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tv   Street Signs  CNBC  May 29, 2012 2:00pm-3:00pm EDT

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we like this name in particular. bounced off its 200 day moving average. a $40 target on the stock. trading in a $35.25 range. >> see you back here tomorrow. that'll do it for "power lunch." >> "street signs" beginning right now. ♪ >> cue johnny depp on the skateboard. welcome to "street signs." i'm brian sullivan. facebook free fall continues. fb shares closing in on 29 bucks. what is the zuck doing? thinking about a facebook phone. should facebook friend rim? we'll debate. bill ackman's bullish on jc penney. so is herb. are they crazy or just genius ahead of their investing time. outrage of the day. we'll meet the ceo whose pay went up $7 million even as the stock stayed stuck. nice work if you can get it, mandy. >> stocks are high. but an early rally has faded some what. the dow up 156 points earlier.
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a rise today would be only its fifth positive session of the month for the s&p 500. fairing a bit better than that. it is up for the fifth time in six sessions. and the nasdaq also higher today, but still looking at its biggest monthly loss in two years. we've got courtney standing in for bob pisani today. rick santelli, as well, is going to join the crew. courtney, always ladies first on "street signs." still a bit of a rally. the question from here is sustainability. >> that's exactly right. again, we look to our global trading partners really steering trade today. art cashin tells me some of the strength we saw early were from some reports that china's considering a stimulus package. also some early strength out of what we saw from europe. france was higher. germany was higher. even greece was higher. then come around 11:00 a.m. or so that euro starts to slide. so, too, did our equities right in step with the euro. that was something that we're going to continue to watch
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though the euro is right around those same levels. still a gain but considerably losing some steam. the s&p case-shiller home price index is an interesting one. it did not show an increase. it showed the slowest decline in housing prices in over a year. the markets are seeing some hope in that move. you've got some of those housing stocks a little higher. just continuing their year to date run. some of them have been very impressive. toll brothers i know up 40% year to date. lennar up 44% so far in 2012. >> thank you for that, courtney. i also want to mention something else which i'm sure is also harmful to retail investor sentiment right now. that is facebook. it is below $29. sitting at $28.91. we're going to talk a whole lot more about facebook later on in the show. in the meantime, over to bonds. rick, i mean, i'm sure the spanish banking problems and all the european issues whirring away in the background are keeping some safe haven buying. to what extent has the bond market buying been held back by what does seem to be at least for today a global market stock
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rally? >> even with the global market stock rally, the treasuries still are finding that passengers want to get on this train. call it the conundrum of all conundrums. if you look overseas to the bund, year to date, you can see very similar pattern. these are the lowest yields ever at 1.35. gild at 1.77. two bay is sis points from its lowest ever at 1.75 a few sessions ago. believe it or not, the greenback the highest level since september of 2010. yes, it actually is called a safe haven. mandy, back to you. >> safe haven by any other name. thank you much, rick santelli.
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>> havens by their nature are safe. a bit redundant. greece woes. spain pain. facebook fails. mandy said facebook now below 29 bucks. we're higher on the dow. joining us now from london, global head of economics at sofge ner sofgen. mark, is this a quantitative easing trade? is this like so much bad news that it must be good news because bad news means fwood news because it means more money is going to come down thanks to the generous people at the ecb and our federal reserve? or is it something more substantial? >> brian, i don't think it's necessarily something more substantial. but i also don't think it's a quantitative easing trade. i think if we were seeing the prospects of quantitative easing in the marketplace, we would see it in the form of higher gold
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prices. which typically looks at liquidity as elixir to move its price of the bouillon much higher than where we are today to 15.50 or so. what we're seeing today is some pouncing on the news that perhaps the conservative political party in greece may have an edge. and as a consequence, more likely to steer closer to the austerity measures under the fiscal compact. which means the likelihood of fwrees staying in the euro curan swib perhaps, has been somewhat elevated at least for today. and in addition to that, we had that data point certainly in the housing market which is actually picking up on a series of those that we received last week that suggests we're seeing at a minimum stability in the housing market. if not, outright improvement. >> it does seem, nonetheless, despite some of these positive things going on here like the housing market stabilization that mark just mentioned, it feels like deja vu, doesn't it, going into summer? potentially a summer of stress like we've had the last couple of years. so we've been here before. we've done this two years running. how can we be smarter this time
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around in terms of our money? >> i think the reality is the markets are going to be very, very choppy. we're in a bit of a political -- we do -- what we're waiting for now is the greek election, the french election as well on june 17th. then we'll start the countdown to see what european policymakers deliver on 28 and 19 on june. if there's not much being delivered there, which is our expectation, then i think the markets will be disappointed and will be set up for more uncertainty over the summer. so that's really going to be the key event that markets will take their cue from on the european side. it's really that summit coming up at the epd of yun. >> okay. as an investor taking all this into account, mark, i'm going to ask you the same question. how can we be smart about this? how can we essentially protect against these kind of events? >> well, i think if you -- >> mark, you want to join in? >> go ahead.
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>> go ahead. >> mark, go ahead. >> mandy, from our perspective, i think it's a time for caution. i think, though, that doesn't mean we need to abandon risk assets completely. i certainly would avoid most of the commodity related assets with the exception of gold. that said, leaning into those large high quality, primarily u.s.-based companies continues to us to remain an attractive choice. not only because valuations remain undemanding, but the balance they offer in times of turbulence should enable investors to stay the course even if we do experience, like i do agree, that we may see further unevenness in the equity markets over the course of the summer. as well to be positioned if god forbid policymakers actually become preemptive. >> wrap it up for us here. i know the world is going to he lrk hell in a hand basket. if the market really believed the world was doomed, wouldn't we be down like the spanish
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stock market? >> well, i think this is really the interesting point here. if we look at the relative valuations around the world, i actually think europe is beginning to look just that little bit more attractive on the valuations. they are very undemanding in that periphery. if we don't believe, that is our base case, that the euro area will break up, we think that's a very, very low probability event. i do think it's an interesting time to start looking at some of those relative valuations out there on the equity market between the u.s. and europe. >> ten seconds, mark. when does europe become a buy for you? >> i think we'd have to go a little lower. i'm somewhat trep dashs with regard to what could happen that could undermine equity prices. i agree, valuations are getting awfully compelling. they lead that to be a very good investment over the long term. >> thank you very much for that. big banks suffered in may. lots of folks still seem to be staying away. for a number of regional banks it's a completely different story. the question now is, is it too late to get in?
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paul miller, head of financial institutions research at fvi capital markets. do you feel a lot of the low lying fruits have been plucked? >> we saw big moves in the reej -- as the risk trade was put on in the first couple months of the year. as you're seeing that risk trade coming off, seen the 10-year go down to these record levels around 1.7, we feel a lot of the easy money has been made. until we get another catalyst. still up in the air what it's going to be. >> sell suntrust, regents, everything if we own it? >> we're on the sidelines of most financials. what we're telling people is if you want to -- if you got to own financials through the summer you want to own those that have mortgage banking exposure. that's going to really benefit from these very low rates. wells fargo, usb, pnc, fifth third. fifth third is the one we really
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like on the regional side. >> what makes fifth third different than the other names. >> they are about 30%, 35% of their revenues come from mortgage banking where it's a lot lower with other names. suntrust is a big mortgage bank, too. with suntrust we're afraid they're not fully reserved for a lot of their reps and warrant risks. there are pushback risks that come from fannie and freddie. fifth third doesn't have a legacy book to worry about. >> thank you for joining us. facebook dipping to yet another new low. below 29 bucks a share. keep in mind it priced at $38. since the ipo just a week and change ago the stock's down more than 20%. "new york times" reports facebook may put out its own smartphone by next year. keep in mind it has now lost about five research in motions worth of market cap which got some people thinking should facebook just buy research in motion? that is our street poll today. very simple, folks. yes or no. should facebook buy research in motion? go to streetsigns.cnbc.com to
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vote. coming up next, the bears are already swimming in the jc penney pool. herb and bill ackman are not jumping in any time soon. it is a battleground stock roll next. as we mentioned at the top, facebook's free fall continues. again below 29 bucks. but what does the options market tell us about what people are betting facebook will do? rally or really drop? we're going to let you know when "street signs" returns. so why exactly should that be of any interest to you? well, in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history. like the transatlantic cable that connected continents. and the panama canal that made our world a smaller place. we supported the marshall plan that helped europe regain its strength.
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jc penney is having a tough year. down 21% so far. this morning on "squawk box" bill ackman say this is is a long-term bet. >> it's a difficult transition. we have to in some ways, there are some extreme couponing customers who we probably lost money on. who may not come back. but the people who are focused on quality and value and ultimately product, we should do very well. i would say the bottom for sales in jc penney. down 18.9 is going to be the bottom. >> wow. well, with that said, let's get the other side of the case on jc penney. joining us now in the fast line -- not the fast line. the news line? january kniffen. herb is here, too. he's on bill ackman's side. he has been horrifically wrong on jc penney for months now. jan kniffen first.horrifically
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right. product, baby. you don't think they've got it? >> they don't have it yet. i was wondering if maybe he hasn't seen may sales. perhaps worst than the 18 that we saw in the first quarter. >> what do you think? >> no. this shouldn't be a surprise to anybody. this is a long-term story. it's a long-term turnaround. i want to point something out here. we talk about me being bullish on this thing. i came out december 1st of last year. stock down 13% since i predicted it would be a hot story. they would be coming out with these broad plan. how that makes me a big bull here, i don't know. but i will say this is a great experiment in retail. i am miffed at one thing. i'm miffed in the very beginning that they came out with guidance. and then as jan has pointed out, i am miffed that they come out and they say they're going to withdraw their gap guidance and -- >> not miffed at alling it your
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favorite stock pick for the year and being beaten like a rented mule? >> it wasn't my favorite stock pick of the year. i pointed out it was a great turnaround. this new issue with guidance, i don't know why they're playing with that in the first place. >> what was that, jan? >> it was my favorite pick of the year. my favorite short. so far it's worked really, really well. i'm riding it all the way down to 20 when people figure out that sales are going to be down 30% in the fourth quarter instead of the 20% -- >> jan, i'll take the other side. why are you so confident sales are going to continue to tank? ron johnson did it very well with target. certainly we know what he did at apple. why to you doubt it? >> i doubt it because i think even if this works long term and even if they have 40% new product this fall, and even if they have ten new shop in shops this fall like they think they're going to have in every store, that when we get to the fourth quarter and promotion counts and their customer reacts to promotion, that on black
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friday they'll be down 40% or 50%. they may as well not open and save the experns. >> jan, you have to acknowledge if there's any positive surprise here the stock could really bounce interestingly at some point this year. one other question i have for you -- >> there's not going to be any positive surprise z. >> you don't know that. you may assume that. i have one other good question. offline you told me once this stock gets to your 20 target you could become a buyer. if you became a buyer at 20 would you buy it because this could be a long-term turnaround? >> i think it's 50/50. when it gets that low you might be willing to look at it to decide if it's going to zero or going up there. until we get through the fourth quarter and see just how bad it is it's really going to be hard to own this stock unless we start seeing some real drama this fall that i don't expect. i don't see how it can happen. yeah, maybe in five years they're a $12 billion company with 700 stores. suddenly they start growing again and they're great.
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boy, that could be really painful from then to now. >> jan, who's taking the sales away from jc penney? where are the customers that would otherwise go to jc penney going to go? >> when ron got that question the other night he said i don't really think it's going anywhere because i don't think they're filling their sock drawers. i don't think they're buying underwear. i looked at sears' numbers. for the first time in my life they had a quarter where apparel was up 10%. double digits. they're filling their sock drawers and their stuff at sears. >> basically, jan, what you're saying is that ron johnson misunderstood, at least now, maybe that'll change, the customer. it's a deep discounting customer. they look for their circulars. they look for their coupons. because they're buying largely commodity goods like hanes briefs and towels and everything like that. they're going to shop on the discounts and you can't retrain customers or if you can it takes a long time? >> this customer was my customer. when i was in may, we were the
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most direct competitor to pen ni's. when the transition came to macy's and macy's withdrew the coupons from the may customer they had three years of down comps. terry lund was a really smart guy. he still had those issues when he made that change. yes, it's worked now. they've got the customer train aid way. but they're still doing promotions at macy's. they're still benefits that customer with some kind of couponing. they still took a really hard hit when they made that dhachan. even though it wasn't a really big change. >> you're saying when bill ackman on our air this morning said this was the worst of the comp store sales declines, you don't agree with him? >> i don't think it's possible that they don't see more damage in the fourth quarter on the topline than what they saw in the first quarter -- >> they're not giving topline guidance. they're not talking at all about topline. they'll only talk about the nongap guidance. which, again, i come back to and that does concern me. >> yeah. i think they made promises they can't keep.
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they've talked about doing a lot of things that seem very difficult. they've talked about putting capital in 1,100 stores. not 700. they changed that really to 700 at this last meeting. the first time they said 1,100. they said they were going to build 300 new stores. we don't need 300 new department stores in america. they're making promises they just should not mention. just see what the results are and give short-term guidance. they're not doing any of that. >> jan, thank you as always for joining in on our conversation. >> yeah. they shouldn't give any guidance. >> i got to say, herb, you're right about 85% of the time. you've been spectacularly right on many things. >> is that statistical? >> the beat down you took on rim last year is coming back to haunt you. every day you brought it up. every day. i have a memory like a steel clam trap. >> what is the -- >> 35.33. i think they call that in john najarian terms out of the money. >> you know what i think they
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call this? sour grapes. just ahead, our outrage of the day. i'm sure herb's got a view on this. ceo is getting an $8 million pay raise even though the stock has only moved about 14 cents since he took the job two years ago. we're also going to head to america's new hub for manufacturing. you will not believe where it is. we're going to reveal the surprising hot spot when "street signs" comes back after the break. break.achines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy. we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪
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let's dig into market internals. nasdaq looks to be about the same. let's go ahead and check new highs and new lows . on the new highs, 48-24. a good football score. >> it would be what we call double. >> or that. new highs, 41. new lows, 30. the resurgence of manufacturing in america and the strength of the gold ole dollar has big business getting innovative when deciding where to open up and expand operations here in the united states. this growth is happening where you would least expect it. phil lebeau has that story for us. >> reporter: chattanooga, tennessee. it's become a manufacturing
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volkswagen opened a new plant last year promising to hire 2,000 work. the plant manager says they'll exceed that number by at least 1,000 due to surging sales in the u.s. >> in totals the project has become so successful, i think to some extent we expected that. but to some extent it's better than -- than we expected. >> reporter: volkswagen will business more than 150,000 cars at its plant here in chattanooga. most shipped to dealers around the united states. a small percentage will be loaded into rail cars, sent to a port and shipped overseas. logistical advantages from rail lines to the tennessee river to the close proximity of airports have convinced companies like amazon, which added a distribution center, to expand in chattanooga. so is alstom which makes gas turbines. it has plants around the world but is expanding here because of the lower dollar. >> just on the dollar exchange rate it's 30% more favorable to
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ship from the u.s. >> reporter: with alstom hiring 70 people and vw adding another shift of 800 workers, chattanooga's unemployment rate should fall even further than the current 7.2%. which is down a whopping 2.6% from march of '09. >> it's a community that's done tremendous things to transform ourselves from kind of an old style manufacturing type place and now we're a community that's making the transition into 21st century digital jobs. >> phil lebeau, cnbc business news. >> very, very cool story there. thank you, phil. coming up next on "street signs," there have been reports that facebook may want to build or buy its own phone next year. should they just skip that and just buy up beaten down rim? we'll debate. >> we've been asking you that question as well. in fact, you can still let us know what you think in today's street poll. just vote yes or no at street signs.cnbc.com. you can tweet us as well. plus -- >> i love gold!
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the look of it. the taste of it. the smell of it. the texture. >> yeah. and gold and beer will come -- yes. gold and beer will come together on today's rather frothy side of the times. look at that. ♪ ♪ ♪ [ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz f.
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it is street talk time. first up why don't we talk a little pan dor ya. >> you know what, it's an interesting story. there's a story out on reuters about samsung possibly launching this thing called music hub premium which would basically allow you to download or upload to the cloud on a pc. it could be out on samsung's newest phone. maybe the market's seeing this as a potential negative to pandora. a lot of people do access pandora on smartphones. >> down by about 7%. eog energy. >> goldman sachs adding eog resources to its conviction buy list. thinks the commodity fears here are overdone. also thinks nat gas prices will recover. loves the shale part of the eog play. basically it's exposed to oil, shale oil and nat gas. that's a positive according to goldman. they removed exxon mobil, by the
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way, to find room on the buy list for eog. >> peabody energy staying with the commodity space. >> we've been talking about coal. beaten up. goldman sachs more positive today. they upgrade many of the names but will focus on peabody to a buy for three reasons. improved china data. powder river basin coal pricing. just a region in the upper midwest where they say pricing is more stable. they like the valuation. the stock's down 28% year to date. it's been just hideous for coal. >> a little bit like peabody, there's another company, chesapeake. i'm sure does not want to hear itself in the news once again. today a good news story, right? >> good news for the investor. maybe bad news for chesapeake management. carl icahn unveiling a huge stake in chk. 7.6% of the company's stock he now owns. he's already calling for the removal of at least four board members here. they said, of course, they would, quote, review his request.
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icahn generally does not give up these type of fights. chk up a bit. >> after being down about 28% year to date. switching completely into a different sector, coca-cola bottli bottling. >> who knew greece's largest coca-cola bottler traded on the nyse. cch up about 14% the last time i checked. basically no news. here is the news. it's a big name. in greece. right? watch the names, not just the banks, to see maybe what people are betting o there's the street talk logo. trust me, folks. >> there we go! up 14%. >> 13.4%. you can always go to c nrk bc.com and get these quotes. i want to bring it up there as a sign that maybe there's a little more -- you hate to just bash greece every day. people still get up, go to work. >> in a recent poll didn't the greeks say they were the hardest working? when they were asked which is the hardest working of the eurozone people, they said, the
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greeks. >> do we have that? i tweeted it. unbelievable. pew research has a study. i tweeted it out earlier. they asked every member of the eu what country is the hardest worker. every country, britain, italy, they all answered the germans. the fwregreeks literally answer the greeks. they also listed themselves as the most corrupt. >> i love that. we're the most corrupt but we're the hardest working. at being corrupt, perhaps. final oil trades are coming in. trade down to sharon epperson. >> we're looking at oil prices that are under pressure. we've turned negative in the oil market right after the euro dipped below 1.25. of course all that had to do with the downgrade once again by egan jones of spain. of course, we are influenced by the euro as well as the dollar when it comes to the oil market. because the dollar strength certainly pressuring oil prices as well. something that may be limiting some of the losses in the oil market is that report that came out friday from the international atomic energy agency showing enriched uranium levels that are at the levels to make nuclear weapons in iran.
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so that is something that is worrisome for many traders. keep in mind as well we are talking about the cme cutting margins for crude oil, wti. crude oil as well as for gasoline futures. that is something else that is somewhat seen as supportive. natural gas prices today finished below 2.50. july now the front month contract. >> sharon, thank you so much for that. all right. taking some of the risk out of investing in so-called risk assets. pimco is backing some of its big cap bets with bonds and derivatives. here now to explain is steven rinalski. all right, steve. your fund's up 33% over three years. five-star rated. in plain english, please, explain to us your investing strategy. >> this strategy is an enhanced index strategy. the target audience is corporate pension plan managers.
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they're concerned with two things primarily. managing risk of their liabilities and generating some high returns in order to service those liabilities. so what this strategy does is combine equity index exposure. and with the collateral that you save from investing in futures rather than the physical stocks, we invest in long-term investment grade corporate bonds and government bonds, which are really how those liabilities are measured. so it does a better job of mitigating the risks of the corporate plan. >> indeed, i see in terms of domestic investment -- the sectors you like are pipelines, energy, i get. but banks. considering all the overhead in terms of regulatory unpredictability and various things like we were talking about earlier on in the show with regards to regional banks, isn't this a risky area? >> i think a lot of the regulatory response that came out of the crisis and a lot of the dodd/frank and volcker rule
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and all these other steps that are currently being taken, would probably have more of an impact on the equity than the debt of the banking sector. if you think about it, they're trying to make these less risky, kind of more boring utilitylike entities. probably good for debt holders over the course of the long run. >> i read over the weekend that as a whole, debt to cash ratios are, like, almost like all-time favorable levels. plus interest rates are nearly at all-time favorable levels. do you peg the default rate on investment grade corporate debt at essentially zero? no major companies are going to go bust in investment grade any time soon, are they? >> well, never and no are two words that since 2008 we probably -- we probably don't want to include in our vocabulary going forward. remember, if anything, it might be the exact opposite here. coming out of the crisis, you know, jump to default risk is something that we concern
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i'm bill griffeth. coming up at the top of the hour on "closing bell," facebook now reportedly dialing up plans for its own smartphone. is that a smart idea? can facebook even compete with the likes of apple in that business? plus, jpmorgan has sold billions of dollars of profitable securities to offset its recent trading losses. good strategy or are they just throwing good money after bad? we'll have a spirited debate on that. they may not agree on a lot of things. but the left and the right both agree that granny may be getting thrown off the fiscal cliff. we're talking about whether medicare could possibly be on the chopping block when all is said and done. maria and i look forward to
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seeing you at the top of the hour from here at the new york stock exchange. first jackie deangeles has the market flash on gold. >> the precious metal falling about $16 or 1%. that sending some of the gold stocks down. goldcorp., barrick corp., newmont moining down 1% or more. also gld, the gold etf, down about 2% as well. gold, of course, being influenced by the weak euro. brian, back over to you. disaster du jour time. vertex pharma tanking after it corrected some data around a cystic fibrosis drug. stock short 65% kre lent oi tennessee original data. vertex says of the improvements were relative, not absolute, whatever that means. still some analysts out defending the stock saying the data while maybe not as good is still pretty darn good. >> okay. also some sunshine for a recent ipo. no. we're not talking about facebook. we're talking about splunk up
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sharply today. since its april debut the stock up about 115%. ticker symbol splk. the company makes software that collects and indexes data. currently up 2% today. >> caving gear. time now for the outrage of the day which is a new segment on this show and possibly this is the first and last of them. here you go. ceo of rite-ate god an $8 million pay raise over last year's numbers. john stanley went from $2.8 million in 2010 to $10.97 million as a full year 2011 compensation. you've got stock, whatever, whatever. i don't know john standley, herb. rite-aid has been a troubled company for a decade. the stock has effectively been under 2 bucks a share for the better part of numerous years. you know me. what companies are willing to pay, fine. you're outraged about the metrie they used to get him to this point. >> the fact they used not just
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t t t t t the ebidda. he's lo -- nailing them on this whole concept of using ebibda. pointing out that warren buffett thinks ebitda -- >> they use one metric. it's a target. once you hit it you get the bonus. also named him chairman. ebitda is probably the easiest thing to massage. >> when you see this, certainly there are different things you can do. you're getting rid of all the bad things just to do that.
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>> creative accounting. >> it could be perceived that. to be fair, when i go back and compared this company with wall gre -- walgreens. >> underperformed cvs. >> a different company altogether. you have improved performance somewhat at rite aid relative to walgreens, which has been going through tough times. i find it disingenuous the company says they used ebitda. walgreens uses ebit and cash flow. you have more hurdles to clear as a manager. >> shareholders should be outraged? >> i think shareholders should be outraged. any time you see a single metric. i don't care what the company is. >> this company tid just over $26 billion in jaels in 2009. $25.5 billion in 2010. $25.2 billion in 2011. they go back to $26 billion. sales have come down the last
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couple of years. the stock has been stuck. we're not just bashing ceo pay. we're saying, really, rite aid? does he deserve it? >> is he worth this salary. yeah. fantastic outrage, herb. always good to have you on the show, by the way. >> i was outraged, too. >> it was his outraged. >> i pointed out to him. he got outraged. we got outraged together. >> nice outrage, boys. coming up, another face plant for facebook shares. is day one of options trading making things worse? reports that zuck is looking to put out his own smartphone. so we are asking you, should facebook buy research in motion? this is it, folks. your last chance to vote. streetsigns.cnbc.com. we will have your results next.
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that event is going to be spectacular. i'm going to be hosting that event, actually, in atlanta next month. join me tomorrow for a preview. go to cnbc's facebook page for a live small business q & a. tomorrow on cnbc's facebook page. right after the show i'll get on
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the intraweb and start typing stuff to you. >> spectacular, is it? spectacular. >> i'm trying to sell it! >> if he doesn't say so himself. >> i'm trying to sell it. i'll be at the variosity. free hotdogs for everybody. >> a gathering of all those humble. an update of facebook shares. well off their ipo price. $29. trading around the lows this stock has ever seen. the selloff comes as facebook options begin their trading. so what is the options market telling us about facebook's fate? let's bring in john najarian. cnbc fast money contributor. also joined by herb. >> because he just didn't leave after the last segment. >> he would be outraged if we told him to leave. we decided to just keep him here. jon, do you feel the start of the options trading is just exacerbating the volatility here? >> we had hoped that it would tone it down a little bit on facebook. it doesn't turn out that it's been that way at all, mandy.
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it's been instead that people have aggressively sought to profit from a continued slide in facebook. they've been right so in facebook. they have been right so far and the seconds day of trading it dropped 11%. third day it dropped 9%. now we've got another 9% drop today. it's just -- i mean, there's a lot of pressure. >> is there any indication that we may be at a peak in terms of fear? >> yes, there is. in fact, we're seeing turnover that is twice the amount of stock that turned over on friday. that was, of course, leading into the memorial day holiday. so this is normally a pretty slow business day as well. >> you sent out an e-mail to us that involved a lot of numbers and out of the money, in the money, puts, calls, whatever. >> magic numbers. >> i was reading it going, yeah. so what does this mean? what does the trading and the options signify to you about
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what people are betting on facebook? >> there are still a lot of believes on facebook. believe it or not, there are a lot of folks who are providing insurance. they do that by selling put options. they are basically saying, if you really think the stock is going lower, i will let you buy insurance for me. these are the men and women who use facebook a lot, apparently, and the people that zucker can berg and the group are hoping to sell a smartphone too. >> selling the puts? >> selling the puts, which is surprising to me, because it shows how involved these people are and how cult-like it is, very much like apple. the people that believe in apple and the people that believe in facebook cannot be deterred from their belief that they are life-changing events or the company that you want to be involved with. but so far you may not want to be involved with. >> people lost stock on itself that lost a put, is there anything that looks profitable to you? >> sure. depending -- i would give yourself a little time to be right. i spoke with jake, a security
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lawyers, and a lot of people are circling the stock because of the botched ipo and if it's found to be selective, that's a real problem for both facebook as well as for some of the -- >> speaking of a lot of retail investors, i think it now clarifies as the worst performing ipo in the decade. >> it still surprises me how much the market has been able to shrug this off. an ipo this big to fall this fast and to not see the rest of the market rollover with it rest of it, given what is going on in the rest of the market, is surprising given the institutional money managers, which is more of a flash in the pan than it is new technology. >> thank you so much for jumping in. >> thank you. let us switch gears here. facebook also reportedly looking to get into the smartphone
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games. that got us thinking. what do you think, should facebook buy research in motion? here are the results. >> 58% of you voted yes. 42% voted no. so actually it wasn't that die cot myselfed. >> 58% said yes? >> yes. not what exactly i thought would be the outcome. we still have herb greenberg and jon najarian. hello and welcome to the show. we can certainly understand where facebook is going in terms of not wanting to be relevant, just november app on somebody's mobile platform. but do you think, number one, launching a smartphone is the way to do it and whether r.i.m.m. would be the one to do it? >> two nos. >> two nos make a yes. >> i don't think they should become a smartphone maker even
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though they have the platform to do it. you have the cameras, phone numbers, and they are looking to buy off here. but right now the space is way too crowded. idc said that 80% is owned by ios apple platform and android, which is google's platform. for anybody to take over that, you'd have to be crazy. >> but what do they bring to the party? if you have an android and make it impossible to access which stinks on a phone, i know it sounds crazy. to me it would be the only way that it would work. >> you kill your user base and start fresh. we've seen that with microsoft and windows phone. they are struggling right now. i'm not so sure that's the right way to do it.
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>> exactly. >> if they want to monetize, they have to do it on their existing user base. let's see what they can do with that first. >> there are two arguments here. the first one is, jon, i'm going to bring you in. if they are hell-bent on launching a smartphone, a lot of people who have tried it have failed. would buying r.i.m.m. be the best way to do it? >> no, they should brand with somebody like htc, which is what they have been rumored to have done, right? they want to find a way to get a smartphone out there. >> one of the issues would be whether or not anybody on facebook would actually spend the kind of money that the smartphone in large enough sums that it wasn't subsidized could get -- >> a premium product, right? >> not the thing that people on
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facebook would purchase. >> i want to point out that john carney said on this network, that it would be an android operating system. >> they've teamed up with at&t and they didn't do very well. i don't think that's the way that they are going to go either. >> thank you for joining us. i'm sorry. i'm really losing my voice here. it's not coming out. coming up next, gold beer. isn't that kind of redundant? >> that looks delicious. >> gold beer. remember goldschlogger? it's still around apparently as we will be after this short break. tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade. tdd# 1-800-345-2550 and i do it all with charles schwab, tdd# 1-800-345-2550 because their streetsmart edge platform tdd# 1-800-345-2550 helps me trade quickly, intuitively. tdd# 1-800-345-2550 staying on top of the market is key! tdd# 1-800-345-2550 and the momentum tool,
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there is a new drink in town. it contains a gram of gold. so far the brewery has produced 500 bottles of it. >> all i can think, brian, is why? what are the health benefits? >> we've got to ask gold member. >> any way, thanks so much for watching "street signs." >> that's right. "closing bell" is coming up next be. more on the overall markets and i know you'll feel better tomorrow. >> i'm not going to speak another word for the rest of the

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