tv Squawk on the Street CNBC June 18, 2012 9:00am-12:00pm EDT
the shoe retailers. pointing to more clearance-prized sales as well as costs tied to its expansion plans, shares slumping on the news. thank you, andrew and becky. >> you're welcome. make sure you join us tomorrow. "squawk on the street" is next. good monday morning. welcome to "squawk on the street." i'm melissa lee along with david faber and jim cramer. karl has a well deserved day off. we're all waiting for the greek elections happen. the pop happened. it lasted for five seconds and we are looking at a lower open, the sdp is looking to lose about six at the open, the dow 55. very similar to what we're seeing in the understanding. we saw the gains quickly fade.
so no surprise. the boost from the new democracy victory didn't last long. concerns about the pop you hear party's lingers impact, now spain's borrows costs are spiking as the g-20 meetings in mexico. >> no surprise. last week's rally may be in jeopardy. within 10% of all-time highs. this morning, though, as ufr seen, giving back. >> microsoft is set to make what it calls a major announcement, but the bigger question, could it be a catalyst for the stock. and it's the one-month anniversary of the i p.m. o for facebook. and the controversy about where to lay the blame is as fear as ever. it was seen as a vote on
whether greece should remain in the europe aren't. relief over the greek election has given away to broader worries. yields have jumped well above 10%, theta showing that bad debts rose. the italian ten-year, they rose back above 6%. that seems to be where we are right now, back to worries about spain and italy, of course, jim action which have larger amounts of debt than greece does, even on its woors day. >> i don't want to worry about it. >> why not? >> but do you have to? >> of course i have to. i want to talk about friday's really, because friday's rally was significant on almost every single metric. i don't want to say that was all because of headlines that maybe there will be liquidity or greece could stay in europe. it was because there are just a -- there's a coalition of
people buying stocks, people looking for yield, recognizing that some domestic companies are doing well, people that don't near a global recession. here's my epiphany. i'm in one of the longest lines i've ever been at home depot, getting my tomato plants. >> isn't it almost too late? >> yeah, and a guy says what is greece going to do? i said hopefully make it so this line isn't so long as home depot. you can't relate the two is what i'm saying. they defy relation, though everyone is on tenderhooking about greece, but. >> so this is a major, major call, jim. basically you're saying we are decoupled, you're not going to worry about europe, because the fundamentals are so strong that that is what goes lifting the markets higher, best two-week gain for the year. is that why?
>> i am making the decoupling case. >> selected decoupling. >> there's a lot of good research today, americas's machinery, goldman sachs saying being very careful about european exposure. what i'm saying is stop worrying if they don't stone on their head. >> but i mean, you can't separate the fact that the whole notion, the reports that came in, coordinated center bank acts, the fact it looked more and more like the pro-bailout party would win, that the fed was going to embark on some sort of extension that that came into the market at about the same time this two-week rally began. it was a massive run, and the dow did close, you know, at one-month highs, the s&p above the 50-day average, these are
major mile temperature stones to be sure. at the same time it's a little coincidental. >> i think 40% of this is over diet, and -- >> 40%? >> yeah, which 40%? >> industrial, oil, finance, tech, i just don't like them because of europe. there's another 20% that doesn't mean anything to me, then there's this other group of stocks that gets hit along with the futures, and i keep thinking about costco. 52-week high, they raised the price for the card, i have the black card now, i'm up to -- because i come to play, and bakley costco jammed, costco domest domestic, it hits a 52-week high. i am trying so hard to link costco to the spanish tenure, and it's hard for me, versus
caterpillar, which says sell. >> that may be a proper blueprint to approach this market. at the same time we just don't know which days we're going to walk in and it's going to override some of those positives, and days where, as last week, where it simply doesn't seem to amount enough to matter. >> melissa is definitely right. what was the spur? it was the story that maybe they'll have to pretty more money, but those rallies are fabulous for getting out of the banks, the techs. >> the rallies are gifts in this opportunity, your opportunity to sell. >> but people don't need to sell everything i keep looking at dollar tree, and i come back and i say, look, these are not being hurt, but do i want to own emerson? i think emerson's numbers are too high. >> there was a school of thought for the percentage of dosh do
you still agree that trade is still on? we take a look at some pairs in the same industry, but with very devin retch mixes, much more leverage to the united states, the once united states outprepped in the second quarter. is that trade still on? is that over? is that all gone? >> we have it at large today, petsmart is raising the dividend. it's a great store and they have done really well. designer shoe warehouse, now known as discount shoe warehouse because the stock is discounted, is -- i they it's narrowing. i think the number of companies you can love does narrow because of a dsw, because of men's wearhouse, but i want in, i want that money, too. i want to take the money that facebook was offer at 26 and own it to 30, though i don't have a
lot -- >> it was a trade. it was a trade. the first one-wean gain ever in its short history. >> if it's four-week history. >> those who are making money this morning are shore the spanish tenure. i don't know if we can have then. the spanish ten-year and the bund has increased as well. people will be keeping a close eye on all of them. we have seen -- they do have, what, a couple auctions this week? bonds on thursday in spain, we will be focused on that, as you see. >> 4 to 4:30 a.m. you get the softening. very much like 1998, 1989, where you had to trade tokyo. >> that's a very difficult level for which the spoonish government to borrow at.
we saw italy. people were my god, there has been to be an el a reorganization right away. you can't keep it up there for too long. there's italy, by the way. that does seem to be where investors are focused today, nirn to of the other news stories. >> keep one eye on it, i like that, because we're blessed with two eyes. the other eye should be kept on the domestic stocks which would be thrown away. we are overbought right now, but be aware not every stock is hit equally by the problem with the spanish ten-year. >> no doubt, but we'll be living with the prices for some time to come. there's nothing else that would give us a formative path. that's not anywhere near our future at this point, so we'll be watching the stuff, day in, day out, trying to figure out what day it's going to matter
and what day it's not. >> i think that's right. >> as much as we're plooking for the results of the greek election, citi comes out and says the chances of a -- it doesn't matter what happened in greece over the weekend, didn't matter the new democracy one. 50% to 75% is where it stands unchanged. i thought that was interesting. >> i think throughout -- >> i'm with you. let 'stop talking about greece. it doesn't matter, but i'm not going to stop talking about spain and italy. >> we all want to stop talking about it. so we feel this desire to be responsible people, right? we're responsible people, yes we are, you say, listen, the main focus can't be today, is today to buy zynga? >> or the day to buy groupon. >> you take groupon-pro, and you
take anti, and i will become the ringmaster, and my forecast calls for pain. we can't do that. and microsoft is set to make what many are calling a major announcement today. most analysts expecting the company announcing it will launch a new tablet. and of course to compete with the ipad and kindle. we should have thought of barnes & noble immediately. remember -- the mysterious investment. >> and you sigh the barnes and noble share price, and since then it's come down. it makes sense always in the
back of your mind was zune technologically better than the ipod? i have look add this nook. to me its technologically superior to kindle. but it hasn't mattered. is this microsoft's revenge saying, we have a better product and we're going to put a lot of money in it and this time the boar product wins? >> who knows? microsoft with -- barnes & noble, by the way, don't count them occupy. the stores adopt matter. they do have a significant portion of you digital book business they are in the race. it's a very competitive race, and your point being apple and amazon certainly are dominant. >> is that is there not a more
feisty microsoft, skype, doing well? this motion that they have a lot of good subrosa chatter going n on. >> i think it's very peculiar, of course it's going to call it a major announcement. it's after-market hours, which seems unusual. it seems like any announcement would occurred before or after markets house, and only an 18% stake on nuco? will it be a tablet or a glor gilled nook? if they had a robust offering where you could actually skype with the tablet or do other things? >> i would love a surprise factor, other than the that are the fact it's surprised the way they're doing it. i don't know if you read
knit copual about apple maps versus google maps. i think microsoft has its worse cut out to destroy kindle. and they still produce a predigitous amount of cash flow. >> can't rule them out. just as spain's too poor, microsoft is too rich. to bring it all back. we hadn't mentioned spain in a minute and a half, and homage to catalonia, lincoln brigade, whatever you need, i can do it. i can get it all in. >> reading hemingway right now, aren't you? thank you. ask not. not for facebook, perhaps. it is one month after facebook's public debut. the report that they made several new moves that
contributed to the volatility. among them shutting out two leading banks from -- to individual retail investors. the paper says morgan assistantly star banker michael groups insisted that he be the sink the driver of the ipo, and if the deal went back, it would be his throat to choke. >> i can tell you some of the reporting i've done, not for air confirm what the journal is reporting today, in the sense that morgan stanley did not approach this, as you typically do, really linked with your co-underwriters where you have a united front on the road show, and are very much more involved perhaps than they were in pricing. the question is how much is grimes out there? i don't know the answer, the way
frank quattrone was wuchblts morgan stanley would say it's not true, but it does come up in a lot of conversations. >> i had heard anecdotally a lot of my friends in the smith barney network got the call saying, i know you didn't put in -- here's your 5,000, 25,000, confirmed that went went on. some chatter that you guys are way off the reservation, so it was very clear, it was like a 36-hour period where i think gorman and grimes recognized i know there will be over the tra transom order, but the way that
nasdaq screwed it up, it was difficult for the flip to occur. there was a flip to be had, but you couldn't flip it. >> and that will come back time and again and simply say we'll never really know how it would have gone had it not been for the major screwups, and that perhaps stability has been found. so a very good pieces, tau you about how there's a diminishing return, go back to that quote, it's his throat to be choked. odd that in this would ever put themselves out in that way. this is a guy that's a successful investment banker. it wasn't really him. i think when i real that article, i think it was the cfo
from fable fable who got greedy. >> i've heard different things on that that may be -- on how hard morgan may have pushed, that we can get this done at this price. >> it's a fascinating stories, but at the end of the day it doesn't really make a difference, does it? is the stock really worth 38, it would be trading at 38, regardless of the glitches and the ipo. >> it comes down to whether pipse likes facebook more than espn. okay? and do you sell more gatorade on facebook than espn? >> all the important questions driving a business. coming up an interview with vikram pandit, his reactions. and billionaire investor mark cuban talks with us exclusive by about the book startups and a feature in television. and futures here as we are
bottom of facebook, so the winner will receive that autographed hoodie, with simon so -- it's a fantastic hoodie, i wear it to the gym every day. what a ride for shares of facebook so far. well, now that the greeks have spoken, what will cramer say next? his mad dash is straight ahead. one more time as we head to that market open. we're looking at a lower open. much mower "squawk on the street" straight ahead. e time books and smash records and on small business saturday they remind a nation of the benefits of shopping small. on just one day, 100 million of us joined a movement... and main street found its might again. and main street found its fight again. and we, the locals, found delight again. that's the power of all of us. that's the power of all of us. that's the membership effect of american express.
fortime time for cramer's mad dash, with the oil, have we bottomed or not? >> ubs says buy eog today, that's the fastest independent growing company. they're in the balkan and emanyford. james is saying strong buy to outperform. national is the most lived way, if you think that oil is going down. national well barko, is going this way. >> going down. >> if you think that oil is going up, eog could easy -- those who want to play the dichotomy or want to be riverboat gamblers on oil, short eog if you think oil is going
down. if you think it's going up, buy calls on both. they are explosive situations. >> what do you think? >> i think that i would sell calls on both, because i don't think oil is going to do anything for a while. if people want to make a bold call, this is the way to play it. >> fasten your seat belts, the opening bell is just four minutes away. and an exclusive interview with vikram pandit after he rings the opening bell. more "squawk on the street" right after this. [ donovan ] i hit a wall.
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and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? a large crowd gathering outside of post 9 as we repare for the opening bell. vikram pandit is on the podium where he'll be wringing the bell, and 200 years for citigroup, a tremendous watershed moment for this
company. >> when we look at these big spanish banks, so powerful, so big, crumbling, citigroup has had many iterations, yet is city around. the bank has survived. >> somehow, yes, or it's lineage. 1990, 1991, it survived. it survived the last time. it's kind of like, you know, a vampire, like a "true blood" situation. >> you're calling the company a vampire? >> why nod? there's, you know, a strong tradition of companies that refuse to die. >> exactly. beshd know our own maria bartiromo will be speaking with vikram pandit in just a moment. energy did the honors over there. so far for citi and the rest of the financials, opening to the down side, no surprise given the
turn we have seen over in europe, and spanish yields spiking higher here. >> isn't that the liquidity, which you mentioned about the rally last week, those two components, one was a belief that thing may be okay here, but the other is if greece falls apart, the banks need greece to fall apart to rally. >> a counter intuitive school of thought, that we need something bad to happen in order for them to central bankers to step in with the real gets. >> i'm not sure we want that, but -- >> it's all game theory. >> we're still wading for the moody's downgrades. past the middle of june. originally we expected to hear from them in may in terms of their new ratings on the concerns we have raised many times, potentially in terms of
collateral and the like, will it be a three-notch downgrade, but we also talked about the overall business, a lack of volume. no ipos in the month of june. none at this point. >> how about that fantastic art this morning. how well wells fargo is doing with the various mortgage modification issues, and how if they've been making money. i've been a staunch advocate. the reason why is because they've done more to solve the housing crisis. yes, they're making some money, but they are making competitive rates. i continue to think that shawn donovan quietly is doing a good job, and they could use him over in spain and wells faro, because that is a real estate crisis first and foremost in spain. >> and investors have heeded your call, nothing else even
comes close these days in the wake of the trading fiasco. wells fargo is twice the size of bank of america when it comes to market value, so that certainly has been played out. >> if you had told me there could be a bank that could have 30% of the mortgage market in this country, i would say the antitrust department of the justice division would never allow it to happen. justice would shut that bank down and make it split up. instead, wells fargo is a solution. antitrust doesn't care, and justice department sure as heck aren't looking at wells fargo, that is lo like a oligopoly. >> they do the origination at the end of the day. >> wanted to bring your attention to qualcomm. qualcomm has had a streak of troubling session of late. it all started when nokia came
out. qualcomm is the supplier of the chip no the lumia phone, then there were separate concerns about qualcomm being ability to supply enough narron ometer chips. you just need to know those chips go into the iphone 5, so there are some concerns they wouldn't have enough manufacturing capability. you have to wonder when you need to stop loving a stock. i'm not saying now is the time, i don't know. >> it's always seemed to have had a halo. when you sit down with intel management. it's an inferior complex. intel generates a huge amount of cash flow. at a pint point i don't want pizzazz or excitement. i just want a stock that gives me good yield, a nice buyback that does well over time.
i think america is coming toward that, but in the end, when called quorum is down, people say i have to get it, that can move $2. intel is not a stock that can move $2. maybe an interesting idea, find stocks -- and this is obviously what i'm talking about beta for the institutional people. find stocks that only moved in 37-cent increments, and you may have something working in this environment. that intel goes up quietly, nobody cares, qualcomm goes up and down noisily and we're all focused on it. microsoft has had a very quiet ride, but it's been good. >> let's check with bob pisani with more on what is moving thorn. >> the probable is kick the can, and the can isn't going very far anymore. there have been proponents, arguing it's buyings time. the problem is what's going on
with greece and spain right now, did you see these early reports? there are reports the greek government will seek a two-years extension. what does that mean? very simple. they're not going to meet the tax collection. the troika will have to come up with more money? nobody knows. it's not clear yet. they'll have to have negotiations, but the issue is very simple, how do you kick that can down the road when the netherlands is having elections in september. it's not even clear this could approve more money at this point. germany isn't isn't going to do it, it's going more different. kicking the can seasonal moving the can very much. they're losing faith in the ability to actually do something, you see what's going on in the give-20 meeting? absolutely nothing. the main accomplishment there shall they'd try to increase the
money, try to ray $420 million. we'll see if that happens without the united states participating. if they can -- that's about it right now. ever where the eu summit, what few bulls remaining are pinning hoping the eu is going to approve the creation, the development of a road map toward a true fiscal and banking union. they also will have to lay out exactly how to do that constitutionally. finally let me comment on what's going on. i know, jim, you mentioned the quarterly end here and the possibility for a rally. most traders are expecting something from the fomc, some kind of stimulus. that's part of the reason they're continuing to play some kind of rally into the end of the quarter. india did not ease. that's interesting there are some hopes of global coordinati coordination, the idea that vettors are a little too far offsides on equities.
remember we're down 6% on the quarter. guys back to you. >> thank you very much, bob. citigroup celebrating its bicentennial. what is in store for this banks giant as it enters its third century. maria bartiromo is on the floor form maria in. >> hi, david, thank you so much. i'm here with vikram pandit. nice to have you on the program. >> good morning, maria. >> you rang the bell, celebrating 200 years. congratulations on this occasion. tell me a bit as you look back how this back has evolved. what would you like to see this company look like? >> maria, thank you for doing this this morning, particularly this is our first business day in the -- we're not too far from here founded june 16th, 1812.
ever since then we've been enabling progress for our clients around the world. we enabled trade finance for trade from new york and liverpool, and ever since wen we've been connect, we financed the panama canal, and every day we go around the world to figure out how to help our clients do their business easier. >> and things have gotten trickier over the last couple years. now we're talking about a slowdown in the emerging markets, slowdown in china, how do you navigate? >> it is an important part for us. they're still growing. i know they're growing a bit slower than a few quarters ago. they're not immunity to the impact of year. we feel it here, we feel it there. if you look at the consumer on the ground, real estate continues to do well.
let's zero in on the news of the day. we know that the bailout team won. how does that impact city? give us your sense in terms of the exposure that city has to some of the sovereigns. >> well, the greek election is certainly a positive for keep the euro together and, you know, we've long thought it is important for europe to have the euro together, they clearly have the wherewithal to do that. having said that, we've got to be ready for every eventuality as a bank. we've been limiting our exposures to sovereigns, managing very tightly our exposures to the financial institutions in europe, and more importantly, when you look at our disclosures, the risk we have is extremely manageable, particularly given our capital and liquidity. >> aren't there unknowns here,
the fact that some of these so-called counter-parties may not be able to live up to the promises? what do you do about the unknowns? >> you know, let me tell you one more thing we've been doing. we've been looking at many of the countries, looking at them as separate countries, or one europe, so to say. so when you go to greece, we tried to make sure the loans we have are matched by local fundings, local deposits. why? you want to be asset liability managed hedged on the ground. that limits your exposure significantly. >> at the same time we are all dealing with this upset in europe. we're also dealing with trouble in the u.s., economy slowing down, capital markets have been debtly, we sea that in your first quarter, how would you characterize capital markets right now? they have slower volumes. they reflect the uncertainty in europe. but owned, where we're seeing
strengths, we're see strengths with the u.s. consumer. we're see strengths in the housing markets in certain parts, and a lot of strength in global trade flows. that's something which really drives economic growth. we've been quite positive about that part of the world. so you are seeing strengths in housing? because there's this debate going on in terms of have we hit bottom, will we bump along the bottom for a long time. from your very strong vantage point in seeing they homeowners and these foreclosures, how strong is that consumer right now? >> well, the first thing that you've got to do is not think about the u.s. as one. that's a positive. different parts of the u.s. have decoupled from the rest of the parts. yes, it will be a long time in nevada, arizona, but other parts of the country have started firming up. you see that in new york city, in certain parts of the u.s., so it's not one homogenous market. we actually are starting to see
in these cities commercial real estate do bers, rentals are very strong, so we're not done yet. it's going to take some time. having said that, we likes the signs we are seeing. >> extraordinary we haven't gotten out of this, even where mortgage rates are, and interest rates are incredibly low. that's got to be tough on business and the entire banking sector. you think the fed continues to ease in this two-day meeting? >> one of the things the fed will be looking at is what's going on around the world, but it's their decision. i do know that the fed policies and the decisions that have made have actually helped not only bring interest rates down to where they are, but they've helped support housing, helped support the stock market and the market for finance assets. certainly that's one of the things that's kept the u.s. economy stronger. >> and of course that's what has been driving these markets as well. let met get your take on the
regulatory environment, people are wonder if citi is it compliant for basel 3. today it's down to -- we've so almost $600 billion of assets. having said that, we have one of the strongest capital positions in the world. we are at 12.5% on basel 16789, reported tier 1 com and on track to be over 8% by the end of the year. that's a very, very different citi than three years ago. we're a completely different organization. >> vikram, i think we're going to wrap it up here for our live portion, but when we sit down in a few minutes for our "closing bell" issue, i'm going to talk about your dividend. >> terrific. >> a lot of people want to know if a dividend is coming in 2012.
that you will here today at 3:00 p.m. eastern. thank you for joining us. >> it's a pleasure to be here. thank you. i'll send it back to you. thank you, maria. thank you, vikram pandit. a very different time to figure out what to do with a bank. would have been a terrific moment if the emerging markets had been strong, but they've all turned out to be as weak as domestics. so what seemed like this great hedge is no longer playing out. >> he talked about strength from the consumer, which i thought was a positive. he talked about trade flows, but to your point, citi has tried to distinguish itself from many of the other banks. it is a great franchise it has in emerging markets. we may not think of it as the strongest name in the u.s., but overseas it is, but of course it is -- well, seeing some weakness, though pandit did not give a great voice -- >> and i was in cairo two years
ago. you walk around cairo, and don't understand, you see a lot of banks that make no sense, and then there's citi. citi is gigantic in cairo. you think it's incredible, but two years later, the last place i want to be in is cairo, the mousse unstable part of the world. it turned out their markets turned out to be not the antidote to the slowdown in america. all right. the dollar's on the rise, treasury yields are moving lower, of course, because people are scared. let's go to rick santelli. >> thanks, jim. you know, if you just walked in, you didn't know much about the elections over the weekend and just looked at friday's settlement, it wouldn't seem like such a wild monday. if you look at a two-day chart, yes, we're down a basis point or so at 157, but when all of these issues from greece were hitting the headlines fresh, we're up around 164, 165. if you look at bunds around 154,
settling back towards 140, fairly much in line with friday's settlements. if you look at where the real action is, you can see the italian tenure is up about 16, 17 basis points, about a ten-year chart puts it in perspective. we're nowhere near the all-time high yield on this particular instrument, but you can see we're definitely moving higher in yield. of course, the worst for last in many ways, spanish ten-year, and you can see that these are the highest yields kind of post-eurozo post-eurozone. this really is the only information that matters. everything else will ebb and flow as solutions come and go. in the end higher funding costs for the weaker countries has to be dealt with. the markets, it seems like they're the only wujz doing that job. melissa lee, back to you. rick, thank you very much. coming up, mark cuben talks with us exclusively about the
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welcome back to "squawk on the street." i'm sharon epperson on the floor of the nymex, where oil welcome back to "squawk on the street." i'm sharon epperson on the floor of the nymex, where oil prices are extremely weak this morning. in fact we are seeing brent crude prices at the lowest levels in 16 months. a lot of the weakness has not only to do with europe, but weakening fundamentals as well as trader and analysts are analyzing what is happening in terms of the supply levels and demand levels particularly of the north sea crude. we now know that the opt temple over greece has faded and spain, we're seeing weakness, but add
to that we are still waiting to see what comes up, the meetings held in moscow today and tomorrow between the western nations over the nuclear perhaps, softening iranian tensions, that is why morgan stanley says they believe we're seeing this correction. if brent crude does fall, they say expect opec to start cutting back on some production. in terms of the metals market, we are seeing gold under pressure as well, but not as low as it has been. keep in mind we still have not only spain, syria, egypt, the list goes on of problems around the world. that may help to support gold praises. >> thank you very much, sharon. as for the markets right northeasterly, we still in the red across the board. i want to point out one stock. that is bks, barnes & noble, we were talking about microsoft cease announcement. what a wild ride for this stock. at one point in today's session, the stock was up by something
like 8% or so. now it's down, dow jones setting sources close to bks saying bks has nothing to do with this announcement. we are seeing it tumble, basically. >> vacuum of info. >> vacuum of info. exactly. much more "squawk on the street" straight ahead. ♪ baby i'm ready to go coming up jim cramer is revved up, jim cramer is ready. six stocks in 60 seconds when "squawk on the street" returns. ns. tdd# 1-800-345-2550 the 5-day moving average just crossed above the 20. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly.
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welcome back. time now six in 60, six stocks, 60 seconds. tractor supply. >> a great story. people taking in retail eers. all scrips. >> stay away from all scrips. be careful. be care careful. and caterpillar. >> be very careful. europe of course the key question sell gene. >> a big ruling coming up.
avon products -- >> at what point do people say i need a salvation. can i come back? they're going to go public this summer most likely. it's the key question, if you think that, a., you're going to dilute us all, but 25, 23, 24 looks better. >> 23 was a joke. >> very good point you're making. what do we have tonight at 6:00 and 11:001234. >> mark west, why does this matter? the m element ps have disastrous. we've got to find out why, because man, they've been terrible. killed people here. >> we'll see you then. >> probably don't think of them as slayers, but they are. >> 6:00 and 11:00 tonight. coming up next, mark cuban, owner of the dallas mavericks, talking basketball and a whole lot more. [ tires squeal, engine revs ]
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positive and negative. this one-point gain after a four-point spike in may. the builders throw in a warning and i'm quoting -- recent economic reports that have shown in weakening likely factored into the marginal gain. that from chief economist david crow. he also cites tight lending and inaccurate appraisals. current sales positions were up two pounds. builders in the midwest and west gained confidence, not so much in the south and the northeast. that's where the index dropped. for more on this report, it's all on cnbc.com. melissa? thank you very much, diana. we are watching the home builders catch a bid. let's get to the road map for the next hour of "squawk on the street." markets trading likely lower on the back of greece's pro-bailout new democracy party. we'll be joined by citigroup's
chief u.s. strategies toe bias levkovich. we're talking to mark cuban about his big block trade in the social media giants. as investors continue to pull out money, we're taking a pulse in the bond market with howard marks. let's head to athens and get the full story out of greece, from our chief international correspondent michelle caruso-cabrera. michelle? >> reporter: hey there, david. the worst-case scenario did not come to pass here in greece, at least when it comes to what investors feared. the leftist party that really wanted to do a really hard-core negotiation with the european union did not get into power, instead we did have the pro-bailout party come into power. we see the process of forming a government. greece invented two key concepts, democracy and drama, so for the next couple days we'll get a lot of political theater.
it began today antonacy samuras the winner of the leads party gods to see the leader of the second party, they sit down to try to form a goism. the leftist had made very clear he was not going to, and then samaras, the winner, spoke to reporters. here's what he said. >> he is not willing to participate in such a government or such a coalition. i believe that the government should immediately be formed. it's something that is required as stated by the developments by the economic situation, and by the vote of the greek people. so that's what we're trying to do. >> reporter: here are the three key things. everybody estimates that dee spite the sausage being made and the fear, they'll have a government by wednesday. the new democracy party has made
clear, what they're looking for is more time, perhaps as much as two years in order to hit the fiscal deficit targets or to have a balanced budget, and in the short term, greece has run out of cash and time. they need to do a lot of things very, very quickly. they've got an interest payment due on june 25th. they've got to convince the troika to give them another couple billion. this country is literally making decisions about whether to pay for natural gas, do we give 120 million euros, or do we spend 100 million euros on arrears to pharmaceutical countries, that's the kind of situation they're in. it's pretty stark. back to you guys. >> so the nail biting negotiations continue in the meantime cutting through that, michelle, citigroup today says there's still a 50 to 75% chance that greece exits the your ozone over the next 12 to 18 months?
>> reporter: oh, yeah, i think that's absolutely one of the possibilities. at some point it just gets too hard, right? they're already essentially prints ious, this is the way it starts. they don't pay contractors, get very behind in payments, start issues ious this is what happened in argentino. even if they don't want to, and at some point it becomes so difficult they end up going back to the drachma. it is highly possibility unless there's more leniency from the european union and more help from the ecb as well. >> michelle caruso-cabrera on the ground for us in athens this morning, thank you very much. toe bias, always great to have with us. >> good to be here. >> now we're focused on spain. is there any point at which we can say i'm a u.s. equity
investor, going to invest in u.s.-oriented companies and i will be okay. >> we're going to get some fallout call it almost half of that. detergeants, food, things like that. but what we really fear is this kind of far-reaching credit cajun, the kind of things you would normally look at, so things like libor, noninvestment agreed credit spreads, they have not done what happened back in '08. investors are far more defensively invested. if you look at how utility stocks are trading relative to material stocks or energy stocks, what you're sealing is almost two standard deviations. relative to energy. if you had gone back in '08, it was the exact reverse.
sicklically pro-growth, in that case back in '08, it was decoupling, china would grow, everybody would be fine. now you've got this very defensive positioning. unless we have some really xoj news shock. >> could it be like a coiled spring? your target for the end of the year is 1425 on the s&p, which is 6% higher. >> right. >> so that's your base case scenario. >> exactly. >> what if good things actually happen? >> obviously europe kind of getting their act together in one fell swoop, which is a low probability outcome. the second one week the u.s. continuing to grow, and if it's modest growth, benefits from lower energy price, investors get encouraged. if we start to get some sense, and i'm not necessarily picking winners or losers, but if we get a sense that people in washington do get the why the we have to fix our own fiscal cliff, or we'll have severe
repercussions -- >> do you hear that in the conversation at the moment? >> not at all. i was in washington six weeks ago. we talked to both sides of the hid and it was a very uncomfortable trip on the way home. i wasn't feeling really good on the flight home, because nothing really can happen until the elections, given both sides have to give in, no different than what we're seeing in europe, and you don't do that to demoralize your base. post-elect, we could have some positive outcomes. i'm not picking sides on the politics, that's not what i do, and you know i'm canadian and don't vote in this country, anyway, but if the market believes you're getting a pro-business or pro-markets view and that would tend mob of a more romney win, markets would rally. i don't think you're seeing that. i think you're looking at a pretty tight election down to the wire. >> if you're making the case
that investors are more defensive, are you saying that we should take on -- we as investors should take on more risks in general? and where would that risk be? >> for the near term, you want to say more quality different, large caps, those kinds of stories. i think the investors will see a lot of up and down the next few months as we try to absorb some of this news. the good news is sentiment is down in panic territory. that gives about a 9 on% probability of gains in six months and about a 96 probable of gains in 12 months. if you look at valuation, pretty compelling respectively. and then lastly, and this one is really important the percentage of estimates to the up side of all changes made by analysts on the street are in kind of the 35, 36% range. when you get to those lows in a nonrecessionary environment, markets start going down.
if you look at the rewards relative to the risk. if you're looking at near-term movement, i think that's where the issues are. we're unlikely to get out of our own way. >> why do people potential continue to flee equities in an environmen environment. >> you hear a lot that this time it's different. there are other positive differences like the fact that the bond yield is below the dividend yield for the first time since the 1950s. back then people bought stock for income. i'm actually interested to hear jim took talk about why mlbs are beaten up, because those are attracting a lot of income-oriented investors, so there is this kind of income starvation, what is going on in bond yields, safe haven status, people running away just for cover. i think you -- the question is, will the market run away from
you the next month or two? our sense is no, not yesterday. >> what you also have not mentioned the fed, of course, which i think is a -- a man of your intellect doesn't mention -- one of the reasons the interest rates -- it's precisely because 34% of all treasuries are held by foreign central banks that are not price sensitive. arguably if we have to start collateralizing derivatives that could be another 1, 1.5 trillion. aren't rates likely to stay low now for a very, very long time? >> that's what financial repression is all about. the question is, does that force investors to look at alternatives to income like dividends? our argument would be in that realm that we're unlikely to see bond yields really soar in the very near term. in a year from now if there's no movement on our fiscal cliff issue, i suspect there might be more trouble in the bond market, but that won't happen immediately. remember, the reason the fed
wants to anchor rates are twofold. once, i've had this discussion a bit with rick santelli, because i disagree on the third aspect. if you keep rates low, keep funding costs for corporates low, which means the hurdle rate is also low, and can make investments -- >> in theory. >> that's what they do. i can prove that, not just in theory. number two -- because that's what blew up in '08. >> you have to assume that demand is constant. >> not necessarily. if you have product activity enhancing stuff. somebody's got to build new machines, the people you order them have to hire, so there is a very tight relationship between equipment investing and in terms of employment. so number two, you generate the push into more aggressive assets, create some wealth, people feel better and they consume. remember, 20% of americans -- actually 90% of the stock market, and they represent 50%
of discretionary spending. if they field wealthier, they go out and buy that extra little thing. the third aspect, where rick and i disagree, what it does for housing, even if rates are low and you're not creditworthy, you're not getting a mortgage. it's not about the rate necessarily, it's about your creditworthyness. >> will the fed inflate the stock market? >> i think they've been trying to do that already. it's -- i don't think -- it's the front and center idea, they want to inflate the economy. there is a benefit, but that initial liquidity makes its way into the market. i think that's been true over the year. >> thank you for coming by. >> good to see you. we're going to go to mary thompson for a quick market flash. >> thanks, david. buckeye technology, down more than 8%, now down just about 7%. what happened is there was an inns didn't at one of its plants in florida. that plant is shut down.
it's a maker of special fibers to manufacturers of industry and consumers goods. >> the company says an investigation is under way. they say the plant will be closed for an undetermined time. they say hear this week they'll know when it might be reopened. it took a sharp dip. it's come off the lows again down 7.22%. simon, back to you. >> thank you, mary. today is the one-month anniversary of facebook going public. we're going to talk about the lessons learned and the valuation, the mobile strategy, competition now one month on. that's next on the program. and of course be sure to stick around for mark cuban, who's been a buyer of facebook stock as well. that's still to come on "squawk on the street." from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place.
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on facebook, so by far the more bullish of the two. how concerned are you that brick taylor, we now learned is leaving facebook, the chief technology officer and a very prominent player recently in public for that particular giant. >> first, i want to say i'm a big fan of mark's, so whatever he says i probably will agree with, losing a senior guy is a bad thing, so you certainly don't want to be -- it looks like rats jumping off a sinking ship. in this i think you have probably a millionaire who stated he wants to go out and try something new. i think it's incumbent for the company -- mark zuckerberg is the cto, we know he runs the show. anything on fortunately they have thousands of engineers behind taylor, so you know there's somebody who is capable who will step up, but you don't want to see a senior guy leaves. i think they have to vet senior
executives and make sure these people have the incentives to stay in place. i don't think it's fat at for the stock at all. >> but mark, very different to incentivize people when they have become so tremendously rich. how do you keep your existing talent at the top when they've been so successful. mark? >> in fact there's a lot of research that suggests when executives get too invested in a company they become profoundly conservative relative to perhaps what investors want, so i do think that's a big concern. bakley my beachishness is based on some very simple assumptions about how fast companies tend to grow after they grow public and what a typical price to sales ratio is. you can easily disagree with me.
i welcome my clients to say they disagree. my analysis shows what must be true for facebook to do better than my bear -- basically they're going to have to grow revenue at a much faster pace. that's difficult given they're such a huge company. you're already -- they come to market over $100 billion, that's a different radio to go down. >> mark makes a great point, that is that facebook is one of these companies that came to market at a later stage in its lifetime than other companies. does that factor in at all to how you calculate where the company is going to go? you have a $44 price targets on the company. i'm assuming you have enough visibility to back it up. >> absolutely. i think that the big dissect is facebook is only monetizing at about $4 per user per user.
people are looking at a couple pages per minute. so the opportunity to get that number up to $10 looks to me to be quite easy. these are late stage in terms of their users, not in terms of their monetization. i they to go from $4 to $10 is a no-brainer. they go from $4 per year per user to about six. again i think we have visibility to take the monetization from 4 to 6. that's a 50% growth rate in revenue per user. not hard to do at all. when you hear the things they're doing like sponsored stories, like mobile advertising, i think that's going to happen. >> would you accept that this could be one of the great -- will be one of the great momentum stocks on the nasdaq that people will get in and out of as it shoots up and it shoots down? isn't that the nature, in
essence of expectations and how polarized we are, mark? >> absolutely. it's entirely possible. i think momentum players are by definition short-term players. the analysis i based was five years out. that's well beyond the time frame of a momentum player. if instead i'm anywhere close to correct in terms of that forecast, which is basically a back of the envelope forecast based on revenue growth models, then yes there will be a long period of time during that period of time when the momentum players will be telling facebook, but does that mean there couldn't also be periods of time when it's going up? absolutely. >> we'll leave it there, guys. thank you for kicking off your week with us. thank you both. and of course, as you know, today is the one-point anniversary of facebook's debut. right now we are tallies up the estimates about where you thought facebook shares would hit the bottom. tomorrow during the show. we'll reveal our face the numbers sweepstakes winners. perhaps you'll be the winner of
this hoodie signed by all of you are here at "squawk on the street" with pill zach. david signed the whole back here. >> team faber. >> it's really quite a hoodie. congratulations to that winner. >> i want to do a quick check. facebook shares are elevating higher today, and the nasdaq overall is in the green, finally in the green. take a look at the intraday chart on apple. we'll see that symptom had a major impact. >> it has to be about other stocks, because facebook isn't in the indices, is it? >> it's in the composite. >> i missed that completely. >> it's not -- i believe it's not in the 100, but it's in the composite. if it goes public, i believe it goes into the composite. apple with its rise today. that was a major impact. >> and having as impact on the
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today today marks the one-point anniversary of facebook's ipo. mark cuban bought 150,000 shares in the open market. what is next for his trade? and where does the future of the internet lie? always great to speak with you. >> same here, melissa. thanks. >> you buy your position in three tranches at different prices. all of it right now is under water, mark. how long do you anticipate holding on to this? and what is your exit strategy? >> i already sold it. i took my hit. my thesis withdraws wrong. i thought we would get a quick bounce. i was wrong, and when you're wrong, you don't wait, you just get out. so i took a beating and left.
>> are you surprised -- i'm sure you're priced that you're wrong, but really the question is, are you surprised that facebook didn't even catch that bounce that you thought it would? >> i really -- you know, it was gambling money to be honest with you. anytime you try to time the market, you get what you deserve, right? sometimes you're right and sometimes you're wrong. in this case i was wrong. i think, you know, the issue with facebook to me, and the reason it was a trade, not an investment is because they put on the 421 million shares. i mean, really what it all comes down to it, stocks that don't pay dividends are just about supply and demand. that was a huge supply. if you look at our companies like linkedin, the stock skyrocketed. this. so it was just, you know, the circumstances that let to me getting in and out. >> market, it's david faber.
>> hey, david. >> hey. some of our viewers may forget -- think of you as the mavericks, and forget, of course, that sale to yahoo! worked out okay. >> that worked out okay. but given your experience from way back in terms of the pc, and you started in that business, of course, as well, tell me what you think in terms of the transition from the p. c to mobile. how important will it be? how big is it going to be? what do you think in terms of the real impact it will have in? >> well, first of all it's going to be a huge impact. the big question is, you know, will mobile -- or how much of laptops and desktops will mobiles display. it will come down to what type of wireless technology we get. is it going to be something that better utilizes spectrum so there aren't limits in our mobile carriers? there's all kinds of new radio
technology coming out. if we see an explosion, the game completely changes, but that's not on the horizon of one, two or three years. where we are today, i think the leveling issue is that all internet companies face the same risk with mobile. it's not just facebook like some people are trying to make it sound. it's google. it's zynga, everybody dealing with the same issues. the real answer is i think they'll all solve the problem. it won't be difficult -- i think it was mike from wedbush who said you could see it going from $4 a user up to 10. i think that's right, you will see an increase on mottization, about you if facebook can't do it, everybody has the same risk and same problem. as you said it's 1, 12, 3, in that period, it seems like there would be a shake-up, because investors today are demanding companies have a strong presence
in mobile, yet that is not what their business model will support in terms of profitability, mark, do you anticipation -- >> you think -- are you saying facebook can't support mobile -- >> no, no, not facebook per se, but some companies, because's investors are demanding companies be on mobile and shift their users to mobile, that's not where the most profits lie at this point in time? >> no, no, that's true. >> so will it shake out some companies? >> yeah, i think it will, because we still don't know who all the winners will be in terms of how ads are delivered and how revenue is generated at the mobile level. i don't think any one player has a dominant solution, either, so i think it's very difficult to pick the winners and loser at this point. >> mark, can i ask you about television? you said recently you think television is an undervalued medium and you're rebanding hdnet, with ryan seacrest.
it's all about the live event feeds, so i'm wondering if there's any chance you might bit against seacrest for dib clark productions? >> oh, zero chance, absolutely none. >> why? >> first of all, i don't know the business. yes, they have some live events, but i think one of the up sides for hdnet rebrandings is we can create our own events, where television currently isn't or there's minimal even internet live delivery. television, because it's zero latency and all digital creates unique opportunities. i don't think we have to go to a legacy business to get those. >> but surely you have to actually own the events to really make the money, otherwise it's bid out between the other platforms. >> see, i would disagree. people talk about things that are changing in the younger demographics. to me it's not technology. people try to say if you're used
ipads and ipods today when you're 3 years old that would be your counsel assumption in the future. that's not the big thing. i think what's changing right now is people are driven to events. people want to be part of groups. there's so many different untapped opportunities in terms of event creation, that we think we could be a leader in creating events and broadcasting those events, monetizing those events in a variety of different ways. there's no reason to go back and look 59 legacies. >> we've got to ask you about where your take is on the markets at this point, with all of what's going on in europe. reference your facebook investment as gambling money. is any dollar invested in the stock market at this point gambling money? are there places to go? >> i've also been a proponent if the stock pays dividends or paying outs its earnings, then it's worth considering if you believe in the company. but i think right for you, the market is gambling.
you can look at europe. you know, europe is no different than the united states. you have no different how the politicians will execute on the things they got elected to do. then i also think there's a big gamble over the market in the united states over high-frequency tradings. there's no such thing ago bug-free software. when you have software battling software to dominate the market, that's an unknown. the bottom line is i think high frequentry trading that is zero place in the market and they should get rid of it all together. it's an unquantifiable risk that can impact the market in ways we can't define. >> a subject worth more time. heat or thunder? your mavericks are still champs for a few more days at least. >> yeah, i know. i almost wore my ring, but you know, i think both teams have great coaches. both teams obviously have great players, so i think actual come down to coaching adjustments. chch coach comes up with the best judgments, that's who's
going to win? i think it's a toss-up right now. >> mark, always great to speak with you. hope to see you again soon. >> anytime, melissa. thanks so much. mark cuban. up next, we have a man who when he speaks, wall street listens. howard marks will join us to talk high yield, private equity and where he is looking for opportunities. stay with us on cnbc. about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful. i'm hardly using gas, but it's there when i need it. anybody that thinks that this car doesn't have solid performance, hasn't driven it. there's no other car like this on the road. ♪ there's no other car like this on the road. you want to save money on car insurance? no problem.
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but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. all right. all right. welcome back to "squawk on the street." investorsing have been pulling money out of equities, parking their monies in a lot of other assets. our next guest warns that calls from the death of equities may be premature.
an interesting call from a man who runs a portfolio. howard marks is chairman of oak tree management, which manages $78 billion in assets focusing mostly on fixed-income strategy, howard. nice to have you here. of course, a recent public offers, o.a.k. the symbol there. there is an environment in which investors don't want to take risk, but want yield. what and how do you advise them to go about constructing a portfolio that might accomplish that. >> the mantra lately has been safety in income, and the trouble is i think investors have to think about at what price? and they're getting such low yields now on traditional fixed income that i think that they should not run trickily to safety and yield, but look for something creative. it might be equities or bonds which might be some credit at risks. >> so you think perhaps equities
in this environment? >> the think i like about equities is nobody likes them. you now. the most important thing is how much op mitch and affect is built into the price. right now, with regards to stocks, there's precious little. >> absolutely. >> in terms of your portfolio, you are comprised of a lot of distressed dead, private equity is a component as well. but equities don't make a big play in terms of what oak tree does. that's right, they don't. my comments are really just academ academic, not touting our business. the best thing we have going now is the yields on high yield bonds, senior loans, are substantial higher than the yields on treasuries, and can produce a -- a satisfactory absolute return. so we are also recommending those, along with the equities that we don't sell.
>> all right. howard, i want to take a quick break, and send it off to michelle caruso-cabrera. and get our microphone fixed here, we'll be back in a moment. over to you, michelle. >> david, feel free to weigh in, we're joined by george papandreou, your party came in third, it got hit hard. how do you feel about the outcomes of the election and new democracy coming in first is it. >> first of all, i felt that politics is to serve your country. i had a lot of costs politically personally, but i do believe we have potential to change, and the vote yesterday i believe will open up a government coalition, and we'll continue major refusals we need to make. >> reporter: what does it say about greece wanting to stay in the euro?
does 2 say anything? >> i think it's quite clear that greeks do want to stay in the euro. this had been so even before the elections, but i also thing think see there's a voice of reason that yes, we need to stay in the euro, but we also need to work within an agreement. we want to honor the signatures that we have made with our partners in the european union the bailout agreement, and that is also to make greece much more viable. >> tell me about what changes, if anything, should happened. try to do some form of renegotiation. if you were doing that, what could you ask for? >> well, one thing i said from the begin, and i think this is what the government will have to stay, we have to prioritize. too much weight on 9 austerity side to cut the deficits, while in fact we have a country which is not poor, about you poorly managed. we need to reorganize it,
restructure it. it's like a company that had been produces things that weren't competitive. that takes time. reform our tax system and civil service. we have made major revisions, but we need to take this forward. it takes time, understanding, and we need a little more time so all sterility doesn't hit as hard as it hit. we should also have a supplemental program for growth. >> reporter: a year ago you suggest add referendum on whether or not greece should stay in the euro. the european union went berserk, they thought you were crazy, they thought it was a terrible idea, you were sit down. should they have let that referendum happen back then? >> i think we should have allowed the referendum to happened. the greeks would have decided do you accept this package and stay in the euro or dot exit the euro? i think we would have had a resounding yes, but this just
shows that europe also has to realize that -- whether it's political or economic beliefs, but has to be a project for the citizens. had we had that referendum, i don't believe we would have gone through the turmoil of the next months. there may be a discussion again about the referendum, but i believe we need time for this government to implement the policies and see how we can find the space to ameliorate the sharper edges of some of this -- >> "new york times" wrote an article very critical of your father, that when he was prime minister he built the patronage system that's so famous and now so criticized, that it was your job to dismantle it and perhaps you should have done more. how do you feel about that whole narrative? >> first of all, i have been a major opponent of the patronage state since i was elected many
years ago, and the last two years -- i've had two years in office, bringing complete transparency in our decision, every euro spend in greece is online. but my father was not the one who created the system. the clientelistic system was there many generations ago, but particularly after the cold war, i would say we had a very conservative government, and after the cold war, we didn't change -- we didn't go through the glasnost or perestroika that other countries did. this is what we had to change. actually, i believe the basic problem in greece is not that legacy, not that we have a big social system. it is that we don't have a state
that's well run. it's a state where we need to create, chez transparent, official, that's helpful to liberating 9 very hard working and creative people. this is what we will move ahead to do. >> you are the third party. is the coalition led by the leader of the largest party? there is a view that he is too divisive. that he is a street fighter and he cannot keep your parties and other members of the political elite on board.
do you need another man as prescribe now? >> first of all, this is a question of negotiations that are ongoing right now as far as who might be the prescribe. but in the end the proof might be in the pudding. i believe the greek people have said we want to see a coalition. a coalition where we bring different parties together where different views, if you like, political traditions come together for a national purpose and that is to save our country, to change our country, to make our country viable. to be proud of what we can be. we have a brand name and agriculture. all the things we can develop.
>> so in answer to my question, can he lead a coalition government, or will your party be asking for a different man to be prime minister and can we get a coalition government until that is sorted out? >> i wouldn't want to get into the details of the negotiation, which are ongoing right now. we need to see how many parties we can get together. hopefully more than two. three, maybe four but i would say three. i think in the end secondary to the fact that we have to have a program of making the forms and moving forward. greece will take on its responsibilities and i believe this. however we are also living a
crisis of the euro. greece has lived the uncertainty the last two years of whether we will be inside or outside the euro. now we are seeing a crisis in spain with the banks and also with italy in this bailout program. this means that it is not greece that is the problem. greece has a problem but europe does not have growth. that's why i think there is a major responsible for all the europeans to pool or efforts and get beyond the petty nationalisms and work together to create issues like the possibility of euro bonds or much rtualizing the risk in the banking system.
this is what we need to create the necessary confidence in the rur row. >> thank you for taking the time. lady and gentlemen, back to you. >> thank you so much. we are back here at the new york stock exchange. oak, a recent public offering. let's talk briefly about that. are you disappointed in terms of the performance? >> i am surprised. we probably went down with sympathy of the market. you love your story and you think you should trade well. >> what do you love about your story? >> i think it's a well run company. i think it has done a great job for its clients. it is in markets that are in
high demand. so our fundamental business is good and the stock's off 20% in ten weeks. >> and yet i can look at many asset managers. really likes them or likes them a little bit. >> in a heated market at very high prices. and so they have come off. and the other thing is these have been a tough five years for anybody to show what they can do. we hope the next five years will do better and of course we didn't come at that price. we went on the goldman exchange. we came public two months ago at 43. while a lot of things happened. >> and you recently bought back some stock below that. >> we bought stock on friday at
35. 35 and change. we are looking for opportunities to build value for the shareholders. >> of course we're talking about equities. most of your portfolios are comprised of income. they don't come monthly as they used to as much. but you wrote about the death of equities being set in the past, 1979. why do you think no one likes equities and what does that say about the performance? >> people used to love them because they did well. now they don't like them. people don't look at things right. if something goes well you should get off of it. people don't generally accept the contrary approach. stock prices are down over the past 12 years. earnings have more than doubled. they are a great value.
everybody says they're not performing well. i don't like them. >> are you considering creating a new asset class or management at the firm or how? i mean high yield has an equity component to it. >> it does. we're always considering businesses. i couldn't say that we won't be a substantial factor any time soon. i only write these memos because i think they're true. >> you spent a lot of money to buy them here in the new york city market. why do you like real estate? >> we think it is substantially up from the high. again, unloved. it is -- we are doing a lot specifically in real estate related debt. a year ago people concluded there would never be another
house built in america again so we made a move into housing. we try to buy them when they hate them not when they love them. >> that's good, too. 740 park avenue is great, too. >> coming up next we will get final thoughts on the next hour. it's very important to understand how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies.
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>> we sl been limiting our exposures to sovereignties. the risk we have is extremely manageab manageable. >> that will tend to be more of a romney win. i just don't think you are seeing that. you are looking at the election down to the wire. >> i took a beating and left. >> good monday morning. let's get a check on the markets here. we have had a little bit of a turn-around here. looked like a much lower open
initially. up by almost 11 points. first solar, the biggest gainer continuing its recent rebound from multiyear lows. we will see an upgrade at morgan stanley. that stock is up element 8%. we will see their take on the impact here in america. plus the latest on the rumors. get a preview of tonight's big event. then the chairman will give us
his take in europe. see what he sees for the future of markets at home and abroad. and the man in charge of rates. find out which country finish ratings thinks is most at risk. >> and we begin with rick. good morning, rick. >> good morning. and of course, of course we have to start out with europe. many on the floor including myself were very much mesmerized by michelle's interview. but one thing and this hurts a bit to say it. we understand that national pride is something that every citizen of every country no matter what culture or country wants to feel but i can't imagine that pride is ruping
high in greece when it's a hand out scenario. there is something wrong with that. there are asterisks. i know that news organizations are trying to get information. as to some of those swap type derivative trades that helped clear greece into the hurdle of qualifying. in the end what it boils down to is we have all heard other people's money. we cannot look at country a running on the gasoline of country b. it is just like a hybrid car. the real engine was debt. and the gasoline back-up was the gasoline coming from germany. you can't continue to do that.
as a matter of fact the am glad the analogy, you know, you know that i have an affinity. we did the conversion. companies are going to tell you that natural gas needs to be liquefied. why? because they want to money-fy it. that means you the people are the boss. natural gas? it's fine just the way it is. >> all right. thank you for that. president obama's in mexico meeting with g-20 leaders.
>> countries have agreed to take all necessary steps to safeguard the country's integrity and stability. president obama is scheduled to hold talks monday evening. in a section strong sustainable and balanced growth that reduces unemployment. but the g-20 response, all words. the bigger argument is the potential world events. the market's focus moved from a need to what individual central banks can do. here are options that wall street economists turned out for the fed. there are those who said they
might do nothing. others are saying just extend the maturity discount from say overnight to 90 days. extending twists and the guidance. and of course new quantitative easing being pushed by goldman sachs. >> with zsh spain's leading finance official called to intervene in the country's debt market. >> let's bring in two former fed executives now for their take. the impact here at home is
former new york. al is the former richmond federal reserve president. i will start with you since you are here on set. what sort of impact, if in, do you think is going on. >> it shouldn't have very much. the election has not changed the outlook. the way greece is where it was two months ago. we have the same type of government that will be in power. they are still in recession. that is still the question mark. for the fed, the european slow down that should be factored into the forecast. it should not effect their thinking. there is nothing new they have learned although the situation has obviously gotten worse. it's not clear what they can do beyond adding more liquidity. >> so with that said, what is
your base for what the fed does? >> i mean they shouldn't do very much. right now the economy is growing about where it has been for the last couple of quarters. that's where it is right now. are we saying that stock prices are too low? that we need to boost them up? are we saying that bond yields are too high? it's not clear what the message will be. it's possible that they may do some of the smaller steps. they might do some of the smaller steps first. >> the point seems to be they have to be seen to do something whether it is smoke or mirrors to support the market.
>> i do think they will act. let me add something that has not gotten a lot of attention yet and it does not really have to do with europe. i think the focus at this meeting is going to be as it should be on domestic u.s. conditions. sure they will look at the head winds. one data point that is worth paying some attention to is the most recent inflation data. longer term inflation appears to be coming down. there is now a prospect. i think the forecast has been for lower inflation all along. the likelihood is now higher and i think that's recognized. if the fed feels it needs to act against that, it's going to think that it will need to do that now rather than later because of the upcoming election cycle. >> so do be clear, you now think that the agenda now is
deflation. >> i don't -- i'm saying that is moving on to the agenda. there is a movement in that direction. i think the fed would like to act. if it feels it needs to act against that and there is an increasing case for that, it will probably need to do that at this meeting. >> help us understand, you had said before that what is going on in europe should not impact the fed's agenda. >> the way that it should impact is does the european slow down affect u.s. growth? does the growth come down to such a degree that they need to
counter it? we have had the slow down this year. we have had the country in recession now for three or four years. we already are in that situation. it's not clear that we have had that much -- that the committee is being told. the other aspect is that we get one factor. the other is the fiscal cliff. >> do you think that is a bigger concern? >> to me it would be. because of the timing and degree. you don't really know what is going happen. so i would actually say they should wait. >> save it? >> exactly. >> al, your thoughts quickly on that?
>> i don't disagree with it strongly. i think they will. my own guess is some kind of modification. they need to say what's the point in doing that. it's a good question but it would be action. and i think they might wait whatever the extension might come towards more purchases of mortgage backed securities perhaps with a view to helping undergird it looks like it may be gaping a little bit of momentum. >> all right. al, do you know, we will leave it there. both of you. >> joining us today.
>> from central bankers or through politicians. kind of just wallowing around without the need for anybody to be decisive. >> i think that's why the markets are not fully decisive this morning. i think people are wondering will they actually be able to form a government in greece? there is a feeling the head of the new democracy party is permissive. there was talk of putting a new party in and see if that fits. the group is afraid to have a coalition without everybody in it.
they think that some of the more radicals will stand outside and blame every new burden put on the populas. >> what about people who are watching you now who are desperate not to talk about europe or have to think about greece and really just focus on what is happening here in america? are there areas in the stock market here in your view that should be focused on what is happening across the atlantic? >> well, you and i may be talking about greece, apparently so is the president of the united states. it remains on the top of everyone's list. we are going to have a meeting. i think people are going to look at that. i don't know if they are prepared to do something radical
like expanding the inflationary target. just to see if that gets people -- >> the presidential election. >> that would be suicide. >> quite frankly it's one of the few things that would stimulate people to potentially move money. >> it is something that bernanke has talked about. bernanke has talked about that in his speeches. >> i wanted to get your take on the overall markets. we have come off a very strong rally. best two week gain of the year. the action went above the average for the first time since may 4 and yet we are still holding fairly steady. do you see this as a sign of strength here. do you think the rally in the first place was a little phoney? >> the market strength in the last week was really begun to make the charts look a little
bit better. the s&p 1345 or so, you might get a little panicky short cover. >> thank you. >> up next on, around microsoft's mysterious media event tonight. we will see what the launch is likely to be. will it be a brand new topic? we will get the latest and how that will impact apple and microsoft's own stock. stay with us.
>> what everyone does expect is in is about tablets and possibly windows ink. that is a major shift in how microsoft has done launches. and what it probably would mean is that the usual partners in the pc business don't want to go head to head. those hardware makers are saving their best efforts for enterprise. that doesn't leave a lot of --
the biggest teches i have talked to are nvidia and qualcomm. this will not be easy for microsoft. i have seen windows on a tap let and it's nice but microsoft will need more than nice to slow apple down. >> interestingly, so much focus has been placed on this one announcement. they have microsoft that has a bigger announcement later on this week which has to do with a phone. >> they are bringing developers together to talk windows phone. google is having its io developer event later this month. apple had it earlier. they need momentum. i don't expect another huge news.
>> we do want to go over to kelly. >> melissa, thanks so much. b of a has been looking to sell its overseas management for a long time and now they are in talks with a privately held banking giant. the terms of the deal still being finalized but the two parties are in an exclusive negotiation period. beneath kpaep would comment interest the record but i will be tracking this as details come together. a deal could be announced in the next week to two weeks.
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>> let's count down to the close in the uk and across continental europe. >> what we are see something a reflection of what we're raring on friday. now that we have got the greek vote out of the way and we have got the least bad solution, still so many questions to be answered. you see the shorts coming in aggressively again. banks in italy and on the big
banks that are exposed. let me show you how we have traded through the session. it's notable. france and italy moved further to the downside. the relief on the election result in greece. almost entirely dissipated away. let me show you the italian banks. you will see the top 600 blue chips are clogged up. there you see the italian banks in negative territory. a lot of the spanish banks have fallen into negative territory. and against that you have seen the yields rising. you see the yields in spain rising and in italy rising today. this is where we are on the spanish tenure.
what else are you going to do than bid for your nation's debt. now it's a two-day event. arguably he doesn't have a trump card to trade. with that we will wait for the final communication. keep in mind this is a real big week for europe. and then on thursday, you will have the eu finance minister's meeting this is important because this is the first time that they will have come together since the greek election. and also what they are say iing
>> the european markets are closing now. >> you will see that it was negative across the boards. let me pick up this train of thought that i was trying to get rid of here or get through rather here. they're going to come to something quite grand. the first is the bottom up analysis. the independent analysis will come through. that will be important. and secondly the ecb this week will also take the lead in talking about a banking union. and it may be that the market gets hoodwinked by that running with it. watch for rallies on the news coming out. which may not be supported by a time line. it is sustainable or workable for the germans. just bear that in mind when the
flashes hit later in the week. the market will rally and people will sell into that. >> good point. let's check in with rick who is in chicago. >> there is a couple things i find fascinating. we have to continue to talk about europe. it is a long way from being solved. if you look at the low yield on a ten year treasury in the u.s., it was 145, here we got 158, 13 basis points away. if you look at the low closing yield, it was around 117. they are currently at 140. dpe depending on when you look at it. we are about half the distance away from our record low yields. so what that tells me is that there is a continued issue regarding safe harbor, how far it takes you but maybe no less than better learned than the euro currency itself. when the initial findings of the greek election were coming out,
they traded roughly around 127.5. hence why the euro is really a tough one you want the liabilities to be paid back with cheaper euros. you will have to figure out a way to get closer. >> let's bring in -- >> considering this was a big build-up, we are in a very narrow trading range. 80 points maybe at best?
markets have been holding up because of the perception. that was a refrain that i heard over and over a lot of traders said they were going to stay long but they have downside protections. we trade over 100 point trading rang range. a lot of people feel that the elections may be a major hurdle. some people feel this will be a time for them to move and do something op it. another trader said to me that it is the best large cap market and it will be for the next several years. take a look at what we have got. what's amazing is the low beta
names are the winners. look at the ones that are lagging. industrials and materials are tech. some of the big names are down i want to note also what is going on with the hoemd builders today. we had fairly good news. look at this. over ten years of sentiment index. it is slowly been moving to the upside. this is the highest level that we have had in five years today. we have got that news this morning and all the home builders have been moving to the upside. at least that group is holding up fairly well. >> thank you very much for that.
a fascinating look at the market as things stand right now. let's bring in jim o'neil. welcome to the program. do you think the fed pulls the trigger here? >> do i think the fed what? sorry? >> do you think the fed will pull the trigger on the question that was just posed? >> i am assuming they will do something. yeah. i think you look at the things that the guys believe in. the conditions. to try a bit more. i don't think you will get anything too ambitious, though. there are some doubts as to why the economy slowed. what's your view of the broader landscape? >> the problem is it is sandwiched in the middle of some very high profile repeated meetings to do with this
european mess. and you know, coming up at the end of the month, you have the world cup final. it's tough to see a big rally, famous last words. we need to at least get that out of the way. that's probably why we have seen the subdued functions of the greek news. >> you do tend to look, i'm told, the soccer tournament. and draw some comparisons there to how nations might play out through the crisis. i am alarmed to see the germans are now taking on the grooeks. i'm not quite sure what that is for. >> i think it's on thursday. and, you know, i was having a bit of fun to break the intensity of people's tricky times with all of this. it is interesting that you have got that. linked to what i said a couple of minutes ago.
if i am not mistaken, the final of the tournament is going be taking place. you could have germany against spain. that would be amusing to put it mildly. >> jim, i want to ask what your forecasts are for the brick countries. you seem to be standing against crowd somewhat. a lot of your cohorts have trimmed back growth estimates for those four countries. what are you seeing that they are not seeing in terms of a strength there. which one has the bigger push? >> listen, as you guys are aware i'm fond of saying that china creates the equivalent of a greece.
there is no comparison. it is way way more important. your first question about the views of the street, people, you know, china is the same size as the other three countries put together. when you are looking at the bricks as an average, half of it is china. the main reason that china is slow is because they wanted to slow the place. as we are seeing signs of it, not only -- they are starting to put a little bit of gas on the accelerator with the first interest rate. i can see why problems in india but i think this move, that everything is going wrong all over the place is getting a little bit silly. >> so you are still bullish on china more so thap the united states? >> well, i see china showing
plenty signs of this rather simple debate. of achieving a soft landing. the most important thing china had to do is get inflation under control and they have done it. cpi was around three. at the bottom end of the target range. so they have got plenty of ammunition to stimulate further so i don't see any great concerns. on the u.s., i have been in the more bullish end for the past 12 months. we just pulled our numbers down a little bit for the rest of the year. the fact of the matter is the past six or seven weeks the numbers have been disappointing, particularly weekly job claims. just listening to the introduction ahead of me about the house bill is the big problems for the u.s. for the past few years are behind it. i think the u.s. situation going forward certainly looks great
for the g 7. >> what do you buy? what do you buy and what do you sell? >> you know, i have an approach this year thinking what about big rally early on will be a big chance come may and early summer. we knew we would get the french and greek elections live here. so, you know, i can see us jumping around in this frustrating risk up and down. going through it early. i think it might well be somewhere where people might want to turn their screens off and take a bit of time. later in the year, i think because of what i said about china because i think the fed will do whatever is necessary to support some growth. i think we're a good chance for seeing new highs later this year. we might get close to my original target. so, i think we have a choppy solo and we could go down
further. for medium term people switching below 1300, looking at china and some of the global plays still looks to be a very sound thing to do today. >> jim, enjoy the game on thursday. i see the germans were criticized for lacking the killer intingt. thank you, jim. >> exactly. straight ahead, one of the top voices on ratings gives us take on -- for the rest of the euro zone. take a look at winners and losers on the trading day in europe. [ mechanical humming ]
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is the next is the next potential turning point in how you view the ratings of the european sovereigns. >> sure, i think the first thing to say is that the greek general election outcome was in fact the best possible outcome given the expectation expectations. it has to face in terms of addressing the debt problem and it is a great problem. the whole of the euro zone and countries like spain and italy within it. in the near term we have got the issue of the new coalition government being formed in greece getting into negotiations. but also we're coming up to towards the end of this month, another eu summit and whether they can come up with some kind
of strategy to address the crisis. >> david, as we are watching yields across kwlueurope take higher. in terms of the time frame. because of the borrowing costs and pressure. ? and how little time there is for europe to get a handle on this. >> i think you're absolutely right in suggesting that the strategy of trying to address individual countly specific problems is really running its course and that we really are running out of time and i think eu leaders are running out of time to put in place a credible
road mark and banking union. and also to convince markets and investors that actually they can regain control over this crisis. i think clearly the eu summit, to some extent a try -- triumph of hope that paefs the way for resolving this crisis. but i think if they don't do that, if they don't make genuine progress, then i think it will be a lot of pressure on ratings. >> david, boil it down for me. do they need to have a full bail out? >> it doesn't need to have a full bail-out. once you go into one of these programs, it is incredibly
difficult to exit from them. >> forgive me for interrupting you. why does spain not necessarily have to have a bail-out in your view? how does it escape that? >> i think it escapes that because we do believe that spain is solved. it has a crisis of credibility with regards to the banking sector. it does have the resources available to actually bring itself out of this crisis. and there are some terms in place cha will be providing financial support. potentially purchases in the primary market that could help spain maintain access to the market, but which would fall short of a full bail out program. >> so, what you are saying is -- forgive me if i am incorrectly paraphrasing you.
through this storm of negativity, you actually see the possibility from you you just told me that the euro zone can hold the con teenage on. there is still light at the end of the tunnel as far as you are concerned? >> i don't believe that it is inevitable and they would consider it to be low risk. >> and they need to address that and address that soon. otherwise, we are going to get outcomes which we don't need to
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obama or romney?? kudlow report. >> groupon's about 10.5% higher but the stock is still down almost 50% year to date. >> that's right. groupon shares soaring on the upgrade and the reason for the upglade, fewer concerns about groupon's competition. shares are nearly 11% higher. giving up $18 price target. groupon's rivals. morgan stanley says they just have not gained traction. >> simon, over to you. >> thank you very much. take away time.
let's get over to rick for final thoughts. and i guess it's going to be on europe, rick. you know, what wr do we stand now, do you think? >> you know, simon, one of the last guests we had was talking about the problems in europe specifically in greece. . >> a couple of economic results. it's definitely insolvency. and it's definitely going to be an issue that we have to reckon with day in and day out for years and years and years. part of the 20s, part of the 30s
and all of the 40s. they are very similar. they are nagging issues with no very easy solutions. they will require behavioral adjustments. in this day and age that is the most difficult adjustment to make. >> jim was on the show on friday. he said five years. five years we will go through events like this. it's tricky. see you a bit later in the network. what have you got on fast? >> we have been talking so much about europe? we have got one hedge fund manager who says the biggest trade of the year is in europe. how much longer it has to run on that course. >> which will not include bonds. >> apparently not. our retail reporter says that barnes and noble is not part of that event. the stock is