? it could be anything. >> okay, inventories are low. the national association of hoemd builders has been up. those are positive signs right now. >> stocks have 60 year lows and they've been there for 40 months, it's unbelievable. and until they turn around, i don't think you're going to see real reko ri.
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>> all right, carl, now that the long weekend is over, let's take a look once more at these numbers. the dow looks to open higher by about 9 points. much br stock on the stream r stream with the nyse straight ahead. mush push p [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations,
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one of the huge headlines cht also goldman saying that some of these energy stocks may be oversold. they're trading on an $85 price. they think it's going to be more like 1.21. now, eug is the textbook case of a company that has been finding a lot of oil in this country, but because people feel that oil is going down in price, people have shunned this and a dark
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goes another one. eog is the fastest growing independent in the world. they also like nbl. i like the ceo of eog. he's talking about eagleford being the largest area of oil. they also have a big stake in balken. this, if you believe oil is going higher, this is the one to own. >> goldman's point is you're not afraid of that at this point. >> the free fall in nature. if you look at the chart, it looks like the moment facebook came public, i like to use the analogy of facebook since it's hurt so many people, to where facebook is right now, it is a steep cliff. if goldman feels the bottom, it will be remarkable. they have kbeen the worst place to be in this quarter and this month of any stocks. including facebooks.
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>> all of the action and the opening bell straight from the post nine straight ahead.
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our week after memorial day with a shot of the american flag and the opening bell. take a look at the s&p 500 at the top of your screen. down here this morning, digital domain media group. the production company behind that virtual performance that we all remember so well. >> but they're actually ringing the bell. >> it's not a trick. over at the nasdaq, steel producer ssab based in sweden. so we'll kick off, jim, which we haven't mentioned yet, just how many numbers are headed our way in the next four days from claims to nfp to revised q 1 gdp. it's going to be a mad house today, though. >> i think we're all trying to figure out how much weather has played havoc because retail sales may have been weather. automobiles. we have big automobiles.
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i think people at home are saying why do you have them? because that number, we are hearing from everyone from one toll brothers, every bank. what i'm saying is we are in the grips of are we strong enough to offset europe? and wait for the chinese calvary to come. and i don't know. i think these numbers will determine how strongly we really turned out to be. >> but there's a market part of this and there's an economic part of this. our markets seem to respond very aggressively in a way that might not be reflective of what's really going on in the larger economy in terms of europe. >> or it could be leading. >> or it could be leading. as far as the road today, we do have a tremendous leadership from technology. we've got 1.5% gains from apple. we are pretty strong today in tech, gym.
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>> a lot of good tech calls. now, i want to caution people that being -- it was just a week ago we were learning from dell that the pc market was dead. it was a week ago we were worried about whether -- well, whether mobile media can be monetizez. now we have people saying we have good stuff about apple saying apple is doing well. we have apple, itv. it's almost as if everything we thought about tech is not nearly as bad. and i think somewhere in between is probably more likely. >> i love the piece in the post today talking about all of the start ups in new york are now trying to revamp their presentations to emphasize rev news as if that was a fad that went out of style. >> we've got really nice digs, man. good perks. >> but you've got oil up. you've got some technology
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stocks that are up. and i think it's always graets seeing financials take their cue from germany and not from spain because the financials would be down. let's not forget. our country is strong. but is it strong enough? i mean, there were so many rumors. who likes to report on these rumors because it ruins your credibility. they don't come true. people keep thinking china has got to make a move. it's terrific if they really well rational. >> here's an out liar. facebook is trading lower by 2%. today is the first day that options begin trading. it has been available to be short for a few days now. and that continues today. but more pressure here on shares of facebook. this, as we learn the company is potentially making a purchase, so that you would cobe the primary driver.
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facebook, maybe it was too early. that's what we used to say in the companies in 2000. >> to 3me, in this case, maybe t was too late. >> maybe the numbers are still going occupy. >> don't you love the fact that there's this conference call. everything is legal. that's a tremendous number of times. they'll call you and say jim, you know it's legal. like it should be legal. but that's okay. it is legal. no one is talking about the substance of that conference call which wasn't just what we're really going to gaffe retail. it was a number cut. where would apple be if we had a number cut today? >> the fact is it was also in the amended s-1. many people went into this offering, whether they be institutions or retail, expecting to make a very quick, nice profit. a lot of people were deeply disappointed. but that doesn't necessarily mean that they are -- should be,
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you know, have this as a result of what happens. >> i think it's more righteous resignation. no indignation. they're resigned. i think people are saying they've had enough. people are not botth bottom f h fishing right now in the stock of comings, you know, i'm using that because goldman today said the trucking industry is slowing down. so by the time the people who researched will feel very rosy today. >> what are they supposed to do? >> out flows will kont. put it in bristol myers trust. i guess bristol myers. >> why do you think buffet says buy american i am and the best
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is a house with a 30 year mortgage. >> i couldn't agree more. i'm trying to buy as many houses as he has. i don't have his fire power. >> this is what you should do instead of buying treasuries. >> certainly better than the german bun today. 1436. >> they've got to make it able so they can exploit everybody education else on the continent. hey, we bit the bullet when we bought eastern germany. >> let's check out what else is moving? >> this may be our first day of trade. remember, europe is one day ahead of us. those bank issues just continue
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to fall. still not sure exactly what the end all, be all solution will be. and take a look at that risk premium. this is hitting euro area highs. this is the highest that we've soon since the euro was created the first time with 500 base points happening yesterday. and we're hitting that again today. today, that ten-year getting closer to 7 prnt p%. but if you move states, a lot of movement in the energy sector, i know you spoke about icahn upping his stake. but beyond that, we've got the entire sector adding a buy to add to sunco as well as console.
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who's to say. and last but not least, look at bp, another energy story perhaps unrelated. it was almost more than two years ago we had that disaster in the gulf. the government is saying the department of justice is investigating about whether the company layed. >> nice to have some good news. hey, i'll take some good news. let's shift to bonds and dollars. >> good morning. i heard the gang talking about low 130s on booms, yes, we kont continue to see the dynamic despite what inflations are. we continue to see them all out perform our ten your briefly touched very close to 170. and then we see low 130s in booms.
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the dollar is off just a built. but i look at the algt e eight major con sfrakts. they're all up slightly. we have consumer confidence at the top of the hour. university of michigan had oofr burner's, best numbers since the fall of '07. and we continue to monitor k-schi k-schiller. back to you guys. >> let's check out the latest moves in energy which has been the driver of a lot of the stock trading this morning. >> of course, a lot of folks were waiting to see the talks in baghdad and what came as the big.4. well, of course, we know that t it's staying off with new talks for june 18th and 19th in moscow. that has hadded some of the political risk back into the oil market. and they're also looking at the fact that of course we are talk
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about china, perhaps, try k to make some measures to stimulate its economy. we are seeing the greatest strength in the energy market with gasoline futures. and the biggest drag down toward that $2.50 mark. and the chatterings that perhaps the crisis right now, they're showing that there were marginally improving fundamentals. so that is something traders are watching. and, of course, they're watching the price level right around this $2.50 mark. >> interesting to see that. the benefit once it gets above that may be a different dynamic there. let's talk a bit about retail, shall we? and jc penney have bnl hammered.
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this morning, noted activist who owns a very significant stake in jc penney had this to say about the company's turmoil. >> i would say the bottom for sales in jc penney, down 18.9d, it's going to be the problem. >> we shall see. akron's history has been very strong in some areas, but there's also the target investment, which is a special purpose vehicle in which he earned options. and then, of course, borders, he bought the stock right before bankruptcy. jc penney, one of the biggest retail investments he' made. >> david, you 45d the great special on j. crew and the take
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away for me of your documentary was merchandise, high invenn foir. these are the things that you need. i don't see the right merchandise. i don't know if john son has an eye. it may be. he's asking a lot of 4his customers. here's what he had to say. >> it's a lot on the brand marketing and didn't focus enough on the price and value offering. now, it also takes time to educate the customer. kind of time is your friend when you change strategy because eventual eventually, people are going to get it. you know, melissa, we'll see. you pointed out many times the multiple on the stock.
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none the leless, remains very, y high. >> talk about the story unfolding the potential tern around. >> two weeks ago, ron johnson said he was 29% through. now it's 33%, maybe 34% through? i'm doing a series on "mad money" -- >> do you think he's 99% wrong? >> i think i remember there was a presidential candidate who stood behind eggleton 100 pbt. i hate to see a brand name falter. but i've bp doing a series about
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successful turn arounds and they're almost all done completely the 07 sit. they are done slowly. ri placing people. replacing systems. don't immediately ruin your previous clients. johnson is just blowing it up. he may be a vietnam ceo. he may have to destroy the village to save it. i think it's time. maybe because of my college reunion, 35 years ago. it's all about the ho chi minh trail. >> i wonder, it's funny, megaput a number on her turn around. 10-15%. but that's sort of how these guys think, done you think? they did not come out at the beginning saying the numbers aren't high enough. i don't mean to be sexist, but david whitman had a -- had set expectations low.
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>> she did. she's made it clear from the very beginning this was going to be a multiyear effort and giving telegraph the moves. yeah, different. very different. >> i did wear my jc penney kak keys. >> what was the reception of them? >> nun what so ever. they were just khakis. i got them for 29 bucks. very good price. >> quick check on facebook shares. new all-time low set today. 30.74 was the swroe. no coincidence we're seeing shares of zynga also setting a new all-time low in today's session. so there is a facebook fall out.
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>> i think everything is good again, david wright. >> yeah, until tomorrow. >> well, speaking of facebook -- >> we should have a call nas book bottom pool. why don't we do that gh okay. all right. >> you be in the deep end. >> i'm up for that. >> i eec'm going to go for moren the price of that burger. >> that's a lot of euros. how many does it take? >> z >> zuckerberg we see here. tweet us at cnbc. we've got your answers coming up. take a look at this morning on the street. goldman up 6 fnt. tdd# 1-800-345-2550 i'm constantly working my screens. tdd# 1-800-345-2550 checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself.
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this is on their honeymoon in roam. big mcdisappointment. michael writes when i said supersize it, i meant the ipo. and then, of course, a big piece of the style section over the weekend. all about her. talk about diving into the deep end of the publicity pool. sf >> obviously smart. 3 trillion coins in a fountain? how about that. >> sure. nice. >> i can't think of one quick enough. >> i had a great -- i went to mcdonalds twice this weekend. i did everything. this weekend was a big weekend for me. and just love their coffee. so good. . >> don thompson's ears are burning.
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>> i had an egg mcmuffin before i boarded the blaen to go to boston. the egg mcmuffin remains may favorite single thing to eat in this world. >> nutritionally, it's not so bad. >> did you see how few calories? it was only 300 calories. they have the calories listed. it was really good. and -- >> you could have two. >> yes, and you don't need to pop lipitor before you do. i mean -- >> you don't even need -- it's so great. and it doesn't come with lipitor. the day it does, i'm going right for a big mac, fries and a diet coke. >> the trading day is young. and so is jim crimer. a lot more "squawk on the street" still ahead. i'm freaking out man.
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cut the theme, carl. as we get the options trading. what will they tell us about when the next faisbook is likely to trade. we'll have someone on the program who thinks they can make 40% over the next nine months. and also we'll kwft qualify for the next stock market what a great exit would do here. of course, not a great exit for the euro zone. let's not forget that. >> see you in ten. time for six in 60. six stocks in 60 sengds. seconds we will begin with broadcom. speaking of which, cisco. skbl . >> terex. >> you see it. be careful. goldman does not like it, but terex is a big name.
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>> spring is eternal. it's been a great high. >> colgate, morgan stanley like es it. >> it has just been a horse. >> and finally, big call on coal. >> they're trying to make a bottom call on coal. peabody is the best in the group. and it is very oversold. but i like that eog call more oil better than coal. >> awe for seconds releft, for more of those names, go to the web site. are you wary given where you are? >> yes, they're spain. i wish they wrnt spain. the only one i really like is eaton. >> there's been an argument put out there if greece does leave, there may be some short term bounce for equities because it's like a company dislodging an underperforming unit, a one-time charge and then you move on.
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>> i guess so, it could happen because it's been hanging over so long. remember, argentina came back. it took a year and a half to two years. >> i've got owens concerning. this is a very important situation because owens is going to determine -- this is housing, insulation and asphalt roofing. peter, this is really just a swan song. he said no to air products and he was dead right. air products, he would have sold the company for way too low. real great america. >> consumer comforts after a break. don't go away. ♪ ♪ [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements.
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46.9, that's the lowest level since january of this year. when we were at 61.5. last month, 69.2 revised slightly lower to 68.7. we see interest rates doing a beeline in the ten-year back towards that 170 level. we settled slightly under 170
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about a weak and a half ago. many are watching ibex, the spani spanish stock market. >> let's get to the road map for the next hour. risk on is the name of the game today. but with an upcoming greek election, jobs friday this week, renewed fears about spain. what's the reprove for the markts? tom lee is with us in just a moment. >> and watching facebook shares continuing a low ere. 30.10 here as the social media giants is set to begin trading. so will pricing be along the bearer siefd. >> plus, financials beginning in the month of may, clocking in amid the worth sector. we'll tell you how to trade that pullback. >> and more troubles for bp. federal investigators looking whether bp lied to congress when providing estimates of how much oil was leaking.
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impact at least 2000 employees. rim currently employs 16,000 people. limb will announce the layoffs around june 1st. fresh rumors about an apple tv update. a relace date could come sometime within early 2013. a juicest that the apple tv set is currently beginning production at the fox fact ri in china. this according to china business news and of course this dove tails with tim cook giving the keynote address tonight at the all things digital conference. 9:00 p.m. eastern time is the start date on that address. those are all kind of circulating out there. >> meanwhile, our market, simon, looking fairly good over here. good in greece and bad in spain.
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tlooegs, so far, we seem to be ignoring hit. and you bounce back a triple digit gain. at the beginning of the week, there is a tendency to put risk on the table and then to move it at the end of the week when you have the possibility that that over the weekend, you could come up with something very negative or positive. >> and the krcreditcred situati europe is kwleerly very poor. >> yeah, equities have been green for most of the morning. but you kcouple that with the jerp man boom. back to the markets this morning, europe continues to be in the headlines. but u.s. markets seem to be shrugging off a few of those fears. investors turn risk on the first day back from memorial day week enld.
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where do you think we stand? specifically on greece? you're not going out on a limb either way. you think it's 50/50? >> that's right. i think it's pretty tough to really have a good feel for a greek political situation. i know people have different robbleties. but for us, we're just thinking it's a 50/50 probability. >> and impact on the markets would be what do you think? ? well, if in fact the chain of events was unleashed where greece was exiting and policy response wasn't strong enough, it's pretty dire what could happen to markets over the next 12 months. so an exit would be very neg fif for equity markets. >> what's dire mean? i think 50 pnt off all european entities.
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you want to put a number on? >> well, you know, we did a conference call a couple weeks on this.conomists basically thought a european recession would ensue. that would knock a couple of points off global growth so that we'd end up with a global recession. i think that we'd have to start thinking s&p would be there that 1200 range on a greek exit assuming it's contarianed. in other words, there's cig n significant policy with the financial panic that would follow. you have to remember, really, at this point, it's sort of a mental discussion because, you know, greece is still -- they're not on a path to an exit yet. >> it's a mental discussion, but if the odds are more than 50% or 50/50, it's something investors have to factor in. i'm curious in terms of the 1200
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level that you see the s&p going to. should there be a contain? wa's interesting about that number to me is identifying that as the same exact target should greek -- greece exit. but they also go onto say that that would prompt a very strong policy response and therefore we then see a rally off that 1200 level of about 20%. do you see that? or do you see a strong policy response to keep us at 12 hurn? >> yeah, i think a strong policy response is needed to keep us at 1200. a 1200 number, basically, is taking last year's low but then adjusting for higher dividends. that's how you can get to a certain 12 hunl. u.s. ek no, ma'am ek growth cou europe could end up being a regional crisis. and the u.s. with housing
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strengthening. the employment date has been pretty good. gasoline is down year afteryear. >> i think more porimportantly, there is a possibilitity that greece does not exit the euro zone and the election turns up a coalition that can do deals with the rest of europe. that is a 45% possibility. and then you're talking about a 13% gain in the stock market here. that' important because the danger is that everybody gets too bearish in their positioning. >> that's right. unfortunately, you know, there's so much interaction between the economy and financial markets that if markets remain stressed, it's going to feed through to economic growth.
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but on the other hand, investor positioning is pretty bearish. by many measures, i think we have to think that the market has a better chance to rally. you know, rally rather than sell off. >> tom, always good to talk to you. we'll see you soon. >> that's just focused eminently on what is happening in greece. julia is joining us from the latest in athens. julia, the recapitalization? >> yes, absolutely. i want to focus on those poll that is we got over the weekend. five polls showing new democracy pushing ahead of the leftest party that's been such a concern for the markets. new democracy pulls this party and they're willing to do it, it
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seems, with europe being envoled in the discussion. they're pleased and talking to factions that have broken away in the last year to a year and a half. these things are incredibly important right now. we just want the get to a position where we can get a majority at the next election for a government here. we've also had a much smaller party come out and say just what would allow them to form a coalition. achbd th and that, too. the kwfrgss i'm having here suck jest that this election is still wide open.
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let's take a look at shares of facebook here. 30.33 down. still to come, the next chapter in this sa kba. options begin trading today. what investors need to know and why such a big deal when squawk on the street returns. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.
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welcome back to squawk on the street. a little relief. take a look at peabody energy. goldman upgrading the stock from a buy to a neutral saying. >> you've got some coal pricing that goldman thinks will head a little bit better than the rest. that stock is up about 4.7% right now. keep in mind, peabody is down 59% over the past 12 montss. it has been very difficult over the past years. >> now up 126 points on the dow. caterpillar up 3.5 pnt. the latest on that aspect of a huge story.
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as of today, that volatility could be exacerbated as the options market has put in calls that have become available today. sources say is going to crash through every single record and has been getting a little bit stronger throughout the day. now, facebook stock is holding that $30 mark down. and then another batch expiring in january 2014 around weekly options will be introduced this thursday. also lets specklators be as bullish or bearers as they like.
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4i9ing their targets in a wide range at market watch to 48 bucks a share. now, watching today's activity could provide key insight for where investors see the stock going. for example, the bears came out of the woodwork when groupon options became available. now stock is down 40% since its ipo in november. taking heat for facebook's debut a couple weeks ago, many expect the immaterial plied volatility to be around 50-55%. based on what we've seen in the stock today, it looks like that is extremely high volatility. >> certainly facebook in the headlines will begin trading. but will they have better success in the ipo?
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mike, always good to see you. mentioned that the strikes range between 16 and 49. can we tell where people are placing their bets? >> yeah, actually, we can. as she pointed out, right out of the gates, we didn't see as much activity. it didn't take long for us. i think we err up to 75,000 con trablgts. it's interesting. right now, probably the top 15-20. obviously, it's still early. have been buyers. they're more active and specifically they've been buying 32 and 30 strikes. the stocks are lower now so they're mostly buying 30s.
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there's a lot of activity. what's been going on is there's been a lot of spread trading. they eve been selling the 25 as a part of that trade. so they might be drawing a line in the sand. >> what are the premiums like? >> the options premiums are reasonably high. so to put things in per spektive, talking about a 55% in volatility.
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given that the stock was moving in about 20%, maybe we would have kpmt today see the options move even higher. what that also suggests is that the options market are beginning to find om resolution about how this stock is going to trade and eventually, we'll see the volatility in the stock come in. >> i know you don't have a crystal ball, mike, but when the weekly options start trading on thushz, what's your expectation in terms of the activity in option and the pricing of these weekly options? >> i think that's a fe no, ma'am al question. we've seen some traded stocked and probably the most active would be apple. people are making near term bets.
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>> all right, mike, always good to see you. thanks so much. >> dow hanging onto a gain of about 136 here. s&p is up almost 116. still to come, apple tv rumors. and a tech gathering for all things fictional. [ tires squeal, engine revs ] ♪
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take a look at shares of facebook. if you liked it at 38, maybe you love it at $30.07. teetering on becoming a stock with a 2 in front of it. and, in fact, the lowest trade in its very short history. >> we'll come back to that throughout the program. e let's just touch orn emerging markets today. none the less, the auto industry
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with asset management and found emerging money. skbl it's a pick up that has been so beaten down. >> i'll tell you what, what's interesting is everyone wants to buy into the indian consumer and some of the things that were focused on that market. but sales have been phenomenal. it's russia and china that have been driving the indians. so there's a new sub compact. the autotrade is a very cyclical trade. that's been the issue for all of the amazing globals. and they've run into at least the globals and fatality questions. that's why the evaluations are
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where they are. they're very attractive. it doesn't mean that you can't run into the same 4ed winds. >> people obviously might look at general motors or the other u.s. players here and want to make the comparison or indeed, players like the volkswagen which today are doing exceptionally well. >> that's the call here. this morning, we come in and the chie naez government announced that this isn't going to be the 2008 standards. but they are targeting. you're going te see a focus on alternative cars. there's $300 billion a year they're going to dlou into this. they have really been the best position in china outside of gm. that's where the boost is today. last week, brazil also put a stimulus plan underneath their automarket.
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>> at 5.7 times earnings. north america is fine, europe is a problem but we're actually growing in china and the rest of the world. you can global every weeknight on squawk on the street. mark your calendars for a new prime time edition of trading the globe. that's this friday, june 1st :0 at 7:30 p.m. >> well, let's go oempb to brian sullivan. >> melissa, sorry to jump in again. but pandora stock is down 7%. here's what appears to be the reason. there's a story in roiters that's due out, the s-3 is going to have muse you can hub premium
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on it for $9.95 a month. some traders perhaps bedding that if this does come out of samsung, it could put a dent in pandora. again, they could probably do something better with the name rkts right? it's like zoom. >> no, music of premiums. it's like a sony product. >> not that that's a bad thing. thank you very much, brian. brian sullivan. let's take a look at facebook. everybody is watching as it gets closer and closer to 29 and dhang. change. the low for today, 30.03 dlars. it crosses the sucker burg ache o a but it's got a little cushion here. when we come back, regular lay
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stores putting jp morgan under the microscope. also, the financial sector clocking in as may's biggest loser s. that where you'll find the best bargains in this market? back in a moment. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. [ male announcer ] we began with the rx. ♪ then we turned the page, creating the rx hybrid. ♪
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some nice, easy music to join us on this 138 up day. some of the stories we're squawking ab. all 30 dow stocks are on the rise led by cat, up about 4%. and the conference boards consumer confidence index posting its biggest drop in 7 months. >> one of the things that's worth stretching is asia rallied on rumors tllds be further stimulus on china. today, this market, it's materials, industrials and energy stocks. not really going anywhere. but you see a more than triple digit gain on the dough. let's look at the breadth. it's 5-1. and over at the nasdaq, where of
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course, we wait the important tech conference kicking off tont. >> anyway, advances rapidly out pacing. >> we are one hour into trading. so let's head over to chicago. lincoln ellis is the chief fm officer. lincoln, good morning to you. wi we simply have european fatigue here? >> obviously, a little bit of shortcomings a little bit towards the end of last week. people are really trying to figure out ahead of the job's number and the kbrks dp print whether or not the profit levels are sustainable, particularly as we head into the second half of the year.
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so in terms of the job's report, are we waiting for the claims numbers? what are we sort of waiting for to put a position on for the week. >> i think that people are triting to get ahead of this jobs number. i think that over the course of the next 3-6 months, we're heading into a job's picture where you're going to be printing north of 150 for a fairly con sis at the present time period of time. look at a number north of 250. some of it has to do with the health of the u.s. economy. >> i want to get back to the notion that this is a short covering rally. granted, we surely could be seeing that. but in terms of risk on sentime sentiment, it tends to be wrong when you look at small caps. technology seeing some very,
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very strong gains leading the nasdaq higher. short covering after a three-day weekend seems a bit odd? >> well shs i think the points you make are interesting ones, particularly the small to large cap spread which has been sitting around 200, say 2000 to the s&p 500 and that moving north is a very healthy sign of risk on. remember, as you know, melissa, on a dividend discount model, stocks to bonds at the moment, look very attractive. >> let's check on energy as well. sharon? >> carl, melissa was talking about the short covering rally. we are seeing that in the oil
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market, as well. we are looking at this the higher prices. we seem to be taking a pause in news from the european crisis. we did see the net long positions for wti futures drop to the lowest levels since 2010 last week. some fraders say there is some short covering going on here. that has created a lot of concern about what that zichuation holds. and we'll have more talks coming up later in june. copper is actually pretty strong as well in this session. and we are looking at, again, a shortcoming rally here after hitting four-month lows. last week, we're hearing some
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con fliblgted reports about whether or not there's somt stimulus reports there. and in terms of pressure metals, gainers are saying that even though we may see some form of stimulus in europe over what is happening. and that is something that is lifting up some of the metals. but others are saying hey, go ahead, we're seeing a little bit of a pause. >> all right. thanks very much, sharon. well, as regulators look at jp morgan, it is safe to say that no matter what they find, the answer to the problem may end up being plr more capitol. >> david, thapgs very much. senior financial regulators tell
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cnbc they've already started examining their own performance if they miss something. the federal reserve has 40 examiners inside to control the currency. they regulate the national bank. but a new york times reporter said there were no examiners in the london unit of bank where the trades took place and question pd whether the ratings were tough enough on the bavrng. here are some of the areas that we understand inc. ves tors will be looking at. will the trades actual macro edges that would have been exempted and should that rule be toughened? regulators have already come to an early conclusion. no matter what investigation fientz, more capital is likely to be the answer. from the worst effect of such errors. but regulators, they insist it
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is not their job to keep banks tr making mistakes. >> banks are going to make mistakes. our job is to ensure that the banks can survive stress events and that the financial system can continue unfettered a offering credit to households and businesses: >> banks are required to see whether a hedge fits and it has to be reviewed and monitored. it would also prohibit adding risk that wasn't there before the hedge. so regulators are looking at the trade and naen ie looer k at controls as well. one sun yor regulator shows if the rules wrnt strongs enough, they will be hesitant. >> jamie dimon is on the board. that still sticks out like a
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soar thumb. >> there are two schools of thought. the first is the optics. they do insist that the board of directors has no say in supervision or say at all in monetary policy. and that's what regulators themselves are saying about these boards. >> but the allegations is jamie dimon too close to the regulators. did they give him too much of the benefit of the doubt? >> right. i think that's right. but i think that may have been the case, si momon whether or n he sat on the new york reserve board. >> i was struck this weekend about the large credit hedge fund manager who was on the other side of the london wales
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trades. so much of this did come back with capital raising and bets on a reference going one way or if other. >> again, as i said, think're irn vest gaiting. was this a macro hedge or a stragts bet? but they are pointing out that the hedge took place in a very ill liquid marvegt. that's why the guy wu a whale. he wouldn't have been a whale in the interest rat market. mefs a whale in the derivatives market that hedges against korpt bond risk. what kind of hedges did banks take and should they be taking hedges in ill liquid markets.
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>> you've got to prove the menz ree ya. and who knows why? >> let's just poibts out that the rule is not in place. so they're looking at this to see if the rule, when it is in place as it's wrilten, would have caught this thing. ben when you y. but when you look at the rule, it does require a series of checks that you have to go through. you have to write out and you have to continue to monitor it. and there are some questions that regulators are raising as to whether or not they followed those steps that might have flagged these trades given the processes, not the exposed evaluation, but the processes ahead of time. >> steve, thank you very much for that. let's focus on the individual stocks now. david joins us. he's chief investment officer. david, we'll be aware that the financials have performed badly recently. you err quite clear. you own jp morgan.
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your family owns jp mor ggan an you think they can basically bolt higher. >> we believe so. obviously, this is a terrific trade for jp morgan. there are a number of things that went wrong. they have an outstanding and very strong capital structure. they're going to get through this. there's going to be more regulatory pushback and it might impair their earnings power by a few percent down the road. but they still have $5-6 of earnings power. the stock is in the low 30s. so they should actually get a bet every multiple outside of this one really, really horrible trade are going to be a lot better.
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>> and yet, david, we've learned that they've sold high income secures. and who knows, you know, if they are on the wrong side of a fairly equal dliftives markt, that sort of selling could presumably accelerate. does that the not worry you? >> well, we're always watchful about how this is playing out. if you go back to the call where jamie deposition exhibit no. imon announced this cap kal gains and their can wantation was they were going to realize a billion dollars. so they really have just gone about doing it. this is how they prurn their business. generally, they don't take capital gains like this. and the reason they don't is they deent like toe pay taxes. in this case, it makes per fektsd sense. >> david, i want to understand
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more. did you add to it a post loss trading low? >> we're probably at is the current level, our cost base is probably where the stock is right now. we've ridden it a lot higher and started to add to it at these levels. once they have some clarity, we expect them to buy the stock back again. at this priece, it east selling at six times earnings. >> david, this morning, we hear from a pretty well regarded analyst who talks about a lack of a trend in kaptal markets business despite what was a half way decent first quarter.
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do you agree in the near term there's some head winds? >> absolutely in the near term for the capital market financial institutions. you have to have a 6-12 month time. in terms of another banks, wells fargo, jr very, very up beet. their business is going to be driven and helped by the bottoming of the housing market. if you have a 12 or 18 month time horizon, it's going to be a lot higher. >> david, we have to leave it there. thank you very much for your time. david katz joining us there vmt. >> and let's take a look at face bhook shares once again. down 5.6% here. 3014. we're just pennies away from a fresh all-time low on the stock.
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vr vrjs. welcome back to squawk on the street. cutting estimates on jp morgan. he comes out and says, yeah, we saw sequential revenue improvement in the first kwauer of this year. he does not believe that it's sustainable. euro exit fears. and the jp morgan loosz
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extinguishing regarding new regulation. it could be a long, cold summer for these names. >> all right, brooic brian sull thank you so much. the next chapter, am terntive investing. everything from art to tax leies to wine. jeremy smith is second market's chief strategy offer. how has the volume been on second mashlgt? i understand ffs a big, big percentage on second mashlgt? >> yeah, it's been great. our private company stock market overall, as great as it's been doing or half of it's been koing. doing and facebook was a porlgts of the private company market. it was nice to have and there's so much more revenue beyond the facebook revenue.
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>> have you seen increased activity in other private companies? i don't want to name name names companies that are the next generation? >> yes, we have. and that activity has been fairly robust. we work with the companies. so we're talking with dozens,s hundreds of companies of high tech start ups about listing on second market and we've started to expand beyond just the technology private companies in to private community banks as well as the other types of private companies that you see beyond just the technology ones. >> where do second markets take on the impact prior to an ipo? here we have facebook stock hitting all time lows.
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>> linkedin was 9 first example and it's been trading up. but on the other hand when we look at facebook, we don't draw the distinction between private and public. >> so what are some of the products available? >> they're very interesting. what we're calling next generational ter in a differences. and these are the ones where really alpha still lives and the concept of noncorrelation is a real thing and we're talking about things like art or wine, tax leans, farmland. >> buying a portfolio of leans, art, would i bes? >> we're connect going our investors with the next
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generational ter in a differences by putting a third party fund manager if between. so our investors have the ability to invest in a fund that then invested in farmland. so you don't need the expertise. you're investing in the fund manager who specializes in these -- >> fund managers? >> yes do. it's important. now, what we do is we make sure they're legitimate and that they're competent teand not tox asset class. we let our investors determine whether it's a good investment decision. >> all right. thanks a lot for coming by. straight ahead, how can you win a piece of "squawk on the street"? the inside scoop on that next.
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this industry jobs friday, that time of the month where we're offering you a piece of "squawk on the street." this time a set of autographed
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golf balls. all you have to do is guess the nonfarm payroll number and tweet to us@cnbc squawk. #the number and tune in friday and we'll reveal the winner. it could be you. my colleagues are smiling. everybody signed it. >> i did. >> we each signed our own ball. >> last month the guy got it right on the button, if i recall. >> we had at least two sets. >> so from our people to your family on "squawk on the street." >> tweet time. this morning we're asking you to capture this photo of mark zuckerberg and his bride feasting on mcdonald's in rome. tell us what you think. stay tuned.
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gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon. it's the at&t network -- securing a world of new opportunities. ♪ there have been various rumors about what might come through from europe towards the end of trading. my sources in frankfurt are telling me there is a long term plan you saunder way about bank stability and discussions between the ecb and eurozone
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about bank guarantees. but as was said last week, they won't come back to the public with anything until the next eu summit which is at the end of june. so people expecting something near term are likely to be very disappointed according to who i've been talking to. >> a lot to get to between now and then. meantime you might be talking about that and other things tonight. >> head of commodities research at city group. also anne lester and jim o'neill. this is a supplier to the keystone pipeline. his outlook on the impact on energy prices, oil prices and how much the company stands to gain. >> we'll see you tonight. if you're just joining us, here's what you missed earlier today. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> so long as we are so weak, one of the things very have to do is create jobs.
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the surest way to create jobs is encourage capital formation and capex. >> i would say the bottom for sales for jcpenney. >> either/ orphans of big companies or company going down the drain by themselves. >> the anger over facebook, i went to the 76/celtics game seven. the anger over facebook trumped the victory of the celtics. >> i think we have encouraging signs in the market. we've come up since last month and this month was flat. last month was down. a lot ofambiguity, but we are seeing signs of hope. >> and the opening bell. >> we have may consumer confidence out. and it's a disappointment.
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64.9. >> i think it's pretty tough to really have a good feel for the greek situation. i know people have different probabilities, but for us, we're thinking it's a 50/50 probability. >> we saw 30% to 40% of facebook's high option claims in weeklies that wouldn't surprise me at all. >> good tuesday morning. welcome to the third hour of "squawk on the street." markets looking at a nice rally. of course you have to put it in the context of where we've been in the month of may. only four updays until now that the dow has been positive. but this is a good one. up more than 15 on the s&p. chip stocks leading the tech sector. the philly index up more than 2%. intel leading the gains. vertex sliding after reports that the drug was less powerful
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than previously reported. road map today, can facebook solve its mobile problem by developing its own phone? it is supposedly in the works, but whether ill it stand a chan. but jim paulson and bill stone here to tell us how to get your portfolio ready for all the data coming. and then the apple tv rumors are back. foxconn reportedly in the trial stages of making that long a wait tv set. and the biggest problem with facebook. we'll explore why the social networks 900 million users are so hard to value and what that means for the company going forward. that's all coming up in the next hour. but first the facebook phone rumors. opera software soaring on reports that facebook might buy the company for its mobile phone technology. jon fortt has more on what it might mean. >> indeed, mark zuckerberg said
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we shouldn't expect more billion dollar deals, but here we he are. opera stock up better than 17% on rumors facebook might take it out. it would cost about a billion dollars. so if zuckerberg decides to buy this, and it's his decision, what would facebook get? opera has more than 700 employees. most in northern europe where facebook has been eyeing today the data center locations. opera produce youers have more than 215 million year, but the most important part is the opera mini browse forer for phones. it's very popularindonesia. also opera has a fast growing mobile advertising business
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which is something facebook could use. it had $225 million affidavit r ad revenue from mobile. so the more i look at it as a company, the less crazy it seems that facebook might want to own it outright. opera is popular in some of the countries where zuckerberg told me facebook is seeing the strongest growth. that brings us to the phone rumors. "new york times" mad a piece saying that zuckerberg is out recruiting specifically engineers who had expertise in phones. this would fit with that. >> interesting stuff. the market not exactly taken with the rumor or the report as facebook is looking at its worst session since going public more than a week ago. thanks jon fortt. want to get to the cme p rick santelli with a tuesday edition of the santelli exchange. >> good morning. there's some fibbing going on.
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and it's actually rather large. and the fibbing that i'm talking about is being done by public pensionsic gses, that's a situation where there's very little honest. these government enterprises are still ongoing, still doing business, still doing mortgages. but yet they're for the most part insolvent. pension funds, public pension funds. let's take a step back. if you look at your cd rates, they're not going to be very large. if you look at your savings rate, it's going to be pretty poultry. you look at your 401(k), it's probably more like a 201-k. all of these returns will be between a quarter of a point and 1 1/2 points. so why is it that we allow public pensions to say they'll be making between 7% and 8%? why does that matter?
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first of all, everybody knows it's insane. this weekend, there were at least six articles about pension funds from alaska to california. and they mentioned new york prominently. because what happens when 78% doesn't get made? that means there's a shortfall. but where does that shortfall to pay things like teachers come from? at that point, it comes from the taxpayers. you've seen all these small cities across the country that have been going chapter 9. that's one of the reasons. so let's get this straight how this works. if we're not making 7% to 8%, we're making significantly less, we are now adding huge amounts of underfunded liabilities for decades ahead of us. we need to get more honesty. we need to make it so whether it's what the s&p or the dow indices are doing over the last five years on average, their bogey, we need to come up with a reference point that's much more realistic because in the end,
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pushing will down tthis down th make it worse and what's worse, all the people involved, they know they can't make these returns. so they end up taking riskier investments. and when it doesn't work out, we get stuck with the claw backs or the lawsuits. so either way, taxpayer looses. carl, back to you. >> taxpayer, retail investor. a lot of common folk counting on those numbers. sga gary kaminsky talking facebook action. not on which tso much the optio. >> you know al pacino when he says i want out but you keep pulling me back? that's how i feel with facebook. yes, we do know it's been reported that the option trading started today. but let me tell you what i think is happening. everything else being equal, jon fortt's report, there will should be some short of bounce, s&p up 1 and a fraction, you would think the stock could find a fundamental bid here and this
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is the reason why i believe it's not right now. we talked about this on friday. today is the day for many portfolio managers who bought facebook on the deal. when the trade becomes an investment, this idea that i bought more than i really thought i wanted to buy. let me wait a week, let me see if things settle out. then i'll try to reduces the position into strength. that strength never came. so you have the retail clients that bought the new issue in a margin account. it's not the right size percent because in many cases 20%, 30%, 40% of that fort poportfolio, te to reduce it into the weakness. and professional money manager who bought more than he wanted. put in for a million, thought he would get 100,000, he got the million. now you have to reduce it. i thought that would happen and it is i think what's happening today. additionally contacts close to the trade have told me that there is this will idea that they want to push it through 30.
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if you're a fundamental buyer, you want to begin to accumulate the size position. let's see how many stop loss orders are really in there at $30 to try press it through you there because this idea is if it punctures $30, is the next trade where it stabilizes close it 28. >> why today, though? why would the sentiment be changing today as opposed to a week from now or a month from now? >> if you own the position, i know how these people think, i've been in that seat, you kind of waited last week. you hoped you'd get the long weekend, get some fundamental buyers in. you want to reduce it the strength. you come into the office and the strength isn't there. so you just finally say i've got to get it to a level which is respectable given the overall portfolio. >> so the fact that it has defended the low today tells you what? >> that there is a huge tug of war going on. you have a number of aggressive short sellers who want to partial the 30 to see what happens. and if i wanted to accumulate
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the stock, if i said i don't own any, i want to take apgs, i'm going to wait and see what happens throughout the day here to see whether or not to defend that 30 and what happens if it punctures it. no reason not to wait. >> it's been fascinating to watch. >> hopefully after this we sort of get away from facebook because again there's other things happening. and as we pointed out the s&p up 1%, let's try to focus on other opportunities. >> speaking of which, let's get back to headquarters. brian sullivan. >> real quickly, western digital and cde technology, both being downgraded by barclays to equal weight there overweight. rice targets also cut on both names. i'll twri to gry to get the not. but downgraded with price target cuts. and according to street account, the highest jump in short interest among the mid cap names was western digital. short interest jumping more than 130% as of may 15th data. so a lot of people betting
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against these names. >> thanks so much, brian. when we come back, how to set your portfolio leading in to jobs friday this week. we'll hear from two market experts who manage more than $400 billion between them. for 30 some years at many themt different park service units across the united states. the only time i've ever had a break is when i was on maternity leave. i have retired from doing this one thing that i loved. now, i'm going to be able to have the time to explore something different. it's like another chapter. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.
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welcome back to "squawk on the street." gary and i holding down the fort. markets are in rally mode as european concerns ease but
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remain in focus. so how should investors navigate the market volatility? joining us bill stone and jim paulson. guys, good to have both of you back. welcome. >> thanks. >> jim, let's talk first leading into a lot of data, we'll have jobs on friday. but longer term over the next few week and months, it will be about europe. you're consistently said that greece can be dealt with in sort of a chronic problem kind of way. does anything about the last week or two and some of the added volatility in europe make you change your view? >> i still think that's where it's at. greece may well leave the eurozone at some point. but my gosh, they've had more than two years to think about how to do that if they want to do that. both greece and the other european officials. so even if they do, i don't know if it's going to be that big of a market event. i find it interesting how many times has europe flared, the new, over the last 2 1/2 years
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and every time the market goes down and people say sell, the market goes on to new highs. how many times are investors going to be convinced to sell because of euro news when every time it's gone on to new highs? it's actually been a good time to buy and i suggest this one will turn out that same way. this is a good opportunity to buy. treasury yield down to 1.75%. >> also on the back of an ltro or new swab agreement or some sort of money printing or involvement by the ecb or the fed. what do you make of jim's argument on that front? >> i have to say i agree with pretty much everything he said. i just got back from europe yesterday and not that i'm
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convinced that greece won't eventually leave, but i think i'm convinced that they could deal with it. and it doesn't mean that the euro in and of itself would implode which i think is part of the worst case scenarios that some people might paint out there. so i do think if you can stomach what is likely to continue to be a volatile environment as the two sides greece and the rest of europe play this brinksmanship game, i do think in the end you'll end out a winner if you can stick through it. >> you mentioned 12 1/2 times earnings. so i'm sumg you have s&p 500 earning 100 or 100 and change. last week goldman sachs joined us and i think the major difference is that you think 12 1/2 times earnings for the s&p is on the low end. some other strategists think it's on the high end. why do you think the multiple on the s&p 1 s. 15 or 15 1/2 times earnings? >> if you look historically, you
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tonight find it as low as its today or lower without inflation and interest rates being considerably higher than they are. there's the old rule of 20. us stock guys remember this. worked well in the 60s ka'60s a, when you take 20 less than the inflation rate. and that traces out. right now that would give and you multiple in the high 17s to 18 times earnings for example. 2340r normally to get single digits, you have to have inflation above 5% or 6% and interest rates in in those same levels. otherwise we just haven't seen an environment like this. i think the discount there is more about fear than it is about fundamentals. we have earnings growing. we have the united states and world growing. the competitive rates really low. i think it's fear and i think that's the biggest asset investors have is the likelihood of a slow but steady reduction
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in fear over the next several years. >> bill, leading in to jobs friday, dow only had four up days this month. estimates for the number or closer to 150 than the 115 we got in april? does it make sense for a short term up swing here? >> i think it does. we expect to come in more around 170 actually. so we are expecting maybe some relief from it. i think the more you can get some better u.s. numbers, you get this kind of -- we've seen the housing numbers i think help stabilize things. we get some job numbers and i think there tends to be less emphasis on europe and some of the worries there if at least we believe the u.s. can continue to navigate the storm. >> guy, appreciate it. we'll see what friday brings. hang thanks a lot. when we come back, the latest on jpmorgan's involvement in the missing money. and a countdown to the close in europe. it's very important to understand
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let's get to rick santelli. talking mf global this morning. >> absolutely. we're just a couple of days from the seventh month anniversary of the mf bankruptcy. the eighth largest in u.s. history. some progress made, but not a lot. biggest seems to be the honorable free who did run the t. what are his fees up to how? this is the attorney pro bono for 38,000 mf customers. >> he's accused over 25 million in fees between his own firms and hired professionals. >> he's been tying you up a bit with red tape. it seems that there's very little traction here as i watch things that go on with facebook, as i watch trades being investigate that had probably don't have illegality in them at jpmorgan. in is it that it still can't get
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off center and get the money back? >> i don't want to sound cynical, but jon corzine was one of the largest fund-raisers for barack obama. >> and you were telling me that the the president gave back $70,000? >> he returned the correct cdir contributions, but kept all the bundled contributions and continues to accept bundled money from corzine. >> when we say there's a whiff of possibly con flilflict of interest, it's the whiff you get from going by those big mountains that they turn in to golf courses eventually. why is it that possession nine-tenths of the law. you tell me that we could -- they should should have given that money back months and months ago. why is it still in contention? >> standard business practices in a bankruptcy or any kind of dispute is just grab as much money as they can and then make people sue them to get it back. so this $168 million was cash on
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hand. could have been returned months ago. and my sources tell me that they still have about $600 million in customer funds that were sent over from mf global to cover market costs. >> you're fairly optimistic. there's about $900 million left to make customers hole in the u.s. and between that $168 million and another $600 million you you believe in the uk we'll get, we're almost there, are we not? >> we're getting there. there's about 300 and if we can force jpmorgan to return the company, we can can 5at least ge u.s. customers whole. >> they're circulating a pace to get an i said council sell and doesn't smell right. how many of those signatures are democrats? >> zero democrats and that's not for lack of trying.
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i knocked on every day because it's in their best interests. if not, obama who went in campaign on a policy of cleaning up wall street has done none of them and romney i hope will show a lot of pictures hugging corzine. >> two days away from the september month anniversary and every two weeks i'm going to grab james and we'll come on and keep talking. house of representatives, get those signatures. back to you. >> hard to believe it's been accept months. a few minutes left until europe's trading today comes to a close. we'll get details what's driving their markets today.
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seeing decent action in europe today. although the credit markets will it tell you a different story. >> if cnbc has a reason, it's to indicate people where you might make money. where you'll be paid to take risk. and where that is proportionate and where that is not. and if you look at the european close, it's important for two things. the distinction you have between the periphery of europe and the core of europe and the distinction between equities and indeed the credit market. here you see the way in which some of those core european countries, the equity markets
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there, have have pulled away and others like spain are moving further into negative territory. let me show you the map as we -- >> european markets are closing now. >> so spain is down, portugal is down, but a large amount of europe has been able to make some gains today. and what is really interesting on those major economies like for example the german or french is the way that people are buying exporting stocks. let's not forget the huge move, the titanic move that there has been in the euro, back to euro-dollar, the huge move in the last month. a 5.5% move. that's huge. if you're in a big european recovery and you are stable, well funded exporter. and that's what you see people buying today. that's why those major european indices are higher. let's take a look at some of those issues there. air france is a bad example.
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volkswagen, huge steel operator. and then the ger machiman expor. have a look at daimler and continental. all doing reasonably well today. but it is a divergence. conversely in spain, you have the spanish market falling away again today as i showed you at the top of the segment. it's not just bankia. they'll pump 19 billion euros and raise that for the open market so they don't scare people to think that they can't access the market. you've also seen hugely negative territory and concern with bankia is that this is the only the beginning of the recapitalization that's required and raises questions as to whether or not the spanish lsh ab will be able to fund that. in the meantime let's check where we are on the bond market in europe. specifically on the spanish yields. we are shy of the 6.5%, but
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still after the spike that we t on friday, we've not really had much of a movement down. still a huge amount of pressure on the bond market in spain. a reluctance presumably for international investors to buy spanish debt and critically of course and this is the chart that really gets me, if you look at the difference that investors demand to hold spanish government debt over german government debt, the difference is above 5%. it is an all-time high for the eurozone. and that really is the metric that should most scare people. but again that divergence between the credit markets and equity markets. >> we did hit 6.526 in spain, highest since november. amazing story being told through the credit markets. thanks, simon. want to hop p over to courtney reagan on the floor. a lot of the gains that we had last week came mostly in the afternoon when there weren't a lot of european headlines to scare investors.
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>> exactly. and today pushed higher perhaps by what we're seeing this europe and like you mentioned, just one of the few day in may that we're seeing green. all the major averages are higher. telecom while not even leading the way in the sector group is sitting at four year highs and helped by both at&t and verizon. both of those names sitting at multiyear highs. despite the disappointing consumer confidence number, retailers at multiyear highs. walmart trading at levels not seen in 12 years ahead of that shareholder meeting that will happen later this week. foot locker and bed bath & beyond trading at 20 year highs. some pretty big moves there for those stocks at least for the levels. and look at the number of firms initiating on ever bank. this of course did make its debut with its ipo on may 3rd.
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so that 25 day period of time in which the firms need to initiate and they're going anywhere from neutral to buy with price targets from $12 to $14. shares are up about 15% since it ip o ipi. and inter-line brands taken private. they make maintenance and repair type products. and last but not least, there a social selloff today. pandora and zynga both trading at new lows. >> courtney, thank you so much. gary kaminsky. simon talking about better mger. >> he gave you a great example of how german companies have benefited. and that's why it was interesting when i was doing my weekend reading, there was some let's just call it a thesis out
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there that part of what you have, let's take a look at the german ten year bund, there was a number of people that were participating in the transaction in the sense they were selling two year at a sooe 0% yield. so you know if it's in dollar ti terms you'll get back the money. why do it. pure speculation. simon just told me ludicrous. but important to understand that some of the larger hedge funds are doing this strategy trade in a sense of they think of it as an open call option. and here's the thesis. if in fact this summer we get the departure of the greek currency, go back to the drachma, there's the idea that all the euro currencies go back to their own country currencies. so what is a good way to buy the deutsche mark on a when issued
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basis. buy the two year payable in deutsche marks at the time of maturity and you get the capital appreciation in the foreign currency. simon tells me this is a crazy thing to think about it temperature i tread over t. i read it over the weekend. there are people out there that are doing this. this is one of the investment trading strategies related to what is going to be a summer of a lot of noise out of europe. >> so the gain you would get potentially by taking koideutsc marks over the defunction euros would be about -- >> some think it's a free floating currency. the deutsche mark could have a 30% to 40% capital appreciation. this is a speculative call option, but we are going to have this all summer in terms of what's going to happen in europe. i thought it was fascinating. >> that's out of the orbit, not just out of the box. >> we know from the jpmorgan
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situation people were on the other side of the train. this is how you make outsized alpha gains. >> people know black swans now exist and this would be another one. >> absolutely. >> interesting stuff. meantime the euro continues to trade right around below 1.25. haven't seen that in quite some time. news that china may not take aggressive stimulus measures weighing on the euro today. robert sanchez is global head of foreign exchange. good to have you with us. >> good to be here. >> china is getting a lot of discussion. a lot of asian trading overnight, this notion of would be stimulus and also the notion that they continue to be robust buyers of the euro in order to protect their exports. do you think that's likely? >> i think that china is in our view probably as important about it not more important than what's going on in europe. my old friend jim o'neill at
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goldman sachs mentioning that china grow as new greek economy every three or four months. and i think a lot of the uncertainty last week was actually related for the slowdown in china. and i think some of the optimism may be related to the fact that china's talking about stimulus now. not clear how aggressive that's going to be, but there are other stories out there besides europe. >> a ridiculous question, but where do you think china's shed when it comes to stimulus sf. >> i think the chinese have indicated their concern about the growth of the economy, but they're not ready to pull the panic button like they did -- or push the panic button like they did back in 2009 when they adopted very aggressive stimulus. i think they're regretting some of that now. you're seeing some concerns
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about bad loans at the banks. so i think in general what we're seeing is expressions of concern, but relatively muted responses. talking about accelerating lending activity. and so modest stimulus. but again, nowhere near as aggressive as they've done in the past. so i think that's what markets are trying to grapple with now. >> hedge funds are buying on the idea that it's a call option on getting a deutsche mark. is the possibility -- is that even a possibility the way you see things? >> anything is possible. i think the sger mans want to resthais scenario. obviously as you were talking about the german exporter, if you think about the deutsche mark becoming separated from the euro or independent currencies, then you have to think that the
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deutsche mark would replace the swiss franc. the franc is horribly overvalued. national bank acting a agrees safely to try to resist further appreciation of the currency. and if you think about a world in which global growth is relatively sluggish and the deutsche mark on a trade weighted basis were to go up say 10% or 15% that would be pretty devastating for german exporters. so it's a possibility p sometime over the next two years, not a bad idea. and when you think about it in terms of what it cost you taking zero yield for a couple years, not the most expensive call option in the world. so not implusausible, but not irrational. >> robert, appreciate your time. thanks so much. want to get one more market flash other at headquarters. >> let's talk about facebook.
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may be looking to build its own mobile phone to come out in 2013 which has reignited the possibility of rumors out there saying facebook should buy r.i.m. it's a good thing. all just rumor, but talk for a long time. still facebook shares just off their lows of $30.03. research in motion bupup about . nothing firm out there. but we're asking you guys for street signs should face bike buy r.i.m. vote. yes, no, and please know what this is, an insanely cheap and obvious plug for street signs. >> we're into that. straight ahead, new rumors of an apple tv release are swirling around the street. will it be on store shelves in time for the holiday rush? first here are some of the winning and losing stocks from europe's trading day.
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rebound. apple tv rumors are back. foxconn has reportedly received orders of trial production. they can denying the reports. tim cook will be a at tech gathering this week. dennis, how much weigh are you giving this? >> i had contact with apple execs a little while ago. i think they have something up their sleeves. would it shock anyone that an apple tv or apple tv product came out in tes? i say no. i put my money behind in sort of apple tv product by christmastime. >> we know if you're a supplier of speaking out of school.
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why would anything like that get leaked? >> it's odd. there's been a higher degree of leakage in the tim cook era. i don't think it's anything related to tim cook, but i think the suppliers are getting looser because they feel they don't have as quite a stern headmaster running the place. but i do think that an apple television, i would not be shocked if it arrives late this year or perhaps an announcement at the top of 2013. but the key is to watch for any rumors that indicate it's more than just the kitchen sink of all of apple's technologies rammed into a beautiful flat panel. if they can get a new way of getting television streamed so you can get a lot of what you want that way as opposed to currently only a little what have you want. >> when you're at cocktail parties out there in the valley talking to all these tech guys, and people say what do you think apple tv is going to be, do you
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have an answer? >> i tell them a new way of watching tv. only they and maybe google and maybe, maybe, maybe amazon have the mike to get studios to the table to start thinking about serious involvement in this over the top streaming future sooner than five years out. which is kind of where they're going now. >> i think he's got a good point. the innovation really is unlocking that content. you want our content, you'll have to pay a lot more. and even then, the great programming from time warner or the great programming from disney or fox and news corp, you to pay for it and you have to do that in a way that helps those companies keep their cable partners happy. and that to me is the real business key here. can they unlock the content. >> dennis, tim cook at d-10,
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this will be a different kind of spotlight. >> he's a pretty open character. the fact that he gave up $75 million in stock dividends i think won him accolades from his employees. but i have to tell you, if you have an iphone, have you used the siri? >> yes. >> it stinks. people don't like to say it. >> the world's most popular par lar trick, but after you play with it for a while, it's not revolutionary. >> it is not as it appears to the advertisement. and if apple thinks that it can launch a television with siri guiding it, i think they'll have a failure. >> that's a whole other segment. thanks, guys. appreciate it. when we come back, why putting a value on facebook's nearly 1
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billion users might be more difficult than you think. we'll being a ketackle one of t problems.
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welcome back to "squawk on the street." take a look at the dow inter-day, actually s&p, which was up about 16. now positive by about 8 and change. severe midday construction. briefly fell below 1 p.25, firs time since july 2010. subsequently recovered some of the action traded back above 1.25, but you pointed out the correlation between our broad market and their currency. >> if you wanted confirmation of the correlation and why you have to pay attention to what eye happeni what's happening, there you go. nothing else happened other than the correction of the subsequent move in the euro. >> and continues to trade crow to the lows of the day.
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keep an eye on that. in the meantime, facebook's volatile public debut has left investors wondering what went wrong. a report says no one knew how to value the 900 million years. yi th ethan, good morning. we knew this going in. we knew 900 million users powerful, but hard to measure it. has wharton made an attempt at doing just that? >> we had a lot of arts about exactly that point. and anywhere between $9 and $45 is a pretty good price range to aim for. >> so what metrics do you look at now? what empirical data that the company can provide it can lead to a he for poe valuation of the
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company? >> you need a comparable and where the numbers are going. neither is clear. it's all about the potential. we don't know where the numbers are heading and there's a lot of debate over that. >> the leadership is unusual given the fact that mark zuckerberg is 28 years old, his voting power is so powerful at the company. >> so if you look at mark zuc r zuckerbe zuckerberg, there was a study of 2500 start ups and found zuckerberg maintained the most control of any founder in the
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study. so a young ceo, a relatively small company and still experiments. we don't know what they'll do with their 900 million years. rumors will is it going to be the launch of a phone, a new advertisi advertising network. so the question is how does fate book react to failure and you how does it continue to learn without making much more public missteps. >> if they report first public quarter, is it going to be revenues and then we go into your model to try to come up with the value, is it sort of what is projected possible operating cash flows? what do you use to basically build the model up from the got come up with a number? >> i wish could i give and you solid answer. we don't have the modeling in and of itself. we're discussing the baseline about for building the model. clearly there's big problems
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with mobile, big problems with ad growth. but the intent is that hopefully facebook has new things up its sleeve that will change the model in the future. and just basically on the pure naums today and the growth with the one system that they have and with the degradation of mobile means you're likely to get a price far below what face sbook hoping. a lot of people are interested in the company. >> options on buying the world and options on deutsche marks. >> yes, large big mac crow bets. ethan, thank you. and facebook has come within two cents of the two handle. don't forget to tweet us. the zuckerbergs honeymooning and chowing down on mcdonald's of all things. how would you caption this photo of mark and his wife?
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