tv Fast Money Halftime Report CNBC March 12, 2014 12:00pm-1:01pm EDT
artist who really does haven't to think too hard about these things but obviously as a team of people who actually do. worry about distribution, you know? >> yes. must be nice to have someone else to worry about having a clel phone, having an e-mail address so you don't have to dali in technology. meantime, dow is back down 24, 25. squ scott wapner is coming up here with another hour. >> another icahn letter, carl. and then the commodity story is one worth paying attention to. i'm sure you guys have noticed what's going on this week in copper, oil, even soybeans for that matter are being impacted because of concerns about china. >> oil, down almost 2 1/2 bucks on some of these -- both the data and some of the reports that are still unsubstantiated. welcome to the "halftime" show. roleover, are some of the markets highest fliers finally starting to show cracks? we're going to tell you which stocks are likely to keep falling and why. the fight over fannie and
fredd freddie. ralph nader on the future of the mortgage giants and one of wall street's best trades. fraud factors, five years after madoff, what have we learned about watching our money? scott cohn up with a special report. let's meet today's starting lineup. pete, jon, weiss, murphy here with us today and we do begin with the fresh concerns over china's economy and its impact on our markets here at home. you may have noticed the commodities have been getting crushed this week. oil is at a one-month low. iron over has been slammed. copper has been in free-fall. soybeans selling off. from stock markets around the globe are taking notice so, too, is our panel. pete, how concerned should we be because i don't feel there's any concern about what's going on in china. >> you are seeing some concern, scott, reflected by the volatility, the way the volatility index itself has been volatile. we've been 14, 16, bouncing back and forth across those levels. i think very importantly you do want to watch what's happening with copper.
when you see copper just late in week last week trading closer to 320. now we're dipping underneath $3. the $3 level is a mindset area that we want to keep an eye on. we're just barely underneath that at 297. >> copper is at four-year lows. >> definitely something. that's why i think it's something we have to keep an eye on. i think that doesn't mean there aren't opportunities on some of these sell-offs. we've seen some of them present themselves very nicely. i didn't see as much today because i was watching the financials closely. they really didn't sell off hard, scott. we were just falking at 2250 on the xlf. we got down near 22 but here we are bouncing back once again. it doesn't seem like we're get that pull back to jump in these names. >> steve, how concerned should we be about china? market seems to discount everything going on over there. >> there's reason to concern. from a practical standpoint in terms of the u.s., i don't think there's a lot of reason for concern. commodity pricing going down is a good thing.
copper is different because that was used as a financing mechanism for chinese her chans. the copper prices that ballooned up weren't really a factor of demand for use. more that's how they would leverage it to borrow money against. in terms of other commodity, we've seen the hedge funds go out of business and fold. that's generally good when you see that type of, you know, bottom being created. i still believe they go lower. they've been over-producing steel. over-buying and storing. i would stay away are from the commodities. if you put a gun to my head to do one or the other, would be short them. >> doc, i wonder china ends up being the canary in the coal mine for our market and our rally, and it's a signal of the great concerns that are going on there, whether it's the first domestic default over there and that may be just the tipping point. >> and while all that could be, judge, that's still out in the future as far as how the rest of this plays out and how many more
line up behind that first one that you talked about and allegedly one already right behind them. however, china is a huge consumer of copper. it takes the united states, europe, and japan together to equal how much china usually pulls in. but that doesn't mean that the rest of the world doesn't trade this thing very aggressively. people have been inventorying copper for years. they've been putting it into storage, into warehouses and so forth. the london metals exchange, lme and so forth, people report about this. already levels last year, judge. to see as it falls and gets to that key number pete talked about, three, as it broke through three and to see margin calls and all the rest, when money is virtually free when you can borrow so cheaply in as many as of folks have, you leverage up. these folks were the ones puking it here. >> what are these opportunities, murph? if at all. are you a buyer on any of these stocks paying the price vumtd of china's concern? >> i am a buyer.
freeport yesterday, one of the main reasons is the catalyst of the dividend. once the dividend gets up over four, 4.08, i'm not calling a bottom in copper. i'm saying there's value in freeport after the recent sell-off. to the point of china as a whole we've had this come up as a potential canary in the coal mine several times in the last few years and it will hit the market short term and the market rallies and goes back higher. it's still going higher. is there a reason for concern? absolutely. there always is. i wouldn't find this trend. to me it looks like the market. any sell-offs bought, we go higher. >> let's get your thought on this topic as well. what are you broad thoughts on the conversation we've been having? >> i think it's a good thing commodities are going down. it's a tail wind for consumers, for industrial, for the rest of the global world. china is slowing down. feel forecasting potentially rates going up because a lot of this was done based on lower rates. i think you're seeing that across -- not just in copper and
you're seeing it in others. you're seeing it in oil. look at oil prices, right? >> iron ore is getting hurt. copper is getting hurt. >> commodities are supply and demand. it's not an on-going thing. we talked about storage. now they have to worry about what to do with this. if you're a consumer of this, you benefit. energy is going to benefit, too. that's why we have a big play. we're on short oil but we've been taking advantage of and we think oil is going lower. and to play lower oil you've got to play different industries that are going to benefit from low oil. >> such as? >> chemicals. >> chemical, refiners. >> airlines. >> airlines have done well. and look, last week we had oil blow out because what happened in the ukraine. but the spread, where we're playing is the spread between wti and brent. more between what we had lls, louisiana light sweep, and wti, that allows refiners, especially those in the gulf of mexico, to export refined products which
we're still allowed to do. that differential makes the marathons and valeros print money at this point. >> top to when you're looking in the refining space, you would point to those and what are some of your best airline plays ride now? >> based upon that, delta, united, and american. american is probably a couple of turns away from where delta is. when i say turns in terms of multiple but also 18 months away. they're going to get hiccups like united. leader is the delta. united is kind of getting there and american is going to get there. all of these industries are benefiting from lower oil. look at curbing. look at all the oil coming down from the gulf of mexico. we're going to get more in the 12 to 18 months and we're separate from the rest of the world. >> in delta, you get both the refiner and the airline. >> delta actually just yesterday at the transportation conference all of them were talking about they still made money when they had massive cancelations. they're running these as businesses. they are no longer being rented. they're being owned. i think investors are coming to that party and saying, wow, maybe something has changed.
you've got to be careful because every time you say that things can change. there's a reason why -- >> thanks have changed. >> let me ask a question in terms of china. you can't go through our largest trading partner even though we run our biggest deficit with them, and not see some damage here to some companies or some subsectors of even chemicals. what would you avoid? where do you think the pressure will be? >> i think you have to avoid companies that are so dependent on china only for their earnings or where they're manufacturing there ordealing with the labor costs. >> cat piller? >> cat, some of the big industrials looking because where china has become -- it's gone from an industrial to a consumer driven economy. they've done all their mass i expansion. our country where's we need to expand infrastructure. you want to go to china for consumer led growth. maybe the higher end consumer led countries. chinese are still going to buy cars.
you want to avoid the infrastructure plays because they've got more buildings out there. now they need to get the people to start using them and becoming consumers. where are they going to spend money? rising and emerging middle class. be careful because you're slowing but if you grow 6% or 7% of a big base you've still got 6%, 7 %. it's double what we had here. you're still going to benefit but you've got to pick your spots. avoid the companies that are going to grow. >> thanks for coming? >> thank you. see you soon. coming up next, could this all american interaction be coming to an end? >> i know what must have happened. it didn't come? >> i'm not your ordinary, everyday fool, okay? now, i'd like my antarctic blue super sports wagon right now. if you want get it for me i'm going to take my business else where. where is my old car? >> the family truckster, there
it is. tesla is pushing to cut out the dealer but new jersey just became the latest state to put a speed bump to tesla's road to direct sales. fannie and freddie battle is heating up. ralph nader is one of them. he's going to join us shortly. also going to hear from senator mark warner, that and much more straight ahead. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today.
in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. it's amanda. hey sweetie. what? [phones rings]
okay, i'll send it. one hundred seventy-two dollars for a chemistry book, what is it, made of gold? just use citi popmoney. boom. ah, she's feeling lucky. hey sweetie...cancun, yeah no, you'll be spending spring break with your new chemistry book. with citi popmoney it's easy to send money to just about anyone, anytime. visit your local branch or citi.com/easierbanking to learn more.
welcome back. fuel cell maker plug power having a wild ride. shares plunged yesterday after one noted short seller compared the company's meteoricize to gambling. >> i'm going to go with plug for my final trade. >> plug, the fuel cell stock, up 6,000%. minimum in a year. >> yes. >> stocks are going crazy. >> pete? >> yeah. >> it's a dangerous stock. >> atsz dangerous stock. unfortunately because we were running out of time we couldn't define why plug. here's what happened. 350,000 total contracts traded just the other day on monday's trade. a lot of that was the march 10 calls trading 1.15. they opened yesterday, tuesday, around $2.30. they doubled. despite the fact the stock was moving around, sold off on morn from the highs. and then actually hit new highs yesterday before this very
vicious move to the downside. >> what was your final trade, monday? >> monday. >> tuesday it was down 40%. >> yeah. but before that down, 40%, it hit a brand new high of just underneath $12 a share. that's when the march 10s that were the activity and that's something we were going to talk about the crazy activity. but unof the things you always ask, scott, when we talk about unusual activity, what's your exit strategy? if they double, we're going take some off, if not all of it you're going to take some. >> if get cut in half. >> you're just done. today for instance those same march 10s are trading around 35 cents, something like that. i virtually think that's call it zero. $1.15, $2.30. take off some but now it's going to be a losing trade. i'm still in the trade. holding on to those. you just never know. i expect they're going to go out at zero. but at the same time -- what's the expiration? >> march. march options that we're trading. >> you don't get the feeling though that what's happened with plug, a stock that looks frothy
to some -- >> to everybody. >> -- is setting the table for some of these other so-called froth stocks to roll over as well? >> well, i think this is just a different category all together when you talk about the fuel cells. i know mifr has done work on these as well. he's talking about it yesterday, i think. he talked about this san area you want to talk about froth, this is the area of froth. i think there are other areas. there was some great commentary on cnbc earlier today from the twitter founder where he was talking about, look, it's one thing when you've got value there. it's another when there's not value there, is essentially what he was saying with some of these stocks. >> just real quick, judge. what rear always trying to stress here, if you invest with options you've got a limited amount of risk. it's limited to whatever you bought. in other words, that $1.10 or $1.40 that pete is talking about is a much better investment to own a call or put like that than $10 or $11 stock that goes to six as this one did. look what ackman didn't do the first time out. he shorted the stock. it went down -- in herbalife.
went down to 26 and rebounded back. his second trade was the good trade. the one where he bought puts. defined his risk with that trade. that's the same thing carl did when he went in in the first place. i think people would learn if you invest with an option and you know how they work, it's a much safer way to invest than owning the stock, or shorting the stock. >> stock pick that you guys make is going to be a home run. >> never expect it to. >> you guys are always the first to own up to a call that maybe doesn't go your way. >> i would still put my money on these guys. >> i would, too. >> i'm a critical observer. >> very critical. >> all three of the guys pop not just the two guys out hair. >> that's just wrong. >> serious though. i got a lot of tweets about plug. i'm glad we addressed it. >> i had a bunch of guys flagging me, too. you're awful for bringing this up. there was opportunity there still and you still would lose money but not nearly the kind of money on this move if you own the stock. >> let's stick with the momentum theme.
new jersey pulling the plug on tesla's direct sales model. our phil lebeau is closely following this story as are a let of investors, phil. >> scott, after this news came out yesterday afternoon a lot of people said how much is this going to hurt sales for tesla. yes, the new york metropolitan area is a top market for model s sales but when you look at new jersey itself it's not a huge driver of overall sales for tesla. about 500 model s vehicles were sold in tesla last year. by commissaparisocomparison, ne dealers for all makes and models sold under half million last year. their question of whether or not this is much of a threat to the dealers, a lot of people are saying that doesn't ring true. tesla is saying it is considering legal options to fight this ban in new jersey. if it goes through and it is going to go through, tesla will have to stop on april 1st selling vehicles directly at its two stores in new jersey. they may convert those stores into galleries where the vehicles will be on display. you can't get any pricing
information. web bush securities out with a note today saying how much of an impact is this? they call it a minor lane diversion when you look at the overall prospects of tesla as an investor far out into the future. in the near term, plenty of attention. >> phil, jon najarian. as far as the franchise laws that all the other players have to play by. why does tesla think they don't have to play by this? >> well, the franchise, as long as they're set up like this, the idea is that if you are general motors and you want to go in and start doing direct sales you would be hurting your franchi franchisees already in business. by comparison, tesla has no franchisees. who are they hurting? they're not hurting you, jon najarian, a tesla dealer because you don't have a tesla dealership. the argument from dealers is, listen, if this happens then ultimately the automakers will all come in and say we don't need dealers at all and this is the beginning of breaking down the dealership business model out there.
remember, back in 2000, remember when ford and gm said, we're bog to go direct sales on the internet, we're not going to need dealers anymore. every time they tried to do that they lost in court. franchise laws are set for protecting dealers from the automakers whose cars they sell. tesla does haven't any dealers so who are they hurting? >> phil, thanks, as always. >> you bet. >> what does this mean for investing in the stock. >> i don't think it means anything. it's an antiquated law. the tesla buyers are educated. the issue is you need their service. tesla, not so much. it's a battery pack. i'm not a fan of tesla because of the valuations. i'm not a fan of the stock, i'm a fan of the company. it shouldn't do anything. >> the street is we defending various calls today. >> if you're going to be long in a momentum name like tesla you want to see something like this, perceived adds negative news coming out and the stock drops and rallies up 3%, you want to be in a name like that.
believe it or not, fannie and freddie are big hedge fund plays. we're going to talk to senator warner pushing to unwind them. and ralph nader, he actually owns the stocks. he is advocating for the shareholders. we'll hear from both men. then gold is nearing a six-month high. we're going to find out what that means for the rest of the market. and speaking of gold, don't miss neil young on "closing bell" today. that's right, he's introducing a high-priced music player. he says will be the gold standard in digital music quality.
look at them on a chart, both toll and pulte are coming in to support. this is an area you want to look at here. >> deutsche bank downgrading aig to buy. saying hier expenses may impact profitability. pete? >> going forward aig is in a great position. trading at a discount. something leon cooper man was talking about that. he talked about $60. this is a stock that the book value is $68. i think there's plenty of upside. >> american eagle downgraded at morgan stanley. weiss, american eagle gave a light outlook yesterday. stock getting hit yesterday. here you go. down another 3% today. >> retam tail stocks when they fall are not like other stocks when they fall because they're fashion stocks. you've got to wait for a new style and hope they come back into fad. i don't view them as compellingly cheap. sometimes they're takeout candidates, not yet. >> rite aid upgraded to buy over at goldman sachs. >> they'ved a recently a upgrade op their debt. and now same-store sales numbers
growing a little better than folks expected. goldman sachs puts them target of $8 for $6.70. they think it's got more upside. >> one bright spot today is the gold rising 20 bucks on concerns about ukraine. for more let's go to futures now host jackie difficult angeles at the nymex. >> good afternoon. that's right. with gold's move today we hit a six-month high. brian stutland, my question to you is this, is all the action today based on ukraine and russia? >>ic some of it definitely is adding to the situation, sad adding to gold here. at least coming out of europe. i don't think that's the whole story. when you look at the stock market making all time high tons year this year and you see the vix up on the year. those two things should counter act each other. vix measuring fear on the market should rise. that should subside when the markets rise. fear overall and the overall global economies and equities is
driving some people to allocate to gold this year. that fear is driving the gold bug. it's driving gold higher. more than just ukraine. >> jim, i want to get your perspective. there is fear out on the marketplace. the vix is reflecting that. can we assume that the safe haven for gold is back out on the table? >> i don't know if we cans assume it for sure. to add on something that brian said. look at copper. copper for a long time has been an indicator that things are not well in the emerging markets. a lot of emerging market currency has been hit, too. that's reason people blocking to gold and moving the opposite direction of copper. i think it's getting close to being a safe haven again. i'm not sure i would buy it up 15% but it's almost there. >> for more on gold and everything else that's moving, futuresnow.cnbc.com. coming up, fannie and freddie are taking a nose dive after a plan to wind down the two mortgage giants passes a key test in the senate. up next, a major player in that proposal. senator mark warner lays out the
or, get 24-months interest-free financing. - a new tv... - a laptop... - a game console! female announcer: what will you get during the big gift event? ♪ sleep train ♪ ♪ your ticket to a better night's sleep ♪ welcome back. most european markets closing now. in the red. simon hobbs is covering the action for us at the no, stock exchange. >> it's a much worse performance in europe as you can see. a lot of red, deep red. disappointment in industrial production falling in january when we thought we would get it up. china, all that stuff from china fed over. high profile earnings misses as well in europe today. ironically in on environment where you worry about chinese growth, actually some of the miners bounced in london today partly because of the precious metals bounce which you highlighted ten minutes ago. not all bond markets in europe
surged today but the irish and the -- irish and the italian are notable, the irish ten-year hit a record low today. they tomorrow are going to auction bonds for the first time in four years. that's the first market of course to exit the international bailout and italy had a record low on the one year today and for the first thyme auctions at some inflakes-linked debt. that's one reason why the news flow, of course, on the italian banks. and others over there like the big energy play that behaves a little bit, scott, like a bond because of the way that he's structured. in italy, they are proposing new tax cuts. more on that later. back to you. new details emerging over the government's plan to wind down fannie and freddie. a decision that could impact investors large and small. kate kelly is here with the latest. kate? >> thanks, scott. a bipartisan proposal came out of washington yesterday that could effectively end fannie and freddie replacing the housing
insurers with a new set of agencies that would put the private sector on the hook first if the loans started to collapse. this is bad news for wall street where the thinly traded common stocks of the two names and preferred shares had been hedge fund darlsings. pershing square's bill ackman and bruce berkowitz took enormous hits yesterday on these double digit percentage declines. the impact on the preferred shares at least initially to this senate proposal and these are held in large skiz by perry capital and paulson and company as well as others, was far less. the prefer every days were much flatter yesterday. perry and fairhome sued charge that their handling of fannie and freddie are unlawful. they argue the government's backing of the u.s. mortgage system is more essential than ever. whether they will prevail under this new pressure, scott, remains to be seen.
there is a lot of doubt as to whether this proposal can get the votes needed. it still remains a i don't know tro ver controversial issue. we do have opinion on both sides. senator warner, consumer advocate ralph nader owns shares in fannie and freddie. we're going to hear from him in a moment. senator, good to have you on the "halftime" show. >> thanks for having me on. >> why not let fannie and freddie recapitalize and recover? >> scott, let's step back for a second. you know, four or five years ago these entities were going down the tubes. the taxpayer stepped in for $188 billion. yes, they've recovered. but we had a system that was not just sustainable. we were unsure whether there was an explicit government guarantee. you had private shareholder gain. when stuff hits the fan taxpayer losses, that is not a sustainable system. you've got many in congress who want to get the government
completely out of the housing, marketplace that would completely destroy the 30-year fix and cause great disruption. we come with a bipartisan pro soesal and started with ten senators, five drks, five rs. we had ten separate hearings on this. everything from the actual housing industry has roughly on a 1-10 scale given our proposal 8-9. we heard nothing in the ten hearn hearings we had that didn't say we were headed in the right direction. yes, we say there ought to be more private capital up front. we maintain the 30-year fix. we maintain the funding for first-time home buyers and low-income home buyers with an a. defined system. we think this is something that actually we may surprise some folks. this is common sense, let's get this last piece of the financial reform in place. yes, i understand there's been some volatility in the market. i would remind the viewers
though, these shares since they were basically worthless have gone up i think 1600% on something that is going to be litigated in the court. they took a hit yesterday. but most of the folks who invested early are still looking at massive profits. >> they are. and they would make the argument with respect, senator, there are more profits likely to be made if these things areal you alasd to be recapitalized. >> let me finish. >> let me make another point. >> sure. >> ralph nader is going to follow you. he would say, what's the difference between fannie, freddie, aig, and citi? they were allowed to get back. they were bailed out. they were allowed to get back on their feet. shareholders were allowed to reap the rewards of the recovery of those types of entities. so why not in this case? >> scott, unlike the others, we ended up having to back those. hopefully what we've done in dodd frank is make sure we've got a resolutionibility to never
do that again. the difference is you've got that government guarantee. what i don't hear from some of the critics who are -- i understand they've got a financial interest they want to make money on. that's american capitalism. have it at it. you've got an explicit government guarantee. you have private shareholder gain and public shareholder loss when we go through a dip, are they going to be recapitalize as for-profit entities, not for profit entity, securitization done and the backstop, at the entity level, at the security level? and quite honestly, i think the system that was set up with this kind of quasi-duopoly was there at the outset. mr. nader to the hedge fund guys, they ought to have their day in court. >> sure, i mean, to your -- >> have their day in court. from a policy perspective, anybody that thinks that the
status quo is viable when you've got enormous pressures to move the government out of housing, i think doesn't have a connection to the policy and political reality we live with right now. >> to your point, senator, bruce berkowitz of fair home, i'm sure you're familiar with him and his proposal here. he sends a statement to me that says the following. i'd like your reaction to it if you would, op blige. what happened before 2008 was the result of regulatory and management failures accelerated by political meddling. he says. these failures continue today with the unlawful depletion of the entities capital in conservatorship, privately-owned fannie and freddie are irreplaceable. all the sincere effort by the senate banking committee simply confirms there is no better alternative. >> i think he has not followed the ten hearings with the exception of his testimony.
let's put more private capital at risk, let's make sure we are explicit about the government backstop, charge for it in a way, make sure we've got the private policy holes instead of the neb plus approach we've got right now. the folks that current status quo we have virtually no private capital. socialized government supported system. >> hedge funds are making the argument that a system with private capital on the hook in part theirs is the way to go. maybe the first 10% to 12% of losses would be absorbed by investors themselves. >> scott, i'm glad you raise that point because that's exactly what we say. private capital needs to be -- does a much better job than the government of pricing both interest rate risk and credit risk. let's let bruce and the others set up these bond garntors before we hit the fdic type reassurance fund. they've got to roll the plate in a new system but in a system
right now where there's only private side upside and downside is absorbed by the public is, you know, i don't think passes the smell test. i would also say for those who say, look, they made their money back. i was in the venture capital business a lot longer than an elected official. if i put the money to work in the bottom of the crisis, as an investor i would want more than a 1-1 return. what beyond that will be obviously bruce and the others will have a case in front of the courts. that ought to be litigated. they'll have their day in court. it should not slow the reform of a current policy that everybody across the industry knows and believes is unsustainable. >> look, i know and i hear from these shareholders who say, you know, they're willing to provide the new capital to a private market solution if they're allowed to do so. i've got to run, senator. >> scott, that is what our bill does. i remember these guys ought to
read the bill. >> my last question. i've got to run. can this pass congress? >> i think it will because if there's ever a chance i got bipartisan support, wide based industry and advocate support, if not, this system is more broken than i thought. >> senator, thank you for spending time with us today. >> thanks. all righty. let's get reaction now to this from ralph nader. he is a long-time consumer advocating actually owns the stocks. he's also the author of the new book "unstoppable." mr. nader, thank you for coming on. i presume you heard the senator here. what's your reaction? >> well, first, the real bill of johnson press release so we don't know all the details. from what we do know a lot of the reforms can be done with the existing fannie mae and freddie mac structure. the two companies are making a lot of money. they exude stability for the real estate industry. they are projected to make a lot of money. they know how to do their business. they can be reformed into a
public utility model and still protect the shareholders. i don't think this bill is going anywhere because unless the powerful real estate lobby and the housing lobby back it, it's dead in the water. >> you haven't joined the lawsuit of some of the other large shareholders have you? >> no. >> why not? >> because they're carrying the weight on this and they're paying their lawyers. so it would just be redundant. i know know one thing. there are too many unknowns when you unravel the bow work behind the housing industry, fannie and freddie. too many unknowns means to the business community instability, it means insecurity, it means they don't know what's going to work, who the players are going to be. in the meantime, fannie and freddie are churning it out, they're meeting the needs, they've got an affordable housing mandate, which is very important and very speculative and what senator warner's proposal vovlsz and there's a chance for the shareholders to
recover after being deceived in 2008 by paulson and the regulator and bernanke who told them in the summer of 2008, don't wor rirks everything is okay. fannie and freddie are capitalized. the taxpayer will be fully reimburse with profit and the other -- the other factor is, if the shareholders don't get the future profits of fannie and freddie, the people who want to reduce the federal deficit will support fannie and freddie because by the cbo $180 billion in the next ten years. it's going nowhere in the congress. >> mr. nader, it's kate kelly here. i thought senator warner said something interesting. he sort of threw a bone to the fair homes and the perry capitals and perhaps common investors like yourself as well, saying there is a legal issue, a real one dealing with the sweep amendment of 2012 and whether or not that was lawful and that ought to cycle through the
courts. did that notion surprise you coming from him? >> it showed that they recognize the equity of the long-term shareholder os fannie and freddie who were told it's the safest investment after treasuries. but what he didn't say is the following. if they dismantle and replace fannie and freddie, how are this courts going to rule when the giver of equity to the shareholders is disappearing? >> so it's essentially a moot point? >> nothing is going to happen until after 2016. it's too hot for the politicians. the people back home, the real estate agents, all the powerful forces, they know what freddie and fannie can do. they're doing it. they are making a profit. their stability. they're not going to rock the boat. it's not going to go anywhere in congress. >> mr. nader, you own 50,000 shares of each or combined here? >> each. >> okay. well, you got a lot at stake, as do a lot of other investors. we appreciate you coming on and
sharing your views with us. >> those are long-time holdings, before 2008. that's why the deception factor is so important. >> understood. thanks, sir. >> you're welcome. >> we'll talk to you again soon. up next, is the market's hottest sector in a bubble? biotech is up more than 30% over the past three months. find out why one trader is starting to see cracks. it's been five years since bernie madoff pled guilty. we'll identify the leg flag you need to watch out for. it's hard to believe that today the internet turns 25. so as we go to break, look at what else is happening in '89. more "half" is straight ahead. $?
i'm waving there, folks. coming up, more fears about china, if its economy heads down from here, will the u.s. markets be able to ride out the storm? plus, how to play china with some short etfs. small biotech firm under public pressure to give a dying 7-year-old boy access to an experimental drug now says yes. the company's ceo will join us
first on cnbc to tell us about the story and tell us about how and why he came to the decision he did. and silicon's valley's most secretive company? oh, yeah, also pays interns $7,000 a month. we're going the take you inside this mysterious outfit. 7,000 a month for an intern, scott. back to you and the "halftime" gang. >> thanks. biotech making a major run so far this year. etf, ex-bi is up more than 20% but could the sector be in bubble territory? let's debate. murphy is the bull, pete is the bear. murph? >> so the biotech industry as a whole has had a huge run but that doesn't mean it's going lower. looking at this etf, xvi is the best way to play this race. if you look at it, pete, a big portion of this fund, three times larger than any other holding in the fund, is intercept pharmaceuticals. we know what happened there, how the stock took off. it's almost over now.
when that breaks up they spread the fund out more. i think it's going to new highs. >> right. i think the problem is because of exactly what you just pointed out. big portion of the fund is intercept. the problem is, you're talking about primary mailly bioteches that have no earnings and huge shortage. >> intercept is a big part because the stock quadrupled. >> so the percentage that it's influence on the index right now, i think is 7% or something like that. >> next few weeks. >> look at biogen and the anything names, none of this is part of this. talking about primarily companies that don't have earnings yet. because of that there are company on a burn rate. when you really look at what's going on with biologics, washington, d.c. is fouring for the exexclusivity of the drugs from 12 years. >> all you need is bun intercept to see the huge returns. >> they got to make money. >> steve weiss, who made the more compelling argument? >> i think murph did if you want to play the space. if you're a doctor or actively engaged in insider trade you can't own single stocks in
noncommercial biotechs. i would own the big cap biotech. >> those aren't in the xbi. >> exactly. my point. >> my point. if you want to own the small ones, do it the way murphy does it. i think it's toast, myself. >> can you make muscle again? huge.right. tell us who you think won the debate. tweet us, use the hash tag bull or hash tag bear. we will get you the results as we always today at the end of the show. coming up, the najarians seeing unusual activity in the options market. they will reveal where it is, next. predicting the future is a pretty difficult thing to do. but, manufacturing in the united states means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out.
♪ ♪ ♪ [ male announcer ] the all-new 2014 lexus is. this is your move. which will cause me to miss the end of the game. the x1 entertainment operating system lets your watch live tv anywhere. can i watch it in butterfly valley? sure. can i watch it in glimmering lake? yep. here, too. what about the dark castle?
you call that defense?! come on! [ female announcer ] watch live tv anywhere. the x1 entertainment operating system, only from xfinity. unusual activity time. pete, what do you see today? >> air products, you take a look at this name, this is one of the names that's been moving to the upside in the chemical space. they are involved in the semiconductor space. they've gone way out this time. january of 2015, the 135 calls being purchased, nearly 10,000 immediately in a single block bought. that's something to keep an eye on. they paid $4. stock just underneath $120 a share. >> you're in it. there you go. >> i am in this name. >> for how long? >> i'll say it like this. if the options double, i'm out. otherwise, i will be in at least a couple months. >> an update on american mobile? >> sure. it's moving today, having a good day. the options haven't performed
enough yet. at some point in time if they continue to the upside i would take some of these as well. >> ackman air products is a big holding for him. >> it is. to me, it's not a cheap stock. however, with that option block trading with what he owns, something could be happening there. >> up next, final trades and the winner of our biotech debate. plus five years ago today, bernie madoff pled guilty. what have we learned since? that report is on deck. ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪
she can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ my mom works at ge. ido more with less with buless energy. hp is helping ups do just that. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. cut! [bell rings] this...is jane. her long day on set starts with shoulder pain... ...and a choice take 6 tylenol in a day which is 2 aleve for... ...all day relief. hmm. [bell ring]
specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade. it's been five years since bernie madoff pled guilty to orchestrating one of the biggest ponzi schemes in history, and everyone wonders how investors missed all of the red flags. scott cohn is taking a closer look at the lessons learned and some of the warning signs we should be on the lookout for now. scott? >> let me show you some language from some actual investment sales materials and you tell me
which of these is a fraud. first, a fund that had 13 down months in 16 years, about a 94% success rate. here's another that seeks low risk and high returns by diversi diversifying. diversification results in parts of the portfolio being able to capture opportunities in asset classes, sectors, industries, et cetera that are not necessarily correlated to the actual portfolio. here's one more. proprietary models and technology evaluate a number of variables to help identify opportune times to activate and deactivate the strategy. which of these is perpetrating a fraud? the first and the third were examples from a madoff feeder fund, the other for stanford international bank as in alan stanford. what are the lessons? beware of returns that seem too good or too consistent. nobody is that good. do a gut check. do you understand, really understand what you're being sold? do you really believe you can make 10% a year just by diversifying or is it wishful thinking?
beware of anyone who tells you they have a secret formula or proprietary strategy. ask questions. if the answers don't satisfy you, run away fast. it's easy to look at all of this and say duh, common sense. but that madoff example was from 2007. the stanford piece from 2004. a lot of very smart people, people every bit as smart as you, fell for them. the final warning signs, your own overconfidence. if you think you have it figured out, think again. ask questions. >> the problem, guys, is that what scott said by virtue of the first three examples he gave, read all of them, said seems reasonable. these things are hard to spot. >> so one thing i would add is that compare to a benchmark, compare to the s&p, compare to nasdaq, because if the returns are so far apart from or consistency is so much better, you got to ask those questions, probably stay away. >> the thing that most shocked me over the years was the consistency. that's a red flag. because as a trader since 1993, never had an identical year one
after the other after the other. >> these returns weren't always necessarily that far away from the market. that's another reason that they are so good. so you just got to be careful of whether you're lulling yourself into complacency and just ask the questions. a lot of very smart people fell for these. >> scott, thanks so much. "power lunch" starts now. "halftime" is over. "power lunch" and the second half of the trading day start right now. >> good afternoon, everybody. new worries over china's economy right now. what if china stumbles and maybe falls hard economically? what will happen here? we will talk about how to get on the right side of the trade potentially if that does happen. a major setback for tesla. new jersey says dealers or no deals. the stock took a hit yesterday but today is back on the road higher again. we will talk about that one. plus, dilemma and decision. see how a pharmaceutical company's ceo decided to give a