tv Power Lunch CNBC May 31, 2012 1:00pm-2:00pm EDT
went from 11 to 10.5. but i thought the reason the stock went from 15 to 11 was because of that expiration. >> more fast at 5:00. you can follow me @scottwapner. and watch "power lunch" which begins right now. breaking news at 1:00 eastern. welcome to the floor at the new york stock exchange where the market is staging a major turnaround. we have just gone positive on the dow. earlier we were down 103 points. but you can see we've now come back above the flatline. let's check where we are with the s&p. remember these markets are still down 6% for the month of may. may has been cruel to the longs. where will we go from here? euro/dollar at the moment currently at $1.2363. again, you can see the way in which the euro has rebounded through the session. the dollar of course generally strong across the board. the catalyst for all this news that the international monetary fund has started talking to spain about a rescue loan. if it cannot find the funds to
bailout one of its own problem banks, bankia, that conglomeration of seven savings banks, which has been a major headline throughout the week, we need analysis on this. this is not what the americans want as major shareholders of the imf, they've always said they would not do that. that's not what headlines are indicating at the moment. let's look at the stock action. mary thompson is here with me on the floor, break it down. >> let's look at the catalysts driving the markets. financials is actually pacing the turnaround on wall street today. but, simon, i would argue the turnaround started a little bit earlier. actually, if you look right around 11:00 or 11:30 or so when the european markets closed, you started to see a turnaround in the markets. couple things here, the s&p 500 held above that 1,300 level. broke below it slightly, but that was a key technical level traders were pointing out to me. additionally art cashin says around that time of the close
there was a report out there that the pro-austerity party is leading in greece. >> yes. there were in fact two polls. which was written by reuters at half past 10:00 new york time this morning. you saw the greek stock market rally very strongly on that. over 3%. but broadly ignored here because that's not the narrative that a lot of people are seeing at the moment. it's all negative. they don't see the fact potentially we could get a deal out of greece. >> right. these were a couple of the catalysts coming from this. again, as traders have been saying, the focus here in the u.s. continues to be these headlines. we are vulnerable to the headlines we are seeing in europe. again, the group here leading, financials under pressure but now trading positive. >> we've got to go. >> sorry. >> tyler, over to you. >> all right. thank you very much, folks. you know, the other major story we're following is this, exactly two weeks ago the question on everyone's mind is, where will facebook price tonight? and what would that company do when it opened for trading on friday? now, very few people could have
expected what happened and the fallout that is probably just in the beginning stages even now. and ipo market is on the ropes. exchange is fighting for its credibility. and one of wall street's biggest banks facing tough questions about how it handled one of the most highly anticipated initial public offerings in history. and that is where we begin right now. the man at the center of the storm is james gorman. and he is going to be on cnbc's "closing bell" this afternoon interviewed by our maria bartiromo. mr. gorman, of course, maria, is the chairman of morgan stanley. what do you want to learn from him? what do you think he will say? >> hi there, tyler. thanks so much. well, i think everybody out there is trying to figure out what went wrong with this deal. the largest technology deal. very, very hyped up. a huge piece of business for morgan stanley. morgan wins the bragging rights, wins the deal. and then we see what many are calling a train wreck, a flop, a botched up deal.
so the bottom line here is people want to know what happened, how did they come up with the $38 a share valuation? $100 billion company here. when we see that it has plummeted from those levels. so what went into the pricing? why expand the deal? and then of course there are questions around the analyst cutting earnings estimates, morgan's analyst as well as two others cutting earnings estimates during the road show. you've got the s.e.c. looking into this. you've got regulation implications. these are all the questions that we are going to ask james gorman. but it goes beyond just the facebook deal. we're also talking about a situation that obviously is fragile. not just for morgan stanley, but the entire banking system right now because of capital worries. worries about a downgrade coming from moody's. what does that do to the cost of capital? where does this all end up in terms of what this firm looks like, what the industry looks like? we're going to hit on all of that. we're also going to hit on what happened to jpmorgan. try to get mr. gorman's take on
the implications of that huge trading loss there. i spoke to one very, very inside analyst just yesterday. and that person was telling me that the losses at the jpmorgan story could exceed $5 billion. we're talking more than $5 billion. this will have wide, wide implications. so we'll talk to mr. gorman about that. but no doubt about it, you hit on the number one issue that everybody wants to hear about, and that is this facebook deal. what does this tell us about what's to come in terms of new technology ipos? which of course are hugely hotly debated and competed for across the street. what about kayak now delaying its plans? does that tell us something about new business coming in terms of technology ipos? we want to know what went wrong at facebook. what happened on those opening minutes of trading at the nasdaq? why was there such disarray and confusion? james gorman already spoke to his own firm and gave the press
some comments about this yesterday. we're going to be delving deeper into it. how they came up with that $38 a share bid. how come 25% of the deal was given to retail? very rarely do you see such a huge deal, such a hotly wanted deal, 25% of the deal going to retail. why that now? and of course the news today about the firm's intention to acquire that 14% of the smith barney business. we want to know why now? why double down in the retail area when the retail investor is nonexistent? all of these issues will be covered. at 4:00 james gorman will be with us live to talk about this. i'm sure that the firm wants to address the issues around facebook. we all know this has been the only thing anybody's talking about. i'm sure james gorman wants to address it. what we want to know is exactly what went wrong? why we're looking at a deal right here that is so much lower from the ipo pricing and how they came up with that pricing in the first place. >> maria, thank you very much. we'll all be watching on "closing bell" later today when you interview mr. gorman.
meanwhile, our facebook coverage continues as a lead-up to that gorman interview. and it is just beginning here this hour. we're going to hear from a p.r. expert with advice for morgan stanley's ceo. we'll hear from the former chairman of the s.e.c., harvey pitt and phil lebeau reporting on gm's decision to stop advertising on facebook. is that a canary in the coal mine through all this? news just breaking on that in the last hour. and we're looking of course as maria mentioned at the future of ipos and the street right now, that and more. meanwhile, simon hobbs picks it up from here. >> tyler, we should note s&p is cutting its price target to $27 from $30. that came through about an hour ago. of course $27 was the level that we hit on facebook earlier in the session. so clearly the hits keep coming. facebook of course we're supposed to jumpstart the ipo market. it may be doing exactly the opposite. certainly graff diamond
scrapped. travel site kayak has pushed back the timing of its offering as well. it had planned to list today on the nasdaq. rich peterson is director at standard & poors capital iq. rich, how bad is this from your perspective? >> simon, first, it should come as no surprise that the facebook ipo performed as it did. our group at global markets intelligence at s&p did a numbers crunching and looked at the ten largest ipos priced in the u.s. and averaged one year after their offering price have only gained about 15%. if you go back to the two most recent big ipos, gm and blackstone, both ipos dropped by double digit percentages a year after their ipo date. in terms of the facebook offering, again, we looked at some numbers looking how expectations were for eastbound traffic ebitda and revenues six years out from the ipo date compare today what google's actuals were. look at the numbers, i think
facebook had a compounded 30% ebitda growth rate going out to 2017 compared to about a 70% actual growth rate for google from the date of ipo in 2004 to about 2009. >> rich, stay with us. we have breaking news. let's go live to steve liesman for an important piece of information. steve. >> simon, thanks very much. just got off the phone with a spokesperson for the imf who is playing down this story of talks of financial aid or discussions of contingency plans. it's something being done internally at the department, not discussions with spain. and that's the important distinction that the spokesperson was making with me. this person described the contingency planning as a normal part of fund business and said that it is normal to look at different scenarios for the department to look at. that's part of what they do. they visit the country once a year but also do contingency
planning. this is an important issue relative to what's going on in spain. we understand the vice president of spain will meet with the imf chief christine lagarde later on this afternoon. but we are told they will not be discussing a rescue plan at this time. we're also told, and i caution on this next piece, we haven't had a chance to confirm this with geithner, with the treasury department, but they will also meet with geithner at an unknown time. a regular mission slate today go to spain on june 4th, simon. that's what we're hearing right now. >> and there's a lot of things coming together. you mentioned that the spanish contingent is here. we also have the undersecretary of the treasury traveling through europe at the moment. >> correct. >> steve, nail it for me. we have said all along america will not allow imf funds to go into europe unless basically europe has put a lot of its own money up front. and obama will not go into the election saying that the americans bailed out europe. how can they do a deal on bankia? >> how can i nail it for you, simon, any better than you just
nailed it for yourself. that's exactly what the treasury's been saying, what the administration's been saying for a very long time. they want to see europe put up their money. there is a pot of money at the imf, something like $400 billion the last i checked, that is designed to be used and it was bolstered a little bit, that is designed to be used for contingency plans, for example, if there were a big global shock. my guess is what the imf is probably doing right now is, hey, look, if this happens, if that happens, if this happens, there could be a call on imf funds. here's how we might use it. we would go to the board, we would do so only in the event of u.s. approval. right now i don't think imf money is going to take the place of either spanish or european money when it comes to recapitalizing the spanish banks. >> let's bring in zach karabell. >> listening to steve's report sounds like a patient with cancer goes to meetd with three or four of his doctors and issues a press release saying they will not discuss the disease.
i mean clearly if the prime minister of spain is meeting with lagarde -- the vice president, and then meeting with the undersecretary of the treasury, these things will be discu discussed. i think the reality, steve, as you know, yes, they're not going to make any statement about anything happening until there's something going to happen. but it should remind us that there are these pools of liquidity. it's not like -- >> that's fair enough. >> -- unprepared. i think some of the market panic simply assumes those are inadequate or -- >> hang on. the ecb itself said it wouldn't come in and help spain. it actually said no. >> also what the ecb said mid-november two weeks before the global flood gates of liquidity were released. so as a political measure and as a stance of saying we will not do these things, you have to get your political process in shape, you have to meet your budget targets, that will continue to be the party line. underneath it all is the systemic risk that these -- >> i think zach is right here, simon. in the november systemic risk i
think the bar for using imf funds is lower. but i also believe the united states and probably in line with germany at this point is not going to let imf money be used to supplant that -- >> unless, steve, unless there's going to be a big fight within the imf with the americans on one side and arguably half of europe and who knows, the brics on the other. >> i don't think that's the case, simon. i don't think right now the imf is set up in a way that would allow something like this to happen in the absence of u.s. consent. >> guys, thank you very much. let's go to tyler. tyler, are you with us? >> i am with you. shall we move along here? yes. president obama has been attacking private equity, but some of his biggest backers aren't really behind him on this. eamon javers -- he's done some digging. we'll find out what he found next. first, the currency board as the imf may be getting ready to move in and help spain. night-visio,
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>> announcer: "power lunch" is back. now here's tyler mathisen live from cnbc global headquarters. even as we follow the story about spain and europe, we are continuing to follow the ongoing opera regarding facebook. and we want to bring in with that in mind former s.e.c. chairman harvey pitt. he is the ceo of kal ra ma partners. mr. pitt, welcome back. i know you to be a calm guy.
but if i read my notes about how you are thinking about what went on or what went wrong with facebook, i can't help but detect a little bit of anger on your part. are you angry? and if so, what makes you so? >> well, i'm angry for a very critical reason. and that is we've heard a lot of complaints over the past decade about how regulation in the u.s. has been driving the ipo market overseas. now we have one of the most sought after ipos and it's incompetence, i think, that will wind up driving the ipo market overseas, not over regulation. >> incompetence, some would argue, mr. pitt, that morgan stanley did what it was ultimately supposed to do. and that is get the highest price it could for the company that it was bringing to market,
facebook. and then of course people on that first day could have sold at a price above the open in many instances. did they do what they were supposed to do? but you call it almost an egregious mess up. >> well, it's -- first of all, it's not pointing fingers at morgan stanley. ere's more than enough blame to go around. and while one wants to get the true value by raising the price beyond a level at which the stock market can sustain that price, i think you wind up in trouble. this was 88 times earnings. and that is a bizarre ratio for any company, even facebook. but what was more important was if you're going to downgrade the earnings, you don't do that in the middle of a roadshow. that really works against the client. it works against investors.
and it prompts shorting, which is what occurred here. >> if you were still chairman of the s.e.c., wouldn't you have a problem with morgan stanley? would morgan stanley have a problem with the s.e.c. for that very reason? >> no. i think it will have a problem because our tendency these days is to figure out how we bring enforcement actions. what i think is really needed here is for somebody to take a look at what went on and come up with a blueprint for how these kinds of offerings should be done going forward. >> uh-huh. >> there are a lot of lessons to be learned here. >> one final and quick one here. my note records that you said the first order of business is for wall street and prospective issuers of ipos to fix the broken part of the process. and to do that means killing the goose that's been laying the golden egg. guess what, wall street won't like that. what's the goose? and what needs to be fixed? >> well, i think what needs to be fixed is basically how firms
wear multiple hats. in this particular case, if you're in the middle of a selling effort and road shows, you can't start downgrading your analysis. you should have withdrawn before the road shows began. and then picked it up again once the offering took place. >> okay. mr. pitt, thank you very much. always a pleasure to see you. >> good to be with you. >> all righty. there isn't just legal jeopardy here. if there is, in fact legal jeopardy, it's been a devastating p.r. hit as well for facebook. that p.r. is a big issue. and it may have started when the automobile giant general motors announced that it was pulling its display ads from facebook. phil lebeau just spoke with the man who made that call for gm. phil. >> tyler, this is all about general motors saying it wants the best bang for its buck when it comes to advertising. today we talked to the man who made the decision behind general motors pulling its direct ads
from facebook. and he says it's simply a case where the ads weren't working. >> what we hear from our consumers and our fan -- and we research the heck out of this, they say it's a little bit distracting. they say your ads popping up there or your things coming in here, they have to be very, very relevant. and we have to find better ways to make those ads they pop onto or on their wall, very relevant. but the ads themselves, they said we don't like them or we don't click on them. >> as you take a look at shares of general motors, it's important to point out the company says it's still going to be spending millions of dollars on facebook, but only on the brand pages and that at some point in the future it may return to direct advertising once it figures out how to be more effective at it on facebook. >> phil, thank you very much. now onto morgan stanley's reputational risk amid that facebook fallout. ceo of quicken and company worldwide apr. mr. quicken, welcome. as you know, we have james gorman on later today.
if you were advising him, what would you tell him to do and say to get some of the egg off of morgan stanley's face? >> well, first of all, i don't think it's just a morgan stanley issue. you can't decouple their reputational risk from facebook's reputational risk. facebook's been an anti-social social media company. it's been founded on openness and connectedness. they're not doing that so far. >> but their ceo was in rome on his honeymoon. >> right. >> smart move? >> no. is he a ceo or vanity ceo? maybe sandberg needs to get out there. they need to talk about how they're going to stave off the threat of mobile. they still have this hangover of privacy concerns they still haven't addressed for more than a year now. now, moving onto morgan stanley. it's interesting, i thought quite brilliant they leaked the internal memo in the talking points from their web cast. that was a good move. the fact james gorman is coming on today. excellent move.
he had some points very similar to jamie dimon with the trading fiasco. i thought that was excellent. jamie dimon just by contrast was more preemptive. morgan stanley waited a few weeks. i think he needs to have continued emit points. he's been steadfast in saying they haven't broken the rules. but here's the nuance, how can morgan stanley communicate to a general marketplace that while they adhered to the rules, but did they break the rules of fairness? did they violate any other rules of integrity or values that the marketplace seems to hold as high regard for as anything else these days. >> that's the critical issue he needs to address. >> i believe so. >> whether morgan stanley -- not didn't break the rules in a deinjury ray sense but broke the rules of fairness in a common sense sense, right? >> that's exactly right. important to keep in mind, morgan stanley is now the demon bank du jour. they need to have the life saving characteristics for them.
they need to have some humility and be a little humble and have some admit points like never before. this is a new environment for them even though it's been going on for some time now. >> thank you for being with us. we appreciate it. >> thanks for having me. >> the big story of the hour, the imf starts talking about contingency plans for a rescue loan possibly to spain. the markets nearly rallying on that news. a big swing after being down 100 or so points. the dow is now a little bit higher. as you see, actually, the dow's a bit higher as i look down there. the s&p basically flat. nasdaq down about 8 points. more "power lunch" in two. lunch before? by taste? yes, never heard of it. well, that's what we're doing today. car insurance x has been perfected over the past 75 years. it's tasty. our second car insurance... they've not been around very long. mmmm... no good! no good? no good!
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to politics now and the fight between washington and wall street. you may be surprised to know that one of the players most outspoken about the alleged evils of bain capital actually may be heavily invested in private equity. eamon javers is in washington to explain why. eamon. >> so far this election year it's been front and center in the political debate. you might think that the teamsters hate private equity. why would you hate that? look at this quote from teamsters president back on may 7th. hoffa saying mitt romney represents everything that's wrong with our financial system. he made his money as ceo of bain capital while destroying u.s.
businesses, sending good paying american jobs overseas and filling his pockets with millions while putting workers out on the street. so what does the teamsters organization do with its money? in part it invests a lot of its money in private equity. in fact, up to or more than $1 billion worth of teamsters private equity investments made by individual teamsters regional funds around the country, they're operated separately from the teamsters national, but nonetheless i spoke to one of the people in charge of making those investments. take a look at what rome said the head of the western conference teamsters pension trust. and he said, i'll be honest with you, i cringe sometimes when i hear them beating up on private equity for the sake of beating up on private equity. you can do so-called social investing and make just as much money as these others. now, he told me in fact the teamsters don't have a single penny invested with bain itself. but they have about $1.3 billion
allocated to private equity. but he makes a key distinction. he says the private equity they're investing in, tyler, is all about worker-friendly job creation. they're very careful not to invest in anything they think is going to destroy jobs, tyler. >> thank you very much, eamon javers. a metals market about to close. we are going to go to the nymex next. [ male announcer ] we began with the rx. ♪ then we turned the page, creating the rx hybrid. ♪ now we've turned the page again with the all-new rx f sport. ♪ this is the next chapter for the rx. this is the next chapter for lexus. this is the pursuit of perfection.
let's go mining the metals. gold and other precious prices closing right now. slim pickings as it turns out. gold currently trading at 1564. flat on the session overall. it's been a bad month for gold. down about 6.5%. we're showing it down 10% there on the graphic that we have now. that is way worse than the s&p 500. stocks down about 6% overall. so so much for the safe haven appeal during the month of may. in fact, gold is heading for a fourth straight losing month. substantial losses there. that would actually make it the longest run of monthly losses in almost 13 years. stocks rebounding though. it has to be said on that news coming from the imf that there
are some discussions on spain underway. let's get back to mary thompson for the latest from the floor. mary. >> hey, simon. as you said the headlines coming out of europe or about europe certainly impacting the markets today, which were under so much pressure earlier because of the disappointing data here in the u.s. let's take a look at where the s&p 500 was a little bit earlier today. really at 11:30 or so, which was the european close, it started to come off the worst levels of the day. holding around the 1,300 mark, which was a positive then starting to move to the upside led by the financials. accelerating on the news that the talks with the imf about a spain rescue. also underpinning the markets news of pro austerity market in greece leading. that too giving a lift to the markets today. two of the worst performing sectors this month actually contributing heavily to the almost 110-point rebound we've seen in the dow jones industrial average. those being financials, banks have turned around. they were weaker earlier. also i want to note or just point out some of the major oil companies, which were under
pressure as well today have turned positive. chevron among them. exxon mobil actually had been lower. it then moved to the upside. it's now down about five cents. again, energy has been one of the weakest performing sectors along with financials this month. trying mightily to push the markets into the green today though. simon, back to you. >> thank you, mary. it's fascinating to watch what is happening with the yield on the 10-year as we plunge to all-time lows. and now as the stock market recovers a little bit, confidence edges in, rick, we're now back up to 1.95%. >> yes, we are. but we're still down on the session. as you look at a 24-hour chart briefly before that comeback, you know, just a bit before the european close we were at a 1.53 yield. if you move down the curve a bit, 30-year bond, it's the one maturity that hasn't made a new historic low yield. we're going to save that for now. around 2.50 on a closing basis from the december of '08 right after the major part of the crisis. that was down to 2.58.
it's back up to 2.66. but the next one, simon, is the one that i still have to look at twice. a 10-year bund briefly was trading under 1.20. 1.19 yield. unbelievable. >> phenomenal. phenomenal. for the moment, rick, thank you v. let's go back to steve liesman on the breaking news of the hour. the degree to which the imf might bailout spain and what america would make of that. steve. >> those are two good questions, simon. what we're told is the imf essentially is playing down a news story that ran -- that there was discussion of a rescue for spain from the imf. we were told again these are parts of a normal contingency planning happening within the euro area department. the big distinction made to me this is separate from discussions with spain. when the imf would go about beginning discussions of a rescue plan, it is something that will happen with spain. we know there are meetings planned today.
i many, f director christine lagarde meeting with imf president of spain. tim geithner will meet with the same vice president. i think that's part of why the market was excited about this. there is a big pot of imf money, but the spokesperson saying it's not unusual for the department to look at these different scenarios out there. while this money may be used, it's very early days for using ilt. and as you said, simon, earlier, the u.s. position has been that it must be european money that would come long before imf money. u.s. not opposed to principle for using this money, but they believe the europeans have enough funds to take care of their own financial problems. i am certain that that's part of what undersecretary doing over there reminding the europeans that they do have the money to bail themselves out. and it can be done without additional funds. >> unless, steve, unless it is a special fund that's come from contributions from the bric countries. remember, we had this discussion before, india and china ponyup
cash in essence of a special vehicle that could just go to europe. we were there, were we not? >> there was talk about that, simon. i don't believe it was ever actually formally put together. and there is no process right now by which special moneys would go to europe, as i understand it. >> rick, how in chicago does the prospect of american taxpayer dollars bailing out europe go down? >> well, i'll tell you, simon. when that story initially broke, the water cooler talk around here was fast and furious. and it isn't based on fact, it's based on political fear. i'll tell you what i mean. many traders down here said if europe sinks in the kwag meyer even farther, it's going to effect the global economy. the global economy effects the u.s. and that effects the outcome of the election in november. so around here what they're nervous about is is it's an election year and most traders don't really like politics, but they think the current administration would have much more incentive to consider an imf bailout should it make our economy look better. these are the types of
conversations going on down here. >> interesting, rick. thank you very much. ty, over to you. >> thank you very much, gentlemen. let's bring in one of the best thinkers i know, zach karabell, our trader and stock buddy today. i want to get your tactical thoughts about what you're hearing coming out of market including these imf stories we've been flashing. and what if anything should i do about them? >> i think you should probably pray, tyler. thank you for that. i mean, look, there is a chain of selloffs that's been going on in the past six weeks or so that have to do with if europe really implo implodes, the exports weakening and the whole resource into china collapses. that's why you've had a 20% to 30% selloff in a lot of these resources, industrials and to some degree tech names. i think that's where you might look to nibble. not in european equities. until the european situation is really clear, you can look at another 20% down easily in european equities before all is
said and done. but maybe you begin to nibble on a couple of these, you know, global names that have gotten completely taken out to the wood shed in the past four weeks. >> commodity-based global names. >> yeah. maybe like freeport mcmo ran. i think down almost 25% in the last month but yield at 8%. there are ways in which the europe story has been played out in equities by selling off these global resource names for the reasons that i described. that's probably where you want to look at before you look at european stocks. >> there you go. two of those that you mentioned there are down just a little bit and one is higher on this day. thanks very much, zach. up next, watch out megarich foreigners are swooping in on manhattan snapping up some prime real estate. the big apple is getting taken over. the city's top real estate guru
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coming up on "street signs" at the top of this hour, we've got bill gross first on cnbc with his june investment outlook. we're also going to ask him if this low interest rate environment manufactured by the fed is good or bad for your money. then we ran a screener for rocky reits and five under the radar names popped up. we're going to give them to you and ask one of their ceos why business is so good. and how long it can last. and forget disaster du jour. we are thinking much bigger today. we are thinking disaster du decade. we've been beating up on rim, but they're not even close. we're going to look at two names in the running and which one gets our dubious honor. those coming up at the top of the hour. back to simon and tyler on "power lunch." thank you very much, mandy. so is kansas the next
bakken-like oil boom? a number are moving into that state hoping to reap the reward. local towns taking innovative approaches to a possible oil boom. bertha coombs is in kansas. bertha. >> tyler, they're trying to prepare for -- here in barber county, kansas, right on the oklahoma border -- the wind really does sweep down the plain. they have seen the population start to tick up for the first time in like 20 years even as their unemployment has come down from 4.5% down to 4% in the last year. part of that, the oil boom. they're bracing for more. in fact, here in tiny kiowa, kansas, 900 people population, they are considering ledding sand ridge energy drill a horizontal well clear under main street. a lot of folks have selling rights and they've been really reaping the benefits of that. now they're bracing for the onslaught of more workers. nearby towns like coldwater have seen, you know, little trailer
camps set up as the folks are coming in and setting up these rigs are moving in to work. sometimes every couple of weeks they're getting a whole new batch of people. but one of the things they are looking for and they've started to work together on is to plan for this. they don't want to be in a situation like we've seen in the bakken where towns are overrun and they get more people than they can handle. so they're talking with the oil companies, they're consulting with consultants to figure out how to do a more sustainable long-term growth plan. >> it's something we have to be in front of and we have to be involved with because our goal is to make this community sustainable. >> we've been praying for economic development in this area for quite some time now. and so we're cautiously embracing this development. >> cautious indeed. this is a town of 900, it could boom to maybe 1,500 and that would be a very big change.
for more on what the towns are doing and how investors are eyeing this play, check out my story on cnbc.com. now, simon, this is kiowa, they have a manhattan here. manhattan, kansas, is a whole lot different from where you and i live. >> i imagine so. bertha, thank you very much. we have a key read on the health of housing. financing a home for many is just getting cheaper and cheaper. the average rate, if you can get it on a 30-year mortgage dropping to record lows again this week. according to freddie mac, the 30-year falling to 3.75%. that's the lowest since long-term mortgages began in the 1950s. and the 15-year loan dipping below 3% for the first time ever. and, remember, if today's moves on the treasury market are sustained and if the banks are willing to pass on the savings, these rates will be even lower, tyler, next week. >> i'm going to call my refinancing department right now, simon, if you don't mind here. i'm on the phone right now with
my mortgage broker. anyhow, that sounds like a good deal. cheap rates and decent currency conversions. new york city being invaded, as always, by the megarich. foreign buyers now swooping in buying the priciest of the pricey pads. so can domestic buyers still compete on the high-end? our real estate correspondent, diana olick, is back with us today. along with dolly, manhattan's property guru from proden shl. >> what we're seeing is a by fur kated market. they are buying up the high-end condos and pushing up the prices. that's where i want to bring you in. you have some of these incredible listings on those condos, specifically 15 cpw. that is a building that looks like an old style co-op, but it is a condo. what are you seeing in your listings? >> the building is full of the megaimportant people of the world, megawealthy, the
megahappy. and we have an apartment that we're going to feature on air now that's offered at $35 million. it's a beautiful three bedroom and a perfect place in the park on the 15th floor overlooking the park with permanently unobstructed views. the building is legendary. it's the building where the $88 million sale just went through. it just offers everything from a swimming pool to valet service to parking garage to a private entrance so you don't have to be seen. >> will it go to a foreign buyer? >> most of the people bidding so far have been foreign buyers. i have to tell you, there's almost a new term now. it's fright capital. europeans are coming in in droves and they're concerned about what's happening in europe after the election and france and everything else. and it's fright capital. they're all coming here, where can i put my money and really chasing property. >> so it's french people. is it greeks? if they have any money left? >> it's greeks, french people, italians, spanish, it's english. >> how about the russians who were so active both in london
and in manhattan. >> russians seem to have tapered off. chinese. a lot of chinese and a lot of billionaire names. >> i assume that these folks are not those who are particularly lured by 3.75% mortgages. >> no. in fact, that's only going to lure the people who really can't afford it almost, right? anyway, i refinanced my mortgage yesterday for the seventh time in a year. >> seventh time in a year? >> and the bank didn't call me up and say do you want to refinance your mortgage. you have to call them up. what's going on. >> when we're looking at the co-ops, you've also got amazing listings we're showing yo ining. what is the price differential? are you seeing the condos are so much farther above the co-ops that used to be the biggest pricer? >> the co-ops are primarily still american. and even still new yorkers. some people from outside new york, but mostly new yorkers. it's very, very hard to get through the co-ops. and most of the foreigners, even if they could get in, don't want
to give the information they would have to give in order to pass a board. >> and just any concern, finally, that anything going on overseas would take away some after that money? or bring more of it in? >> i think it will bring more of it into new york. the rest of the country is a different situation. as you said, it's a bifurcated market. >> good to see you as always. go to cnbc.com right now. it says right now. to see jim cramer's plays on a potential housing rebound. jim is giving two thumbs up, by the way, to some stocks that may surprise you. simon. >> looks like i got ahead of that one as an immigrant as well, ty. thank you. up next, an historic moment for space travel as the commercial spacex capsule returns. importantly with cargo back to earth. jane wells following the big moment. jane. >> simon, one not so small step for elon musk.
one giant leap for his company. we'll have the latest plus a stock play when we come back. and somebody asks me a question about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful. i'm hardly using gas, but it's there when i need it. anybody that thinks that this car doesn't have solid performance, hasn't driven it.
there's no other car like this on the road. ♪ there's no other car like this on the road. for a hot dog cart. my mother said, "well, maybe we ought to buy this hot dog cart and set it up someplace." so my parents went to bank of america. they met with the branch manager and they said, "look, we've got this little hot dog cart, and it's on a really good corner. let's see if we can buy the property." and the branch manager said, "all right, i will take a chance with the two of you." and we've been loyal to bank of america for the last 71 years.
the spacex dragon capsule returning to earth. it's an historic moment, jane wells, i guess for capitalism since it's commercial and clearly for space travel. >> right. in the old days lockheed or someone would make the capsule and nasa would own it. spacex makes the capsule, spacex owns it. nine days, 58 hours later as dragon craft touched down in the pacific, a barge is on its way to retrieve the spacecraft. you can kind of see it there. reusable if it's undamaged. spacex hopes to create a land based landing system for dragon. founder elon musk sat quietly tweeting and drinking coffee waiting on word of dragon's condition. notice the casual attire and lack of paper there?
compare that to nasa mission control. people in ties, all very old school. musk wants to take spacex public only after he has a consistent launch schedule maybe by the end of 2013. analysts say this is good news for publicly traded customers like aridium. there is, of course, guys more confidence that that will happen. simon. >> yes, and i hear the capsule had a new car feel about it according to one of the former astronauts. >> apparently, you know, the astronauts said when they got inside it smelled like a new car. >> good to see you, jane. jane wells, thank you. thank you very much, folks. it's time now for analyze this. it's our brand new segment on "power lunch." we look at some of the big analyst calls of the day to see how they're impacting the stocks. we'll keep tab on the picks we feature here going forward so you can decide which analyst you want to follow and which you want to love and which you want to loathe, zach karabell is
here. s&p reiterating sell call on facebook also lowering its 2012 eps estimates from something like 38 cents to 48 cents a share. something like that. at any rate, the key here is buy, sell or hold facebook. do you agree with their analysis? >> facebook go public recently? >> i heard it did. >> interesting. i think the problem with facebook, what's it going to earn and how much should you pay for it? this was so egregiously overpriced, it's probably heading back to around where it's value is, 40 or 50 cents for this year, maybe 80 cents in a couple years. you're clearly paying for 30%, 40% growth. i think somewhere in the mid-20s you may have a decent buy. >> but would you agree with their sell rating? >> i would agree that you don't necessarily jump in here. i sold some puts at 24. so the problem with the sell rating is it makes it seem like there's no reason to own this company. just not at this price. >> let's move onto facebook bounce off there.
rw baird updating zynga from outperform to perform. shares of decline, pricing and concerns slowing growth in social games basically saying the stock is on sale. is it? >> the problem with zynga, it's hard in my view to make an aggressive call about zynga and making an extremely negative call about facebook given zynga is so tie today facebook as a distribution platform. and they've been trying to move away from that, unless you have a real confidence in facebook, i don't know how you have real confidence in zynga. >> we were going to do coinstar. buy or hold? you like it or not? >> i think thumbs down. >> thumbs down on coinstar. all right. is new york going too far in banning big sugary drinks? vote yes or no at streetsigns.cnbc.com. results will be revealed during the next hour. we will be back in two minutes after i go get a 20-ounce diet --
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