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tv   Street Signs  CNBC  May 31, 2012 2:00pm-3:00pm EDT

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can get them, clearly good news. the question is what does it signal for the future? that's it for "power lunch." ty. >> thank you very much, simon. zach karabell will be back tomorrow. thank you for joining us. "street signs" begins right now. and welcome to "street signs." i'm brian sullivan. are record low interest rates good or bad for the american economy? and near a breaking point? huge questions. bill gross is here with some big-time answers. low rates have meant some rocking reits. many real estate stocks have been soaring. and we have got an exclusive "street signs" stock screener digging out some under the radar names with some over the top stats. plus, why rim looks positively rosy compared to two other tech disasters. there can only be one champion. and the big fight over big soda is beginning to pop, mandy. >> it's positively fizzy, brian. a midday rally seeing the dow
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briefly away a 103-point loss. monthly numbers for may still very ugly. the dow headed for biggest one-month drop since may of 2010. went the entire month without a single two-day winning streak. as for the s&p 500, it's suffering through a 6% loss for the month of may. that's only the worst since last september. and the nasdaq had its biggest monthly percentage loss in two years and biggest point loss since october of 2008. let's not forget facebook. how can we? it's hitting yet another post-ipo low by falling under $27 a share. lots of things going on in the market. so why don't we check in with mary and rick. mary, great to have you standing in for bob today. we really saw some of the losses being raised on those reports about the possibility of the imf providing some support for spain. i mean, since then we've had a flurry of headlines. some of them contradictory. can you clarify what's going on and what it means for the market? >> the imf is down playing the
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fact it's talking about a rescue plan for spain. the markets started so accelerate around the european close and that gain accelerated pushing the dow into the green on the headlines from the imf, which have since been down played by the imf. as a result, we have seen the dow and the s&p come off their highs -- or best levels of the day. right now all three of the major indices trading to the downside. the s&p holding onto a key level of 1,300. that bounced off that and started to move higher. again, above that now. but traders are now starting eye the jobs report tomorrow because the data out today was disappointing. there's some concern that we could see a weak jobs number for the month of may. one thing to note, it was financials paced the turnaround. they are still trading to the upside, a very strong performance in today's -- or relatively strong performance, but one of the worst performing sectors for the month of may. brian, back to you. >> i'm going to pick it up there
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and throw it out to rick santelli. i asked you yesterday how low can it go in reference to the benchmark 10-year yield. i guess today we've got an answer. even lower. >> that's right. if you liked selling what you thought were the highs yesterday, you're going to have even more fun today although even though rates are a bit lower than they were at yesterday's close, they're well off their best levels and much of that based on what you just heard from mary. but let's not forget, mandy, we had some data this morning. one of the pieces inside the gdp report caught many traders attention. and we'll show a graph of it in aggregate, we're talking corporate profits here. in the month over month change was down 4.1 quarter over quarter. that's the biggest down drop in percentage change since the crisis hit in '08. to me this is really what you want to pay attention to in the context of a global slowdown. >> and we are, rick. thank you very much. and as rick and mandy just mentioned, the 10-year yield hitting below 1.6% earlier
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today. it is certainly a shocking headline. but what does it really mean for your money? are low rates ultimately a good thing or a bad thing for the u.s. economy? no person better to ask than bill gross, pimco co-founder. he's here now first on cnbc with his outlook. before we get to your outlook, which was excellent as always, bill, i want to ask you, if i'm young and i want to buy a house, low rates probably good for me. buy a car, probably good for me. if i'm older and a saver, they're bad for me. net-net are low rates good or bad for the united states? >> well, you posed the problem correctly, brian. it's good for certain segments and bad for others. demographically the young benefit from lower rates. demographically the older generation that depends upon bank deposits and low cd rates, are basically disadvantaged. and the economy as a whole ultimately what the fed is trying to do is to promote low
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interest rates and to elevate asset prices and to have the capitalistic fuel so to speak that has been so evidenced over the past 30 or 40 years in terms of credit extension to see that continue. that's not exactly happening the way they had planned. we have very slow economic growth, better than in euroland, but 2% isn't going to cut it in terms of the unemployment rate. so is it good or bad? you know, ultimately it's bad because savers desire a higher return on their money. and unless savers and borrowers can meet in the middle, you know, almost like -- do you have one more second, brian? almost like facebook. you have to have the right price. if there isn't the right price, then buyer or seller, you know disjointed in terms of meeting at the middle. and something bad happens. so it's the same thing in the credit markets. if you can't satisfy both sides,
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then ultimately the credit markets themselves are dysfunctional. >> you know, i'm going to ask this question in a different way. i'm going to ask whether or not these low yields are good or bad for the world's largest holder of treasuries? that's of course china. at some point -- i know, okay, i get why they have to buy treasuries. but at some point they're going to say i'm going to go elsewhere, i'm going to go somewhere i can get a higher yield, higher returning assets. what kind of implication would that have for the united states? >> i think so, too, mandy. it's been a while. and we've been looking towards this potential for several years now. obviously the chinese have other prerogatives in terms of trying to keep their currency from appreciating. that's why they buy treasuries. ultimately, yes, at a 1.57% yield for treasuries on the 10-year level, you'd have to think that they're looking for other alternatives. what might those be? you know, typically they might be real assets, they might be commodities, an outright purchase of oil. anything that basically has a
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better potential return than a 1.57% return on the u.s. treasury. >> and then what would happen? i mean, would there be anyone else to step in and essentially fill china's place? >> up until this point it's been the federal reserve. the fed has been buying through, you know, through the qes about 70% of the issuance of treasuries. you know, some would say, and i think statistics bear out that china, yeah, basically has been leaving the market gradually over time. and so it's up to the central banks. that's what we've seen with qe. that's what we've seen in euroland with the ltro. if the central banks don't buy, the question becomes who will? we're going to find that out on june 30th when the fed basically ends its current qe program. >> two quick questions to follow-up on that, bill. do you ultimately expect we will have a euro bond? a common euro bond? and if we do, would that then take away a huge amount of demand for u.s. treasuries? to mandy's point, and spike rates here? >> well, to answer the latter, yes, it would.
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currently at -- we don't know what the yields would be, brian. but they probably would be on a 10-year something like 2.5% to 3%. so if there was a fiscal union -- and remember that euroland in aggregate has about the same debt-to-gdp as the united states. if they can ever get together -- if this dysfunctional family could ever function and begin to like each other and produce a euro bond, yes, that would take some demand from treasuries. to answer your first question, will they? you know, something tells me and something tells us at pimco that that's not going to happen. >> can i ask you, bill, it feels like we were speeding up and looking better perhaps than other places around the world. but it feels as if u.s. economic activity recently has been hitting a bit of a soft patch. jobless claims up, are we starting to get closer to the idea of qe-3? >> we think so. we were just talking about that investment committee, mandy. one of the odds 60% for and 40%
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against it. the moment we've listened to the fed's fisher and the fed's dudley in the past few days. and they basically seem to say that things are okay for now. but we agree with you that the economy seems to be slowing down. the jobs seem to be at a slower pace. ultimately the asset markets, the stock market, is beginning to reflect that. so a qe-3 and what form will it take? we don't know. perhaps last on june 30th and give us a month or two months break. we don't know that either. but, yes, increasingly as euroland becomes dysfunctional as our asset markets go down as opposed to up, what the fed needs to do is to do another qe. >> i ran a stock screener last night on real estate investment trust. we've got some of the names that came up in the next block because many of them, bill, have done very well. gun to head, is real estate right now -- or maybe mortgages related to real estate, the single best investment out there? if not, what is? >> it depends on your outlook
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for long-term inflation or reflags. whether or not these efforts will be successful. we just had our secular forum at pimco about a month ago. put the odds there again 60/40, 70/30 towards reflation. that's what ben bernanke wants to do. he's been unsuccessful at the current level. at the 2, 3, 4, 5 years out, will real estate be an appreciating asset? we think so. >> bill gross, bill, have a great weekend. thanks very much for joining us. >> thank you. brian and mandy, thank you. >> up next on "street signs," another exclusive stock screener. we just talked about it. we are going to go reit hunting. some of the names around malls and office parks, are they a good bet for your money? >> and call it too big to drink. we're going to debate the big talker of the day. we're all over this one. new york city wants to ban those big old sugary drinks. and what do you think? is a band going too far? we want you to weigh-in. go to streetsigns.cnbc and vote.
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welcome back to cnbc. i'm kayla tausche with your market flash. take a look at the airline sector. we're seeing positive news across the board. of course that's partly due to lower crude oil prices. but if you look at it, u.s. airways up, jetblue up nearly 7% on the back of a ubs upgrade saying jetblue will be fine no matter what happens with amr.
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united, continental, delta, southwest all up as well. a report that u.s. airways is looking to team up to buy amr. either way whatever happens the airlines are sitting pretty. >> yeah. i think u.s. air doubled this year, kayla, or even more. thank you very much. few sectors have been hotter this year than the reits. many big name real estate investments are up double digits so far in 2012. instead of just looking at the big well-known names like simon property and others, we wanted to dive in deeper into the sector, like we like to do always here on "street signs." so we built a stock screener. here are the metrics that we used. we used u.s.-based office, industrial, residential or retail reits. i didn't want the mortgage reits for a specific reason. plus market cap more than $1 billion. you have to have a 90-day return of more than 10%. price-to-book got to be below 2. here's the kicker. your quarterly funds from operations per share growth has got to be more than 10%. what does that mean? reits tend to use funds from
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other operations than net income. it's specific to reits, but it's what you want to look at. so there are -- i ran this thing many times last night, folks. finally got down to just five names. and here they are. national retail properties. and i brought them out by yield. yielding 5.7%. pennsylvania real estate trust, pei, 4.87%. corporate office properties trust yielding 4. -- really 8.5%. wine garden realty investors, keep that name many mind yielding 4.5%. and retail investor opportunities with a great ticker, roic, return on invested capital, perhaps. this year maybe the dividend is about 4.3%. mandy, five names from our screener under the radar reits just for our viewers on this thursday. >> just for our viewers. it's always just for you guys. in the meantime go back to the houston based reit focusing on
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the retail space. the stock is up about 16% so far this year. let's bring in andrew alexander, president and ceo. drew, great of you to join us on "street signs." two of your three biggest tenants i believe are ross stores and t.j.maxx. ross stores have been doing very well. what is the quality of your stores in your retail portfolio? >> it's absolutely key. it's a pleasure to be here. and as i heard on cnbc early this morning, both ross and tjx as you mentioned reported very good comp store sales at about 8%. so that drives traffic to our properties, which helps our other tenants do well. keeps our occupancy high, our centers in demand. things are very good in the shopping center reit space these days. >> i would really like to know in terms of trying to get a pulse check on sort of small business tenants, mom and pop operations, how much essentially are you dealing with big national retailers and franchisees as opposed to the mom and pop stores, which have had difficulty getting financing
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in the current environment? >> well, we deal with everybody. we look at our portfolio, which is about 93.4% leased, which we're very pleased that we increased that occupancy from 93% at year end even with the first quarter typically being the time when a lot of tenants go bankrupt. we bifurcate that to about 90% leased and shop space about 86%, 87%. clearly we have some work to do on the shop tenant. we're very focused on that. we have a major initiative there we call a shop centric initiative. but we have lots of demand as well. a lot of service businesses, cleaners, edward jones offices, tax offices, dental clinics, emergency medical clinics, a lot of the quick service restaurants you talk about on your various shows, chipotle and panera bread. things are good. there's not a lot of new space being built. supermarket anchored centers are very recession resilient. our models continue to improve. and we look forward to a time --
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>> increase that occupancy. >> i have to jump in quick. you're lightning the it up, if not shutting it all together. are you that bullish on retail? >> i think it's function that the market has clearly spoken that they prefer pure play companies. we like the industrial business, but strategically we thought it made sense to get out of it. and focus on retail, which is what we know best. what we've been doing for 60 years. while it's a lit dilutive in the short run, we think it's right long-term. we'll reinvest with cities with good growth and barriers to entry in florida, california, texas, georgia and the washington, d.c., area. >> i've got a quick question for you. we've been talking about how rates are so low, record lows at the moment. you could arguably say it's a pretty good time to buy investment property as in the real deal. you know, bricks and mortar. tell me, drew, why would it be better to, for example, invest in a reit like yours as oppose today going and investing in the
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property itself? >> an excellent question. i think for several reasons. i think a public company in the reit format gives you incredible diversification. our properties are spread all over the country. our tenant base is extremely diversified. our largest tenant, kroger, is under 3% of our revenue. and you have a professional team of managers who are constantly looking at the assets. you also have liquidity that you can sell the stock at any time. >> okay. >> so while investing in real estate is great, there's tremendous advantages to the reit platform. >> understood. drew, thank you so much for joining us on the show. >> my pleasure. >> all right. on deck, forget disaster du jour. we've got, maybe, the disaster du decade. it's not rim. in fact, the blackberry maker believe it or not is higher over the last tenst t years. but there are two tech titans down triple digits over that span. can you guess who they are? we're going to reveal the names on our mystery charts coming up. >> you know, you're upping the ante here. we'll have to do a disaster du
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millennia. the super rich are in the home buying mood. up next we take you inside the megamansions they are craving. "street signs" back in two. >> announcer: before we head to break, here's today's return on retirement. according to a recent survey, it appears americans of all ages are becoming more risk averse when it comes to preparing for retirement. so what percent of american workers consider protecting retirement assets more important than growing them? the answer when we return. i have three daughters and my son, and then i have eleven grandkids. right when you see them, they're yours, it's like, ah, it's part of me. it's me again. now that i'm retiring they all have plans for me. i'm excited.
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in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store, whatever else that i need to do -- still don't have to use gas. i'm never at the gas station unless i want some coffee. it's the best thing ever. as a matter of fact, i'm taking my savings so that i can go to hawaii. ♪
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>> announcer: today's return on retirement question. what percent of americans consider protecting retirement assets more important than growing them? the answer, 35%. according to charles scwab's
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rekrebt survey, only 8% considered growing assets the top priority for retirement. for more on retirement, go to
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this half and i like free choice and at the same time, we're shown that. we're making bad decisions. hundreds of billions of dollars a year. don't we have to do something. you know, there's a whole new policy and responsibility. it was personal irresponsibility that got everyone to be overweight and it's going to take personal responsibility for everyone to lose it. here's the problem. mayor bloomberg's proposal is the opposite of personal responsibility. >> he's making a size limit 16 ounces. you can refill it and without personal responsibility, as long as somebody else is picking up the tab for your freedom, then that means that we're subsidizing that. we're paying for it. >> our viewers, at least 74% of
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our viewers say that this is bloomberg going too far. i want to ask you, maybe this is all moot anyway. a tax on sodas, using food stamps, he fails. >> no. he just hasn't succeeded yet. big beverage is really ugly. it's a state of new york to take the company out of the state of new york if they pass any taxes on soda. big beverage plays birth tdirty. >> if you want to pay more for soda -- >> guys, just a last comment. if you don't agree with a tax on satisfied da, should we have a tax on bmi health care? because it's making us bankrupt. it's making us bankrupt. health care is making us bankrupt. $3,000 more per year for an over
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overweight worker. somebody has to pay for it. >> the bottom line is, the government has never come up with a way for americans to lose weight. it can be solved by going on a walk and eating a little less. >> we can all agree on that. >> it gets people's blood flowing, doesn't it? >> great fight. yeah. >> thanks for watching street signs. i'm going to walk around the building 75,000 times. >> "closing bell" is coming up next.
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