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tv   Squawk on the Street  CNBC  September 17, 2012 9:00am-12:00pm EDT

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historian to know. i imagine somebody would probably say we've been through this before. >> mike spence, thank you for being here. >> it was wonderful to be with you. >> on this anniversary, that's what we're calling it, of occupy wall street. and that as well. make sure you join us tomorrow, "squawk on the street" begins right now. lower manhattan waking up to protests from occupy wall street on the first anniversary of that movement. a heavy police presence, many arrests are expected all day today outside the new york stock exchange. good morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee. jim cramer, david faber have the day off. david greenehouse riding shotgun with us this hour. take a look at futures. busy week of data, earnings and some fed speak shaping up here stateside. european stocks meantime retreating from some 15-month highs as the spanish bond auction environment this week
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ventures out to the long end of the curve. >> the markets, multiyear highs, best two weeks since june. with the fed out of the way, we turn our attention from housing data and earnings from fedex. >> at&t says preorders for the iphone have broken records. will verizon and sprint say the same? meantime, yahoo! has officially ditched the blackberry, promising iphones and samsungs to all new employees. a report saying netflix is lose key content as early as this week while the stock has a dismal $50 price target. and gm reportedly wants treasury to sell their stake, saying government restrictions on pay and perks hurting his ability to recruit talent. but at what price can the u.s. really afford to sell? first, though, can the bulls keep charging ahead? the market's coming off a week in which the dow and s&p each closed at levels not seen since december of '07, spurred by the plan to embark on more stimulus. more than 20% of stocks in the
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s&p hit some new 52-week highs on friday. and this week markets will focus on earnings from the likes of fedex and oracle as well as economic data on housing. dan, we're going to get starts. we're going to get existing. and already chatter about to what degree the fed's move is going to start to impact mortgage rates and how soon. >> well, i mean, i find it hard to believe, obviously, it will show up in data in the immediate. to the extent that we know monetary professional operates with a lag. this is not a new idea. you're talking anywhere from 12 to 18 months for the full thrust, but let's be clear with respect to housing data this week. we're in the middle of something resembling a housing recovery here. you see this in the home building stocks which are on average are up 100% year to date versus 20% for the s&p. and not just in the stock performance themselves, but the company performance. the companies are indicating that things are getting better. the stocks are reflecting this and the macro data is as well. >> you sound constructive on the markets, dan. >> on housing, we are of the belief that housing probably --
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housing as a whole bottomed towards the end of 2010 or so. and we've been in something resembling an upturn since then which provides a bottom for the market and the economy. >> the market's gotten everything it's wanted over the past couple of weeks. the german court, ecb, dragi, bernanke and the fed here, but the data will be a little more agnostic this week. and fedex which has been one of the key warnings of the season is reporting tomorrow. >> yeah, this is the interesting thing. if my conversations with clients late last week and this weekend are any suggestion, the enthusiasm with markets over the last couple of weeks, of course, we are up somewhere around 15% off the june 1st low. that's met against -- i know people think the economic data's gotten better than expected, but it really hasn't. you saw that this morning with the empire manufacturing, industrial production, retail sales, a number of indicators have been worse than expected and of course you've had a number of warnings from the likes of fdx this morning, burberry, fdx recently, u.p.s.,
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burberry. where you position yourselves with respect to the current rally really stems from how you view things. is the fed able to overpower in the near term some of that weakening? we think that -- or at least our view has been the answer has been yes. and so we think there's a little further upside. >> 1500 is not out of the cards? >> something completely unrelated statistically insignificant observation that i made last night was when the fed got active in 2011, it took the s&p up somewhere around 12% or 13% above its 2010 high. if that was to hold true this year, you could get to 15 and change pretty comfortably. let's be clear, does that mean that we should be there or we're going to stay there or perhaps go higher is separate from whether or not investor enthusiasm for the fed can take us there. >> we continue to see the winning sectors continue to win in that, we see the higher dividend paying stocks continue to go higher even though they're stretched by historical valuations but simply the need to find yield will drive them higher, or will we see a rotation within the markets
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where we see that money go into higher areas? >> since the bottom, we've clearly seen outperformance among the likes of global cyclicals, financials, technology. there's been a clear positioning. that said, we don't just favor nominal dividend payers, we favor growth over the last 50 to 75 years, you've gotten a significant amount of portfolio return and asset performance, but let's be clear. cyclicals have led this 15% rally. >> we have a conversation every day about relative performance. even if you're not sure about the fed's mission and their plan, doesn't catching up put a put in the market over the next quarter? >> absolutely. and let me refer to my good friend barry riddles who runs the big picture blog who quotes ned davis's book "being right versus making money." when i meet with clients, i can't emphasize this enough. we can fight all day about whether or not the fed could or should impact the unemployment rate or could or should affect the federal debt.
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this is all a fun academic debate, and my meetings go hours on those things because at the end of the day, you're judged on performance. and if you believe as i do that easing central bank policy can drive up asset prices, artificial or warranted or not, then you have to stick with that theme. >> all right. let's talk about apple. in the spotlight today. 700 could be in the cards in today's session. in fact, the tech giant announcing preorders for its new iphone have topped $2 million in just 24 hours, more than double the previous record of 1 million held by the iphone 4s. apple says demand for the iphone 5 exceeds initial supply and that while the majority of preorders will be delivered to customers friday, many are scheduled to be delivered in october. and of course, as i mentioned, the watch is on to see if apple shares will hit $700. right in the premarket, just about $697. last week the stock intraday high, all-time high of about $697 or so. this is an interesting story. as much as we've talked about apple, apple and at&t saying
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this is the most it's ever sold of iphones ever, at&t stock this morning is not feeling it. that goes to the point that we've made that apple is really the best way to play apple and not any of these sort of derivative plays whether it be the chips or the carriers. >> yeah. and obviously that comment about initial supply will feed the conspiracy theories among some that they will not be able to keep up. and we'll see whether or not -- the estimates, dan, for week one were pretty aggressive. >> sure. unless i'm mistaken, they came out above. listen, this is going to be a market-moving event, obviously. and if you believe michael over at jpmorgan, an economy-moving event. putting out a piece saying this could boost gdp by a couple of tenths. this is a terrific stock. i always tell the story, one of our traders was out to dinner, one of our financial traders, with five financial p.m.s and he asked them how many of them owned apple and they all raised their hand. pretty clearly this is the dominant part of a number of portfolios and obviously it's coming up quickly on 700.
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>> let's bring in our analyst, will power is an analyst, got an outperform rating on the stock, $750 price target. will, good to see you. >> good g. >> does it look like they'll raise estimates at this point? >> it's a built of a groundhog day, isn't it? iphone mania strikes again. i think the numbers do suggest an upward bias to estimates and we'll evaluate how things proceed in the next couple of weeks. >> how closely, todd, is your price target to your current earnings estimates? i'm just wondering if there is an upward bias on where your price target is if estimates have to come up. what's the sensitivity to that? >> i think that's exactly right. using just a 13 multiple. 2013 earnings which we think is conservative relative to the market and certainly expecting growth. as earnings go higher, that likely would push that target price higher. of course, remember, iphone is the company's highest margin product. that's going to provide a
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disproportionate amount of upside to the numbers. >> is there any concern on your part that supply won't be able to keep up with demand, or is that simply going to push sales into a later quarter? is there no concern at all that those customers will go elsewhere or not put the order in? >> there's some concern from a timing perspective with regard to apple. i guess i'm less concerned those customers go elsewhere. we think apple still has the pull position with respect to the top product in the marketplace. you know, near to medium term, insure, could that push some purchases back some? it may. i think it's more of a timing thing. the bigger issue is demand and out of the gate it looks strong. >> will, of all the things they have in the hopper that are ready to bubble up next, right? you've got nano refreshes, television, you think might be a 2013 story. what's going to be the most impactful? because it wasn't long ago some were speculating itv might be a holiday kind of thing. clearly that's not going to happen. >> right. i think in terms of impact on numbers, it's probably a smaller ipad. i think that could really open
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up new market opportunity. i think longer term the key to apple is continue to innovate. that speaks to itv and opening up a new marketplace. that's how you really move this stock from, you know, $600 billion, $700 billion cap. itv appears to be the next biggest opportunity for that. >> to what -- you mentioned bringing it from the 6 and the 7 70s 0 something else. what do you think it is capable of being? >> that's a good question. it depends on what the product looks like. we think that's something in year one could contribute another $5 in earnings, maybe more. that depends. >> speaking of products in the pipeline, will, in terms of your analysis of the mini ipad, should it come out, now that we've gotten more clarity on the pricing of the iphone 5 and we're seeing the price of the ipad to come down, that leaves us with sort of a sweet spot as to where that ipod mini can be priced. what's the back of the envelope
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calculation in terms of how much components will cost and what that margin will be on that new product? >> well, those are all good questions. you know, we had done a survey a couple weeks ago with respect to ipad mini trying to determine both customer demand and prices willing to be paid. it suggested customers were willing to pay in the $200 price range. that does raise questions there. i think the sweet spot to us is, you know, for a price point in that mid to high 200 price point range. could they try to go higher? perhaps. i think at that price point, they could generate a margin that's not dissimilar from the current ipad out there. >> will, if i could ask you a fairly simple question but one that might take a while to answer, why is apple so cheap? >> well, that's a darn good question. i think part of it is the law of large numbers, right? you know, as you continue to beat numbers, it gets tougher and tougher to grow at the same clip. decelerating growth rate's probably a piece of it. you know, aside from that,
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that's been one that we've struggled to answer for some time. >> but this thing's been cheap for $200, $300 now. if investors are as smart as they are, if the market as sufficient as it is, shouldn't the multiple be expanding by now? >> you would think. and particularly with the dividend yield and perhaps if they were to pay a greater dividend, maybe that would attract another cater of investors. i think a lot of it comes down to the fact that this is the consumer electronics industry. it's hyper competitive. at some point somebody's going to have a better widget. at some point, all good things don't continue for forever. >> all right, will, thanks for your time this morning, appreciate it. will power. we should apple shares ticking higher premarket. $698.46 right now. so that $700 mark pretty clearly within the realm today. >> yeah. we'll see if it happens. meanwhile, "variety" is reporting netflix could lose two major suppliers, a&e and the
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history channel. both licenses are set to expire on friday unless a new deal is reached, just reading about some of the shows that potentially, if this deal is not reached, could be off the service. "storage wars." >> yes, that's a good one, actually. >> gene simmons family jewels, hoarders, intervention and coming on the heels of losing epix. how much can they afford to keep things online? they see it being weak for the future. >> it's competitive in terms of how much content providers are willing to demand. they're going up against amazon prime, hulu plus. now the competition is really there so they're going to have to pay up. that's always been the problem with the netflix business model. how much can you afford to pay content when you have other competitors entering not to mention like the cable channels that are offering on demand like comcast and time warner cable. >> and let's be clear, this was the 15th most-watched network at the end of last year.
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so content has become, as you know, increasingly important to the business. if that's going to suffer, then the higher level of competition are going to start to have an effect. >> it's interesting when netflix says in terms of viewership is not dependent on any one source of content. so therefore one source could go away and nobody would notice. at what point does it start to accumulate where people go to netflix and they can't get a&e and something else and then they decide, you know what? it's just not worth it and i'm going to go to hulu. >> there's a very fine tipping point in there. i think people are already to talk about them in terms of having decent offerings on television, not so decent offerings on film. then you could be looking at subscribers who just say, i'll spend my money on another application. >> yeah. i mean, look at the ride on this stock. the 52-week high of.85. >> basically straight down. >> i think the target today is
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50, looking at what they're calling a pretty vicious model. >> right. that's 10 bucks lower from where we are right now. also following shares of general motors. the treasury department and gm reportedly at odds over whether to sell the government's stake in the automaker now. according to "the wall street journal," treasury wants to hold off on selling its 26.5% stake in gm because it would lose about $15 billion on the bailout based on friday's close. but gm executives want to get the company from under the stigma of government ownership saying it hurts the automaker's reputation and also its ability to recruit talent. apparently there are also some internal squabbles about being able to use private jets and corporate jets, the perks that are involved, not just with retaining people but also recruiting people as well. >> friday's close, 24.14. if the government sold there, lose about $15 billion. "the journal" says they need to get to 53 a share to break even. but that treasury might consider selling somewhere in the 30s. >> that would still be quite a loss. i mean, considering it's a $15
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billion loss on a $50 billion investment made in 2009. >> terrible, by any stretch of the imagination. however, let's just be clear, from a political standpoint, if you are on the democratic side of things, the liberal-leaning side of things, you're inclined to say, $15 billion to save the automakers, the auto parts makers, that seems a small price to pay if you're of that ilk. >> the terms of whether or not it reaches 30, take a look at ford, and the two are trading basically at the same pe. it's hard to make the case necessarily that it is the stigma and the stigma pa lo alo. we're talking about the government like we would talk about eddie lampard. you had a good winner in aig. you lost some of those. >> the federal reserve. the largest hedge fund in the world. >> that's true, given its balance sheet. >> just broadened the portfolio a little bit last week. a lot to watch today.
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when we come back, the home building sector on fire. nearly doubling returns this year. i think up 160%, something like that. is there still time to build on that rally? and take one more look at futures. we got empire. we'll talk you through some of the data today when "squawk on the street" comes back. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations,
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protesters began gathering here in the financial district right outside these doors this morning on the first anniversary of the occupy wall street movement. and that brings us to this morning's "squawk on the tweet." what's your birthday wish for the occupy wall street movement? tweet us @cnbcsquawkst. i'm sure people who live and work in this area, operate businesses, they'll probably say go away. >> yeah. >> would be their one birthday wish. >> something like that, yes. we'll see. we'll see what the arrest count looks like later on today. they have things planned down at foley's square, try to get into zuccotti park later today. >> they were supposed to have a wall of people, a human wall around the stock exchange. >> to block entry. >> i didn't see that coming in at whatever quarter to 7:00 in the morning or so. we'll see if that materializes at this point. but it's amazing that a year ago they really captured the public's imagination, and with
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that platform, not much has happened. as a result. coming up, getting a jump start on the trading week with art cash, and he'll join us here on set next. let's take a look once more at u.s. futures as we head to this monday morning open. looking to lose a little bit on the s&p and the dow. nasdaq could eke out a gain. more "squawk on the street" straight ahead. to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.
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good morning. planet earth didn't have a good weekend. protests in china, japan, here. how much are these geopolitical -- >> spain. >> yeah, spain. how much are the geopolitical rumblings going to affect markets this week p >> for now the market seems to be shrugging them off. i've been fascinate for a couple of weeks that we have a great many geopolitical pressures. and everybody's concentrating on the largess of the central banks. after bernanke said at the press conference that one of his targets is to move the stock market higher, that gave new meaning to don't fight the fed. >> essentially, art, the lowest level in 3 1/2 years with empire, you close your eyes and you step in and you buy anyway because you simply can't fight the fed? at what point do these sort of data points get in the way of that overall thesis? >> well, i think that somewhere further down the line. i think dan alluded to it in the morning, you can have all the philosophic arguments you want and say that the fed is way off base, but if bernanke's betting
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his wallet against the price of the market, it's tough to fight it. i do think that you will see more and more of a kind of disconnect between the economic results and where the stock market is. but that's because the fed is there. and i don't think anybody's really dug into the idea of how cumbersome this program may be for the fed because they will wind up owning a disproportionate amount of mortgages and treasuries. and i'm not sure that there's enough supply out there for them to do this easily. >> cover the ft this morning is how originators already have their hands full and they don't have the staff to -- i mean, the idea that the fed program would meld its way into the mortgage market any time soon is pretty unrealistic. >> absolutely. the traders identify talked to think it may be like the proverbal bull in the china shop. no way to easily and smoothly do this without disrupting markets. >> yeah. let me just, for future reference, the work we did suggests that maybe the fed
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could buy another 700, $7$700, billion worth of mortgages before getting to a quarter of the mortgage market before you become the bull in the china shop. on the treasury market, though, and this is something a lot of people didn't know, and i hope i did the math right, the fed's ownership of treasuries as a share of gdp is basically right where it was before the crisis. in essence, all their treasury purchases have just kept up with the growth in the economy and the growth in the treasury market. the mortgage is a problem. at some point, and let's be clear, by the fed's estimate, they're going into 2014 to buy bonds. they'll start running up again some walls. >> the thing are treasury, they put their clutch by doing the twist operation, taking in some and letting out others. he really was quite aggressive in this program. >> witho dou this was three different easing programs, basically, in the statement. >> art, look forward to a busy week. thanks for coming by. >> it will be. >> art cashin. get ready for another big day of
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trading. a lot more "squawk on the street" in just a moment. and i took nyquil, d,
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and there is the opening bell for this monday morning. kicking off the week with the dow, the s&p, going to rustle the nasdaq at multiyear highs. of course, the dow up 54 points on friday, and the best two weeks since june. over here at the big board, wnet celebrating their 50th anniversary of channel 13, new york's public broadcasting station. over at the nasdaq, new york state assemblyman hakim jeffries. we are keeping our eye on one name this morning, and that is apple, melissa. >> yeah, no surprise, a fresh intraday record on apple, $699.50. we're trading at $698 and change. the watch is on as to whether or not it will cross $700 a share in today's session. this after reports that at&t has sold a record number of iphone
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5s. the most iphones it's ever sold over a weekend. in terms of shares of at&t, we are watching those shares trade slightly lower, down by just about .22%. one story involves apple and r.i.m. when you look at this headline out of yahoo! this the company is issuing no more blackberrys to new employees. they'll get apple samsungs and other types of smartphones. there's a look at r.i.m. one company and you're down 2%. >> that memo from marissa meyer, it was interesting. it said we will give you any phone under the sun except for a blackberry, and we're discontinuing i.t. service for the blackberry, but you can have a nokia, htc, samsung. >> basically one of the top ten tech-savvy companies in the country. >> right. >> right? whose i.t. departments have to be among the best in breed.
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>> because they want to give people phones that users use. the implication being that users don't use the blackberry anymore. so that's pretty daming when you read between the lines. r.i.m. shares down by about 3% in today's session. taking a look at netflix, initiated at underperform. some questions as to whether or not a&e and history channel will continue to be content providers. if they can forge a deal by friday. that stock down by 4%, $58 and change. gm, another name we talked about at the top of the hour. "the journal" talking about company executives frustrated with the stigma of being known as government motors. want treasury to sell their stake, 23.85 at last check. as we said in the last half hour, treasury would need a $53 stock price just to break even. and "the journal" speculates they would consider selling at level s below that, even in the
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30s. your point's well taken. >> there is a broader issue with the automakers, and that has to do with europe. that has to do with china. and those are issues equally weighing on these stocks as we do see the pe ratios and the forward p/e ratios similar. office debow is another one we're watching. a report that starboard capital may have a stake and that private equity firms in general, that floating around since last week and those shares up by about 14%. there is also an impact more broadly, we saw staples last week get a little bit of a bid, and it's firm here in today's session in the green. $700 million market cap company, fairly small, but it could be in the crosshairs of private equity. broader in terms of the market, the financial sector giving up a little bit of the gains we've seen in the past couple of weeks or so. we've got citi down by a percent. bank of america which had been on a tear. >> the best performing dow stock. >> and the week before.
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bank of america is giving up 1.3% as well as jpmorgan. a little bit of a breather in financials after this torrid, torrid run into the session. let's check in with mary thompson on the floor here in for bob pisani with more on what is moving. >> reporter: hey there, melissa. we have a broad-based decline. we are seeing gold stocks also higher, but other than that, pretty much weakness across the board. something you'd expect, of course, after the dow and the s&p touched their best levels since december 2007. and if you read the morning notes and talk to some traders, some of those concerns about the overseas markets coming into play today, concerns about a decline in china property prices, also concerns about the ongoing mideast tensions. and as you mentioned earlier today, melissa, that empire manufacturing index, very weak reading there. all of that combining to put some pressure on the markets in early trading. offsetting that, a couple of deals to tell you about this monday morning. monday, of course, which we watch because in the last 13 out of 14 trading mondays, we have seen the dow close lower. we'll see if it makes it 14 out
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of 15. of course, no one hopes for that. let's go over the deals today. first of all, danaher is buying irish. price tag there, $19.50 a share. iris is basically a diagnostics, an in vitro diagnostics company, so that's getting a boost. waste connection indicated higher on the news it's buying a nonhazardous oil field waste treatment firm. and then lastly, we're talking about lowe's. this is actually a company that is withdrawing its bid to acquire that canadian home improvement retailer. you might recall there was some nationalistic concerns about it from canada about lowe's making a bid for rona. odp, office depot, with starboards taking that 13.3% stake. the value to be on lock there includes expense reductions reportedly along with smaller store formats and maybe additional sales of private label goods by office depot. we're keeping watch on steel stocks as well. remember on friday, ak steel lowering guidance for the third quarter, expecting a larger than
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expected loss. in the wake of this, jpmorgan downgrading a number of steel stocks including ak steel. lastly tyco also lowering revenue outlook as well as its outlook for operating margins in large part because it's taking a charge on some receivables in china. the dow off its lows of the session, still down 17 points. back to you. >> thank you very much, mary thompson. the latest moves on energy and metals, go to sharon epperson at the nymex. >> reporter: good morning. we're seeing commodities churning a bit, but still oil prices near the highest levels in four months' time. gold and silver near seven months' high as the markets do try to digest the fed's action as well as all of the turmoil that we're witnessing around the middle east and protests continuing in afghanistan, indonesia, a number of countries around the middle east and north africa region. also, though, these high prices highlight the impact that it could have on the global economy. and some traders and analysts are saying that perhaps is what is causing a bit of a damper on the rise that we have seen
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recently. also keep in mind we're waiting to see, of course, how the markets will react to the latest decision by the u.s. in terms of iranian sanctions, and they have upheld the status quo for many eu nations as well as for japan. granting them waivers once again against having to cut their oil imports. keep in mind as we watch all of this, we are continuing to watch as well what is happening in terms of what some of the opec ministers as to where oil prices should be. the latest from the iranian oil minister talking up prices saying it will not damage the global economy with prices at this level and even higher. back to you. >> sharon, thanks so much. and as sharon just mentioned, gold hovering near seven-month highs after the fed, of course, pledged to keep u.s. rates near zero till the middle of 2015. lincoln ellis is portfolio manager at poplar jackson live at the cme. lincoln, always good to have you. welcome back. >> thanks, carl. great to be with you. >> where are you on the inflationary debate? because as much as we talk about
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cpi and oil prices here, people give us a hard time for not talking more about deflationary wins out of china. how is it going to affect metals? >> well, i think it's very clear out of the metals complex, the real divergence. mary was talking about it in terms of what you see out of the steel and steel producers. weakness in the iron ore complex and the weakness you're seeing in the emerging economies is really at odds with the more inflationary picture that we saw out of headline cpi over the course of the last week. but those numbers are very, very transitory. and the metals complex in general is much more reacting to monetary policy than it is to any long-term inflationary tendencies. >> you make the point copper, if you're looking at that metal closely as the doctorate that we call it, dr. copper, it suggests we might be in for some renewed activity? >> well, look. it broke out of this range it had been in in the 325 to 350
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range. you saw a lot of short covering over the course of the last seven days. and the december contract really moving towards that three point, if it breaks through that 385 level and heads back towards 4, that may signal something very different. but i think as dan was saying at the top of the show, look, it's really a competition between whether you want to be right or make money. and maybe peter cheer's comments about the rule of three. and that is the third time something comes into a marketplace, maybe it has much less of an effect than it has over the course of the previous two times. >> you're referring to qe and the question of why now that the fed has jumped in, why gold is not above 2000, 2500, that kind of thing. >> yeah, absolutely. prices would suggest that if you had more of this monetary easing, gold should be well through 2500 by now. silver back up to the upper 40s where we saw it at those record highs a couple of aprils ago. it's just not there right now. so either people have already
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made that allocation or people are becoming a little bit more defensive and actually trying to square what's going on in in the economy with what's been going on in the markets. >> and at the end of the day, lincoln, is the bernanke bid underneath copper less important than whether or not china actually steps in? >> yeah, i think that that's absolutely right. and you'll begin to see that in the iron ore prices even with large spending packages out of beijing, we continue to see people playing china in a very defensive posture. and that's obviously not good for places across the emerging economies as well as the developed parts that are exposed there, australia, new zealand and, of course, exporting europe. >> lincoln, i just want to clarify, perhaps i heard you wrong or i heard you right, but did you just say that even if china, for lack of a better phrase, is rolling over, qe from bernanke's more important to the copper and commodities space? >> no, absolutely not. sorry, i must have misspoke. >> i might have misheard. >> that's definitely not the
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case. china much more important than uncle ben. >> so then if we take a look at copper prices right now up where they are, in your firm's opinion, what's the case for adding to copper positions right now or through the equity market perhaps through like an fcx in. >> right. you would be much more defensive. you'd probably want to be into those positions by riding puts, just as we have made significant progress, 10% to 20% across the metals complex over the next two weeks. we expect some consolidation, some volatility and using that volatility to take advantage of that as a place to enter. that would be the case and the action. >> all right. lincoln, thanks a lot. talk to you next time. >> thanks, carl. >> lincoln ellis at the cme. coming up, how the occupy wall street movement is celebrating its one-year anniversary. we've got a live report from just outside the big board. right outside these doors straight ahead. and as we head to break, look at this morning's early movers on this monday on wall street.
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it is the one-year anniversary of the occupy wall street movement, and protesters are gathering outside the new york stock exchange. kayla tausch is there with the latest. kayla. >> reporter: well, melissa, this is familiar territory for you guys and familiar for those people who are watching these protests start up in lower manhattan just a year ago. now, today the protesters at the beginning of the morning trying to storm wall street. they just tried to do a sit-in again, but the problem is the police barricades have been too strong, and so they have bean disbanding, moving elsewhere in mobile clusters. you can still hear the drumming. a lot of protesters moving down to bowling green, moving to sit in the branches of hsbc and wells fargo. also moving to chase manhattan plaza for jpmorgan chase. arrests have been taking place there. also on water street near standard & poor's. we have no estimate right now on
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the number of arrests, but it has been pretty frequent. the problem being that when you break up, thin out into smaller mobile clusters all around town in groups of 10, 15 to 20 in some cases, you can't really stand up to police presence as well in those cases. it is a truly mobile movement today. mobilized by the #s17 on twitter and a text message blast telling people where to go and where more force is being used. but the issue is still one of the message. the message is also being spread thin. they're attacking foreclosures. they're attacking the big banks, wall street, bailouts. i even saw one poster saying they needed to regulate the art market. you definitely have people of all walks of life and all colors coming down here today to commemorate one year since the movement began. but it's unclear and unlikely at this point that the movement will gain steam beyond today. carl? >> the art market? >> kayla, what's your sense in terms of whether or not this group, one year later, has a better platform, a list of
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demands, any other sort of more central themes to rally around as opposed to these disparate people who want to occupy various things? >> reporter: right. melissa, i think that they definitely have their act together a little bit more, even if not their message. the fact that they are taking their protests to the lobbies of some of these corporations that they have began protesting a year ago instead of just sitting in a park. that is a roughly new development, but they still haven't really crafted that message. it's still very disparate. it's still just anti-corporation, anti-corporate greed, anti-big business, anti-american capitalism. and it's unclear at this point whether that will have any traction. we do know, especially in watching the gamesmanship in this election season, that the rhetoric around the 1% or the 99% is probably its greatest achievement today. that's something that's sticking around. >> kayla, thanks so much for that. we'll keep a close eye on what happens outside. kayla tausche outside near the
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corner of wall and broadway. >> can i just jump in? did i hear her right that they want to regulate the art market? >> everything. >> that is the quintessential nobody's business market. i mean, only the more well-off in our society participated in what would be considered an art market. the call to regulate that really seems -- >> yeah. there's an interesting story about the new movie "arbitrage" just to ensure it and have it to make the film look real. that's how much the high end is affecting wall street these days. >> wow. >> we've got to keep our eye somewhat on europe, dan. euro once again at a four-month high. a lot of chatter today about this week's spanish auction schedule. it's going to go out to some longer durations. and we'll see how -- we'll see its mettle this month. >> you see this across the curve for particularly obviously spain and italy, sprints, the german bonds have collapsed, the verbal intervention on the part of the
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ecb has in that regard rourked and i don't see any reason why the auctions wouldn't perform okay this week and of particular interest, you know, nobody talks about france. their finance minister today obviously said he's going to push ahead with the idea that francois hollande wants to tax incomes for the next two years. and yet the spread is collapsing as well. i think it's somewhere around 50 or 60 basis points, half where it was at its peak recently. there's a lot of cross-currents in europe. for u.s. investors, all that ultimately matters is are those spreads collapsing? are things better today than they were? the drawback, of course, is that it appears as though we're taking a little pressure off spain to apply some of the cuts that perhaps the market's demanding. meanwhile, it seems to know that asking for aid would on the be good careerwise. is it important, and if so, do they need to do it sooner rather than later? >> the first point where they'll ask for aid is the middle of october, give or take.
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probably aid for sicyprus at th same time. when michelle caruso-cabrera was in europe, her private conversations were saying that everybody knows what to do, they just don't know how to get re-elected once they do it. that's the unfortunate reality for the current situation. to the extent that europe has gotten themselves into it, they're trying to get themselves out. that's where the ecb comes in, to provide space and time to accomplish those goals. >> these euro levels are worth noting. it actually hit intraday 131.70, the highest since may 4th. it continues its climb higher. it is said that technically speaking resistance is being established higher and higher on the euro/u.s. dollar. meantime in terms of broader markets, we are seeing a significant pullback in home builders in today's session. so the hgx which had been trading at levels not seen since april 2008 giving up 7% with the likes of toll brothers, mdc, lenar.
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>> key numbers tomorrow beginning with starts and existing home sales. and later on in the week. still to come this morning, tweet time. you know about occupy wall street outside today. what's your one birthday wish for the movement on this anniversary of ows? tweet us @cnbcsquawkst and we'll read some of your answers after this break.
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it is an eventful day down here at the exchange for all kinds of reasons. one of them is that simon hobbs is here. >> as a protester. we've got a great hour coming up on the program. is now the time to double down on social media stocks? you know, groupon had a great week last week, facebook, a lot of the hedge fund managers are increasing their exposure there. we'll talk about the social surge, talk about the home builders, absolutely on fire. will they crash or can ben bernanke compel them further higher? we'll have a travel disrupter. the ceo of hit monk will be on the program who says he's going to take the agony out of travel search. if you find agony in travel search, you really haven't lived. back to you. >> simon, thanks.
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let's get on "squawk on the tweet." thesen heating up outside our doors on this one-year anniversary of occupy wall street. our question is what's your one birthday wish for the movement on this, the anniversary? matthew writes, "the protesters occupy their minds with something constructive like applying for an internship at goldman's." "that it would become articulate about its goals and be a bit more thoughtful and grateful." "that we don't have a second one." "that we still live in a country that supports the right to protest." no matter what you think about the movement, the fact that they are able to assemble is something that -- given the environment in countries all around the world, it's one of the most amazing gifts we have. >> you know, some of those tweets are -- i would argue -- somewhat inappropriate. you know, listen. i disagree generally speaking with the view that's being espoused right now, but cleelete
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clear. the birth of the movement began with income inequality. one or two years ago you and i had a conversation on air about this. one reason why a developed society doesn't want growing levels of income inequality is it because it leads to eventually social unrest that this is not, but eventually over time could be. let's be clear. over the last 30 years the top 1% has seen its income grow around 275%, although that was corrected a lot during the crisis. so there's -- the funny thing about this is there's something under there that's worth talking about, how we run our country appropriately the last several years, and yet it gets washed away in this push to regulate the art market. >> right. and it's like -- and their mission is like buckshot. it's all over the place. there's not one narrative. there's not one spokesman. it's awfully difficult to frame what they want, right? you'd argue that. but even today in "the journal," there's an article about how exchanges are bracing for more regulation because things have gone wrong. it's just one small example. but they have -- when they
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complain, there is stuff to complain about. >> absolutely. >> sure. >> and one area where the tea party movement, you know, the extreme on the other side, for lack of a better word, it's gotten a lot of sort of push bb, but let's be clear, dick armey's involvement in the tea party, while some say this is astroturfing, dick armey's involvement has helped coal is around a particular message, whether you agree or disagree with, it's coherently explained and put forth. whether i agree or disagree with the movement, and i generally don't agree with them, getting someone like a dick armey or not necessarily him, but getting someone together to help formulate that message in a coherent way to get it out there to say this is what we stand for, and it's not this disparate amount of nonsense that's never going to come to pass would serve the movement better. >> that may be coming. dan thanks so much for coming in. good luck getting back to work. straight ahead, social media stocks bouncing off their lows, seeing double-digit gains in the last couple weeks, but do you trust the surge? good question. we'll talk about that after the break.
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in case you missed it, several social media stocks staging a major comeback last week with the likes of groupon, yelp and facebook climbing above 9%. so have the fundamentals within social really turned the tide? plus, today marking the one-year annivrye occupy wall street movement. we'll take you live to the latest protests on the ground and give you a like back at the moment's first year. and another sector quietly flying under the radar with major gains, home builders, although pulling back today. are further gains to follow, or are the headwinds too tough to overcome? net fliflix taking it on th chin after reporting they may lose key content partners. is this game over for netflix? but first, anti-american, anti-western protests continuing in the middle east and beyond today. nbc's atia joins us from kabul, afghanistan. over to you. >> reporter: hi there, simon. yes, today in afghanistan, it was the first day of violent protests. we've had protests the last
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several days, but they all ended peacefully. today right outside of kabul, there were hundreds of protesters walking down the streets near nato bases and western compounds. they were chanting "death to america." they were throwing stones at these compounds, and they were throwing stones at the police. there were three protests in kabul in total. four vehicles were set ablaze. 45 police officers were injured in the protest. the district chief here said it was primarily minor injuries, but at the same time, they were violent protests. it was a vee violent weekend here in afghanistan not necessarily because of protests but also because of insider attacks. that's when afghan security forces turn on their coalition counterparts, killing them. four americans were killed on sunday, and two british soldiers were killed on saturday. carl? >> atia, thanks so much. joining us from kabul this morning. one sector we want to turn your attention to, the social media names. several stocks within the sector ending last week on a high note
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all rising far above 7%. have the fundamentals changed for good? our bertha coombs taking a closer look at that. good morning, bertha. >> momentum has certainly changes. two weeks ago it seemed like facebook couldn't spend a day without hitting a new low. it is now coming off of its best week ever on a down day, it is just below the even mark. certainly helped last week by those comments by mark zuckerberg where he says the company is not going to move forward with a new phone, which had been rumored, although it is making some progress in terms of mobile. capstone this morning says it sees a rebound in gaming growth for facebook for its third quarter and could perhaps top expectation, expected to earn 11 cents a share. take a look at how they've all performed this month, month to date, if you take a look at the social media this month. if you look at it, facebook and groupon have been the best performers. they're up about 24% wore so. or so at this point. although, of course, they're coming off very low bases.
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groupon down 75% year to date. facebook down about 40% from its debut. this morning they're all lower. groupon, in fact, getting hit this morning. they don't think the fund mentals there have changed. groupon has so much competition. they've actually added that stock to their conviction sell list. and something else to keep in mind, linkedin, because of the fact that it has nearly doubled this year, its forward p/e remains about 200 compared to zynga and facebook's 46. so those p/es remain very rich and certainly the track record so far has been very mixed on these, guys. back to you. >> bertha coombs, thank you. for more on the runoff among the social media stock, facebook, groupon, facebook, let's bring in anthony declemente, senior analyst at wedbush securities. good to have you both with us. anthony, facebook, you've got an equal weight rating on the stock. you recently lowered your price target to $23 and we're within striking distance on facebook, $23. last week do you think that
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there could have been a sentiment change, and that se sentiment, just a dearth was keeping it down. >> yeah, i certainly think that the comments from mark zuckerberg helped. in terms of sentiment, keep your eye on fundamentals, and it's all about mobile for facebook. so remember that really sponsored stories in the mobile news feed only started and really ramped in june. so analysts and investors are going to be listening on this quarterly conference call coming up on how mobile is progressing. this is the first full quarter we'll get those. even though users and engagement are starting to sort of slow on desktops, we'll be focused on mobile and think deeper integration with the iphone 5 as kind of one aspect that's driving that. and then pricing on mobile which was helpful in the second quarter pricing actually increasing unlike let's say google where volume is more than offsetting pricing declines. so those are the fundamentals, i think, those will drive
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sentiment really more than anything else. and right now you have a little bit of vac yuum of data, and th will change as we get closer to the call. >> michael, do you have we had a vacuum of data? last week what jumped out at me when i was listening to mark zuckerberg being interviewed was that he was humble. he admitted the company made mistakes, but they've made that switch to address that problem and that there was somewhat of a strategy, that mobile was more like tv and that ads needed to be integrated into content. >> you know, i do think that this is about a vacuum of information. i don't agree with anthony at all. i don't think this is a story about fundamentals. and i actually don't agree with anthony that the fundamentals are solely based on mobile. mobile's the biggest area of growth. they're clearly faced with the problem of how to monetize. they seem to be doing everything right there. i think this is a retail-driven stock. i think institutions don't quite trust management. i think retail investors came
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back in when zuckerberg spoke. institutions are on the sidelines not because they don't trust the fundamentals. it's because they don't really know what the company is doing. the company has not told us why they're spending more than 60% year over year higher -- spending higher expense spending. and everybody does understand the revenue story. so i don't agree with anthony at all. i think we all have revenues growing about the same, but the range of estimates next year is 36 cents to 83 cents. that shows that we don't know what's going on. this isn't a story of facebook fundamentals. this is a story of the company is not explaining to us clearly enough what to model, so we're all over the place. i'm at 55 cents, kind of in the middle of the pack. and i have no idea if i'm 25 cents too high or 25 cents too low. >> anthony, do you just want to come back on that briefly? >> yeah, i think it's true, this is a retail-driven stock, and i think there are certainly technical factors here such as the lockup that's coming, such as retail demand. but i think it always comes back
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for institutions to fundamentals. and so michael may be correct in that there's maybe a lack of guidance, lack of transparency on the guidance. but i think for institutional investors to really endorse the story, we're going to need to see an acceleration where it matters. and it matters in mobile. >> guys, i want to talk about groupon because that is a fascinating stock. if you look at where we traded last week, even with today's 5% fall and we were talking about the conviction sell list, conviction sell recommendation from evercore, groupon is still up 5%. you have a new head of sales who was talking at a reuters conference on friday, talking about how increasingly they could internationally expand certain businesses. for example, rosetta stone from the ten countries to 25 in which they operate. we learned bill miller and steven cohen have been doubling down on their commitment to this stock. do you see groupon -- okay,
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we've reached saturation point, but living social is in today's "financial times" as again pumping the idea of these deals, sushi lessons for the day or whatever. do you think, michael, that the industry is changing? do you think that there is some saving grace for the likes of groupon? >> you know, i don't cover groupon yet. i do think there's a lot of competition in the space. and i think that the stock has been down because of various entries are so low. you mentioned living social. i actually think facebook is going to embark on a competitive type of direct marketing product. but i'll defer to anthony if he covers it because i really don't want to talk about that stock. >> anthony, do you cover groupon? >> i don't. my colleague, mark may, does. there are questions about the business model that mark would love to come on and address. >> i'm glad i raised groupon, then. that was a really smart thing to do in the two analysts that don't cover it. let's talk about pandora which also saw a lot of action over the weekend. michael, where do you stand on that? >> you know, i have an
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outperform and only because i haven't yet seen hard evidence that apple is going to compete. my source was "the wall street journal." i actually spoke to the reporters there. they sound like they're convinced like they've heard it directly from record labels that apple is, in fact, going to launch a competitive service. that concerns me deeply. i think if apple competes with pandora, it's going to take somewhere between 10% and 30% of pandora's market share. and that means pandora steps back one to two years in its growth profile and faces competition going forward. so i actually think if apple enters it, pandora's not such a compelling investment. i don't know that they're doing it. >> and no confirmation when we got the launch of the iphone 5 that that was what was coming which is why pandora reacted in part the way it did. >> no, we didn't. i'm happy to disagree with michael on this one as well. i've got an underperform or underweight on pandora. really the reason is that mobile rpms are not really as robust as desktops are. but the variable costs are very high.
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pandora, like netflix, is i would say vulnerable to high contest costs. and in the case of net flick, it's higher fixed content costs. pandora, it's higher variable. it remains to be seen on competition, but barriers to entry are somewhat low in this business. i think that's why the perceived threat of apple and perhaps others is something that investors -- gives investors pause on this one. >> all right. anthony and michael, thank you for your time. >> thank you. >> have a great week, guys. let's get a market flash now within the auto sector. hi, seema. >> electric carmaker tesla getting a top. jpmorgan upgrading it. analysts writing this upgrade is not meant to call the bottom in the stock but rather to mark an improved risk/reward scenario to other stocks under coverage. tesla getting a nice pop, up better than 4%. carl? >> thank you so much, seema. when we come back, occupy wall street is one year old today and they're celebrating by staging protests around the country.
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we'll have the latest on what they're doing right outside the stock exchange when we come back. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪
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as you probably know, protesters have set up camp outside the new york stock exchange here on the one-year anniversary of occupy wall street. joining us here at post 9 is rob johnson, former chief economist
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for the u.s. senate banking committee and now director at the institute for new economic thinking. and while it would be nice to explain what that group has in common with what's happening outside today. >> well, the institute for new economic thinking was set up around the sense after the t.a.r.p. bailouts in 2008 that all was not well. and particularly, the -- what you might call academic and financial community were creating bad maps. we were navigators at sea and we hit the rocks, and some of the complex mortgages, some other elements that involved environmental economics, some aspects of social instability were not things that that quantitative discipline was addressing. and we sought to, what you might call, enlarge the spectrum of the competition. >> redraw the maps, in other words. >> redraw the maps, make them a more accurate reflection of reality. >> you've worked for soros in the past, pretty famous stories about some of his plays in global markets. you've worked under various
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economies. >> yes. >> thinkers -- you would imagine would agree with what's happening outside, but i'm sure you'd also agree what's happening outside is not well telegraphed, right? it's not specific. >> yes. >> can you help us read into what they want? >> what i would say regarding stigletz and soros, they would agree what's happening outside has an organic basis. i'm not sure they're necessarily alied with specifics of the protests. but they do recognize there are social disequilibrium right now. the people outside do reflect a grievance that's quite widespread in society right now about growing inequality. something that's been growing for 40 years. and maybe what they did, more than anything else, was brought it to all of our attention. we now discuss it more openly. it's been in the data, in the state of working america by the economic policy institute, epi. it's been there for a long time. it's been growing at a rapid rate. but we haven't proposed
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remedies. we haven't gotten back to that cooperative gain, that constructive state of mind where we say what are we all going to do about it? >> what remedies do you think we're going to be talking about realistically in the next one to five years? >> i think the most important thing we have to recognize is the system of money and politics in the post citizens united world in washington is broken. we cannot make rules regarding financial regulation, regarding health care, regarding the tax code, regarding our military strategy. i went to m.i.t. military strategists tell me that the pork and the lobbyists have taken over, and they can't even do defense preparedness anymore because they have no traction with the ideas that protect our country. >> do you feel that there was a missed opportunity on the part of the occupy wall street movement because they really did capture the public's attention a year ago, and they had the power to draw some attention to the cause, to perhaps rewriting some of the maps. and that's sort of dissipated because they didn't have any
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coales coalescence. there was no real list of demands or just comprehensive -- >> i think there is absolutely a need for a next stage of the agenda. and as you rightly say, they were not prepared for that at that time. though i do hear in conversations with people about the occupy movement, that they felt being too concrete would limit the scope of what you might call the anxiety they wanted to create. so i'm not sure it was all incompetence. it might have been a different type of strategy. >> but isn't it the nature of the capitalist system that unless you control capital, capital will grow in value, that the rich will always get rich much those that have money will always get richer. that's the nature of a free market system. it rewards capital. there's only two ways you can get around that. one, you stop the functioning of that system in some way so it's not free capitalism, or you take those people that are poor and you increase the value of what they have. and the value of what they have is their labor. and what you don't have in this country is a discussion about
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educating up the 80% of society up the value chain so they can compete in a capitalist world. and you do have thathat conversation in western europe. and you've had it for decades. and i don't understand why the united states does not talk about trickle-up economics, take that 80%, educate them, make them pay taxes, and stop charging the top 5% more and more for what they create. why is that conversation not happening here? >> well, that's part of why inet, the institute for new economic thinking, was founded. james heckman at university of chicago and nobel prize-winning economist and i are working on a major program. we have 179 people worldwide on early-age human capital, early-age education which includes public health. >> you just have to put more resources into the education system to make it work. >> and better allocation of incentives, absolutely right. you're talking about a national tragedy. >> the word "resources" is loaded especially this week when we've got chicago teachers facing a potential injunction. >> yes. >> overturning citizens united,
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right, is not going to -- is not going to pacify what's happening outside. >> mm-hmm. >> neither is paying teachers more or giving them a shorter school year. right? >> i think if you paid teachers more, say relative to other professions, you would draw a higher quality of individual to education, and it does have very, very magnetic and amplifying benefits for society. so i do think we need to honor that profession with a higher standing relative to the rest of society. >> i guess my broader point is the fixes that are going to quell this debate are going to be decades in the making. and we're going to be living with this for a very long time. >> that's right. i think that's right. i think these are deep structural problems. i think some of it is related to the integration of the united states and the developing countries and the compression on places like detroit and pittsburgh. and i grew up in detroit, but i know god wasn't born in detroit. these developing countries growing is a triumph for humanity. so there's a lot of stress in
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the system long term, demographic, structural. you're right. it's not going away in the next year or two. >> do we know if soros is bankrolling anything that's going on outside? >> i do not believe he has anything to do with that, and i know him very well. >> and does the institute, would they take on a role as a surrogate? would you ever be open to speaking for the movement on a formal level? >> i would be open to speaking to the movement because the void that you described in terms of ideas and concrete structure, i, as an independent group, we would be very happy to engage with them and talk with them just like we are with anybody else. but we will not speak for the movement. >> rob, interesting stuff. please come back. >> my pleasure. nice to meet y'all. straight ahead, home builders seeing some huge gains over the past few months. despite today's pullback. with qe3 in play, are more gains in store? will the sector headwinds get in the way? we're answering that question straight ahead. bob... oh, hey alex. just picking up some, brochures, posters
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home builders seeing a pullback this morning, but they have been absolutely on fire as regular viewers will be aware, despite, of course, the housing sector being hid hartest in of
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the recession. in fact, the s&p home building index is up 167% over the past 12 months. so you've more than have doubled your money. actually, it's what they've done just this year so far. so do you hang on in there? do you buy? do you sell? megan mcgrath joins us with mkm partners. bob wettenhall with rbc capital markets. bob, obviously if you're new to the game, the party's been going for some time. where do you think we're lickly to trade from here? >> we remain encouraged by the fund mental outlook. a lot of the easy money's already been made in the sector, but you don't need to get off right now. we're just looking for smaller gains as they move into year end. the fundamentals are robust. stock prices are lofty. >> megan, i suppose to people it depends on whether or not you think from this promise from the federal reserve to keep buying mortgage-backed securities is going to further boost the housing market and home building market, and there's a lot of
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discussion about whether mortgage departments are overwhelmed or whether people who can refi have already refied. what do you make of what the fed has said in particular for your industry? >> yeah, well, clearly what the market told us last week is they're expecting qe3 to work. home builders last week were up 11% on average. qe3 really has to work for these stocks to continue to work. so what's most encouraging, what a lot of folks have been talking about is the open-ended nature of the qe3, that they will continue to support how's being markets and try to get housing markets and job markets back until it works. and a little past when it started to work. >> but megan, i want to know what you think. you've described to me what other people think. do you think qe3 will boost the housing market? >> i think it can. i think the difference about qe3 versus the other quantitative easings is that housing is already starting to recover. we already have sentiment better which is so important for the housing market. so a little further boost could get folks back into the market. so i'm encouraged, but it's only a couple days old, so i'm a
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little bit cautious. i wouldn't head into the home builders today. i'd wait maybe, if you see another 5%, 6% pullback, i might start to buy again. >> when you say we may see smaller gains in home builders, what prevents you from saying we'll see big gains or just as big gains? i'm curious, the fed's promise fits in and whether or not that will actually perhaps increase the size of the gains that you're expecting? will that work its way into housing, or has that, the ability to get a mortgage, the ability to get a loan, not been the factor holding you back from saying yeah, we're going to continue to see big gains here? >> great question. let's look at the tape. toll reported blowout earnings and the stock was up 2% to 3%. we're looking for kb to produce strong numbers this friday. on monday, lenar is going to put up strong numbers. so fundamentally we like what we're seeing. but the gains are going to be muted relative to the huge
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upward move we've already had. so we're not saying it's time to get off or abandon the sector. long term, this sector's going to work. it's probably going to outperform a lot of other sectors. and we're still looking for accelerating earnings growth. as it per tapes to what the fed's doing, absolutely it enhances affordability which is a key and necessary component for better housing performance. so we like what the fed did. it's the tailwind we've been looking for. >> megan, let's say we get the pullback you're talking about. do you go to the builders? or i noticed on friday, sherwin williams has made more 52-week highs than any other s&p stock so far this year. do you start looking at masgo's, usgs or the companies that assemble all of these materials together? >> yeah, well, i only cover the home builders, but what i would say about the builders is what you really need to see from them is price increases because what you're seeing from the building products guys that you mentioned is you're starting to hear that they're starting to raise prices. and so the builders have to combat that. and they need house prices to go
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up as well. so if you don't think the builders are going to get the home price increases, then the building products guys might be the way you want to go because they are getting the increases through. so what we are looking for over the next couple months and into 2013 is home prices going up. that's going to be key for these stocks. >> okay. hang on in there, megan. bob, when you get all these people saying -- being positive at one time, it kind of makes me nervous. this is a very kumbaya conversation. everybody believes that what the fed is going to do is going to work. and i think that the jury is still very much out for an awful lot of people, at a time when palty is up this year. we haven't had quite a strong confirmation that housing has turned across the board. sections of it have turned. and if the realization sets in that actually we still have persistent problems here which might be why the fed is committing so much money, don't you think that these stocks could crash? >> definitely not. i'm going to take the other side of that. i think that palty's done
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tremendous work operationally. but i think if you look at the sector, we're at the start of a multiyear housing recovery. so we actually think the fed's intervention probably is more intended to help the labor market and the broader economy. but right now, housing is a bright spot in an otherwise sluggish economy. this is good for the stocks. we're not expecting a crash. >> and a strong message from both of you. thank you, megan and rob on the housing stocks. >> thank you so much. when we come back, the major indices still hovering near multiyear highs. a lot of big data on tap this week. strategy from several experts who manage more than $400 billion combined next. at optionsxpress we create easy-to-use, powerful trading tools for all. like our all-in-one trade ticket. we put strategies, chains and positions all on one screen. start trading today with optionsxpress by charles schwa
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we had phenomenal gains in precious metals last week. let's link over to sharon epson at the nymex. good morning, sharon. >> good morning. metals are taking a breather after that tremendous run we saw last week. copper a 4 1/2-month high and gold and silver at the highest in seven months' time. they are taking a bit of a breather as traders try to reassess what the fed has done and keep in mind what continues to happen in the ongoing financial crisis we're seeing in europe. but they say don't fight the fed. they're still looking at support here for many metals. the metals to watch really are platinum futures in this session because we have seen a slight
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pullback after a nearly 10% ride in platinum over the last two weeks. and that, of course, with the unrest we've seen in south africa. the largest platinum producer in the world has announced that they are going to have workers resume going back to the mines on tuesday. now, they announced this last night. we immediately saw platinum futures fall. they've rebounded a bit because there is some skepticism whether workers really will return to this mine. we'll continue to monitor that situation. we're also looking at what is happening in terms of natural gas because natural gas futures had a tremendous run in the middle of last week, up some 14%, topping $3. and now we're seeing weakness. why? well, we say it quite often. there's plenty of natural gas out there. traders realizing that the fundamentals really don't support it here. back to you. >> sharon, thank you so much. sharon epperson over at the nymex. meanwhile, stocks moderately lower on concerns over china, the mideast and the united states. reaction, of course, to the fed's decision on qe3, raising some questions, too. want to bring in a panel of experts.
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john lonski, chief economist with moody's. jim paulson, chief investment strategist and vikings fan. and mark lucini, chief investment strategist with janney montgomery scott. good morning to all of you. >> morning, carl. >> jim, i'll let you have first crack because you've been right all year long. you've been stubborn but you've been right, although there might be some disagreement over how you were right. do you think this rally is all central banks or is it somehow fundamentally tied to the economy? >> i think the great tragedy of the fed's move is that it left the impression that the economy is still on life support and that this market rally is just a sugar high. i think there's a lot more fundamental underpinnings, carl, to this rally that would have come through if the fed would have stood down. you know, if you just look here, we've got a manufacturing sector which certainly is down with the emerging world, but outside of that, housing's really come to life for the first time ever. auto sales, at the highest level of the recovery. consumer confidence just went to its highest level in almost four
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years last week. the unemployment rate's down 1% over the last year, despite the fastest labor force growth of the entire recovery. so i think the citigroup economic surprise index has been heading straight higher since mid-july. i think that's the primary driving force behind this rally. so rather than it just being a fed induced, think i there's more federal underpinnings, and that's going to surprise people going forward. >> john? >> jim's right as far as balance sheets are concerned. household balance sheets have improved, but the level of demand remains very weak for an economic recovery. a recovery that's going into its fourth year. recently, we've gotten some bad news on manufacturing. my understanding is, that u.s. manufacturing hit a wall in the month of june and has yet to recovery. new york state, the empire manufacturing index, is down, lower than anticipated. we're going to have the fourth straight month in which the isms
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index of u.s. manufacturing activity shows a contractive reading of less than 50. >> do you not buy the notion that the fed can buy $40 million worth of mortgage-backed securities, help people feel richer through stock appreciation and housing price gains and that will help -- >> or jobs. >> or jobs. >> i think it's better than doing nothing. i think the fed did the right thing. they had little choice but to convince investors and businesses and consumers that they mean business. that the fed will do whatever it takes to prevent the u.s. economy from suffering a relapse. >> so mark, where does that leave us in q4? and add on top of that relative performance and all those managers will want a piece of this action if they want to keep their jobs? >> carl, i think you're right. i think in fact, because of the pall pessimism over the market, it's been high. it's started to melt a little bit of recent as we saw from the citigroup surprise index jim had mentioned. not so much that we've got good
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news as much as we stopped getting bad news. as a consequence, those managers that have lagged badly throughout the year i think have a game of catch-up to play. so when you look across hedge funds and their net long positions and pension funds allocated to risk assets, i think both have a chance to reallocate monies toward risk assets in the event that they can't afford to fight the fed. and in doing so, continue to put a bid in equity prices. now, that said, of course, concerns about the fiscal cliff are looming. and i think that is what's starting to weigh on manufacturing activity as evidenced by today's empire state index. but nonetheless, if we can see some kind of partisanship put aside and work towards some solution on that end, i think the rekindling of animal spirits will help to lift equity prices toward year-end well into q4. >> john, you said just now that the fed promised to do everything to right the economy. it hasn't actually promised to do that. what it's promised to do is to buy mortgage-backed securities until somehow magically the economy improves. there's no direct link between
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mbs and actually an improvement in the economy. and i very importantly want to bring up what has happened now to the yield on the 30-year in response to the activities of the fed. maybe there's disappointment that they weren't buying fixed income, but fixed income has been brutalized here. and those rising yields are very dangerous for the american economy. >> i think the hidden message of the fed continually taking these extraordinary actions -- >> inflationary action now. inflationary action. this is a change. this is a sea change. >> and i will also -- what your comment there as well made about the 30-year treasury, look at the 10-year treasury yield. despite this action by the fed to begin to buy $40 billion per month, you know, mortgage-backed securities, we still find that the 30-year mortgage yield barely dipped from 3.55% to 3.5%. you know what happened is the ten-year treasury yield is headed towards 1.9% so that rise in the ten-year treasury yield has offset a lot -- >> you think that's good. you were just praising them for standing there.
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>> wait a minute. i think the markets are wrong on the ten-year treasury yield. they're wrong on base metals prices. this recent run-up by industrial metals prices makes absolutely no sense when you consider that manufacturing is shrinking, that it's weakening. so at some point -- >> surely they are now embarked on creating inflation across the board in the american economy. >> i mean, factories would want theoretically to stock up on copper and different materials and inflation kicks in later. >> copper silti insitting aroune not using right now. so this run-up is entirely based on speculation of an improvement in global economic activity that may not take place at any time soon. >> jim, before we let you go, 1665 is the s&p's all-time high. you think we punch through it before the end of the year? >> i don't know. i'm going to stick with my 1500 target i've had all year, carl. we certainly could make a run-up. i think if i had to guess, my guess would be we run above
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1500. we take a challenge at that. maybe fail and come back to 1500. before the year is out. one thing i'd like to respond to john, i think the reason the manufacturing sector is the only sector in this country that's in the mud right now is because the emerging world's in the mud. if what's going on with shyborg going with 6.5% last june in 2011 down to 3.5% and the real money supply in china going back to double-digit growth, they're going to cause a pickup in the emerging world probably in the first quarter of next year. if you imagine what sentiment will be, if the emerging world picks up, which revives the domestic. ma manufacturing sector, i think there's another big catalyst waiting in the loom in the room here as we go into 2013 that's going to be another positive that hasn't played out yet. >> all right. gentlemen, dot to leave it there. john, mark, jim, thanks, guys. we'll talk to y'all later.
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>> thank you. netflix is back in the news on reports that subscription screaming service could lose some key content. so as shares sit down more than 62% in the past year alone, what is next for netflix? a top analyst on that joins us. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real ness.
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"variety" reporting this morning that subscription streaming service netflix could lose two major suppliers of content, a&e and the history channel. both licenses set to expire friday unless a new deal is reached. mark ma d hchheny joins us. what's the latest? the report seemed like netflix believed a deal was in place but that sources say there wasn't a deal. >> well, it's hard to know. you've got public negotiations going on between two companies.
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you've had this numerous times with netflix. they have a lot of deals that are constantly in play. the question is whether there is an exclusive deal or not. there's still plenty of elements to the a&e deal that will remain live post this friday. the question is whether these two particular shows are going to be renewed. >> let's say these aren't. let's just say this goes away. their partnership with a&e and history channel. what happens with netflix? are we close to a tipping point where netflix is losing enough content partners cumulatively to give viewers fewer reasons to tune in? >> no, i don't think so. i think this is -- we're talking about one or two series or one or two shows here that are, for all intents and purposes, immaterial. they've had material losses. starz was one. that was material to the company, material to the stock. a&e, i would doubt, would be material to usage on netflix. also, i want to keep in mind two major trends going on, really one which is at the increased
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usage and increased rollout of tablets and maybe now smartph e smartphones. >> interesting. it reminds me of like a football team where players are constantly coming in and out of contract. the only problem is they keep creating other teams that they potentially could one day go and play for. if you say these series are immaterial for all intents and purposes, what is the line that determines a show that's material and immaterial? >> well, i think it's the large bulk contracts like the starz deal. carl, you just made the point about other teams. and the biggest other team we focus on and investors should focus on with netflix is amazon. they're clearly building a larger content library, and their service is free so subscribers. we still think it's an odd cross-sell. i'd point out that netflix with 24 million streaming subs will
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have multiples higher than anybody else and therefore can better negotiate for terms than anybody else can. they are the studio's best pitch in terms of who you want to sell content so because they can pay the most for it. >> what makes that cross-sell odd in your words? what's odd about it? >> we like amazon as a stock, but the idea that you're going to sign up for prime subscription services in order to get access to free videos, to us it's kind of like broccoli and burgers. they don't really cross-sell that well. nonetheless, amazon has got a lot of marketing power behind it. >> to your point that you made just before, mark, when you talk about tablets and the availability of tablets and that netflix is sort of a derivative play, why would an amazon plus be a derivative on its own tablets? >> no, it would be. netflix is available on kindle fire, but of course, much more importantly, netflix is available as an app on the biggest devices that are out there. and obviously, the ipad's at the top of that list.
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that's what survey data shows as an increasing usage driver of tablet purchases. tablet usage which is watching video and streaming services like netflix. that's the underlying driver for netflix for at least the next two years. >> whether or not a&e and history is material or immaterial, i think it gets at the core issue, and that is increasing cost of content, and will they actually be able to pay up and compare to an amazon which is basically this is sort of, i don't know, a hobby for them to offer free video. they don't need to make money off of that line of business, per se, and then also going up against the likes of a time warner cable and a comcast. do they have the funds and the deep enough pockets to actually go into that competition against these players? >> you know, melissa, you're raising all the reasons why this is probably the single most controversial stock i cover. i say buy. clients scream. but, you know, that aside, yeah, he think they have enough funds to do this. they are spending about $1.5
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billion to $2 billion a year to purchase content. nobody else is spending that kind of money except for hbo with which a larger subbase is spending about $2 billion see a indicates netflix needs to spend materially more than it is currently spending. by the way, it's spending that and you're seeing domestic streaming margins rise. that bear argument is not playing out. >> are the streaming margins rising faster than we're seeing the dvd subscriptions sink? that was really the core of the profits. >> yeah. they're in play at the same time. what that comes to in terms of the p & l is domestic earnings aren't growing. they're not going to grow this year. those domestic screamstreaming s are rising at the same rate the dvd business is falling off. >> it's standing in place and spending $2.5 billion a year in content. >> yeah. what's the driver? what's the so what? over the next two years they're going to come through this cycle. by the way those dvd subs become
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sources of streaming subs for netflix. you're going to have an acceleration in earnings growth almost inevitably has streaming becomes a larger and larger part of netflix's business. that's the bull case. that's our bull case. >> interesting case. screaming buy. good to see you. here's a question for you. are you getting a little orr wemed trying to book your next travel destination? we're taking a look at one online travel startup that might make life worth living for you. stay with us. bob...
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oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners.
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one thing's for sure. the online travel business is getting a little crowded these days with the likes of expedia, travelocity and kayak. here's a name you need to know. hip monk grabbing the attention of savvy travelers throughout the world. the founder, adam goldstein who is its ceo. welcome to cnbc. >> thank you. >> it says here you graduated m.i.t. in 2010. you're quite new to the space. yet very soon you had the likes of ashton kutcher investing in you. >> that's right, yes. you know, when we built hip monk we built it off our own personal frustration searching for travel. it was easy to build something fast that fixed all the problems we saw out there.
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>> what does it do the others don't? >> there are two big things. the first and most obvious when people visit the site is we present all our options in a very visual way. you can very efficiently find the best flight or the best hotel. the second thing is we pull in more options than any other travel site out there. in addition to flights we search trains, we search private jets. in addition to hotels we search for vacation and apartment rentals all in one site. >> are you a technology company or have you done deals with the travel providers that you're then offering to the public? i'm not quite sure what the end game is here. because you're obviously quite small. and, therefore, quite threatening to a lot of the big players. but they're on a different order of magnitudes in terms of size to you. i'm not quite sure where you're going to take the business. >> we think of ourselves at our heart as a technology company. we were started by engineers. we're an engineering driven company. we can innovate faster than any other company out there in
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travel. at the same time, we've been doing more and more deals than any of these other company. we have, you know, alternate providers of data. inventory from all sorts of different corners of the world. we've got both at the same time and we've just outpaced any of our competitors up until now. >> adam, what really caught my attention at the beginning of the interview is when you said you were able to do something very quickly and put this together. doesn't that speak to the very low barrier of entry to this area? that anybody can step in with a bunch of engineers and manage to start up a site which will get the attention of other players, but at the end of the day, doesn't have much of a barrier to entry? >> i think that that might have been the case a few years ago when we got started. the dynamics in the travel industry have changed significantly. the consolidation in the airline industry and a lot of the lawsuits that are going on in the hotel industry foreshadow a world in which startups aren't going to be able to very easily get all the data that they need. we were in a sense fortunate with our timing in that we were
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able to get all of this inventory before the sort of travel industry went nuclear on each other. >> i'm imagining, i mean, what is your search volume compared to, say, kayak. i'm imagining kayak is 100 times the search volume you have? >> they're not that much bigger. they're definitely bigger by an order of magnitude. we're continuing to -- you know, to grow faster than they are. >> okay. all right. adam, we'll leave it there. good luck with the business. nice to meet you. thank you very much. adam goldstein, ceo of hipmunk. movers in today's session. some of the names to watch in today's session coming up next. a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.
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♪ all right. tow is down 21 points. the joke on twitter is that fed is pondering qe-4 with this market today. >> there's no four. it's qe infinity at this point. >> exactly. >> ceo of shutterfly. took a dive off the iphone five announcement on photo stream. ceo of kimco realty david henry. >> see you guys tonight. in the meantime, if you're just joining us, here's what you missed earlier on this morning. >> welcome to hour three of
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"squawk on the street." here's what's happening so far. >> it is going to be an overcrowded trade through this whole cycle. but it will go through one and two month pullbacks. on those one and two month pullbacks like we had in january and february you're supposed to add to your position on those pullbacks. >> is there any way for this to not end badly. >> not that i can think of. >> would you spend more now or no? >> yeah. i think i would. >> how much more? >> i would call it a moderate -- i wouldn't cut the deficit too fast. >> at the end of the day, you're judged on performance. if you believe as i do that easy central bank policy can drive up asset prices, artificial or warranted or not, then you have to stick with that theory. >> it's a bit of groundhog day, isn't it? iphone mania strikes again. i think the numbers released this morning at both apple and at&t probably do suggest an upward bias to estimates and we'll continue to evaluate how things proceed over the course of the week, next couple of
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weeks. there is the opening bell for this monday morning. >> i certainly think that the comments from mark zuckerberg helped. in terms of sentiment, you've got to keep your eye on fundamentals. fundamentals are all about mobile for facebook. >> the people outside do reflect the grievance quite widespread in society right now about growing inequality. something has been growing for 40 years. maybe what they did more than anything else was brought it to all of our attention. >> good monday morning. welcome to "squawk on the street." live at post nine at the new york stock exchange. a check on the markets. moderate losses hoaere. dow down 17. chipotle and starbucks two of the big movers. the firm says chipotle's third quarter revenues are tracking above consensus. itg meanwhile lowering estimates on starbucks which is trading
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sharply lower. cliff's natural the biggest loser in the s&p after getting hit with a downgrade from jpmorgan. road map to the iphone 5. now the fastest selling iphone ever with preorders for the device surpassing 2 million in the first 24 hours. so when will apple stock hit 700? should you buy it before it does? plus, the new study that says high income tax cuts do not help stimulate the economy. we're going to debate that subject and see what it could mean for the election in just 50 days. then we'll take a look inside the iphone 5 and see which chip suppliers are set to benefit from the device's popularity and which ones you should be buying. the startup that's helping facebook monetize its advertising business tells us how they do it. ceo of nanigans joins us live coming up in the next hour. squawk on the beat. as we said, the iphone 5 setting some records in the first hours of availability with at&t saying it is the fastest selling iphone the company has ever offered. jon fortt is live in san jose.
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been working all morning long with some details. morning, jon. >> morn wk carl. apple stock flirting with the 700 buck a share level right now, as a matter of fact, 699 the cnbc iphone app tells me. the fastest selling iphone apple's got out there since the last iphone. about 23 iphones per second by my count. more than twice the rate the iphone 4s did last year. at&t says it's their strongest launch ever. at&t said they cleared 200,000 units in the first 12 hours. they've apparently done better than that this time around. three key questions i want to address now. what does this mean for apple's current quart, the holiday quarter and the next 12 months. for the september quarter apple bulls like analyst gene munster of piper jaffray started -- all apple has to do is sell half a million each day for the rest of
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the quarter. not taking into account big launch days. last year after the u.s. launch weekend, apple said it sold more than 4 million of the 4s. the next wave of country is coming on september 28th. includes a lot of europe where apple's last quarter said sales had been depressed because of economic conditions. apple's also launching in relatively stronger areas of northern europe. for the holiday quarter, 37 million units will be the number to beat. that's what apple did last year. frankly a lot of the strength will have to come from international launches. i'm not one of the apple watchers who thought the iphone 5 would have trouble doing better than the 4s did in the u.s. the trend i have seen is for iphone buyers to buy earlier and earlier in the cycle. what this also means is for really strong growth to happen throughout the rest of the year, apple's going to have to rely on asia, specifically on china. that's a tough proposition. if you think china is slowing, they're probably going to have to get china mobile to come on board, carl. >> that's something a lot of people have been waiting for, jon. we'll see what happens. thanks so much. for more on apple and its
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run towards 700, i want to bring in tavis mccourt. senior analyst at raymond james. an outperform on apple and a price target of 730. tavis, good to see you. good morning. >> great to be here. >> let's talk about the price target versus your outperform. you're within 4% or so of the target. why -- i mean, what changes here? up the target or re-evaluate your rating? >> when we get some more data on the -- when the product actually launches and they report numbers, we'll update our price target at that point. but obviously in the near term, the market has gone up quite a bit relative to when we last put out our price target in the early read from the iphone is obviously very strong. >> yeah. very strong. jon referenced sort of the expectations for the number of units that ship in the quarter. what is your best guess on that number? >> yeah. we raised it last week from --
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we previously had not built in any expectations and our expectation now is 8 million. clearly there'll be demand for well more than that. probably demand of 12 million or more by september 29th when their quarter closes. the question is going to be, you know, what is the supply? how much can they actually ship and book in that september quarter. >> yeah. and for the following quarter, how many -- what's your expectation for that? >> we've got iphone shipments of 49 million for december. up from last year, 37 million. again, a lot more before the end of the year than last year largely because this launch is a lot faster in terms of its geographic breadth. you know, this year they'll be in over 100 countries by year end. last year they were only in about 53 countries by year end. so all of this is happening a lot quicker this year. that'll make comps in september and december relatively beneficial for apple. we'll see how much of that that pulls out of the march quarter. >> incredible statistic handed
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to me at s&p. the market cap game, tavis, year to date, is about $270 billion. it exceeds the collective market cap gain for the remaining 70 companies in the s&p. information tech index. they basically created another i.t. index all by themselves. what would be wrong with going to a hold at these levels if, in fact, you think 730 is roughly what it deserves? >> i think right now the momentum is very strong. there doesn't appear to be a substantial competitor in the u.s., anyway, to the iphone. and -- or anywhere to the ipad. and this is really anrating system play. this ios operating system is really similar to what windows experienced back 25 years ago. and these things tend to take multi -- multidecades to play out. what would be wrong is if you time it wrong, you'd end up missing a multidecade growth story. >> yeah. >> i would say the only real concern is, is iphone sales
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internationally. i think jon brought out the iphone market share and kind of the ecosystem impact internationally is not nearly what it is in the u.s. and canada. and so that's going to be apple's challenge over the next several years is can they build that same level of dominance for ios outside the u.s. that they have inside the u.s. >> yeah. the party is definitely here. can they recreate parties around world? speaking of which, how much do you think pivots around a china mobile deal next year? how much tis appointment if we go through 2013 without one? >> you know, it's important. but i wouldn't overstate it. there's a lot of iphones in china. most of the folks that are ted set on having an iphone have had the choice of switching to china telecom or china unicom at any time in the last couple years. i wouldn't expect china mobile to launch and it all of a sudden to massively improve apple's china trends. i think it's certainly incrementally positive. what they're going to run into in that market is it's just
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price point. the iphone selling for roughly $700, $800 unsubsidized in china. that's up against some pretty meaningful android competition at sub $200 now. the degree to which they can increase share in china is capped to a certain degree by price point issues. >> and incomes in that country. tavis, good stuff. good to have you on the newsline. thanks so much. >> thanks a lot, bye-bye. let's hand it back to headquarters this morning. check in with seema mody. >> m & a action. donaher in an effort to gain a stronger foothold in the medical diagnostics business acquires iris international, a company that specializes in in vitro diagnosti diagnostics. seeing shares of iris rise sharply today. market cup just under $315 million. carl? >> thank you so much. when we come back this morning,
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the new study that could prove high income tax cuts may not help the economy. what it could mean for the election when we come right back. a little help saving. for adding "& sons." for the dreamer, planning an early escape. for the mother of the bride. for whoever you are, for whatever you're trying to achieve, pnc has technology, guidance, and over 150 years of experience to help you get there. ♪ you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying...
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congressional republicans and presidential candidate mitt romney have both pushed plans to cut taxes on the nation east wealthiest americans in order to stimulate the economy. a new study says those plans don't work.
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our wealth reporter robert frank has the latest on that story. morning, robert. >> morning, carl. thanks. mitt romney as you mentioned, he wants to cut the top income tax rate for those top earners from 35% to 28%. he says we need to encourage those job creators to create jobs and get this economy growing again. yet a new study from the congressional research service shows that cutting taxes on the rich, in fact, does not create economic growth. the crs says -- this is, of course, a nonpartisan group. part of the library of congress. they do research for congress. they showed that the average top tax rate, that's the share of total income paid by those top earners, was above 50% in the 1940s and '50s. those top tax rates fell by half during the 1980s and ensuing years. capital gains taxes also fell from 35% to 15%. yet as the taxes for the wealthy fell, so did economic growth. the economy grew twice as fast in the 1950s than it did in the 2000s when those taxes were low. of course, there are bigger factors driving economic growth
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that lower taxes don't necessarily cause that slower growth. yet the study found there was no statistical proof tax cuts, in fact, improved growth. or that those cuts had any level of effect on private investments or savings or even productivity. now, there is one measure that did grow with these lower taxes. that's inequality. as tax rates for the top fell, the share of the nation's income going to the top also grew. their share of income more than tripled, in fact, over the past 30 years to 12%. so cutting taxes for the wealthy may not grow the economic pie. but it does grow the slice of the pie that goes to the wealthy. that's a message i'm sure the occupiers are probably singing this morning. >> right outside the doors of this exchange, robert. >> exactly. >> i wondered, though, obviously causation is very difficult to point to looking at any decade in trying to look at taxes versus other things that were going on demographically. what's your take on the methodology of the study? >> yeah.
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i think it's solid. i think what i liked about the study is they said that lower taxes didn't cause growth, but nor did they say that lower taxes caused lower growth. i think a lot of the other side tends to make the argument that lower taxes on the wealthy resulted in lower growth. i think taking either side of this bet, you have to understand that taxes are a tiny piece of what drives the overall economy. i think that's a very true fact that we all see every day. markets, interest rates, other things that we cover have a much bigger impact than taxes. >> interesting stuff. well crystallized. and howard dean, former governor of vermont. governor, j.p., good to see you fw guys. good morning. james, let's take a look at this study first of all and relate it to what romney's proposing. how does he argue that lower rates are going to boost --
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create 12 million jobs? >> i'll tell you, i love studies like this. there's been a lot of studies like this that make the exact same mistake. they say basically this. look it, economic growth was so strong in, like, the 1950s, you know, top tax rates were 90%. growth hasn't been as strong in the '80s and '90s when tax rates were a lot lower. clearly high taxes don't matter. well b, the problem is the 1950s were a really weird decade. you had all that pent up demand from world war ii and the great depression. you had the rest of the world in tatters. it was really a strange decade. what happened starting about the 1970s you had global growth slowdown everywhere. but the places where growth slowed down the least were countries which deregulated and cut marginal tax rates. if you look at, say, the united states and france where they were 1980 and where they are today, france, which kept tax rates high, which didn't deregulate, has fallen behind the united states. i think if you look at study after study you'll find out that lower tax rates, listen, every
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tax rate isn't going to recoup all the income you lose. but lowering taxes will boost growth. >> do you believe that the plan as we know it under romney, which is still going to be fleshed out, we're told, in the coming weeks, is that going to be -- is it acretive or do we break even? >> if all he's going to do is cut rates, no, it's not going -- it will increase growth. it's not going to increase growth enough to make up for the lost revenue which is why he wants to get rid of various tax breaks. but what i refer, obviously, is a completely different tax code that would probably switch to some sort of consumption tax. yeah, do i think that romney tax would produce growth? i do. >> governor, $360 billion in lost revenue. i guess the whole world's waiting to hear what kinds of things he's going to cut to make up for the lost money. >> he's going to cut things that benefit the middle class. martin feldstein, a republican, believes this tax cut is just more hooey. the interesting thing about this, i heard what james said
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about the studies in the '50s and all this. the most interesting thing is the biggest growth rate in the '70s has been china which hardly is the model for economics that the united states would like to follow. so the most interesting thing about all this, the american people know it's hooey. they don't have an economics degree. but they realize when you cut taxes, it helps one group of people and it isn't them. what romney is talking about is helping his own types, his people, the people who made all that money. he is not talking about helping middle-class people. what feldstein and his peoplest ma -- the american people know that. they simply do not believe mitt romney. >> i love the governor brought up china. that's an excellent example, really. what happened to china in the late 1970s is china began to give economic freedom and dignity to wealth creators, entrepreneurs. when societies do that, when they say, listen, if you create jobs we value you, economic growth increases. i think that's something we need
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to be very careful of in the united states when we start raising taxes on sbe preneuros that the message we send is, guess what? you're not important as a job creator as, say, government is. >> the tax rate on entrepreneurs in china is not zero and it's not 22%. we're talking about tax rates. >> they also have a -- >> in this country entrepreneurs are very well taken care of. >> we shouldn't be taxing capital income. >> that's completely nonsense. why should mitt romney not pay any taxes? why should these guys make money trading credit default swaps instead of investing in the biotech industry which actually produces wealth? our tax code is screwed up, all right. because it advantages people who shift money around on wall street and do not create wealth. >> put the bullet points aside. the worst taxes, the most harmful taxes to growth are taxes on corporations and capital. what we want is our current tax code penalizes investment and savings. what we want is to have a
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neutral tax code that doesn't penalize investment and savings. we need taxes -- >> how many examples of tax repatriation holidays to we need to have that result in no meaningful increase in investment in this country? >> that's exactly the right point. that's exactly the right point. we should -- obama is right. we ought to help companies that invest in jobs and create jobs in america and not create jobs oversea. that's what we've been doing. our tax code is really screwed up. inequality is a big problem in this country. not because of some moral code on the left. but because when you get too much inequality and people stop believing in the system, you ruin the country. we are in real danger in this country because of wealth inequality. >> wealth has risen across the globe. it's not a u.s. only issue. >> that's true. that's a big problem. >> what's unique about the united states is the united states has done better over the past 30 years than countries which have decided to keep tax
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rates high and keep their industries regulated. by lowering marginal tax rates, by deregulating has given the u.s. a huge advantage over countries that haven't. >> the times we did best of all is when bill clinton was president. i think we ought to have the same tax rates we had when bill clinton was president. >> can we get spending down to 18% of gdp like bill clinton? does that come with that? >> i'd be happy to do that as long as we could raise taxes to the way -- >> the president would not. >> last word. >> the fact of the matter is that all this talk about tax cuts is nonsense. it advantages a particular group of people who are already at an advantage. >> that's class warfare. >> it's fitting we end on an equality note given what's happening outside the doors of this exchange. >> be careful. >> governor, j.p., thank you guys. see you next time. when we come back, banks getting a boost from qe-3 but
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pulling back today on some news of possible money laundering. a probe, at least, at jpmorgan. are these stocks just to risky? we'll find out after the break. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign.
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bank stocks jumping on the announcement of qe-3. already pulling back again. should investors beware of the sector? brian sullivan at hq. >> it has been a run, carl. thanks very much. the bank stocks, the big ones got a big pop last week on the bernanke qe-3 news. what i've done is i want to take a look at whether or not these financials were overvalued according to some of the street's best minds. first, though, the setup. this is what carl just talked about. the one week chart of the bank index versus the kre etf. actually a s&p regional bank etf. not quite double the performance of the big bernanke bounce here. close to doubling the performance. so with these moves does this mean these banks are overvalued? the best way to look perhaps at
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the big financials is price to book. not necessarily price to earnings, right? you want to look at price to book ratios among other things. but this is sort of the most top down version. look at the price to book ratios for these names. b of a, citi, morgan stanley, jpmorgan still trading not only below one, but it discounts to their historical averages. moreover, carl, if you take a look at a three-year chart of what i just showed you, kbx versus the regional banks, you can see it's no contest. regional banks have been absolutely trounsing the big banks over three years. this is why thomas lee of jpmorgan, scott miner, gym paulson who you spoke to earlier and a few others i talked to this morning said they all think the big financials are not overvalued. and they like them. >> all right. yeah. tom lee's target is still aggressive for the year. thanks, brian. brian sullivan at hq. european close coming up next. up your game. up the ante.
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the european markets are closing now. >> here in this country keeping an eye on the occupy protests outside the new york stock exchange. over the weekend, simon, in spain more protests over there regarding austerity. >> a lot of unanswered questions in madrid. just as you look at the close there, it is obviously all red. do just check the detail on that. some of those stock markets are just, just below the flat line. it's not the sea of deep red if you like. of course you had all the euphoria last week of the federal reserve further boosting
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asset prices in europe. so today it's back to a more humdrum kind of way of life. jim o'neill, you may have seen him on squawk box earlier on from goldman's saying he thinks thursday will be really important when we get the flash pmis and therefore an indication of just how rapidly europe is heading into recession or if perhaps there might have been a recovery because of what was being said by draghi during the period in which they polled. spain is the issue. when will they ask for a bailout. they've announced tomorrow they'll auction 3.5 to 4.5 billion euros of notes. 12-month and 18-month. thursday, again we come back to thursday, they're going to be selling some of the bonds. presumably at the 10-year there. after all the rally we had on the spanish bond market today, there is some selling. just some profit taking there. therefore yields are higher. you can see on the 2-year we've moved audiotape little bit. 3.43. on the 10-year, again, yields are just marginally higher.
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above 6%, though, importantly as, of course, the spanish test whether they can clear some of those bonds later in the week. presumably like last time they'll have sewn up those deals already with the banks we assume. still the corporate data to work our way through. swedish make r of steel ssab has an impact on the steel sector today when it warned of a loss and increasing demand. ssab makes about half its profit here in the united states. but you can see it moved the other major steel makers in europe. just for the sake of completeness, h & m came through today saying actually sales fell in august because of the extreme weather. there was some real heat waves moving through various markets. so the second largest fashion retailer in the world, h & m in negative territory. down 1.5%. thursday looks like to be where
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we're now headed. still a discussion of greece and spain on top of that. >> you're more the burberry guy. moves that moved the energy market. crude up 28 cents. sharon's at the nymex. >> hey, carl. a bit of a mixed picture here in the crude market. we are looking at the wti futures up slightly above the $99 a barrel mark. brent crude futures are slightly weaker. we're continuing to monitor the situation and the protests that we have seen over the weekend in the middle east and north africa. really it seems that many traders are just digesting the fed action of last week and trying to figure out their next move. and while qe-3 may boost overall economic activity, that, of course, the goal, there is a great deal of concern that we are going to see a negative impact in terms of demand for oil products. and that issin something trade are talking about. they're looking at what's
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happening to heating oil. up double digits over the last couple of months. that could significantly derail any type of economic stimulus that we do get. we're also looking at the retail price of gasoline has continued to climb over the last week or so. we're at $3.86 a gallon now. a little weaker than last night. still up from a week ago. up about 26 cents from where we were a year ago. this is what consumers are watching when they look at the impact of qe-3. back to you. >> thanks a lot, sharon. we'll keep an eye on that. over to mary thompson and get more on what's moving here at the exchange. >> carl, an all too familiar situation for a monday in the trading pits of dow, weaker again president 14 out of the last 15 mondays we have been lower or closed lower. we'll see if it happens today. the weakness here pretty modest. the dow just came off its session lows of the day. held in a narrow range. about 31 points. fwloebal concerns, weakness in the china property market, concerns about the middle east tensions and, of course, the
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empire manufacturing index which dropped to about a 3 1/2 year low, all of that playing into the weakness we're seeing in the markets. of course, coming off friday's strong performance when you saw the markets touch a 4 1/2 year high for the dow as well as the s&p 500. here are the sectors leading the markets lower today. materials under pressure because of weakness in steel stocks. financials also under pressure as well as a number of the big banks which performed well last week are giving up some of the gains. consumer discretionaries, utilities and industrials under pressure. transports also weaker today in large part because of the manufacturing index. that's putting pressure on this group. airlines among the leading losers within the transport index in today's session. on the other hand, we are seeing the biotech index hit all-time highs today. that's right. all-time highs for the biotech index. take a look at a couple of the leaders there which include alexion, gilead as well as united therapeutics. all hitting multi-year highs in today's session. couple story stocks.
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tyco kriming third quarter revenue outlook because of a charge for some receivables in china. also waste connections up on the news of big acquisitions. office depot up on the news that the hedge fund has taken about a 13.3% stake in the company. dow now at session lows, carl. off 31 points. back to you. >> let's get to seema mody as well over at hq. quick market flash. >> steel stocks underperforming the major indices today. here's why. jpmorgan downgrading several different steel makers today writing that steel prices are likely to fall further. demand remains near precrisis levels and uncertainty around the upcoming election is also likely to weigh on demand. one of the biggest losers there, ak steel down 4%. carl, back to you. >> thanks so much. sales of apple's new iphone 5 could be so big sop experts think it could boost gdp by as much as half a percent. is now the time to get into apple chips. joining us, craig berger, analyst at fbr capital markets.
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and vijay rikesh. the way we post the question makes it seem a little silly. it's been a nice run. i always see qualcomm at the top of these lists. why? >> because qualcomm is a clear winner as they move from the iphone 4. two years ago they weren't in that device. a year ago they got into the iphone 4s with a 3g chip. now they're selling a 4g chip in there which is about double the content of what they got a year ago. so qualcomm could see apple chips by themselves become 15% of revenues up from zero two years ago. plus the device royalties layer in on top of that. quality come is a clear winner. probably going to head toward 70 by the end of the year. >> is that your favorite name? >> in the iphone winners' bucket, that's probably the best name. a lot of them have already gone up a lot. but that's one name where i see more upside. a second name where i see upside, a smaller name.
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fairchild semiconductor. ticker fcs. they're getting more content into the upside. >> vijay, some of the also rans people may not be thinking about immediately. >> along with the iphone 5 other names we like are sky works, an disk, all of them with increasing content just like qualcomm. i think as you look at iphone 5 it's probably one of the biggest launches in the december quarter. if you look at the 4s -- iphone 5 will be in 100 countries like apple said. pretty significant, much bigger launch than the 4s. >> yeah. people worry about -- not worry, vijay. given what at&t said today there's a supply discussion going ongoing into the quarter. does supply extend the chips? is apple going to be able to source everything they need? >> i think -- this is vijay.
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i think when you look at the supply chain there's obviously a need for qualcomm shifts. also some worry on the screens for the iphone 5. given that apple seems to be launching it pretty aggressively, there is confidence in the supply chain as well. >> what of the supply question, craig? >> the biggest question is the new touch screens. as vijay mentioned, new incell. brand-new technology. apple's really the first company rolling it out in large scale mass production. that's been one of the limiters. and then just one other note as people do talk a lot about winner. but one loser of note is samsung. not because of the lawsuit. but they're not selling the nan flash. they're not doing the screen. a couple losses there. then as you get a year from now, tsm or taiwan semi will probably be making the next generation a7 processor for apple. samsung is definitely getting out of the mix there. >> between the court ruling and
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that frenemy relationship there with apple, samsung probably on the short side of that stick. rikesh, you've got an interesting call in one of your notes. mxpi. does that happen later on? >> i think it's probably on the road map. obviously supplying to the samsung galaxy. you're going to see more and more -- i think like apple said, when -- the consumers start to look at it, they'll probably -- >> yeah. craig, as the eco system expands, whether it's with the iphone or apple tv or whatever comes next, are there names do you think that are not in the bucket yet that will be one day? >> you know, apple tends to stick with a lot of the same suppliers. one core supplier that hasn't been mentioned here is broadcom. ticker brcm. they've been a long time
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supplier to apple across a variety of products. they'll probably continue to do so. maxim power management is found in some of these devices. that could be another one. but apple has a track record of kind of sticking with its core suppliers. >> yeah. people they can trust, so to speak. as it gets harder and harder to keep these things secret. thanks so much. interesting take. when we come back this morning, the company helping facebook maximize the effectiveness of its ads by knowing just about everything there is to know about facebook users. the ceo of nanigangs will join us live at post nine after a break.
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let's develop more stars in education. let's invest in our teachers... they can inspire our students. let's solve this. ♪ up next on the fast money halftime report, the fed printing press rally appears to have ended today. we're going to ask ultimate bulgerbull jeremy seegle. one of the best fund managers in the country is is buying the banks. should you follow suit? bill makes his case. a app apple's iphone 5 smashing records. if i call professor siegel,
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jeremy livington siegel, will anybody get it? >> i double dare you. thanks a lot. see you at the top of the hour. meantime, facebook's trading slightly lower coming off one of the best weeks, in fact, the best week of its performance since going public. one of the big questions, of course, surrounding the company is their plan for ad montization. m nanigans has placed its future on the results it can drive through the facebook ad platform. nanigans ceo, good to have you. >> thank you for inviting me. >> everybody is obsessed with how they are going to make this work. walk me through the origins of your company and sort of the prism through what you are looking at what's working on facebook and what's not. >> nanigans is about two years old. we developed a software product for optimizing ad spend on facebook. we're entirely focused on facebook. we're entirely focused on
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performance advertisers. advertisers that want to see a direct response, a direct conversion in return from their ad spend. not big brand advertisers. >> i'm an advertiser. i pay facebook for the ad. and i pay you a fee to tell me how effective my ad ended up being, right? >> you pay us a fee for use of the software. the software does the bidding on your behalf based on performance. >> in general how effective are these? are they getting more effective? as they venture out into different types of platforms, sponsored stories, are they going to work is this. >> our customers are in several vert kls like social gaming, e-commerce, financial services and travel. i can only speak to the verticals in which we've participated. but we're seeing great success. especially in e-commerce with companies like we're competing against google head to head with facebook and we're performing. and our ad spend, which is our fees, becomes ultimately our revenue is based entirely on that performance. you see our ad spend go down if we're not performing.
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>> when gm comes out and says it wasn't working for them, execution on their part? how does that disconnect s? >> you need to have the right creative. message, format of the ad. you need to have the right targeting. and you need optimization. facebook gives you so many ways to target. you could have thousands and thousands of combinations of creative and targeting. how do you know which one to bid up, bid down. you need software like ours. it's execution. >> gm, we knew in-house their advertising process was a little troubled. but you think they might have been blaming the wrong person? >> facebook at -- do you think some of them buy cars? >> well said. how does mobile change the game? >> one reason mobile is not monetizing as well as the web for everybody, targeting is much nor difficult on mobile. use of cookies on mobile is technically impossible. we think facebook is really well
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positioned for mobile because of their -- just the breadth of their data to allow better targeting. >> do you worry about the user experience the way the company appears to? that it is some sacred sanctum that can't be tampered with too much or people will flee? >> facebook's revenue has always been for ads inside their website or mobile app. whereas google's business is ads running outside on other websites. facebook has that opportunity in their back pocket. no one seems to talk about that. that's a huge growth potential. i'm less worried about the user experience. >> meanwhile, you guys raised $3 million in funding last year. profitable. >> yep. >> what's the future? how big can you get? how big do you want to get? >> so we have about 5% of facebook spend running through our software. we reached that sort of level with a very small sales and marketing -- >> i lost your mike. i'll give you mine to finish. >> sorry about that.
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we've reached our 5% of facebook spend with very little sales and marketing. we want to scale the business. what we do is not limited to facebook. we can go beyond this. >> this is called live television. ric, thank you so much for your time. the company is nanigans. straight ahead, how the president is taking on china in an effort to win over blue collar voters. more on that in just a moment. w, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.
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i'm seema mody with the market flash. watching shares of techers outdoors. stern ajy writing that early ugg sales appear to be slightly week. beyond the rack has broken the ice with a flash sale for this past weekend where for the first time, carl, you can buy classic ugg sometimes for 15% to 50% off regular prices. i know you've been wanting your own pair of uggs. >> everything must go now. absolute back to school, back to work. seema, thanks a lot. back at hq. meanwhile the president as he campaigns in ohio today will announce that he has filed a complaint with the world trade organization accusing china of $1 billion in illegal subsidies for exports of cars and car parts. phil lebeau is in chicago with more on that. interesting day both politically and from a business sense, phil. >> this is a no brainer in terms of campaigning in the upper
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midwest and trying to appeal to vote rs in ohio where one out of every eight jobs is tied in some fashion to the auto industry. here's the complaint that the obama administration is filing with the wto against china. essentially saying, listen, auto part suppliers from china are getting export subsidies. that's allowed them to increase their exports by more than 700% in the last decade. as a result, the auto part suppliers, companies here in the u.s., they're suffering. well, let's look at how many jobs have been lost in that industry over the last 12 years. yes, there's been a huge fallow-up. roughly speaking about 360,000 jobs have been lost since 1999. while the obama administration is targeting the part suppliers, they're also complaining about tariffing that are being put on u.s.-built vehicles shipped into china. now, the u.s. says china tariffs are targeting u.s.-built autos, imposing a 15% tariff on large engine autos and suvs. we're talking roughly 90,000 vehicles. some jeeps, cadillacs, buicks, not a whole lot of vehicles.
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when you look at the china market overall, keep in mind, there are 18.5 million vehicles sold there last year. 90,000 is a drop in the bucket compared to the overall market. it is the world's largest auto market. when you're talking about the auto industry in the upper midwest and you take a look at shares of general motors, keep this in mind if you're the obama administration. this plays well with the base there. also with those undecided voters, carl. there's still a lot . despite the obama administration rescuing the auto industry. you can still find a number of people in the towns where the plants were saved who are interested in voting for mr. romney or outright supporting mr. romney. for the obama administration this is a no-brainer. >> he comes from that world, so to speak, phil. it brings to mind the story in the journal today about gm having been saved. anxious for treasury to sell their shares even though selling today would mean a major loss for the u.s. government. >> at least a $15 billion loss. the bottom line is this. this idea was first floated out this summertime.
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treasury department was like forget about it. they're not going to touch these shares during the campaign. it's a no-win situation for the obama administration. they're not going to touch it despite the fact that, yes, the people at general motors, they would love to see treasury finally get out of owning any share of the company. that's not going to happen before the election. >> do you take gm's criticism or frustration at face value? some would say the performance of the stock if, in fact, these restrictions are hurting their ability to bring in talent, it's not that much different from how ford has performed lately, phil. >> that's why a lot of people look at this and say at the end of the day, is treasury really hurting general motors or is it europe that's hurting general motors? it's europe. it's not only hurting gm, it's ford, the entire auto sector. until that's resolved auto stocks are going to be staying at the levels where they're at. >> phil, on ford, big week for the company. >> yep. >> last week mark feeields, the board meeting, how to rationalize european operations if at all.
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>> the same situation as general motors. remember, carl, what we've been talking about for some time, ef this to get rid of plants in europe. because of labor laws you can't close those plants before the end of 2014. what do you do? you know, they're kind of in a stuck situation. >> phil lebeau. a lot to cover on your beat today. we'll see how that ohio move plays today. fi lebeau in chicago. meanwhile, keep those tweets coming. as you probably know, protesters began gathering here in the financial district this morning on the first anniversary of the occupy wall street movement. we'd like to know, what is your one-year birthday wish for occupy wall street? tweet us @cnbcsquawkst. we'll get some of your answers right after this break. eir very. [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] [ yawning sound ]
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oh, hey alex. just picking up some, brochures, posters
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copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. save 50% on banners. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim.
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we're raising the bar on flying and tomorrow we will up it yet again. some of the pictures from outside the new york stock exchange today. this one anniversary of occupy wall street. some reports saying as many as 100 arrests. brings us to our twitter question this morning. that is, what is your one birthday wish for the occupy wall street movement? joe writes, a change of pace. namely an intelligent and coherent message. steve writes that it realizes that 99%ers own stock, too. debor writes, happy birthday. hope all your wishes come


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