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tv   Fast Money  CNBC  June 7, 2012 5:00pm-6:00pm EDT

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thanks so much for being with me. tomorrow i'll be back in new york. follow me on twitter and google plus. a special edition of "fast money" live from chicago gibbs right now. stay right there. melissa, take it away. it's bernanke and central bankers to the rescue. >> the federal reserve stands ready to do whatever is necessary to protect our financial system. >> stocks post their biggest two-day gain of the year, and it couldn't have come at a better time with the market turning lower for 2012 earlier this week. and so this special show couldn't have come at a better time either. from the financial center of the midwest and the trading capital of the world, a special trading town hall, "markets in turmoil." it's 16 hours till the next market open. we've got a full table of traders. >> it's dark, and we're wearing sunglasses. >> time for "fast money" chicago.
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>> i'm melissa lee. great to be here in the windy city. let's start trading, promising day early on, but the market losing steam after chairman bernanke dodges the question on qe3 so the question is how are you treating it? peter najarian, give us the first answer here. >> when you look at volatility index the way it's been slammed over the last couple of sessions, down over 20% from the highs on monday. that's a pretty significant move to the downside, and then when you look at what really did perform and held on today, it was the industrial space. look at names like united technologies and boeing and 3m an all the rest of those, kind of leading the way and at least holding on to some of the gains. i think it was age pressive rally early. i think the financials weakening late. that was concerning, for sure, so i think going into tomorrow. obviously you've got to be a bit cautious, but the kind of move that we've had and the fact that we're maintaining where we are right now i think is boosting confidence. >> do you see this as the greatest gift possibly to traders out there because it was time to take profits and when we're in a tight trading rake and at the top of that range? >> mixed feelings on that,
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because i think people are looking at somewhere below the market and one more test of 1290 in the s&p using that as a proxy but whatever market you're following as actually a place to hold and then buy. what was disappointing is china's rate cut. to me should have been an opportunity for people to start taking some of it, at least, reflation trade a little farther. the dollar to me has held up well and despite the selloff over the last couple of days, the dxi is holding a rake that tells me it's still in an upward trend. china's rate cut at 7:00 a.m., at least new york time when was on a plane, i watched and said, oh, man, have a lot of shorts i might need to cover. not really. in fact, that was the high of the market, and i don't know that we actually hold on to a lot of this. i think there was a lot a lot of pessimism out there. i'm not sure what changed in the last 24 hours, other than china, which i think is important news to talk about. >> hello. >> good to be here. >> have you had a wiener dog, chicago known for their hot dogs, deep deep pizzas. >> i'm trying to lose weight. >> markets today. >> it's done everything that we've talked b.yesterday we
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talked about if it got above 1290 we would test the 1325 level, and we got exactly there. 1320, failed. i'm in sort of the pessimistic camp here. if you told me before the day started here yesterday that china was going to cut rates, i would have said the s&p should have gone to 1350 and held and it didn't and the fact that we're back down here did not get the help of the financials pretty much all day, leads me to believe we'll test 1290. 1290 holds, off to the races on the upside, but if it fails this time my sense we'll get the 1205 level we've talked about. >> how are you feeling about the markets, karen, one important event and that being ben bernanke. we also have the greek elections coming up, g-20 coming up, a host of other events in the pipeline. >> i was actually somewhat disappointed today. i thought what this market really needs was clarity, and what we keep getting is no clarity. yesterday with the eu. we didn't really get any clarity. with bernanke, the same thing no, clarity, so it's hard to really feel -- really feel great about putting money out there, but to me i think what we have
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to do is just pick prices, put a bid out there and -- and i know i'm never going to pick the bottom and just live with it if it's a price that i want to own, it i will. >> dr. j, what was your reaction to the market-to-today when it comes to positioning ahead of these events? >> number one, bernanke kept his powder dry. he could make some sort of a statement, and he's very aware that if he does, he'd move markets and he'd rather hold for that when it's needed. he didn't have to today because of china and because, quite frankly, gasoline prices adjusting as they have and so forth. both of those are positives. also, i think you've got the potential for the nervousness ahead of, of course, the election that's just over a week away in greece. a lot of traders are focused on that, as well they should be. if you're a short-term trader taking money off the table as tim talked about, if you're on the long side on the 100-point pop in the dow today, brilliant trade. on the other side, if you're a longer term trader and you're
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not in and out every day like that, i think the setup is very strong. china rarely makes just one rate cut. they are going to make multiple rate cuts. >> that's the first one in four years. the last one came in the crisis that came -- interconnected in the entire trend. >> if they make multiple cuts you don't want to be on the short side of that. guy's point, if we get down to 1290, i'm sure about that. the chairman has dry powder even though there's not a lot you can do with twisting and quantitative easing but still that's dry powder. >> let's talk specific stocks here. if we are to believe this is the first in several rate cuts coming out of china and we don't want to be on the wrong side of the trade, should we get into the likes of freeport mcmoran or the industrials like cat? >> a lot of people think because china moved things might be a lot worse than we think. they have a slew of data coming out late next week and the gdp number, the people in the next couple of days, we might
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downgrade china's gdp which is something that threw us into a dizzy in the first quarter. if you think it's a multiple cut, go back to fantastic companies trading in valuations and in the commodity space that's a tough call. if anyone is going to benefit from china, it's volley, four times ebitda. and especially with brazil's currency having been devalued massively. material stocks, that's the place you run but i don't think you uniformly buy them and as i've said in the past couple of weeks, i've been talking about freeport for the past couple of months, more than a number of people tearing me on a new one. >> freeport, the only name that people talk about when you talk about copper. how about southern copper, 7% yield and trades between $29 and $39 a share. here it is trading their 29, last six months, 12 months, outperforming freeport every way across there. >> yeah, but, again, on some level, picking stocks on fundamentals here, i'm not even sure is the call.
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on a relative outperformance you're absolutely right but you better hope this is happening because southern copper traded all the way down to four bucks back in 2008. >> right. of course, with the fed meeting on tap, the question is what is the fed likely to do next? let's delve deeper into what we heard from ben bernanke today with cnbc's rick santelli. made it all the way out to harpo studios from the cme this morning. good to see you. >> and i was on another show 15 minutes ago. >> the "closing bell." >> you were on the air. >> what "r" word did i use? >> rorschach. >> what did ben bernanke say. >> draw you an ink spot, ask 20 people, you get 20 versions, you listened to janet yell-in, listen to grown man saying she's painting it this way, ben can't paint it on that way and on the two-day meeting it's possibility they resurrect the twist, and i wouldn't doubt that. i think in the end, i'm a pragmatist. i think it's a diversion to talk about the fed, not that they don't have power, not that they
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can't move markets, but they certainly have been ineffectual in using some policy decisions to do things like lower the employment rate, and if people want to run at me and say, hey, we're over 9 and now we're barely over 8, i'll say the labor force participation rate. move it up to the same level it was at two years ago, we're back over 9%. >> rick, let me ask you something. do you think the china move was any part of any coordinated effort? was bernanke aware of it? did that influence what he would say today? >> see, i have no way to answer that question, but i will tell you this. i was talking to john off camera. there's been a couple of stories, one on the "wall street journal" website, about stockpiles of iron ore in china in the port cities so you see a lot of this. we know there's overbuilding and we can see commodity prices and we know they have leveraged their copper as collateral for loans. it makes sense there's a slowing. is it coordinated? i can't tell you. even if it is, so what. i don't know that it's going to change the equation. i think what ails the world, what ails europe, what ails the
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u.s., there's a lot of things we can do, but most of them aren't going to be possible until after the election. >> right. rick santelli, always good to see you. thanks for having us in your lovely city. >> thank you, it is a great city, isn't it? chicago! >> it really is. it really is. all right. well, rick had said something to the effect of it may not do anything at the end of the day, but isn't it a great thing for investor confidence to see the fed, the ecb and pboc say essentially that we will step in if things get bad and shouldn't that be a lift for investor confidence at least? >> he made a point how bad must things be in order to have this consolidated -- >> we have a central bank backstop. >> i'm not sure that you do anymore. >> okay. >> my sense is if the fed acts again you get a one-day knee dark jerk reaction to the upside and i think it will be short lived and this time the markets could actually crater. again, how bad must the world be and the u.s. be for us to go down these roads, and rick talks about that all the time. i'm not nearly as optimistic as i would want to be, and i fear that the markets, again, if we
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technically break down through the 1290 level, it could get ugly very quickly. >> again, the ecb, mr. draghi told policy-makers i'm not going to do your heavy lifting for you, and this is what i hope big ben is doing over here, but that's something -- central banks around the world know monetary policy can only do too much and we're really at a place where fiscal policy has to take over. >> the fed might be in wait-and-see mode for the time being, but treasury yields continue to plum the depths. just how low will rates go. joining us is a fighting irish alum, jeff kilberg of kilberg capital. welcome to chicago. >> thanks. >> what are your expectations in terms of the ten-year yield? >> i think karen hit it on the head. we'll see an emotional trade in june and we talked about this 1.67 for a long time. we're following the german bund that went down to 1.9 in the panic on friday. in the event we don't get the clarity we're looking for, if we
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get the coordinated bank effort it will going g back to 180, 210 and right now emotions are high. >> when it comes to the german bund, is there a spread that you expect the german bund to maintain? >> when you look at the chart, tailing it. inverted back in march when everyone thought everything was well, you saw it tail so it's a 20-tick situation that it could catch up with. >> jeff, great to see you. thanks for coming by. >> jeff kilberg, fighting irish alum. so obviously rates are going to go higher. does that necessarily mean that it's good for the financials? let's trade this thing, right? we showed you a chart yesterday. it's the correlation between the etf and the ten-year yields, 60% correlation on that with yields, so if yields are to go higher. >> depends on why they go higher. if they go higher because the economy is improving, then i think that's good for banks. you know r, if a -- i hope that why they go higher and not some spike, whether it's oil or some exxonnous spike that just causes inflation and we end up stagflation.
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i am long banks, not the right place to be. still own them, jpmorgan. >> i'm not certain that that would be the case, and my concern, and rates have gone down in a very methodical way, but i don't think they will go up in the same way. i think it will be extraordinarily fast which could be incredibly detrimental to the equities market, so rates higher, i don't think it necessarily means stocks or banks go higher as well. >> you know who has been right on the financial trade for a very long time. >> peter najarian. >> pete najarian. you read my mind. what are you doing now in financials? >> yesterday, as a matter of fact, credit suisse was one that hit with a lot of unusual activity, a lot of upside buying. pig selloff in jpmorgan today, the july 28 calls. i'm not saying the bottom is in for the financials, but as we heard earlier with maria bartiromo, this is a traders market, not an investors market, if you want to trade the financials i think there's great opportunities. >> coming up next, our special town hall summit. "markets in turmoil" continue. concerns in all the markets and
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the volatility, plus a power-packed lineup of guests still to come, jim metcalf and tom ricketts, chairman of the chicago cubs and rahm emanuel, mayor of chicago all coming up. much more "fast" live from the windy city right after this.
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welcome back to "fast money" live from the heart of chicago. our special town hall summit, "markets in turmoil" continues. let's hit our chart of the day. oil taking a wild ride today, surging as high as 87 bucks a barrel. only to end the day below 84. this coming, of course, after china's surprise decision to cut interest rates and ben bernanke's testimony, so we've got to ask here what is a trade and certainly the oil stocks and the oil pullback, you have just been pulling a phrase from your handbook, not good, grim perhaps. >> with halliburton's announcement yesterday or two days ago, maybe you got a capitulation, that valuation-wise it has been cheap and may be getting cheaper.
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maybe finally you have a trading bottom there. i think the selloff again in gold gave you a tremendous opportunity. if central banks continue to cut, australia, obviously china, it's all going to lead to gold. it's obviously a painful day to be in it today, i understand that. never a fun trade, but i do think, again, i'll say it again, three months from now you'll come back and it will be north of $2,000. >> miners, junior miners, pete? >> love the miners. they took a hit. spoke about the gdx and the paper. back to oil in a second. bp has been absolutely been a stellar performance recently. giving a 5% yield so you've got that on top of it and seller of upside options creates even more yield, but that's a name that just continues to perform very, very well over the last week and a half or so. i continue to hold that name. >> and put a date on the counter. the iran nuclear atomic meeting is something that i think is going to put a -- a big amount of pressure on the price of oil, just because, first of all, at the end of the day it's the saudi's best interest to drive down the price of oil to star about the iranians and possibly
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iraqis. i think oil has gone lower. i think actually you can see brent begin to try to test the ad range and, that of course, is with the next move lower in markets. one thing about this that people don't talk about, that this is very good for china. very good for the united states, but, again, the places that are going to give you that stimulus type of reflation trade, most of the world has an inflation problem in at least part of the world that's growing and that's going to be very good ultimately for the miners and people that will be chugging along with that:so watch this price of oil so weak oil is very good for the global economy. >> very clearly in addition to oil, also watching nat gas closing at a one-month low here. we're actually 40 cents within the decade low, dr. j, and it's amazing to think of the wild ride we've seen in nat gas, just when we thought it was going to bottom and turn higher, here we are close to where we were before. >> close, still like the july contract. did get all the way down to $2 per million british thermal unit and then bounced all the way up to 280. pretty significant bounce, as it did that, of course, you saw the recovery in some of the coal names. some. coal names but not all of them, and to guy's point about gold,
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if i could, i think based on what tim is saying about iran and so forth, that's one more reason, melissa, to be watching gold and picking it up on dips here. a week ago gold was -- the gld contract was 148.50. this week it hit 159.50, i believe yesterday, gave you a fantastic opportunity, if you're a trader, to take that profit and then you can reload just like guy is talking about. >> if you're looking for a nat gas play, apache has been a great stock to trade. talked about it forever. look at the double bottoms. we may have put in an apa. go back to late september, october levels. basically traded down there a couple days ago so against 81.5, 82, apache 83.5, if you're looking for risks reward, to me sets up incredibly well. >> let's go to a man who was using the dip actually today to -- to build a position here. jim yuri of tjm institutional joins us on set. this is the realtime trade, by the way, of the day and when did you enter this trade in. >> four minutes after he spoke. i think i got about 155 and change on the gld.
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can i tell you with conclusion that it is a lonely trade today, and it was somewhat painful, but i do think it's the right trade. there was a disconnect today between the gold market and the stock market, where the stock market kind of realized that the fed is still out there lurking somewhere and the gold for some reason took qe3 off the table. i don't know why it did that, so i stepped in and grabbed it. my stop is well defined, 148.60, if it makes some new lows i'll get out. right now we have the bank of china and the fed saying by whatever means necessary. that's the quote that i heard so -- >> when you buy gold, do you only buy gold or do you also buy the mineers? >> long royal gold as well, long gld and sometimes play in the futures contract, and i'm not crazy, don't have stores of gold at home in guard dogs and guns either. >> not that that's crazy if any of you have that. >> i don't have guard dogs at home guarding my gold because that would be crazy. >> two things about the miners. barrett fired their ceo because they want to concentrate back more on gold again. i think it sends a message about n & n about the mining section that there's not going to be an
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unlimited bid out there. more importantly, gold miners, if you treat them like not miners but like any company that trades at two times cash in the case of gfi or harmony, i mean, these are very, very good companies, and the ones that are well-run are companies that you should own. that's the difference here because these are cheap companies trading at levels, again, three cash yields of 3% and dividend yields of 4%, 5% at a time. i don't think the underlying price of gold is priced into their portfolio. >> to your point -- >> at market value. the fact that you go into these miners, when you go into gold, you don't get any kind of yield. everybody gets freaked out about that whole thing and when you go into the miners and get a new mont giving you something like 3%. >> i mean they are cheap. >> if you're willing to be whip around and possibly lose in the stock you want to be paid whatever dividend, not going to offset too much. >> won't offset a lot, but at least you've got something in your corner when you're getting into that rather than going into the actual physical gold. >> the gold trade i never quite got, but one of the reasons i'm really -- it would be uncertain to jump in it seems like it's
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subject to so much other stuff. let's say you have a big hedge fund that needs to liquidate gold, hit a bunch of stops, it has nothing to do with whatever the underlying -- >> what's different about that than any stock you own? >> because we know there's giant, giant conversations on gold. >> don't team up on the guy. >> we're not teaming up. >> i think that was the end of the first quarter, and i think that's the opportunity here. >> "wall street journal" had an article talking about exactly what you just said. i mean, this inherent risk being long stocks and specifically mining stocks, and i would agree, my place to be if umonic gold, down 2.5%. trading at a well-defined range, and the best gold trade to me is to be in the commodity itself. >> we'll check in with jim a little bit later on. we'll keep track of his trading. >> like a magic trick. >> it's crazy. a different person. all right. you know the saying when in rome, so when in chicago you've got to talk about what so many people here in chicago watch and
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that is the vix, so we have to bring in our "fast money" friend brian stutland. i came across a staggering statistic today, brian, that this month is one of the most volatile months, the fourth most volatile month since 1996. >> well, typically us a get that sell in may go away. get an increase in volatility. why, people come in and buy put protections against the longs in case the markets turn against them so you get increased volatility in the months and in july some of that heads out as you head to the fourth of july. >> what are we seeing going into the summer and into the fall? >> one thing that was actually promising for the bulls, put call ratios fell about 20%, both in the index, put call ratio and equity put call ratio meaning there's been some heavy call activity so the bulls definitely have a good grasp on this market as we've seen the market rally nicely over the last couple of days. concerning things, a big institutional block trade buyer out there of vix volatility in august and september. so i don't think the smoke is
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necessarily clear here. we could have volatility headed into the fall months. >> what did you make of that big trade? >> i saw that trade as well. in the near term, that july 25 call seller sold almost 70,000 total, came in and sold 40,000 and followed up after that. that actually told me something about what they think in the near term but to your point if you go further into the fall, you start to look at the august and september, there are expectations for some extremely volatile markets. >> getz guess what, the seller of the july options what, better way to get an indication of what's going on in europe seeing it was barclay's a european bank, a little positive near terms for the market. they will stabilize the holds in there. if you want to stay long this market, look to maybe buy some vix call spreads and protect those long and spend 1%, half 5% of your portfolio and can you stay in the market, what i've been doing over the last few days, adding to my longs and adding good protection. >> brian, good to see you. interesting to hear the time frame that brian is saying volatility will ramp up because soros was on the tape today saying the european cries sis going to climax in september
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specifically. i don't know what it is about september, but that's his date. >> pretty tough to think of any other time than the month of june which is basically don't bring your company models to work. bring your file-a-fax, all about policy dates. >> got to take a break. coming up next, "fast money" live in chicago continues. we'll talk housing with jim metcalf, the boss of chicago-based usg and, of course, our traders will give you the best ways to play the space. stay tuned because it's a very special edition of "fast money" just getting started. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. ♪ and development. a few distribution issues will be resolved. some new members of the team will be introduced.
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as usual the i.t. department is always there to lend a hand. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you're responsible for liquid assets. and employee incentives. you just need the right professional to help you take charge. because you don't measure your success by the size of a pie chart, but rather by the quality of the pie. ♪ ♪
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welcome back to a very special "fast money" live from the harpo studios in the windy city. breaking news from bertha coombs in the federal courthouse in lower manhattan. >> reporter: lloyd blankfein will be back on the stand on the insider trading case, he would not talk about the case as he left the courtroom this afternoon. i did ask him about his thoughts on the crisis in europe at this point and whether he felt we were looking at a potentially could be a lehman event if greece left the eurozone and abandoned the euro. he says, you know, we'd love to
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see a resolution of these -- these -- these issues. he does expect that there will be some sort of resolution, he told me, when i asked him whether he thought there would be, but he said the politics clearly are difficult. you look at our country it's difficult. when you look at europe, he says, it gets geometric. as far as greece and the eu resolving their differences, he says we are right for it to work at this point, but there are risks that have to be plowed through here. i asked him do you think if greece leaves the euro it will be a lehman-like event. he says not necessarily. he says you can't in a sense be surprised twice. at this point he thinks a lot of people have had time to really prepare for contingencies at this point. back to you. >> all right, thank i very much, bertha coombs. as the housing recovery continues to gain some traction, building material companies are getting a boost. usg, makers of sheetrock, have seen their profits boost 60%. warren buffett serves on their board of directors and as of
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march 31 stth owns 17 million shares of the company. joining us now is ceo jim metcalf. pleasure to have you here in chicago. >> great to be here and great to be right here down the street with our worldwide headquarters so it was a great commute here. >> try to make it easy for our guests. jim, got to ask you about the relationship between your stock and the housing recovery because when you say housing recovery, you think of a usg. at the same time, one analyst writes, rbc writes, don't buy the stock because you're excited about better housing trends. you buy it because you think the company can recognize higher wall board prices. are we at a different phase in the recovery where you're more dependant on price increases as opposed to the overall market? >> no, actually, what we're looking at first when you look at housing, we believe in a long-term demographics of housing. if you look at people coming to the united states, babies being born, still believe that the household formation is still very, very solid and it's not a matter of if housing is coming back but. when we think housing has bottomed out. that's only part of the story of usg. housing is only 25% of our portfolio.
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if you look at housing, really the big story at usg corporation is repair and model, residential repair and remodel and commercial repair and remodel. if you look at from a residential standpoint, our products are very good products to put in a house, when you're remodeling and moving houses around, joint treatment, texture, duroc and people can remodel their homes and they are not moving out of the house. we also have a great commercial and repair model. if you look at the commercial floor space right now, 60% of the commercial floor space right now is over 30 years old. there's a great demand for the repair and remodel sides, so when people think about housing and think about usg, that's a very, very important part of our portfolio, but only about 25% and sometimes 30% >> i want to talk about the repair and remodel part of the business because that's more than half as of some of the latest figures out there. when you look at some of the numbers, the glut of foreclosures out there, houses not maintained, how can we understand how much your company
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will benefit from the remodel of these houses? how much, for instance, on average sheetrock or ceiling material goes into those foreclosed homes that now need to be refurbished? >> when you look at the foreclosed homes, and there's a lot of different numbers of how many foreclosed homes that are out there. there's a long shadow of foreclosed homes. we think it's a great opportunity, particularly for the sheetrock wall board products. look at ceiling tile, not a big product for foreclosed homes. that's more of a commercial remodel products, but our products, like our surfaces products. we have a joint treatment product that has a very, very large market share, and you can repair the surface of a wall, because a lot of those foreclosed homes have a lot of damage, as you know, so our products really fall well into the foreclosed homes, but really, we look at homes where people live now. what i like to say about our company is we provide shelter. that's where people live. it's where you work and where you play, so when you think of usg, we provide shelter in a commercial building, in a home, in an auditorium and a school.
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>> right. >> so our portfolio is much more diverse than a lot of people may think. >> right. >> during the crisis of the last few years, how much capacity has been taken out of the markets so that we do see a recovery in commercial, residential. how much will you benefit from that extra utilization and absorption? >> we have taken a very proactive look at our portfolio in our capacity. we've taken up capacity. our capacity right now is one of the youngest and most efficient capacities in the industry. what we've focused on is lowering our break even of the corporation. we think that's very important to lower the break even, take out the old capacity and have very efficient, high-speed capacity and also do things better. we have really focused in this time frame of taking capacity out and lowering our break even, but also innovation. we've come out with new products in this area because our customers really expect usg corporation to provide a better way with new products and new solutions. >> such as the lightweight products which a lot of analysts are very excited about.
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they are also excited about a potential price increase in fiscal year 2013 and i know you've just had one and they say that seems to be fully absorbed in the marketplace as they are looking at that one as a next catalyst for your stock. can you tell us whether or not to expect one in 2013. >> let me talk about ultra lite, innovative product, 30% lighter. patents surrounding it. we are getting market share and price improvement because of it. it's a wonderful product that our customers really want this product to create a different way for our customers. we're very optimistic about our portfolio. we had a very good first quarter. we had positive operating profits. first time that we've had operating profit in a few years and what i want to say is we want to create our own recovery so price improvement and all product categories is very, very important but we have to provide value to our customers and not just price. >> jim, great to see you. thanks for coming by. jim metcalf, the ceo of usg. when i read my notes in my little room back there, i
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realized the largest customer of usg is home depot. >> jim explained the story fantastic and talked about shelter, but the stock has not been a shelter for the last three years, basically in the mille of a rake we've seen since 2009. 15 bucks whereas home depot has been a monster now for the last three years, so although i think they are obviously in similar businesses, if you want to own a stock that's hd. with that said there's a monster shortage of usg. >> really. >> so if you think the tape is going to turn here back towards the upside and if you do believe that the housing market is bottoming or turning higher, then usg with some 30% short interests here at 15 and change is extraordinarily interesting for a trade. >> let's bring in a man who has done some research, steve cortes with his housing trade. guy warns about the tremendous shares of interest in usg. does that scare you? >> listen, i think usg is very well-positioned and in some ways
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capitalizing on a weak housing market so i'm constructive on usg but by no means constructive on the housing market as home and here at the homes of the chicago bears i'll give you the bearish outlook on housing. calls for a bottom in housing, almost unanimous right now on wall street, and i'll give you two reasons that i think are the most important why housing has not yet bottomed and is not bottoming. the first one is despite extremely low interest rates, we're not seeing a material uptick in a new home loan demand. seeing a heck of a lot of refinancing, but if you look at the nba and mortgage application index it's actually plummeting as rates go down so that is a serious problem. there's not demand out there or the credit availability. the second one that's more for a tactical trade sert fact that construction-related stocks, things like fasenol and granger, a chicago company, all of these stocks absolute hi in the tank lately, some down as much as 25% just over the last two months. that tells me that investors think the construction, new home
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construction outlook is extremely dire going forward. i'm not in the trade right now. i was short home builders, crushed them last week and took profits on monday because i thought they were oversold and if it gets back up near 21 it's time to short again. >> cortez, good to see you. >> how can you not mention, that's the -- >> well i wasn't going to mention it because i thought it might embarass him. >> he wanted me to say something. >> this tie is volatility, talking about the vix. this is volatility. i get so much praise or absolute denigration based on this tie, so it's -- >> denigration. >> denigration. it is always good to see you, cortez. all right. got to take a break. when we come back, special town hall "markets in turmoil" continues. we'll talk to tom ricketts, chairman. chicago cubs, strategies to help you stay ahead despite the record low rates we're saying right now. "fast money" live from chicago. we'll be right back.
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we're back on "fast money." we're broadcasting live from the world renowned harpo studios in chicago. the market rally fizzled into the close and another day in the red for facebook. the biggest ipo of the year has fallen more than 30% from its ipo price of 38 bucks a share. so how is the retail investor responding? let's bring in "fast money" contributor and chief derivative strategist for td ameritrade to get the pulse of investor confidence. now, it's amazing because when we were talking about facebook, the ipo prior to it actually happening, saying this could actually boost investor confidence. are you actually a buyer of the notion because of this one ipo in which not that many people have a piece of, that's a reason why investor confidence has waned? >> i really think with the facebook ipo as an industry we missed an opportunity. i think the people already in the market still have confidence that the market is great, things like that. i think some of the newer people, particularly some youker people who are excited about the product, wanted to get in the market for perhaps the first time. we missed an opportunity there because things didn't go as smoothly as i think everybody in the industry would have liked it
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to go. so from that point of view, in fook itself. i still think there are plenty of people who think it's a good stock and at this level you can certainly make this argument, but as far as investor confidence, again, it was more of an opportunity lost and people saying the market is bad. i think a little bit of it got overplayed. i talked to a lot of retail traders every single day and overall they still believe in what's going on. the problem being the newspapers, magazines haven't given the good stories coverage. it's not sexy to talk about somebody who invested for years and years and then ended up paying for their kids' college. it's more fun to say this guy got screwed. >> j.j. on that note, have to leave it there. >> good to see you. >> facebook, in terms of fans, j.j. may know a few fans of facebook shares. not many found on this desk right here, and the action continues to be abysmal, and also we have the fallout on shares of the nasdaq. i mean, the nasdaq is just getting reamed today in terms of its response for compensating some of its customers for losses
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they incurred >> i hate to be the bearer of bad news, but i facebook will continue to head south. it traded up yesterday on what wassin excellent tape, but, again, lower today, and i don't see any compelling reason to go piling into facebook right now. i think there are better places to be and facebook isn't one of them. >> next trade, baseball teams getting a shot at rebuilding their rosters in this week's draft, but how should investors approach rebuilding their portfolios in a low interest rate world? joining us with his take on bonds and baseball is tom ricketts chairman of in capital and, of course, the chicago cubs. >> good to see everybody. >> we will talk baseball in a moment but have to talk business a little bit. in terms of investing in the lower rate world we hear so much about high-yield corporate bonds. is that still in favor or are you noticing a turn? >> obviously it depends on the investor. one of the things we've always focused on at in capital is buy them, latter them and hold them, play safe. not usually the dollars you want to speculate with that's in your bond portfolio so just kind of
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follow the same principles every time no matter what the market is and that's diversify across the credits and diversify across the maturity spectrum >> when you take a look at sort of indicators around the world, what would be the best indication that perhaps investors might be laddering out of the bond trade, even in a measuring fashion and into higher risk trades? >> well, obviously you watch credit spreads, credit default spreads. you'll see those move around a lot. obviously credit spreads have come in a lot in general over the past few months, although with financials they tend to trade more individually. but, you know, i think you watch that for some kind of indicator any type of big movement in -- in the sentiment in bonds. >> going to baseball in a minute. the cubs are obviously struggling right now. how is it going for funding for stadium improvements and how did it go in the draft the other day? >> we are off to a tough stuff this year. lost a lot of very close games. most of our games have been two runs or less and not doing well in those games but we'll get
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that turned around, though it's not where we want to be on the field. the funding side, you know, still working at it. i think we have a lot of good ideas and a lot of people that are helping us kind of move that forward, and i think we'll get somewhere pretty soon on that, and then on your last question i think we did okay in the draft. our guys are pretty excited about -- about the good young -- good young players that we got, and it's -- obviously it's a part of just building a great foundation so that we can have that sustained success that we're looking for on the team. >> real quick. is baseball a passion or a business, and you can't say both? >> ooh. >> it was a passion long before it was a business so i'll stay with passion. >> great. >> but obviously with -- with our investment it -- it is in both worlds. >> that's fair. tom, good to see you. thanks for your time. tom ricketts of in capital as well as the chicago cubs. coming up next, he was once president obama's right-hand man, and he's sitting down with "fast money" for a special one-on-one. chicago mayor rahm emanuel will talk the economy and the dreaded fiscal cliff in an interview you will not want to miss.
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a very special "fast money" live from chicago continues right after this. [ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪
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welcome back to "fast money." we're here in chicago, illinois. our own karen finerman sat down with chicago mayor rahm emanuel. he weighed in on the economy both here in the windy city and the u.s. overall. how he thinks the president is doing, and much more. take a listen. >> i don't create jobs. the private sector does, but i create conditions for businesses and jobs to be. businesses to grow and jobs to be created. one of the central pieces that have is a modern contemporary infrastructure. you can't have a 21st century
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economy sitting on a 20th century foundation. it just won't move at the speed and the efficiency it needs to. that said, i had to come up with a way to kind of do what i believe for the city to break out of the logjam of being tied either to washington or springfield's dysfunction. >> you were able to get a balanced budget which i guess have you to do, but you got that done with a 50-0 vote, and you made some difficult cuts that i think, maybe surprising to some, maybe not to others, but are we seeing now in light of the walker election a -- a fundamental change about pension reform? >> no. part of it as you describe is cuts. i think we've made a lot of reforms. by way of example, we're going to save $20 million in our health care because we now have the largest most comprehensive integrated wellness plan. we'll make sure that people take care of their health. that's a reform. not a cut. >> this is a financial center of
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the world, not just of the united states. >> correct. >> do you think that we can remain competitive and that you can continue to be a financial center, even grow in your -- >> city of chicago? >> the city of chicago, absolutely. we have a diverse economy. we lead in risk management. we lead in insurance. we lead in pharmaceuticals. we lead in transportation. we lead also in business consulting with centrist headquarters, north american headquarters here, other businesses here, deloitte touch here. our economy is extremely diverse so we're not tied to a sector. >> you, as well as anybody in the united states, understand how governments work. we are facing -- >> or not. >> or not. >> how dysfunctional governments can be, and we are facing a fiscal cliff coming up at the end of the year. how do you see this playing out. >> well, i think, karen, the way i look at it is elections have
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meaning and they have purpose. in -- in 1995, the republicans shut the government down. we got it -- obviously under president clinton we got it open again. we had a battle in 1996 about the role of government, who was right. president clinton won. nine months later he had a balanced budget agreement that doubled the size of our national parks, created the children's health insurance program for children with no health care whose parents worked full time. we created the hope scholarship, the lifetime learning tax credits to send middle class children to college and make it economically feasible for families and also cut other types of taxes and balanced the budget. nine months after an election. i think after an election, and my view is the president will win, people will come to the conclusion he's won. he's the president and they will work on stuff. >> so elections have meaning and purpose, and i guess the question, is karen, who -- whatever happens to the election will lead to some sort of fiscal
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bargain where we'll have resolution on the cliff and therefore resume growth. >> i think it has to. i think that we can't -- there's no more road to kick the can down anymore. we have to do it. i'm actually optimistic with the walker recall and some of the cuts that we're seeing in some pension plans around the country, i think we have to do it. >> all right. we want to, of course, in the windy city, the home of options trading, got to get the options action trade, of course. bring in "fast money"'s scott nations, president also of nation shares for the trade. scott, take a look at mcdonald's. >> that's right. >> midwest company. >> a wonderful chicago company with a great brand and wonderful leadership, but with a pe of about 16.5, it's not exactly cheap so this calls for one of my favorite strategies selling a put option in order to buy a stock in a discount n.mcdonald's i would sell the july 87 half put for $1.30. i get to keep that 1.30 no matter what happens and the worst thing that can happen in this case is i buy mcdonald's at an effective price of 86.20, 3%
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lower than it is right now so selling a put option to buy a stock at a discount, a lot like putting in a bid for a stock but getting paid waiting to see if you get filled. >> pete, you in this trade, mcdonald's? >> not in mcdonald's right now. i love it. sticking with starbucks right now. more upside but i do love the mcdonald's. >> scott, thanks very much. scott nations. we are, of course, live in the windy city, but we have not forgotten about our trade of the day. up next, our own jon najarian will reveal what lies behind the red velvet digital curtain. one of the ideas you'll hear from our panel tonight. you'll want to find out what it is. stay tuned. ♪ here we are, me and you
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♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh
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"mad money" delivers the details in 30 minutes or less.
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>> welcome back to "fast money" in chicago. time to reveal what is behind that special curtain, our trade of the day. dr. j, what is it? >> well, whenever we talk about unusual activity and we wonder what might be the catalyst for that activity, frequently it's somebody thinks they know something that the rest of us don't know, and in the case of today's trade it's sprint nextel. sprint, of course, a stock that's just been hammered. it's $2.74, but people were stepping in very aggressively, buying the january three calls, just out of the money, and selling the five calls, some 77,000 times, so that's about 7.7 million shares worth of stock, and they are doing it for the long term. just after the bell it was announced that their virgin mobile unit is going to get pre-paid iphone and they will start selling that. was that one of the catalyst, it could be. i mean, whenever there's a bit
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of news that breaks right after somebody does a really big trade, it makes you scratch your head and maybe say somebody knew. >> i'm going to go brother versus brother because forced to choose, would you choose sprint as the telecom trade or go for a yielder? >> verizon mobile. >> out of the box. >> i love that yield. >> okay. >> i'm right. >> good. it's an interesting name and off 25% in the last couple of weeks so you're getting a valuation. not sure that trades on fundamentals but i like the call on dividend yield. >> china mobile, interesting. it is a very special day for "fast money." >> why is that? >> it is not every day that the show comes all the way out to chicago to the windy city. we set up here, set up shop and harpo studios so it's a fantastic day just for that, just for that, but there's more. there is more, because it is the birthday of our executive producer, the fearless john malloy. >> come on. there he is. happy birthday, john.
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john was here from the very beginning when "fast money" was created, and as you -- >> john melloy, 6'3", 235, get him out here. >> who they should be scared of. >> have something very special for john here, and we've made our way to the control room back there just behind. >> there we are. >> happy birthday. >> the world's smallest -- >> that's a deep dish pizza because when in chicago -- >> there. >> he will be 235 the way he's eating right there. >> the guy is jacked. look at him. >> exactly. >> our best wishes, of course, for john's 16th birthday. >> absolutely. >> all right. >> we'll head to break. got your first move tomorrow when we come back. stay tuned. ♪
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[ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. ♪ and development. a few distribution issues will be resolved. some new members of the team will be introduced. as usual the i.t. department is always there to lend a hand. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you're responsible for liquid assets. and employee incentives. you just need the right professional to help you take charge. because you don't measure your success by the size of a pie chart, but rather by the quality of the pie. ♪ ♪
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time now for the chicago edition of the final trade so let's go around the horn. tim in. >> walmart of brazil, ticker cbd. food retailing and appliances
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and a value price. brazil is not spent. >> guy? >> if you're a cubs fan out there, 19-37. they lost in ten today. i mean, off to a slow start. i mean, that's the understatement of the century, folks. i mean, tom ricketts, god bless him, but look at standings, my man. goldwyns to this, gld. >> had to dig deep for that. >> i mean, you know. >> karen? >> i like cf. i still think the underlying story is there, so this is the kind of name where we put bids out. i know i'm not going to buy it at the bottom but 165, a good place to add when natural gas is going down, as it did today. i like cf. >> pete? >> under the radar, like the rails, the way they have been trading, particularly looking at norfolk southern, trading at multiples of 11 pe and getting a 3% dividend yield. coal was supposed to kill the rails, that's not the guys. >> dr. j. >> i thought guy was going to say budweiser or crackerjack but as far as where i'm seeing


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