tv Street Signs CNBC June 4, 2012 2:00pm-3:00pm EDT
>> all right. we will watch those going into the close. we'll see whether or not we can better our position. that does it for "power lunch." "street signs" begins right now. see you later, simon. and welcome to "street signs." where rainy days and mondays are getting us down. but to paraphrase yogi ber ra, it feels like deja vu all over again. we're going to make the case why this could be a good thing for your money. does corporate america need to shut up, stop lending washington and step up and take back the economic dialogue? we'll debate if washington should render itself irrelevant. and is the solution to our massive debt to just add more debt? and an artful way to invest in this oh, so abstract world, mandy. >> very abstract indeed. the stock market june swoon continues. major averages are down for a fourth straight day.
the four-day drop about 4%. the s&p 500 lost about 4.5% over four days. but unlike the dow, it is still positive for the year. well, the nasdaq is down nearly 5% over four sessions. all three averages it's the worst four-day drop since november of last year. brian. >> all right, mandy. thanks very much. we know the painful stats. man di just gave you some. we know how bad of a may it was. you can put in your sort of timeline here. but here's what we want to show you because maybe we have been here before. and maybe it's not just a bad thing. all right. first off here's what we've done, we've got three brightly colored lines on this chart. all three brightly colored lines reflect a different year, 2010, 2011 and this year as well. and you can see really from the beginning of the year into where we are right now, the markets track pretty along the same lines, right? with the exception of a couple drops here and there, we look pretty dog on similar because we pretty much had may swoon all
three years. with a dip in summer. and the last two years, not huge rallies last year, but in 2010 we had a decent gain. 2011 ended pretty much flat. but we didn't continue to drop. that is the point. the question is, and this is the first question of two, does this mean, given that the charts look the same, that we will do the same thing this year as we've done the year before? little summer swoon followed by a fall rally. the other issue is, number two, valuations. okay. maybe we've been here before from a chart perspective, but we may not have been here before from a valuation perspective. case and point, on this day two years ago the s&p 500 traded at a 15.8 multiple for price-to-earnings. 15.8 on the s&p. last year on this time on this very day, it was 16.6. today we are at 14.6 times. in other words, the s&p 500 today is trading at a -- two
points less on a p/e basis than it did this time last year, mandy. the question becomes then, are stocks cheap or will earnings take a tank and make that number go up? i don't know the answer, but maybe our guests do. >> maybe they do. that's why we've got them here. we've been here before, but does that mean the markets are indeed cheap and signal a huge buying opportunity? joining us director of investment strategy at glenn meade. and jason international associate of har ra's. is there something different this time around? >> look, we definitely see there's a mirror sort of image here versus past years. we've been basically saying this is a slow growth low rate recovery that we've been going through, which means we're going to have sub par growth to the period. but we're also going to see oscillations back and forth between what appears to be
normal growth but then all of a sudden deflationary scares again. we are entering -- we're right now entering one of those deflationary scares. it will probably again last through the summer. it's hard to tell exactly how hard it will be. and much of it is very much dependent upon policy. but it seems very similar to what we've seen before. >> all right, david. good to see you, man. thanks for coming on. i don't know if my piece made sense. i was trying to show from a chart perspective we look similar, at a valuation perspecti perspective, we're trading at a discount. that's the u.s. i know you're focused mostly international. do you see as a whole macro right now stocks being inexpensive? >> i think we will look back three, five, ten years from this moment of time and say this was a tremendous opportunity to increase equities to one's portfolio of investment holdings. by any measure of the spread between stocks and bonds is huge. in the meantime despite the macro economic disturbances, despite the political fears, the
global economy keeps marching to moderate growth. i mean, the united states we're seeing it. china, yes, it's slower but it's still going to grow at 7.5%, 8%. japan, the world's third largest economy is growing at 3%. even the european largest economy, germany, is growing. so, yes, there are these issues out here. my argument, and i would assert that these issues are more than reflected in share prices. >> uh-huh. >> companies are simply entities that generate free cash over time. and that price of that company should be dependent on the free cash flow stream that it generates or that it is capable of generating. prices have been hit dramatically. and those long-term cash flow streams i would argue have not been hit. thereby giving us an opportunity. >> you certainly sound like the glass half full kind of guy, david. i mean, jason, those feeling a little glass half empty starting to point their finger at the fed and saying maybe this should
sharpen the debate about whether or not we need some more stimulation. what do you think? do you think qe-3 is something back on the table here? >> i personally don't think that is the answer to what ails the macro economy. what ails the macro economy is confidence and political stability and policy stability and policies that make sense. so the agents in the economy can invest then to grow profitably. the problem is our system lacks that. we see what's happening in europe. and that stuns confidence. we see what's happening in the united states. this whole notion with the fiscal cliff and budget deficits. >> uh-huh. >> so what i think we really need from a policy perspective is not more stimulation, but more policy that introduces confidence. >> like what, david? give us an example. we're going to argue in the next block why doesn't corporate america just render d.c. irrelevant? we keep waiting for something to happen in washington. just forget d.c. and move on. >> and the good news is to some
degree the consumer's doing this. if you look at auto sales as an example, look at the sales of bmw and mercedes cars. despite all this fear in the last year, these things just keep marching up. but here's the problem, brian. the problem is at the end of this year people aren't going to know what tax rates are starting january 1st. >> uh-huh. >> and, you know, they can wait to the lame duck session after november, but if you're a business and you're trying to plan and you're trying to think about capital expenditures and hiring and resource allocation. >> right. >> at least you should know what your health care costs are going to be, so on and so forth. >> we'll talk more about it later in the show. jason, let me bring it back to you. what do you do as an investor, as brian was saying we've been here before, we've been through a swoon the last couple summers. if indeed this is the case this time around, do we buy now? do we wait for things to get cheaper? >> i don't think it's as black and white as what david's making an argument for. i agree from a long-term
perspective equities look like considerably the better deal. the reality is investors have to bear risk to that. there are a lot of uncertaintys that could cause significant swings on a near-term basis. the risk adjusted approach is actually to stay in the middle of the risk spectrum. that's not going all the way on one end of the spectrum and buying equities, but that's also not hiding in cash and treasuries basically guaranteed nearly to underperform inflation for the next ten years. it's actually better to be in things in the middle. that's higher quality equities on one side and more risk taking and fixed income on the other side. >> are you quoting the january brady stock market right now? is that what this is? what do you mean in the middle? >> defensive equities. you're getting the long-term play of equities, but your more stable companies, dividend growth companies, on fixed income, we think high yield is a very interesting alternative. provides very attractive competitive returns to equities yet half the risk. >> okay. jason, david, thank you very
much for kicking off our show. in the meantime, let's check back in as to what's happening down on the floor of the nyse. mary thompson, what are you hearing right now? >> same story as friday, mandy, weak pressure on the markets right now. the dow jones industrial average down about 54 points in the wake of a disappointing number on april factory orders and some disappointing readings on manufacturing in the new york state area. you can see the markets off the lows of today. but take a look at some of the companies that are under pressure from the news of those weak factory orders, specifically the machinery companies, companies that make heavy equipment, et cetera. all of them under pressure in today's session. the s&p 500 continuing its slide as well. of course friday breaking below it's 200-day moving average. today breaking below near-term support at 1275. 1250 is the next level a number of technicians are looking for there. what are the groups pacing the decline in the s&p today? some familiar names. industrials, financials, materials as well as energy among the weaker groups. one bright spot is retail index.
it's been trading pretty much above the flat line for most of today's session. all of this ahead of the earnings we're expecting from dollar tree, that comes after the close today. and as you can take a look some of the retailers moving to the plus side today, that includes some discounters including dollar tree and of course walmart, the dow component. home depot higher as well along with rite aid, drugstore companies strong today and buckle, the teen retailer. back to you, brian. >> mary, thank you very much. s&p 500 companies have -- wait for it, $1.2 trillion in cash sitting around. and everybody's blaming washington for our problems. up next, we will debate whether corporate america needs to shut up, step up and get down to business. >> and also as we careen towards that fiscal cliff we were just talking about, is it time to double down on our debt? that's all ahead on "street signs" after this quick break. stay around.
welcome back to "street signs." we are watching the fertilizer makers today taking a little bit of a hit. of course money is coming out of the commodities space, but especially some of the riskier ones as perceived by investors. look at potash and mosaic near 22-month lows. cf industries also feeling the heat today. brian. >> jackie, thank you very much. well, friday's jobs report was nothing short of awful. and more and more people and pun dants are blaming d.c. for the lack of jobs. with more than $1 trillion in cash on corporate balance sheets, why can't corporate america put d.c. in the rearview mirror and take back the economic dialogue?
in other words, like we said going into the break, shut up, step up, get down to business without washington. well, let us ask bill george as well as john allison, former chairman and ceo of bbnt. john, you know, after the jobs report came out and then you saw romney take advantage of it, the president came out, the pund ents, twitter, everything started to blow up. when are we going to ignore washington and people can do what they want and d.c. becomes less and less relevant to our economic life. is that possible? >> i wish it were. i think that public policy in washington has done a tremendous damage to our economy. but if you're a business leader, you have to make long-term decisions. and you're making those long-term investments in the context of public policy. and any intelligent business leader can look forward and say, wow, we have a real fiscal mess in the u.s. and we don't have any meaningful solution. in fact, the current administration's solution is kind of a disaster from a business perspective.
so it's not surprising that business people are cautious. it's interesting, if you actually look at the numbers, the more cautious ones are small businesses, not big business. bb&t is a small business lender, if you look at lack of job creation, it's mostly in small business. i talk to a lot of small business owners and they're making the same decision. i'm getting by. my business is okay. i'm not willing to invest until i'm not only more certain, but i'm also cin we aren't going to have some of the solutions that are so bad for my company in the long-term. >> you can certainly understand the cautiousness of small businesses. bill, you talk to a lot of large employers and large ceos, what are they saying? do you feel maybe they're using dysfunction at d.c. as an excuse not to hire? >> i don't think it's an excuse. you have $1 trillion in cash trapped overseas. and if they could just have a repatriation or reduction, you don't have to have a holiday, you would see a lot of that money being re-invested in the u.s. leaders like alan at ford are
taking the lead in restoring u.s. auto industry to competitiveness. that's one area where the government helped out with gm and chrysler. i think that industry has come back to help. look at the oil and gas industry. take houston. people want to move out there, but they keep getting constrained. we can't get a pipeline in from canada because of the blockage on keystone. >> so regulation holding us back then. >> well, that's true. see a guy like jim rogers leading the energy industry in charlotte, north carolina. he'd like to make a lot of investments, but there's so much uncertainty on policy on nuclear and constraints straining people from making investments. go to northern california. look at all the burgeoning. a lot of people they want to hire get sent back to india or china. really simple things. these are not complex things. >> i hear you, bill. and, john, listen, that's fine. but there's a darn good chance that in six months we'll have the same situation we have now. maybe the change of the senate doesn't switch. we have 33 seats up for vote.
maybe it stays the same. maybe obama stays in, maybe romney stays in but the senate stays democrat. we could have this gridlock idiocy in d.c. for another four and a half years if not longer. what do we do? just wait? wait, wait, wait. at what point -- that's the point i'm trying to make. corporate america needs to say i'm just going to go forward with what we know today. you can't wait for change all the time. >> well, i think though if you're running a business, it's very difficult to do that because you have a fiduciary obligation to your shareholders. and you have to be able to be comfortable that your investments will make satisfactory returns. you can't ignore the context of the environment. and really to emphasize the regulatory attack on business. in my 40-year career i've never seen anything like it. it started with the banking industry, but it's across all industries. and that makes it very difficult to invest because you don't know what the next politically correct arena's going to be. i give you one example, the fed's been printing money like crazy and yet it hasn't turned
into actual growth in the economy largely because people don't want to borrow the money. and partly because what's happened, the regulators have tightened the lending standards radically. tighter than they've been in my 40-year career. so tom comes in and gets turned down for a loan, he goes and tells all his friends he got turned down and they're actually scared to come to the bank and makes them more conservative. but the banking regulators are playing a really destructive role. it's much worse -- we had a correction in the early '80s and early '90s. regulators overreacted then, but this time they're overreablgting -- >> bill, if you were still a ceo, would you be hiring now? >> yes, i would. and i'd be investing. i agree with john. but i also agree with brian. it's going to be four and a half years of gridlock whomever gets elected president i think you'll see gridlock. somehow we have to come to our rational senses and allow the growth industries to grow. i'm hoping we'll see more of that. meanwhile, i think the progressive business leaders are moving ahead. they're making the investments. and they're getting competitive.
we started a big competitiveness study at harvard business school working very dedicatedly on that not worrying about the government. let's get business really competitive in this country. i'll tell you, today a lot of manufacturing companies are coming back to the u.s. if you look at total cost, we're very competitive in terms of cost of energy and logistics. i think the u.s. is in a position to move forward, stop worrying about europe. the german mile is a great one. let's get back to fixing our own house. i think if -- like john says, let industry be freed up to do its thing, we'll create millions of jobs as we did under reagan and clinton. >> that's a great point. we just showed our viewers a great stat about revenue per employee according to "the wall street journal," it continues to soar. companies i understand will naturally hire when they can't squeeze anymore productivity out of an individual. are we close to that point? >> i think the opportunity's
there. i think with the right kind of view of the future at a macro level it would be amazing what would happen to our economy. we're making huge advances in technology. we have radically improved our cost structures, as bill just said. if we really had a free market, we would have almost no unemployment in the united states. it's a shame we're underutilizing this opportunity and that we need a different kind of leadership. >> uh-huh. okay. >> so the question is there on productive workers, it's not that we don't -- people are productive. they're becoming more and more competitive. with india, with china, with germany. and i think that's the key. if we can have our work force in this country be highly productive because we're investing in r & d, we can lead the world out of what is a lagging recession. >> bill and john, we have to leave it there. great conversation. thank you. >> and i would just quickly tag on what john said. he's right to a point. we need a different kind of leadership. i would argue we need
leadership. >> yeah. we need leadership. >> of any kind. just ahead on "street signs," herb, he's got such a deal for you. >> and an all you can eat sunshine stock all about meat in tube form. >> and later on, it's hard to follow that, the art of investing. is it time to hang up on this market and hang money on the wall? that's how a lot of us feel right now by the way. "the scream." ttd#: 1-800-345-2550 ttd#: 1-800-345-2550 let's talk about how some companies like to get between
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it ain't just facebook, my friends. two ugly charts for recent tech ipos, yelp down 3% today. just broke below 15 earlier. and that is for the first time since it began trading on march 2nd. then you've got tumi, not a tech company, a suitcase company. they fell below 15 earlier this morning as well. they've come back a little bit. still down about 6%. herb, you apparently have a deal for us. which is a mysterious tease. >> such a deal -- look, you could say this is the ultimate groupon on groupon. this stock is trading at all-time post ipo lows today. but the real story is that with
its low price, the stock has slipped below the $6 billion google had offered to buy the company in 2010. and last check groupon's market cap was around $5.75 billion, well below the $20 billion when the company started trading last november. all of this comes after friday's delayed post-ipo lockup expired when insiders could start selling 600 million shares. volume today so far is more than double, actually, the normal average daily. makes you wonder if things are really desperate over there at groupon. i'm not saying they are, but there is this latest groupon they're offering one that brian sullivan will absolutely love. for $100, groupon employee will tuck you into bed. the value is $100. before i came on air the groupon site said only two people had bought it. the good news is, three days left to buy. and there is limited availability. >> of all the things they could have offered. going to tuck you into bed?
>> it's not only tuck you into bed, he will immediately begin to analyze your linen seams and pillow placement. >> i would like to ask you as well, how much of this -- >> is that trespassing? >> is it trespassing? by the way, a lot of people wondering whether it was true. they have an faq on the site saying, yes, it is true. what did you want to ask? >> i wanted to ask how much of the decline in groupon is also attributed to perhaps the facebook fallout, the general souring towards the social media space. >> i think the groupon fallout started long before facebook. it was once this company went public it was down. look at that chart. and even with earnings that actually came in surprising people on the upside, it's still going down. >> hey, sleepy, have you ever purchased a groupon? >> no. because i don't need, as jim cramer would say, a manicure. >> have you ever purchased a groupon because you do need manicures? >> i have never purchase add groupon.
i look at the deals. think that's great. but i don't do it. >> i unsubscribed because all the stuff coming in, who needed it? >> like the reply all button in corporate america. thanks goes to 10,000 people. >> as people who know this business, people getting rich off groupons are the people selling groupons, meaning the salespeople putting those out there. >> good for them. the american dream. commerce. >> all right. radioshack is the disaster du jour. there's no news on the shack today other than it is now trading, herb, at -- you celebrated your 40th birthday the last time this stock hit this price back in 1978. sorry, guy adami. hold on. we have a lurker in the shadows. >> here we go. jim cramer. >> we have a lurker in the shadows. >> and he's miccing up. he's armed and ready. >> what are you ensensed about? >> herb's right. this morning i got my daily
groupon. >> right. >> and it was for a mani/pedi. they heard my cry for help. i said what good is this, it's from statten island, i'm in manhattan, they sent me one from manhattan, changes the whole equation. immediately after the 9:00, got my mani/pedi. >> dare i say it's lovely. >> in reality, no, what i've been saying to them personally and professionally is stop sending these things that have no meaning to us. amazon sends me something within my zip code that is really interesting. >> they can't do it. it doesn't exist. >> why not? why can't they use an engine like pandora has for music to whittle the fuzzy logic-type. >> or they push all these other books about world war ii, why can't they do that? >> what they can do is offer you a tuck-in at night. >> i haven't slept in months. >> i agree. >> yelp is down big.
groupon. is wall street bringing a bunch of dogs public -- not saying facebook is a dog, but why are we getting these look what's happened? what's going on with these? >> take a look at some of these things. this morning salesforce.com buys buddy media. against mill len yal media and exact target. this morning, google, they seem to have a service that could be better than yelp's. what i think is happening is all these companies got through the window. and then the other guys are mimicking them. i've got to tell you, groupon is not worried at all about amazon. they should be. every one of these, brian, got in just before a competitor came out that has more fire power, that has more to do. and i think it really does matter. >> okay. >> look at that chart. >> i like the haircut. >> it's really good. >> thank you for jumping in. >> i heard my name mentioned. you know i never miss the show. i had to come out. >> we appreciate it. >> put her there. >> we need a nathan's groupon.
get back to the sunshine later. >> okay. >> all right. microsoft kicked off e-3, which is the annual electronic entertainment expo with a big x-box announcement. julia boorstin's there with microsoft's interactive media president first on cnbc. >> thanks, brian. yes, a number of announcements from xbox here at e-3 today. president of microsoft interactive entertainment. thank you for talking to us today. i want to start off with your announcement about music. you just announced a new xbox service also works on smartphones and tablets. >> yes. >> but it seems like this is a direct attack on itunes. why are you taking on apple? >> people of music, want it in their living room, want to be able to use their large screen tv, their tablets, pcs to teract, we created a service that has intelligence, allows you to buy songs, subscribe to songs, manage songs. >> it is a direct competitor with apple, isn't it?
>> sure. it's competitive with apple. it's competitive with any music service. we think we're doing a better job by knitting it all together the way we have. >> now, a number of today's announcements were about entertainment. you have 35 new content partners. you have a big push into live sports with more content from espn, also nba, nhl, will the xbox be more about entertainment than gaming? >> there's never been a better time to have an xbox. consumers are spending more time with what we offer. and they're getting it all in one device. it's great. >> so is this a move away from gaming because you're seeing the rise of social and mobile gaming on devices like the iphone and ipad? >> no. where we are are the aaa hit blockbuster games. people love them. our industry generates about $40 billion a year in sales right now. we're continuing to see substantial growth in the future. >> well, you had an interesting
announcement today about new smart glass technology. this aims to make the smartphones and tablets that people have in their living rooms when they're on their consoles integrate them into the video game experience. what's the strategy here? >> simple idea. you own devices right now, download a free app that enables that device to speak with our xbox to be used in conjunction with what you see on the tv. and it allows us to touch all classes of content. games, tv, movies, music. and we've put intelligence into the system. we have bing driving that in the cloud. it makes for a seamless consumer experience. >> well, unfortunately we have to leave it here. but, don, the president of xbox interactive entertainment, thank you so much for joining us. back to you. >> thanks, julia. a little sunshine today. nathan's hot dogs near a record high. nathan's is the home of the famous hot dog eating contest. the hot dog maker said it
doubled profits during the fourth quarter. that's a lot of dogs, folks. revenue rose 14%. all right. that's hard to watch. >> i'm feeling a little sick now. >> it really is. up next on "street signs," forget austerity. some are calling for uncle sam to double down and rack up more debt. good idea? we'll debate. >> i say eat more dogs. plus a subscription for you, big pharma dividends double the average yield of s&p stocks. the names when we return. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. wanted to provide better employee benefits
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welcome back to "street signs." a lot of stocks seeing red today. but particularly the home builders. take a look at some of these stocks. there are concerns about the global economy impacting these. and housing recovery could materialize. also seeing profit taking here. these stocks have run up a lot lately. down about 9% is the worst hit today. others anywhere from 4% to 6%. rough day for home builders. >> thank you very much for that. rough day for home builders, all three averages are now sitting
in the green. in the meantime it's stock talk time. i want to start first of all with yum brands. >> falling after raymond james downgraded to a market perform last friday. we had another analyst saying some checks in china indicated that sales are perhaps slowing at kfc. yum now down 11% in the past three months. >> china was going to be their really big market. >> i heard that on "trading the globe". >> there you go. a tease. delta airlines flying high or low? >> it is flying low. in fact, all the airlines are down today. this one has the largest stock drop. we're not picking on delta only because the numbers are bigger. and they showed a drop of traffic of about .06%. the good news is capacity also fell, meaning the load factor, number of people on the plane is about 84%. so you have about 16% empty seats. still, stock getting hammered. >> boeing is another one we're watching today. but it's a better news story. >> yeah. nice segue off the delta news. boeing upgraded from buy to hold at stifel nicholas. they see strength in the
aerospace cycle all the way through 2014. they have an $80 price target. what is that $13.43 if my crummy math is less crummy an upside. >> down about 7% year-to-date. >> the stock up 14.5%. positive results of a late-stage drug for a penal deformity drug. potential market for this is about $100 million. auxilium getting straightened out. >> okay. bbva. >> bbva. no news on this one. it's trading higher. the reason i threw it up here is because we've seen so much pain in spanish banks. >> we have. >> this, folks, if you want to have one maybe name, ticker std, if you want to have two names to look at to track the spanish banks, these are them. i did bbva instead of std.
>> an awkward after the auxilium news. >> yeah. the stock straight up in the meantime. looking for yield in this market? of course we are. very little yield out there in terms of treasuries. let's get yield elsewhere. big pharma offering big dividends. seema. >> that's right. man mandy, during times of hovering at lows, although green at the time. turning to high paying docks many in the pharma space. the average is 4.15%. that's almost 2% above the average dividend yield of the stocks in the s&p 500. as you can see illustrated in this graph. now, these six stocks paid an aggregate $26 billion in dividends, second highest amount of any individual industry only passed by $28 billion in oil and energy stocks. that data according to wisdom tree. now, analysts say j&j is a good stock pick when the markets are volatile, as it has a
diversified portfolio with recession resistant products including tylenol and band-aids. our own jim cramer says in this awful environment j&j is the kind of stock you can circle the wagons around. healthy dividend of roughly 4% is also quite attractive. other high yielders include pfizer, bristol miers, merck and eli lily. higher than some of the tech heavyweights including ibm, hewlett packard and intel. if you want yield, look at pharma. >> we will. thank you very much for that, seema. >> all right. coming up, screaming for profits. >> yeah. we're going to look at art as an investment and the kinds of returns you can expect from example from the moderns to the masters and everything else in between. stay tuned. i'm brian sullivan. cnbc is heading down to atlanta for a town hall event on small business. we are going to be hosting some of the greatest entrepreneurs of our time. small business owners will share their challenges. we'll look at opportunities. and we'll learn new strategies
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i'm bill griffeth. coming up at the top of the hour on "closing bell," will renewed economic fears force the fed to step in with more easing? steve liesman and rick santelli go toe-to-toe. it proves to be another epic match upcoming up. with interest rates as low as they are, larry summer says the government should be buying more, not less. is he right? or would that speed up the nation's fall off the fiscal cliff we've been talking about? and the senate votes tomorrow on a bill aimed at closing the gender pay gap. we will hear from one woman that says this is actually bad for both business and female workers. maria and i will see you at the top of the hour for "closing bell" as we turn positive here. anything's possible during that last hour. we'll see you then, mandy. >> sure is. i'll join you at the top of the hour as well. the sharp pullback in stocks recently has investors seeing red. should you be hanging your money on the wall instead?
last month you might remember "the scream" sold for a record breaking $120 million. our next guest says the market is outperforming the s&p 500 so far this year. joining us is professor at the nyu school. based on history, am i better off putting my money in art right now than the stock market? >> well, it's hard to predict the future. >> yes, but historically. >> if we look historically over the last ten years, art has certainly outperformed the s&p. if your history is 25 years, the s&p has done better. if your history's the last 50 years, they've done the same. so you really have to pick your poison. >> and it also really depends on what kind of art you want to invest in and how much money you have, right? if we're talking investment pieces, what would be a minimum amount of money you would need to start with? >> well, the beauty of art is we study auction prices. and the day auction sales often have works in $25,000 to $150,000 while the evening sales
often have things in the millions. art is democratic because it turns out that the lower price art is performs better than the high-priced art. >> i don't know anything. i mean, i know what i like, right? i don't spend a lot of money on this stuff. at least i can analyze a balance sheet and income statement for a company to kind of gauge how well that company's doing. is there a way to do that with art? or literally with up and coming with new artists, is it pure luck? >> new artists i think is quite hard. it's like new pharma trying to get that one correct drug. but historically there are groups of artists that are like the s&p in some sense. >> right. >> that have been around for a long time. have been proven results for a long time. and the beauty of it is is over the last ten years there's so much data that's available that you can really look at what the historical returns have been. >> and if we start to categorize or group those out, it's interesting, for example, you have here all masters have a 10-year return of about 1.6%.
so like treasuries? you know. >> exactly. but unfortunately with even more risk than treasuries. but you then find impressionist and modern paintings. and they have returns that are similar to art over -- excuse me, similar to equities over many time periods. >> can i ask you, has the equation changed in terms of what kind of returns we'll get from say impressionists? you have emerging markets, the chinese, the indians, brazilians, whatever, coming in with lots and lots of money. what they want for example is a van gogh, something very easily recognizable on the walls so their friends can come over and say van gogh. impressionists fall into that category, right? >> it's interesting. that was true in japan in the '90s. nowadays, the emerging market, in particular china, they seem to be collecting their own historical art. that collecting territory has been gang busters up almost 17%
over the last ten years. it's the single strongest performer. it really depends on whether or not they're going to be collecting their own or look out to the broader market. >> what would be the art equivalent of facebook stock? >> someone like i guess damien hearst or people like that who are really contemporary, they are well-known. they've been selling well, but the question is all expectations. facebook and others, your valuation is based on expectations. and the story is not completely written. >> worth more than -- >> you're probably right. but he's been around longer. >> i love him. my wife's favorite. >> the shock and fad factor. thank you so much for joining us. >> you're welcome. >> okay. coming up, is it time to double down on debt? >> all the talk in washington about where to cut the budget and by how much. but are rock bottom rates presenting the government with a chance to borrow our way out of the economic mess? or is debt just debt?
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prosperity. larry summers thinks so and he made his case on squawk box this morning. >> who running any kind of responsible financial operation with the opportunity to borrow money at a rate of 2.5% for 30 years, especially in a currency they get to issue over 30 years, wouldn't be taking more advantage of that opportunity? we can take advantage of that opportunity to prefund future obligations and if we do that, the financial health of the government is actually improved, not made worse. >> so is summers right? should america be borrowing even more? joining us, cnbc contributor, steve leaseman, jimmy, great to have you with us. steve as well. jimmy, is summers wrong? >> you know, he makes a very detailed case that the borrower pretty much will pay for itself, you can borrow so cheaply and we certainly can find some, he mentioned public investment
projects that would give even a small rate of return to more than pay for itself. what he does not do, and does not spend much time talking about, is the reaction both near term and long-term of financial markets of the u.s. taking on, i'm not sure how much he wants to borrow. i'm assuming it would be another stimulus amount of nearly a trillion dollars. he seems confident that bond mark woet shake it off, i think without any evidence that that's the case. >> steve? >> i think it is overstating it to say we can br borrow our way to prosperity. can we create an improvement in long run economic growth and fiscal position -- i think it may be to a point. i think jimmy may have given us the litness test. as long as they are scrambling to get into this country with the dollars they got from us, from however they got them, we should take in those dollars and take in those dollars at longer term and lower interest rates to
the extent they want to do that. the problem becomes, and jimmy and i can have a nice debate about this, whether or not there's any efficiency or productive outcomes towards the expenditure of government money. >> well, listen, i think that's the point. we have just gone through a period. remember, if we're talking stimulus, summer's original theory has to be targeted, timely and temporary. i'm not sure how well that just worked. if he is talking about something else, that's some sort of longer term projects, he is -- i want to see the list. i want the short list with all of the public investment projects, that he thinks we can officially spend hundreds of billions of dollars. that's what we are talking about. a report just came out saying if we had not spent the $800 million stimulus, at best, it would be a point lower. that's about a hundred billion per tenth ever percentage point. >> because debt is not always a bad thing. we act like it is. but it isn't.
if we borrow a million dollars to kick off a factory making a hundred thousand a year for a hundred years, that's a good investment. why not roll over current debt into lower rates, not expand the borrowing, therefore, free up more cash on balance sheets. >> can i tell you there's two schools of thought on that. one is the one that says the treasury shouldn't be out there basically gaining the market that one of the reasons why america has one of the biggest liquid markets in the world is because it doesn't gain maturity. the other school of thought is that the treasury is absolutely crazy not to do just what you said, which is to go long and mature its and going 50 years, even a hundred years. you want our money, you want our paper, give me your money, i will give you as much paper as you want. >> no such thing as a lunch. d day will come, jimmy, steve, thank you. let's get to bertha coombs with breaking news. >> hey, mandy. ceo of goldman sachs is on the stand right now in the trial, insider trading case, of former
board member gupta. gupta is accused of having tipped off the convicted hedge fund manager to a key event when warren buffett invested in goldman back during the financial crises. he is accused of getting off of the goldman call and turning around and offering that tip to roger rotman. well talk about how important that investment was. we will have more on his test as events warrant. now back to you. >> thank you very much for the latest update on that. coming up next on street signs, why it down to the wire for your money. [ male announcer ] at scottrade,
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log on now to androgeloffer.com and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. called a very mommy dearest sign the at times wbt u.s. just handed down trade penalties on wire hangers from vietnam. accusing the vietnamese government of unfairly subsidized exports. since vietnam is the top exporter of hangers to america, there's probably something you didn't know, you will probably feel the pinch the next time you pick up your dry cleaning. many dry cleaners rely on metal hangers. >> if we have a zipper crisis, please let the media know. thanks for watching "street signs" everybody. dow back in the red. >> "closing bell" is next.