tv Closing Bell CNBC May 31, 2012 3:00pm-4:00pm EDT
>> announcer: a rocky month on wall street comes to an end. should investors play it safe in june or is this a buying opportunity? plus, morgan stanley's chairman and ceo james dorma talks exclusively with maria about the facebook fallout and what is next for the banking industry. it's all ahead on this special edition of the "closing bell." >> hi, everybody. welcome to the "closing bell." i'm maria bartiromo coming to you right from the source of where the action has been. in the middle of the morgan stanley trading floor here in new york city, bill. >> and i'm bill griffeth. a lot of buzz about what will come out of that interview, especially the fallout from the
facebook ipo fiasco. facebook falling again today, maria. >> that's correct. that's why we wanted to come to you direct from the trading floor. what are the ram my if i indications of that falling from the $38 pricing. we're going to talk to james gorman coming up on the program. also, we'll talk about the retail investor and the announcement that they will buy 14% of smith barney. a lot to cover. we'll get into europe and, of course, get into the possibility of a downgrade from moodys. >> a lot is going on in washington, especially the concerns about falling off that fiscal cliff at the end of the year with the tax breaks scheduled to go away. >> we have a hot show coming your way for sure. >> exactly. >> no matter what happens in this final hour, it will be a bad month for stocks either way.
we are on track for the worst month for the dow and nasdaq in two years. and the s&p 500 is on track for its worst month since september. a lot of mixed signals on a bailout loan. very mixed signals on that front. it's moved at 12,425. nasdaq down 13 after a sharp selloff this morning. s&p is down two points at 1310. maria? >> of course, bill, let's get a check on the stock that we will be focusing on with mr. gore man and that is facebook. once again, we're looking at more sellers. the stock is down another 4%. i'll be talking about what went wrong and why it was priced alt $38 a share. how he envisions this story playing out. an exclusive interview coming up on the "closing bell."
a lot to talk about. the lead underwriter of facebook. for most investors, it's good rid dance for the month of may. take a look at the major indices. it's been anything but a good month for the bulls. rebecca patterson, cnbc contributor, larry glazer and mary thompson and rick santelli joining us. thank you for joining us. rebecca, let me kick this off with you. a lot of action in asset classes. >> the hope that the imf might come and help spain. i think we're a way from clarity with europe from a long shot. the hope that the calvary is coming back like we saw with the ecb in december and earlier this year, i think central banks in general are helping to limit the downside. i think the bigger question is just what's the catalyst to get
us up again? we need better economic data, greece resolved. i don't see any of that happening in the short term. >> larry, maria was saying, or i was, i guess, the nasdaq down the worst month in two years. you think the markets held up in may? >> when we look back on may, i think what we're really saying is how resilient the markets are in the face of such horrendous economic news. when you look at that, what the market is saying, investors are uning out of safe havens and number two, so much of the bad news is priced in. greece has been on the front page for two years. it's already news already. >> news, rebecca, you call that noise, right? the u.s. continues to be mixed and that gets investors nervous
about committing. the u.s. is still doing okay. we have housing that at least is bumping along the bottom instead of going down. oil prices and retail gasoline prices going down. a huge plus for the consumer, easygoing into the summer. still very easy fed. look at ten-year yields today. it's not great but given all of the external teas that we're facing, we are still okay. >> goldman sachs came out with a ten-year yield at 2%, not 2.5%. we could be at the end of 1%, huh? >> what it tells me is our guests are going to find something that glitters because they are in the business of trading in one form of another and as far as goldman, it's a lot like the fed research. they are catching up. they are catching up. i certainly look for 156 yield and that's where we sit at now and that's three basis points
off the best yields of the day. let's put up a chart of corporate profits. down 44%. that's not so good. you have to go back to the crash times and credit crisis in '08 to find a worst month over month percentage change. >> let me follow up on that, rick. i thought it was really extraordinary that 55% of the s&p 500 companies now have a higher yield than the ten year. i don't know when the last time you saw a number like that was. when you're talking about -- >> hold on, maria. the 30-year bond right now is up more on the year than the s&p futures. about 4 1/3%. we could go either way on that one. >> what are you looking at today, mary thompson? >> i was speaking to one strategist who said that's the reason to buy the markets because of the yield that investors will receive but this
is what investors are reacting to as a result the market is likely to stay in a trading range until there is some resolution, given that the economic data here in the u.s. is weakening. may was bad, maybe we put in a bottom. right now the outlook for june is not much better you can catch rebecca at 5:30 p.m. eastern time tomorrow on cnbc and go to cnbc.com for our story on whether the rising u.s. dollar could be setting up a prime buying opportunity for grains, energy, even gold at these levels, maria? >> we are coming to you live from the trading floor in mid-town manhattan.
as much as 30 to $30 billion in trades takes place right here. this is the source. revenues for morgan stanley increased in 2011 the investment banking arm has gotten the most attention and in fact morgan was marked number one in globals and we'll talk about the facebook ipo. a lot more in my exclusive interview of morgan stanley. james gorman is join us later. you'll want to hear what he has to say about the deal. right now we want to focus on the final hour of trading. portfolio rebalancing going on as i speak among global funds and pension funds on the last day of the month and those
tracking the moves is for the americas john pacey. good to see you again. >> hi. thank you. >> it's good to be back. we appreciate you having us in the middle of all of this talk about the face boong deal. >> we have a semiannual small s&p changes and there is a month-end curve ball. so what i would anticipate is volumes increasing about 30% in the next hour of trading. >> that's what i was going to say. what kind of implications do we see with all of this rebalance? you're expecting volume to be up
30%. they do pick up significantly and and we're going to see highlights from consumer discretionary, financials led us higher today and technology. and funding that trade will be energy, consumer staples, and health care. >> this is really good info. thank you for that. i want to point out to our viewers. we checked facebook's stock and it's trading higher right now. it was lower earlier. we'll talk about james gorman coming up later in the program but you're expecting some groups to shift out of this. you expect that they are going to sell things like energy, moving out of things like financials and into -- where are you seeing this in the are rebalance? >> it's a global rebalance worldwide. it's $1.6 billion of u.s. flows
and individual names will be heavily weighted. >> thank you so much. >> we're in the final stretch here. real big market moves. facebook is one stock that we're focusing on. the financials, once again very much in front and center here as well as technology. >> we were talking to a trader on the floor about the morgan stanley rebalancing and it's going to add to the volume in the next hour. we'll keep an eye on that. the dow is up 19 points. we've been all over the place. anything is possible, maria. >> it shoour is. this is a huge show today. you do not want to miss a minute of. >> announcer: still ahead, the exclusive interview everybody is waiting for. maria's one on one with morgan stanley chairman and ceo, james gorman. his firm in the heart of the facebook fallout storm. now for the first time on television, the lead underwriter ceo responds to the criticism his firm is taking about the
welcome back to the program. we're live at morgan stanley's trading floor. a quick check of the dow. the dow industrial is on pace for the biggest monthly decline in two years. it's been a tough month in may. the international monetary fund is putting together a contingency plan for spain. the imf says it's a normal part of the business. right now, as you can see, hitting a four-year high and moving into telecoms on the last
day of the month, you heard earlier the rebalancing going on we've had a tough month in terms of most major sectors. over to you. >> not many were positive. the dow is down 6%. look at some of the other indicators that we follow for the month. the yield on that ten-year note, down 18% for the month to 1.56%. a new low for the ten-year yield and then the price of oil in new york down 6%. it's down at $86.66. we started the month around $100, as a matter of fact. joining me right now is michael shay from direct access
partners. can we have another month like this in june? >> i think there's a great likelihood that we will. we will have a lot of choppiness because we're going to see a lot of comment out of europe. >> still? >> even today. even today where we end up digesting what is going on over there. we are going to push back and every common we get out of here, it's going to shake the market a little. >> do we not pay attention to housing, then, and jobs? it's a big market mover. >> it's interesting. this morning i would have thought we would have hit the trifecta of lousy news. they had virtually every economic indicator that came out was not good. and we actually have a strong dollar. >> sounds like a great time to
buy and there are a lot of people waiting. i don't know if this is the moment but we start it on monday if we get funky and greet election is not until the 17th of the month. >> not a chance. not a chance. and it's like going to a college football game. you don't know who is coming out on the field. we don't know who is going to make the comment tomorrow or monday or tuesday. >> i will say, we pointed out earlier that we have a comeback for the markets on word that the imf was in talk to put a bailout package for spain together. spain's own finance minister
said that was nonsense. there was going to be no bailout for the imf and the markets didn't do much for that. there is something going on behind the scenes right now. >> you know, actually, we did get the rally -- the news came out that they were putting together a contingency plan. that was one of the pieces of news that took this market off the lows about 11:00 or so and then the imf came out and said, wait a minute, we want to be clear. we're not talking with any spanish officials. we're doing this in-house. >> michael, thanks. >> my pleasure. we're heading towards the close. the dow is up 21 points as we try and close out what has been a tough month for the bulls, maria. >> sure has. and it's going to get tougher in terms of the economy in the u.s. if this fiscal cliff materializes. as america heads closer to that fiscal cliff, political system getting more toxic? take a look at this. >> you can't handle the truth, my friends.
that's the problem. you can handle the truth? then quiet down. >> so will anything get done to solve america's fiscal mess in this environment? paul ryan is ahead in an exclusive interview coming your way. >> john's media is taking over xmsirius radio. the exclusive that everyone wants to hear from, jim gorman coming up in just a little bit. we have it coming p on the "closing bell." stay tuned.
. we are ending what has been a dismal month for stocks. the worst performing stock in the month of may. on this last day of may, energy is taking the lead. it's the worst performing sector with a decline of some 7%. it's largely because the price of the wti crude oil has fallen 17% this month. a lot of people, bill, might say that's a positive for the overall economy. >> yes, they just might. it's like a tax cut. that's what that is all about. thanks, maria. we're going to talk about
sirius xm satellite radio. trying to buy a controlling interest in this satellite radio firm, if john malone likes it, should you buy it at these levels? we have carter worth at oppenheimer. i'm going to start with you. the subscriber transaction that he hoped to have by this time, john malone sees some value there. do you at this point? >> i totally disagree with this there are 22 million subscribers right now. it's a very good business. it's like cable in the 1970s. 40 million cars on the road with it, going to 140 over the next ten years. they are double their ebitda and trending at an 8% free cash flow yield and it's a tok you have to
own and i think the selloff has been prompted by the liberty bid. it's a great entry opportunity. >> let's start with the selloff, carter. would you buy it at these levels right now? >> we're not particularly sanguine on this one. it's not exactly and right now and at the 250 level, in terms of the lon der term chart, it's not random where it happens. and now there's a chance to get the money back. a lot of unhappy people who have sold into this and we're hovering precariously on this trend line here and we say, leave this alone. >> all right. keep an eye on that. we'll see whether john can get
control of it or not. thank you for joining us today on talking numbers. maria? >> bill, we're in the final stretch. 30 minutes before the "closing bell" sounds on the day. the market is improving here. dow jones industrial up. even if the month of may was a tough one for the bulls. up next, will anything get done by lawmakers to prevent the largest tax increase in american history? we'll talk about paul ryan next. he's got an exclusive with us coming up. will jpmorgan's trading loss lead to more regulation? we'll talk to morgan stanley james gorman in an exclusive interview coming to you live from morgan's trading desk. we'll talk about the role in the facebook mess as well. america anxiously awaits the jobs report. whether you think the number is a surprise to the upside or downside. send us a tweet and we'll reveal your answers later on in the program. back in a moment with a busy
been an overall disaster for the bulls. dow losing roughly 6% this month and even if the blue chip average were to close higher today, it would still have declined 16 days this month. that's the most down days for the month of may since 1956, a year near and dear to my heart. if the dow gives back today's modest gains, it will post five up days tieing a record that goes back to june 1969. for those of you at home keeping score, maria. >> and we are, bill. thank you so much. as we approach the close, pretty good moves here. meanwhile, the fiscal cliff is the talk of the town in washington. if my next guest had his way, the talk would be on fiscal discipline. paul ryan has a budget plan that would lead america out of the fiscal crisis, he says. but not everybody is buying it. paul krugman criticized ryan and
romney as fake deficit hawks cutting social programs while pushing tax cuts for the rich. paul joins me exclusively from washington. mr. chairman, it's good to have you on the program. >> how are you doing, maria? >> let's get right into it. bill dudley this week says that the fiscal cliff in action could bring us into recession once again. do you agree? >> yes, i do agree. that's why we've been trying to fix this problem before it gets out of control. we've tried to get economic growth through tax reform and get our debt and deficit under control before entitle reform and spending cuts. we want to pre-empt the debt crisis. we agree that it's coming. it's obvious. unfortunately the senate has chosen not to pass a budget. the president hasn't proposed a single solution in any of the four budget submissions that he sent to congress. >> you know t. almost seems that the people will buy into
something even if it does include hard cuts because at this stage of the game, we all know what we are facing. >> yes. >> we're talking about a $15 trillion debt and the deficit that we talk about all the time. so let me get your take on this. i mean where, is the leadership in terms of, look, here's what we're facing at the end of the year. we need to come together. are you expecting the two sides to come together before the november election? because if you don't before the november election, you're talking about, what, november and december before these tax cuts as well as the spending expires. >> well, we can act and that's what we're doing in the house. the president and the senate have chosen to do nothing. we've passed our reconciliation bill, and next month in july we're going to pass our tax bill showing exactly how we propose to deal with this tax issue coming at the end of the year. we in the house will act. unfortunately, the senate and the house have chosen not to act
and if we have it our way, we will extend everything into the 2013 session and fundamentally and permanently fix this mess. mit rom has knee has proposed the kind of solutions that we're talking about. we don't have to have austerity yet. we can pre-empt it with tax reform and get kmieconomic grow turned back on. if we miss this opportunity, the next session in congress, we will have austerity and it will be rounds of austerity, benefit cuts for seniors, that's what we're trying to avoid and that's what our budget does and we're acting by passing these bills and unfortunately we don't have partners on the other side of the bill to respond with any actions of their own. >> i want to talk about the budget because it was criticized. before that, let me get your
take on this. you just said you are prepared to agree to extend the period to actually look at this? >> yeah. >> what you're saying is, you're saying is you won't take r make a change on the tax cuts and spending? >> we're going to pass those bills showing how we're p preventing this cliff from occurring in january. we passed one a few weeks ago. we're going to pass another one dealing with the taxes in july. so we will show the country precisely what we're proposing to do to avoid this kind of cliff from happening so that people can plan their businesses and lives accordingly and in 2013 with the right leadership in place, with a senate willing to budget, we want to put in place the entitlement reforms and tax reforms to get back to growth, to get these entitlements under control and do it so that people near retirement don't have severe
disruptions in their lives. we can still do that. if we miss this opportunity, it's going to be a european austerity crisis. that's what we see coming. >> we should also take note of the fact that everybody is watching this from main street to wall street. the mark kits could get impacted as well, particularly if we went from the 15% all the way up to 43%. a lot of people expect a big market disruption. having said that, in an op ed this week, peter said while it's true that the republican budget plan put forth earlier this year by paul ryan would theoretically get us below the 20% of gdp threshold by 2040, the heart of the ryan plan it s to put caps on key types of spending and hope for the best. what's your reaction to that? >> well, first of all, you
obviously didn't read our budget and we do put caps on spending. that's important. we put the key fundamental entitlement changes in our budget. we propose medicaid reforms. we propose dealing with the drivers of our debt, which are these health care entitlement programs. everyone has seen us push off the cliff so they know that we are taking action on these key fundamental entitlement reforms. we're proposing the driver of the debt be reformed and then enforce that with the caps on top of that. what peter doesn't mention is, in addition to these caps on spending, we have the reforms underneath them that actually change the law which is the driver of our debt and that is what our congressional budget office will show you that we are getting debt under control and prevent a debt crisis in this country and prevent the debt from ever getting to the dangerous levels which trigger a bond market run and give us a dollar crisis. >> let me switch gears and let
me ask you about big government versus small government. you talk about it getting bigger and bigger. was the big talker today, especially in new york, mayor bloomberg's plan. is he moving to ban high sugar drinks to combat obesity. you can't have a huge soda if bloomberg had his way, especially considering the government's bigger role in our health care, what do you think about this? >> i gave up pop three years for lent. it's up to you. do what you want with your life. we believe in economic freedom. we believe in individual freedom. and so we don't want a nanny state. we don't want a government micromanaging your life and we don't want a government micromanaging our energy sector, our health care sector, you end up having big business joining a common cause to wreck barriers against entrepreneurs and
against families. that doesn't want work. if you want to see how that story goes, look at europe. we believe in limited government and we have a safety net that is there for people who cannot help themselves and for people who are down on their luck to, help them get back on their feet. that's what our budget seeks to do. >> and, of course, the soda thing, bloomberg saying you can't have 16 ounces or more. they are basically saying, you can have soda but not a lot of it. >> and by the way, on the other side of the coin, you just mentioned we don't want big government involved in financial services and this and that. but don't you -- doesn't that fly in the face of, oh, god, we just had this huge trading loss and now everybody is worried about what that is going do to the bank, it could be a $5 billion loss coming out of jpmorgan. does that point to more
regulation or less regulation as needed? >> a couple of things. it's their money that they lost. it's not taxpayer money. number two, what dodd frank does is it amplifies too big to fail. the regulators didn't see this coming. let's have a good debate about the proper capital reserve ratios. that's really important. the proper roles for sectors in the economy. but let's get rid of this too big to fail doctrine which is cot fied in dodd-frank which will result in a handful of really large banks to so the big banks get bigger and the small banks get fewer. this will stack the deck for more bailouts. that's the wrong direction to go. >> congressman, thanks for being on the program. >> you bet. >> thank you very much. bill, over to you. >> you know, i will say morgan stanley rebalancing that you talked about a while ago seems
to be having an impact on the markets. volume has picked up appreciably. the rebalancing that you talked about earlier, i think it's clear it's under way right now. >> and earlier you heard that volume is going to increase 30%. that's what we're seeing happening right now. it's getting busy down here as well as wall street. my next guest says it will take longer for the mess that is happening in europe. and for the first time on television since the social media giant went public, james gorman.
nasdaq lower in may. closing lower by nearly 7%. meanwhile, facebook shows signs of life late today. the stock was down another 4% earlier in the session. it has come back, as you can see, in the last hour or so. but if you're paying attention, you know that it is still down 25% roughly since going public less than two weeks ago, maria. >> bill, thank you so much. we're coming to you today from morgan stanley. this is a special edition of the "closing bell" live in mid-town manhattan. the international monetary fund downplaying reports that it with held a contingency plan to bail out spain. they cut their losses and it's clearly a sign that europe's troubles are still playing a major role in what happened in the markets in the united states. joining me with his thoughts is co-president of insurance institutional securities for morgan stanley. he's the head of the mid-east africa and asia pacific business. good to see you again.
>> good to see you. >> thank you for joining us. you've got a lot on your plate these days. i realize that. later we're going to talk about facebook with james gorman. give us your take on imf in terms of the imf bailing out spain. do you believe it will play out this way? >> well, spain has strong links with the imf. i think what is happening here is that there is a push and bull between countries that want, in addition to fiscal austerity, some looseness and spending in order to boost consumption and so on. and the germans clearly are holding very fast about what needs to be done. so the imf coming in has probably a good way of breaking some kind of road block. >> so you think it will happen? >> i think the imf is very concerned about the systemic risk and the interconnectiveness in the euro zone issue. >> do you think greece leaves
the euro ultimately? what does that mean for the rest of the group? how does that impact the markets? >> i think the central case is that greece holds in but there's a nontrivial chance, one in three, that greece may elect to leave the euro zone. remember, you can't be expelled under the treaty. you have to be encouraged. if greece leaves, the interconnectiveness is huge. number two, europe will still have a humanitarian issue in greece with the greece that will fall into serious decay, people being displaced and so on. so there will probably be some rescheduling of debts and so on. the other big problem with greece, if it goes, is that you will have a run on the banks. certainly within greece. and that will have massive contagion into europe z are we already seeing the greeks take money out of greece and put it into the deutsch banks of the
world? >> well, we're certainly seeing greece take money out of the banks. retail deposits are coming down as well. i suspect there's more going on under the mattress than going elsewhere. the corporate deposits have been reallocated but europe is staying in good old cash. >> i feel like people are doing that here for a number of reasons. you've got the ten-year now so low. 55% of the s a&p 500 are zero percent? >> the two-year traded at 2%. we're seeing that significantly impacting activity. >> do you worry that the retail investor is gone? first we had what happened with the flash crash and then a market that they felt that they were just not participating in.
of course, then you have facebook. what are you seeing in terms of the retail investor today? >> well, the retail investor is slowing down, without a doubt. but i do not believe that there's a secular change. i believe it's cyclical with big present day problems, savings pools, savings for retirement, particularly the failure of states to provide. i think you'll see continued activity by investors once we come through the cyclical challenge. >> and where are you seeing the flow in terms of money moving? what areas in terms of big investors putting money to work? >> well, really we're seeing -- if we're seeing flow, we're seeing it on selloffs. we have crisis and then resolution. the good time to buy is at the height of the crisis where you know the resolution is about to happen and people are going to be trading that. the u.s. market continues to be relatively buoyant compared to
europe. >> good to have you on the program. thank you very much. over to you, bill. >> things are cooling off, maria. the dow is coming well off the highs. the gain of 27 points. we'll keep an eye on this. coming up, my interview with james gorman minutes away from the firm's european exposure to the facebook ipo fallout. we'll cover it all at 4:00 p.m. exclusive in an interview with james gorman. back in a moment.
positive for the month. they were walmart, disney, and verizon. so very consumery kind of stocks. analysts did well. walmart up 12.9% in the period. they had a pretty good month. >> yeah, they really did. and also these companies have in common that they paid dividends. >> yep. >> they have certainly been in focus. i also want to point out some of the losers year to date we're at the morgan stanley trading desk. morgan is actually the third worst performer within the s&p 500 year to date followed by nasdaq. of course, we're coming up and talking with james gorman, the chairman and ceo about the facebook deal. there's a lot of finger pointing going on. when you look at morgan shares, it's also had a tough month of may. down a percent or so. we're looking at a pretty good rally today but you know that this stock has done an
about-face for the month of may for this chart here. >> let's look at facebook. it was down 4% earlier today and it's turned around big time. now it's up 3.6%, 3.7%. this is interestingly one of the best performance days they've had since they came public two weeks ago. >> that's right. having said that, they priced it at $38 a share. we're sitting at $29 a share. talking about a 23% decline here, valuation now around $61 billion or so after pricing at 104 billion in terms of market value. lots of volatility there. interesting to see a real reversal at the end of the month for facebook. >> so you've never been to jcpenney. have you been to a kohl's? >> i'm sorry. if you weren't with us yesterday, you missed a good one. any way, we're taking a break. we'll come back with the closing countdown. >> okay. tomorrow's may jobs report jump starts this market or threaten
okay. final two minutes. the worst percentage losses in two years. volatility jumped by 47%. it got pretty quiet for a while in the early part of the springtime but volatility is back, the biggest increase since last july. these are the sector performers for the month. telecom did the best among the tep sectors. utilities came back. look at the worst performers of the ten. energy was at the bottom there. i want to bring in rebecca patterson. as energy goes, so does the stock market. what would you buy, though, for the month of june going into next month? >> i think for june we still have a lot of unresolved issues. we're going to want to see where the fed is in terms of more
easing if the economy warrants it. i want to be defensive. looking at the high dividend equities, especially the ones that have lagged year to date and how much further does oil fall from here? at a certain point the producers don't want it much lower. >> producers don't but i keep hearing $75 could be the next big support level for the price of crude oil in new york. >> if i saw that, i would probably be recommending clients to think about buying, honestly. >> you're not there yet? >> we are not there yet but that would be extreme. >> telecom, that was the best performer. like it here? >> yeah. i'm not sure about telecom. tech is firms tied to mobility. that's a big theme to