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tv   Closing Bell  CNBC  May 16, 2016 3:00pm-5:01pm EDT

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the s&p's off a high. the dow is higher by more than 200 points. the s&p up by 1.5%. apple and its suppliers all charging ahead here in today's session. >> thanks so much for watching "power lunch." >> yeah. we'll see you at 5:00 p.m. for "fast money." but "closing bell" starts right now. hi, everybody. welcome to the "closing bell." i'm kelly erns with the new york stock exchange. >> and i'm bill griffeth. as you can see, stocks are in rally mode after being lowered for three weeks straight overall. oil prices are fueling this rally after goldman sacks put out that mildly bullish, not wildly but bullish. that in and of itself is interesting, talking about the rise in prices. we're going to talk to leading trader to see where he cease prices for oil heading next. plus jeremy siegel will join
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us. he thinks oil has also bombed. this year he'll lay out his case coming up. also apple giving a nice boost to the dow today. in fact, it's the best performer. it's up more than 4% right now after word gout out that warren buffett's company. also julia robertson has reduced his stake. let's start with oil prices rising. goldman turning bullish. previously one of the most bearish forecasts over the past year, now saying prices could go to $50 in the next half of the year because of an oil deficit interestingly enough. >> and the oil market has gone from interior soaring saturation to being so much earlier than expected. with us now is anthony row
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sanity. it's the highest since november, right, so clearly the market is moving in a more positive direction here but how stable is it? >> you know, that's the big question, kelly. how sustainable is it. it's up 700,000 barrel as day. the weak dollar are driving this higher. after the summer it remains to be seen. >> how did we go from such a huge surplus to a deficit according to their calculations? they're looking at nigeria going offline because of political problems, canada because of the grass fire, but you still have iran wanting to pump and get back up. >> you do. >> where did the supply go? >> you do, bill, but also the u.s. if you look at the united states, we're down 700,000
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barrels a day. even if iran gets up to the 250 to 300,000 barrel as day, it's another going to be enough to make up for that. and, yes, all the things you're talking about are rectifiable. venezuela, i can't see that lasting for too long because that's one of the only things they have of value they can export. they're going to protect that production. in the u.s., i hear there are close to a thousand wells that if we trade a sustainable over $50,000, those are going to come back online. those will be profitable. it will be interesting to see in the third and fourth quarter when this oil starts coming back on the market if the demands are there. right now it's a bit of a supply issue, but not enough to drive us much higher than where we are right now. >> it's interesting to catch up with where the price is, they also reduce next year's anthony. i guess it gets to the point,
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which is they're still not convinced this is part of a sustained uptrend. i think they lowered their trend to 2250. >> it's a vicious cycle, kelly. we're much more efficient at doing that but we've become much more efficient in not using the oil. you're talking 700,000 barrel as day in gasoline. those are a lot more efficient. we're using it right at this point. it remains to be seen whether that continues after the summer. >> so your favorite game, how high can we go here, do you think? >> i think 55, maybe 60 if there's some geopolitical issues or another disruption in supply, but it's going to take something more than that to keep us above those levels. >> all right, anthony. thank you for joining us. it settles at its highest. >> let's get to our "closing bell" exchange. with us ron smith from riverfront investments, ben willis from princeton securities at the new york stock exchange, at post 9, and rick santelli is
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in chicago. ben, it occurs to me when you look at today's rally, it's about oil and technology, this is a lot like the rallies we got in the last couple of years we had been missing earlier this year. this is like a throwback, a retro rally, if you will, huh? >> i think this is a great indication of how sensitive this is. i continue to remain net bullish just because there's so much negativity in the marketplace. warren buffett who's not picked a great stock in a decade suddenly decided in his group that apple would be a good play, apple selling at&t. it was a change of dividend flow within the same fund. the oil story, very interesting. coming from goldman sachs who by the way, this quarter, became the seventh largest natural gas merchant in the united states. they're larger that exxon and chevron. i think it might be a little self-serving as things go on. the last time oil was more than $100 a barrel jp left being an
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oil merchant. there's some self-serving going on in the market. with the net effect when you're having redemptions, you're seeing net selling, you have firms selling, well, for the last 14 weeks, the smart money has already been selling. who's left to sell. that mice belief that this market still has room for the upside. >> that's a great point. meanwhile the tone coming in was much more negative. you had misses going on. is the u.s. going to be able to keep that, you know, on the back burner for the time being in order for this rally to continue here? >> the way i look at it is we're in the slow grind phase of both the economy and the stockmarket. it's highly unlikely that we're going to get a significant pump but slow grind means it gradually works its way back up. you're dead right, the market
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likes a weaker dollar. it likes higher oil prices, and it is a bit retro and that's good news. and i think if you look oversea, we have to expect china data to continue to be weak, but i don't think people are paying enough attention to the fact that european data, particularly consumer day tarks car sales, bank lending is actually pretty encouraging. we're bulls of stocks. >> and, rick, while this happens, yields are going higher, they're buying treasuries as well as stocks, huh? >> i think so some extent. the short end is where everybody was looking at. consider a two-year note at its current note. it's going in a two-week high yield close. we're higher on thursday. i think that speaks volumes. the treasuries really -- it's not a question that they sold off. the fact that it's still under
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180. you look at a 20-year chart. it's not like we spent a whole lot of time in the 180 in those years but it seems as if our guests have points out, energy is a big deal, but you can't keep everybody happy forever. every developed economy can't keep low interest rates and their currency low. somebody's going end up when the music stops not have an fx weak share. that's important. in terms of energy, yes, i would contend as all the new technology and as our guest ben willis says, there's a lot more with the turn of the switch. i don't think there's going to be big trading above 50. it can doesn't mean it can't get there. i mean the new way to look at energy is where the supply starts to turn on is going to be a ceiling and i think that ceiling may remain in place for many years. >> good point. >> ron, i'm just wondering what they say too you when they say look at the perform of gold and
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all the miners here. what's your advice when it comes to those areas of the math? >> i say to people that value is more important than predicting. and we did a lot of work on a lot of these companies, energy companies. i think rick's right about the price of oil, but the stocks, particularly some of the more oil price sensitive stocks, they really priced in a doomsday scenar scenario. i hardly met anybody in first couple of months of the year why oil prices weren't going to come down. there's a lot of pessimism. we like the energy stocks. in terms of gold, think i it's a beneficiary of negative interest rates. gold does not do well if the banks will pay you more than the writ of infla iks to hold money but they're not paying you at all. overseas, they're making you pay them. think gold continues to be a beneficiary of that. think i there's a bull market going on. stealth bull market. i particularly like the companies rather than the
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commodities themselves. >> ben, let me throw a little wet blanket on the reality today. if memory serves t last time we had a down day, we had a selloff. are we setting ourselves up here? >> i think so. i don't think oil will hold. i think we're bumping right up into the s&p resistance level. there had been some support levels, but we won't get through the 2071 which is where we are right now, 2075. i think we'll see a bit of a pull bachlkt again, that doesn't mean i'm not bullish or that this rally will continue. i just think given what's going with the central banks in the world, it will take a real gut check to continue to buy the companies that you like that are going to continue to appreciate, and i'm thankful today of all days that he didn't bring up a fat finger story because i'm the guy sitting here. it was a fat fingered trade in china that drove our market down
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and there was a huge trade in the gold futures market again. they never -- that never really recovered. it had selloff and really kind of bounced back. so the traders are looking at that again as a sign of a weakness in the market where you can break things pretty quickly suggesting that there's some rally to the upside is not that sustainable. >> i would never bring that up to you. thank you, guys. appreciate your thoughts on today's mashtd action. >> thank you all. >> see you later. >> about 50 minutes to go. the dow is up the 213 points. you're right. it will be interesting to see. >> you know, the two prettiest timeses it happened, the rally was on very low volume. today it's moderate. it's not heavy but it's heavier than it was the previous two times. >> we like to watch the transports and they're up 81 points. the russell up as well. the s&p is up 25. the nasdaq is up 1.5% or 72 as we keep an eye on things. >> warren buffett, his berkshire
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hathaway taking a $1 billion with a "b" stake in apple. stick around. we have a bull/bear debate on am coming up. also ahead, jeremy siegel tells us whether it's a good or bad sign the maurkts have failed to make a full high for the year. you're watching cnbc, first in business worldwide. the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.
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the stockmarket holding on to the lion's share of the gaines todagains today. intrasensitive, utilities are going down. >> telecom underperforming as well. apple's ceo tim cook is on a mission in the world east most popular country. china. eunice yoon has more. >> he's accompanied by the president of the ride-hailing app company in which apple invested $1 billion. tim cook got a chance to take a
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closer look at the app. to underscore the new relationship between the two companies he and her shared a didi taxi to the store. he posted photos from his experience to his wabo account to his 800,000 followers and once they arrived the two attended a roundtable. cook expressed the importance of china. cook's visit here was widely expected. the company's business has come under pressure in china because of the slowing economy, the competition, and the smartphone market, and the government clamp-down on some of its sfszs including itunes and ibooks. expectations were that he would resolve some of the ins during his trip and he's expected to meet with high-level government officials as well as internet companies during his stay. eunice yoon, cnbc business news, beijing. well, shares of apple up more than 4% today.
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this as berkshire hackett away. also with us the apple bear. welcome to you both. brian, first to you. you've turned bullish on apple now and so explain the reasons why and what you think warren buffett's position means here. >> i think buffett's interest here is purely on value. it's most likely through the services side. they have a billion users service. i think that's what he's making a multi-year bet on. e go back to november. we saw supply cuts in the chain and demand really slide not only in the end of q4, calendar q4 but during the march quarter.
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now we're at the bottom in terms of units and we're about to head into a meaningful product cycle and because nobody has a handle o whan they're going to offer, everybody's very negative because of what's occurred over the last six months. what's exciting is the 7 is actually going to do well but the 6 s is going to drop in price, the 6 is going to drop in price. you have this se price that's going to do well and they're making 5s still for some parts of the world. so apple is going to do very well on the iphone side on the back half. >> max, you're not a lone wolf when it comes to being bearish. you know, julia robertson, we learned, liquidated his assets. why are you bullish right now? >> we believe it's very cheap when you look at the fact they're going to have a good
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revenue for a while and then a huge buyback. we still have a lot of people who buy it for growth. i think that's what we're starting to see. here's what we're worrying about. phone sales are dropping or turning teddive. places like indonesia and places where there are a lot of price quality and chinese makers are picking up market share. we think that's pressure on apple. we think it's a good company, undervalued. we're cautious short term because when a love affair as intense as the one between wall street and apple ends, it's going to be bumpy. >> that was the view four or five months ago, i agree. the difference now is apple has
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products. most people don't know -- >> it was also more valuable. >> that's fair and that's what i'm saying. you to turn it at some point, max, because things are absolutely going to get better for them over the next six months and max will be on saying, oh, that was the turning the point. i think that's where we are. >> i'll buy you a coffee. >> i like it. >> brian, going back to the original question which is sort of should the public if you're not apple follow warren buffett in, berkshire might be fine if they lose 20% of the price initially if they see some how down the road this thing is able to generate value or they can reallocate the capital ott out of it or something. is it the same kind of argument to say if it makes sense for berkshire, it makes sense for an investor? >> i think it does. part of that is because it is cheap. consumers are still using apple products. i think a lot of main street usa can take a look at their own product usage. are they using apple tv or apple
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services or are they likely to use them more. that's the best indicator or where apple is likely to head on the consumer side. are they likely to buy the iphone 7? maybe they should wait till they see it. when it comes out, they'll be surprised. apple is going to make a lot of modifications to it and that's going to be the story in the back half of the year. >> i'm not going to speak for wolf, max, but we're hearing about the iphone 7 that it is only going to be incremental in what it offs compared to the previous versions so where is the growth engine? where's the wow factor? >> first of all, we don't know. >> these important, isn't it? >> we'll have to get back. >> we've seen the lead images. we probably know what it looks like. this does not geechbt to the heart of the matter i'm not sure
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brian and i could disagree. are they going to make the next must-have product or do they have a low price, low multiple and are they going to throw off tons of cash? on the value case, it's a slam dunk. on the this is the future of sexy in technology, it's much bigger. we know the glory days are probably if not at least half or more in the rear view mirror. >> i have to say the problem is they look at ibm and say, okay, the last big position that was taken by berkshire here is not one that was necessarily able to show -- to put up great returns. >> yeah. they lost money on ibm. warren will say it himself. he loses money on some of the investments. we don't know what they're doing behind the scenes but the engineers are not sitting still. what's different about the approach, they don't show what they're working on. with don't see things in beta and prototype stage.
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apple is going to improve and they're going to monetize their existing users around the world and i think there are a few things they're likely will to see that will include things around the car which is no secret in the valley. >> and virtual reality is a big opportunity for them. >> no doubt. >> they've done their best on the consumer side. they're working on it. they'll have a competitive product, but that will not be a story for the next two to three quarters. >> right. >> intelligent conversation as always. thank you. we're heading to the close. we've got 37 minutes left in the trading session. the dow holding onto these gains, up 208 points. the nasdaq is the better performer today with a gain of almost 1.5%. coming up the government's air travel report card is out. phil lebeau will run through that for us. and jeremy siegel, why earnings could be heading for a comeback this summer.
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still to come.
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♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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♪jake reese, "day to feel alive"♪ welcome back. rally day across the markets. some are calling it a rally relief. nevertheless it was a weaker
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tone. we're marching on here with the s&p up 23, the nasdaq up 68. nearly 1.5%. check out the ishares. better than 3%. barron's was generous. >> an a core, if you haven't seen it, big time. pfizer bought the drugmaker. works out to 99.25% a share. >> nanacor makes a treatment fo eczema. meantime range resources is buying rival memorial resource development. that stock deal is valued at
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$4.4 billion. it will allow range resources to expand into the appalachian and u.s. gulf coast regions. memorial is up while range is down 10%. the didn't of transportation consumer report card is out. phil lebeau is here to tell you the winners and the losers. >> oh, boy, oh, boy. >> hey, phil. >> hey, kelly. we're looking at the month of march. remember, there's a little bit of lag between when we get the data and when it's reported. we didn't have storms in the major parts of the countries. so 85% of the time flightses were on time. all close to 90%. the worst performers in terms of on time a rival. spirit, virgin america and jetblue as well. fewer complaints came into the d.o.t. in march from passengers. in fact, far fewer compared to last year. and when you look at mishandled
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baggage cases, they were down in the first quarter. so overall the airlines did a pretty good job in the month of mar. let's see what happens this sucher. one other piece of information regarding the airlines. take a look at delta. they're up today in part because the company is trimming its plan for capacity growth in the fourth quarter and heading into next year. in fact, as part of the plan to cut capacity growth, the airline is going to be deferring a couple of planes or four planes that it plans to be taking. they're going to push those back aways. this is all part of improving pricing. you have fewer seat miles added to the system. it should help your price. at least in theory that's the way it works. shares of delta moving higher today. >> do these satisfaction surveys include the time spent in line and security at the airports, or
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is this just a relationship with the airline itself? >> just the airline itself. i knew where you were going, bill. when you look at the quality ratings which do include the overall travel experience, they're lower in part because people say, look, i'm not happy in the airport. i'm not happy with the security system situation. >> right. >> this is strictly looking at when you are on the airplane leaving the gate and arriving on time, et cetera. >> but, phil, for a lot of those folks who are at one of the hubs like chicago, it seems like it couldn't help but bleed into your overall, you know, sense of how it went if you're at one of these airports that just has horrendous lines. >> that's what we see. j.d. power had one out and it said that people are not happy with the security situation. it's been that way for a while and it's going get worse this summer. >> it's going get worse. >> what did we say is worse, chicago, denver? >> newark.
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the lines are breathtaking. >> again -- >> again, kelly, some of the airports and some of the airlines are paying to have additional staff work with the tsa. they're not working with the tsa duties in terms of the actual screening but they're helping with the related activities in terms of helping people get through the lines. look. we talked about this last week. there's not enough personnel and there's not enough staffing and there's not enough entry points at these airports for all the people going through there. >> and the bins. >> by the way, i have a theory also why hawaiian air always finishes at the top. who's not happy about flying to hawaii? >> those aren't complaints. those are the number of flights arriving on time. which gets to the point. if you're flying into h, rarely do you have weather problems. >> they can get there whenever they want. i'm onmy way to hawaii. >> it has basically a monopoly
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over the market. thank you, phil. >> thanks, phil. >> you bet. let's get to susan lee with a market flash. >> we have valiant shares rallying right now. andrew left has changed his tune as it regards valiant. citron research left last in the paul last year. basically he was the reason that valeant shares went into a tailspin. they're trying to see what he's up to. back to you guys. >> wow. he's like never mind. >> oh, i know. valeant tried to say some things. we know tepper was involved. bill miller. if you fall 90%, you start to get some lows, apparently from the people who drive you down
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that much. >> we have a cnbc news update right now with sharon epperson. >> hey, bill. a well backed campaign backed by a millionaire has collected enough signatures to raise the tax on cigarettes. it would triple the tax to $2.87 a pack. the speak of the alabama house is going on trial on felony ethic charges that could result in his removal from office. jury selection beginning today for mike hubbard who's phasing 23 counts of using his office for personal gain. nintendo says it will up its game in the film business. nintendo will reportedly invest proceeds by selling its stakes. and a burger king in finland has made the idea of enjoying a
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whopper in a sauna a reality. it features red and blue accents to match the restaurant's logo, 48-inch tv and tower featuring burger king branding. that's cnbc at this hour. what do you think of that? >> does it smell like burgers? >> i can't imagine the lavender scent along with burgers. >> oh, my lord. >> not relaxing, no. >> very nice. good stuff, sharon. >> sure. >> i'll tell you. there's a bear burger nearby. you walk by and the way that vent smells, it is intoxicating. >> that's by design. >> yeah. why not extend that into a whole spa concept. oh, my gosh. >> i think they're onto something. where were we? 25 minutes left in the trading session. here the dow is starting to lose some steam here. up 186 points. the s&p is up 20.
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nasdaq up 62. a leading trader will tell us what he's watching as we head into the close here after this. ♪ [crowd cheering] i could get used to this. now you can. when you lease the 2016 es 350 for $329 a month for 36 months. see your lexus dealer. you won't see these folks they have businesses to run. they have passions to pursue. how do they avoid trips to the post office? stamps.com mail letters, ship packages, all the services of the post office right on your computer. get a 4 week trial, plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.
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♪ for decades, investors have used a 60/40 stock and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20.
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welcome back. less than half an hour go. coming off the highs. >> yes. well, i mean we've had a really good move in oil propelled this to this level, you know. there's a lot of small positives, i think, that have been pretty good and now i think it's just run out of a little steam. >> i forget who it was. someone was running this calculation about how if you overlay the futures odds of donald trump being president with the market, the market likes -- when clinton appears to be ahead. is there anything to that? i know there's more and more attention being paid to the political cycle. >> i think with hillary, not that i'm going to endorse either, but i think with hillary, people understand where she's coming from. i think she's been pretty clear about -- relatively clear at this stage and i don't think trump has been clear at all. so, you know, that uncertainty is probably why, you know, the
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way they look at it with some certainty, you know. the market will probably react better. >> i'm just wondering. we'll watch it in the months ahead. >> it will be interesting. >> friday's retail report s that still feeding into the environment or what are you watching? >> i think it's starts. the retail sector had been such a disappointment for over a year. and then you finally start getting some positive feedback in that area. meme people are spending more money as a consumer based economy. one goes with the other. >> i wonder about home depot. first thing in the morning and everybody loves that retail here. >> of course. it goes with the housing sector as well. you know, it's doing well, you know, home depot is a well managed company that has great breath of -- you know, it's got a great reach around the country. so great majtd. >> we need them to keep firing all their pistons here. >> i suppose. >> thank you. >> i'm enjoying all the tweets
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we're getting from viewers. they're making comments about the burger king spa. i wish we could put them on television though, they're that clever. 20 minutes left in the trading session here. the dow's up 197 points. this weekend, by the way, marks the one-year anniversary of the all-time high in stocks. it's been a year. mike santoli will join us with a then and now comparison and what may lie ahead for 2016. also, food shopping, has it really changed in 50 years but there have been some online success and now amazon is getting into the business with private label brands delivered to your door for less. what it means for the retail food business when kelly and i come back. at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday.
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jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade.
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that saturday marks the one-year anniversary of the s&p all-time closing high. >> michael santoli is here with some key market metrics. >> you know, kelly, it seems like it's been three years, not just one. we've been in the zone for most of the last year and yet not able to match it. as a matter of fact, if you look
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at a one-year chart, we're about 2%, a little more than 2% below that all-time high. we've actually stayed unusually close. of course, you've had those two nasty spills that got us down as much as 14% or so from the highs, but if you look back, i solicited data going back to 1900. we've averaged 5.6% below the dow's all-time high in the past year. that's about as close as you'll ever average without getting to a high or being in a better market. historically, it's been a mixed bag. you've had times when the bull market resuming and other times when you were basically on the praecipes of a downturn. what i think you have to highlight, in order to stay near those highs, you've about had massive rotation below the surface. look at the down jones transportation average. one's up 13%. one's down 13% in the last 12 months. that shows you this defensive tone cycling into these dividend paying stocks like utilities.
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transport, one of the worst groups in the past year because of the global trade slowdown. al of these when you do a then versus now analysis, the market has not gotten particularly much cheaper. it's about 16.6 times. a little more than that in today's rally. last month's was about 17 a year ago. now, on a relative basis, stocks probably look a little better than they did back then because the yields on the treasuries have come down, stocks have gone up. i do think there's a saving grace in this analysis which is, guys, we obviously were too high in the earnings estimates. so we were about 17% too high. you were more expensive because the earnings didn't come through. if they come through this time around, you probably have somewhat better support, because it's pretty hard to bet. >> i thought especially given that earnings collapse. the fact that the multiple is down. it's interesting.
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let's get some more reaction to all this. jeremy siegel, finance professor at the university of pennsylvania's school. welcome back, sir. looking at the market being down from this time last year but not considerably so, how are you reading things? >> well, i think we hit on the main things. the earnings collapse that we saw in 2015 was the worst earnings decline outside a recession that we've had for decades. and, by the way, it was all due to the collapse of the oil sector. if you take oil -- the oil sector out of the s&p, earnings were actually up in 2015 over 2014. if you put them in, s&p operating earnings were down 11%. that's a huge swing. and the fact that oil has come back and going forward.
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>> what role do interest rates play? the expectation? we've been waiting for the fed to raise rates. they finally did one time in december, but does that hang over this market or are we just kind of taking that in stride right now, expecting them to do nothing for the foreseeable future? >> well, you know, i don't think a rate hike is out of the question this year. if you look at futures market, it looks like maybe one more, and i think we have to look. one thing that one should realize, especially if you're a stock investor, they're not going to raise rates if it looks like the economy is going to be sinking back down. if it looks like inflation is returning. all of that is bad for the stockmarket. if we see economic strength, prices stabilize. it's not an all bad scenario even if they do raise rates once or maybe even twice to the end of the year. i don't think june is in the
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picture now. the fed would have given us a hint unless we get some really, you know, bad inflation news over the next four weeks, but i don't think we should rule out the rest of the year. but it isn't a necessary bleak picture for equity holders even if they do raise rates. >> i do wonder, though, coming into the year everyone was set up for the higher rates trade after the first one. that didn't happen. they got creamed. now everyone seems to be on the other side of the boat. we know what happened here. remember, some of these guys have been out talking like they're going to raise rates two or three times a year or look at the sales report. what happens if they raise rates or sooner than the markets are currently positioned for? >> then you force more turbulence in the market if it really does come sooner. but, remember, the oil collapsed in early february down to 26. it was devastating. we saw 10% wiped out of the
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stook market in a matter of one to two weeks and around the world many people were saying we're already in a recession, you know, we've just got to get the data. now we look back and oil has come back. it's put in a low. emerging markets have come back. i think they put in a low. there's -- china has not collapsed. remember how much worry there was around that. so now what we need is we need those earnings to move up because i mean they have stalled o out, and we're going to be in this range until we see a breakout with the consumer going forward and oil stability. we will get it toward the second half of the year. >> very quickly, jeremy, clearly the average investor would seem going toward the dividend trade. as mike points out. utilities, the best performing sector last year. is that where you'd put money still right now or where do you see the best opportunity right now? >> you know, absolutely. i think we're really in the
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first or second inning of this differ accident mo dividend move because people are saying, you know what? i'm nerve going to get fixed income from this. look at the ten-year treasury between 17 and 18. uni's even lower. you know, when we look back in history, when the s&p yields more than the ten-year, that's been an opportunity and we know dividend yielding stocks are in the 3s or 4s. >> professor, we have to go. >> i think that is going go. we're not over with that shift yet. >> 19,000 of the dow. that's still your target here? how soon? are we talking -- >> i still think that's possible by the end of the year but we have to see earnings begin to materialize. >> thank you so much. >> thank you, jeremy. >> wharton school's jeremy siegel. the s&p's up 20, the nasdaq
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we have seven minutes left and the trading session is running a little behind. joe quinlan is with us here. if oil has bottomed, is that good news for stocks here? >> it is good news. we're bottoming around $40, $45, it's good for the producers and the consumers. this is a good price. good for the markets. >> do you like consumer names here? staples, discretionary? >> the u.s. consumer is in graduate shape when it comes to employment. the income is going to get better. confidence is picking up. minus the election and anything activity there, it does well. >> jeremy see gel says the dividend trades are going to last for a long time. >> that's been our mantra for quite some time. we paved the way. you have to be in dividend stocks. >> look at the valuation of some
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of these names. >> private trade, isn'tet it? >> they're not cheap, but they're giving you the cash to give you income quarter in, quarter out. you have to stick within this low yielding environment. >> we've got photg to go. come back when we can talk longer. >> sure. donald trump weighing in on the uk's possible departure from the european union. what he had to say with both sides of the atlantic paying attention. we'll tell you what that was coming up.
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heading to the two-minute mark. mary thompson joining me on the floor. they said it had moved ed td t deficit. here we are with a 1% gain still for the industrial average. so we'll see if that can continue. the retail fund also continues. tomorrow morning home depot will be reporting. that's something we'll be talking about tomorrow. >> home depot, lowe's, target. it's interesting. it wasn't only energy but also apple that helped the dow move to these levels with the news with warren buffett taking a
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stake or berkshire hackett away. those were two key factors. we have come out. talking to traders they're not quite convinced the is a trend. we're in this market but remains range-bound, they say. it's pretty much a reaction to the event of the day. today it was oil and the news on apple. >> the last two times we had rallies like this, it was to the down side. i'm not saying it would happen tomorrow. it's in part. >> it's interesting. i've heard. it's become pessimistic. it's an optimistic side for the market. i don't know about that. still they're trading. you know, a very, very reactive
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market. >> thanks, mary. we'll see you later. we're well off the highs of the day. the dow finishing up about 170 points. the brazilian american claim beof commerce ringing the bell. at nasdaq it's tasr international. stay now for the second half of the "closing bell" with kelly. i'll see you tomorrow, kel. thank you, bill, and welcome to the "closing bell." i'm kelly evans, and here's how we're finishing off the day at wall street. across the street. the s&p up nearly that much of 20 points. 2066. and the nasdaq adding almost 60 points. 1.25%. gold, oil. we had some movers we'll get to. joining our panel mike santoli. welcome back along with dennis berman from "the wall street journal." great to have you both on board. i mean first of all, i love the point that you made earlier,
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mike, which is we came into this trading session with a lot of actually kind of bearish calls on the market. it just loves go against the grain, doesn't it? >> it really does. you had anxiety building up. we were trading down toward the low end of this range, which was about 20, 40, s&p. you came in, goldman sachs says, well, we think the market stays at 2600. merrill lynch also saying a lot of bearish signs were welling up in their work as well. then grout a lot of work, i will say, on the bullish side to get this to 1% gain, right? you've about got oil with a strong balance and another goldman sachs call in part. also m & a market seems like there's life in it. it doesn't hurt. obviously the treasury yield is lifting a little bit. so all these things, i do think gave them the news as well as with berkshire hathaway. it helps. i think that bill is correct that we have to be on alert for
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the idea that this is kind of a one-day spurt. >> that said, an interesting thing on the deals spread. is this the trickle before the flood? both may be deals but also the ipo pipeline as we head into june. >> i think we have a ways go, kelly, if we see a true ipo pipeline. everyone wants to believe it to be so and there's an argument that if it doesn't happen in june, it's not going happen much in the year. the number of true high tech ipos is nil, which is rather incredible to. me the main changes in the market were what i referred to, the price of oil. brent almost getting back to that level. that's a pretty big number in terms of psychology overall. >> and i'm thinking of some of the public offerings still in the works. it's hard to imagine after what happened with nordstrom last week. >> absolutely not. i hope we talk more about retail because retail is getting killed and despite the economic numbers
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we saw last week. >> that's why notably it's still on there. >> you have this week the ones that have to do well. you have home depot and lowe's which everyone loves, especially home depot. and t.j. maxx. hello. everybody's obsessed with that name. >> you're absolutely right about that. they're also the ones that tell us a little bit more about the true current state of the consumer, nobody really thinks that t.j. maxx is structurally as bad a position as macy's, so, therefore, if they falter, consumers might be dog something different. also small ones, like alta salons. if you look at a ten-year chart of both of those or five-year chart, let's say, and they're in lockstep up more than 200%.
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>> which is impressive. you would have thought once the cycle weakened it would go with it, but it has not. >> they man amged to sell a lot of pet food and a lot of stuff to make believe farmers. >> hey, i enjoyed the tractor supply very much in the hometown. we welcome tim seymour into the conversation as well. >> hey, kelly. >> you are there. we weren't sure. >> i am. >> so, listen. what do you make of the market today and what do you find compelling in terms of opportunities here. >> definitely by the way, fluffy will always get fed so the tractor story continues. i think the dollar remains one of the drivers here. despite the fact that they had slightly weaker dlachl. 5 1/2 month highs, i think they have largely bottomed. the goldman call, a lot of people give a lot of attention to these goldman calls. it's kind of interesting that it's come at this point. so the fact that we're at $50
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oil, big deal. so i agree. i think home depot lows is the real testament to where people are hiding out. these are stocks that continue to trade at multiples they don't entirely deserve but i think they're not going to disappoint. i think it's going to be a good week for them. >> there's two ways to read this goldman move. the one is they're finally realizing the prospects. >> right. especially the call was based on the sunday supply response. i think that's part of the psychology. >> fair enough. by the way, it's interesting to keep an eye on it. there's name as well where there's a name like dollar tree.
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there's an interesting thing. maybe in barron's over the weekend, if you want to play to the lower income connell super getting more money in your pocket wrrks are the places you still koonlt of wand to be? >> walmart has traditionally been the place for that but we've seen walmart struggle both as a stock and a company. gas stations, not much of a stock play there, of course. but, of course, you might want to play costco if you're interested in that. >> gold today was kind of a weird one. it came in just rip roaring and then even a little bit last week. and then it had that weird selloff and dropped this morning. >> i don't know what's captivating gold. i think a lot of things have worked in gold's favor. you have a lot of nongold players who are saying it could work in this kind of environment. they're not necessarily gold bugs but they're saying when inflation is going from low to not so low, that sometimes is a tail wind. i don't know what is really -- where it really is in that kind of adoption phase.
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>> if we could take a bit of a step back and note that we're talking about the ten-year, it's still at 175 for gosh sakes. it's so low. the central banks have been pumping and pumping. even though we're looking for changes perhaps on a micro level, stock level or security or asset class, the world conditions are very bizarre and very impressive. we're meeting with bank ceo today. he's had his handed on his hea. we have to take a look at the big macro picture. >> donald trump, joined good morning britain over the weekend. the political newcomer has been criticized for some of his grassroots affairs. he asked what impact the british exist from the eu it would have on the u.s. and if britain would be heard in terms of trading. his answer, take a lab.
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>> -- lynn . >> i don't think we've heard. britain has been such a great ally, they went into such things that they shouldn't have as an example going into iraq, okay? >> would i it make a difference to you? >> to me it wouldn't make a difference if they were in or out. >> looking at toward of a special relationship with the quote/unquote uk is. that adding to the sort of instability around here? >> it doesn't help. we talk about this all the time. i'm not a political analyst but i think trump's whimsical somewhat uninformed comments about these types of thinks that are an inch deep are not things that should be moving markets right now. the fact is the uk is a fantastic rally and they is're
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not part of the common courtesy. you know, whether this changes the uk's role in global trade is another thing. as far as holding hands with putin, this is -- you know, this is exactly what -- you know, what i think is what we have to be careful about. this is strength by a show of force is not necessarily how you do it and that's how he rolls. >> the latest poll in britain, that i saw this morning anyway, seems to indicate there's a lot of support for staying as opposed to leaving. >> there were those various scary things. on and on and on. i mean trump has a point that from the u.s. perspective, whether it stays in or not, it's the choice of great britain. >> what do you think, mike? >> if he expressed concern over the support, which is to say, i think you wouldn't be hearing
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the same noises. i don't think we're living and dying by every one of these comments. but i do think there's a bottom line calculation which is the rest of the world would be quite unnerved by a surge in the polls by trump because they simply don't believe that he's a predictable actor and he's something that necessarily is calculating things in a way that is careful about -- >> so what happens to the dollar if trump takes 55/45 lead in national polls? >> to the dollar? the foreigners own 50% of the u.s. stockmarket. >> last word. >> for trump to be electable in any way, he's got to come more to the center. i would argue so does hillary even though she's less electable in an environment. no matter what happens here, you have to have policy that comes to a place where there is predictability. no matter what, these are not one-man or one-woman
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corporations. that's ultimately where people get comfort and where there's checks and balances in our entire system. >> we'll see. definitely watching those polls. thank you, tim. we'll let you go. there's more with tim seymour coming up on "fast money." the publisher of the global macro investor will explain why he's getting short. that's at 5:00. we have a developing story with kate rogers. what's happening. >> someone is objecting. douglas o'connor, he's a named plaf says he feels betrayed and sold out by the unjust settlement despite signing the agreement. nyu law professor samuel s. striker telling us while this is embarrassing, he's not the sole named plaintiff and the settlement could move find. it could impact the judge's decision but not affect the decision. others are also inhappy with the
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settlement and a hearing is scheduled for this one on june 2nd. we'll watch for that. >> to make sure i'm following though, the settlement happens. it's a big dollar amount. has further stipulations if uber goes public, et cetera. so what's the hang-up in this particular instance? >> one of the named plaintiffs, he's not certified to liev the class but he's named o'connor. he's objecting to the $100 million settlement proposal. the judge still has to approve this. this could -- >> does he think it should be more? >> absolutely. so he hired these new layers and he says he was rushed and kind of forced into signing this and he was actually not okay with it and he thinks that on behalf of the other drivers this only solely favors uber and it's not fair to the rest of the drivers and that yes, indeed, it's too low. >> that's interesting. do you think he ham a point? that's background noise. >> he may well have a point but the settlement has been
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described. that's the whole point of a class settlement. you ku sort of squeeze out the lone discenter. probably moving forward. >> uber feels like it's getting hit on so many different hits. warren buffett's berkshire hathaway. we'll hear from a pair of buffett watchers next. and amazon taking on the world getting set to launch new private label brands including food and diapers again. see how aware consumers and product makers should be. that's ahead on "closing bell." you're watching cnbc, first in business worldwide.
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together, we're building a better california. welcome back, in case you missed it, they're going where they have not gone before. the company chief buffett has historically shied away from tech investments but what does this say about the future of berkshire and its investment style. welcome, guys. scott, what did you think when you first heard this move? >> i thought it was great news.
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i want to turn back the clock a few days and remember that carl icahn came out and sold the stock and then we learned that warren buffett is buying it. so someone who's a corporate raider, someone who's more of a trade trader and someone else is buying the stock. i think that's great for shareholders. >> you own shares of apple, right? >> we own apple. actually we bought it -- we owned it on growth portfolio. the dividend yield was great. but we think this also marks a change in the thinking of warren buffett because now he's allowing some of the newer fresher blood to think a little bit out of the box. and, finally, warren buffett is making a true technology investment which is really kind
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of an old world technology investment. >> interestingly, mark, there are others who would say, uh-oh, isn't this a sign that apple is the new old world investment that his might be behind it now. >> you know, what's buffett doing in apple, okay? apple is not a val yaw stock in any way, shape, or form. the problem he's got is he's been telling people he likes to invest in his technology zone. it doesn't have any durable competitive advantage that he normally looks for. doesn't have a big monopoly or big moat. it's a very small percentage of his portfolio. $1 billion out of a $100 billion equity fund is basically nothing. i think he's sort of closet indexing. i doubt he made a decision on this and it's more or less a flip.
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frankly all the buffett worshippers ought to be concerned because here's buffett doing something he said he would never do. >> dennis? >> i think it's known he did not make the decision personally. it was his managers. from my perspective, the most important thing is stay the king. if he gives these guys an opportunity to make an investment like this, that's fine. as he makes the comment on this is a small percentage of the overall berkshire portfolio. >> if he knows he has to hand the company over, does it give you comfort? >> me, personally, no. one day if they take over -- >> why did he invest? >> why didn't he? >> if you're going to do a $500 billion investment, put it in google or something that's got a real monopoly value. >> i'll tell you why. because warren buffett invests
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in companies. he sees that the company will continue to generate cash, which means they can buy back stock. >> it's a one-trach po hone-tri >> i'm sorry. people are too focused on this. they're not a one-trick pony. >> it's two products. they don't have a monopoly in that product and it's a product that came out of blue in ten years basically. they've got to find the next big thing for that stock to stay at these prices. >> who says they're not working on the next big thing and by that argument all microsoft ever had was windows. >> okay. those arguments you're making are basically arguments he said he would never get into as a value investor. he doesn't have that with apple. >> he looks -- he looks for cash cows.
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companies that generate cash. can you tell me of -- >> google has. also he wants recurring earnings. >> how you do predict that? >> all right. >> we can only give you tools to predict that, but we can't say 100%. by the way, we own google also. >> mike, what were you going to say? >> i think what it does show is that apple is making its ways into the hands of these kind of keep it simple stupid investors for right or wrong where they look at $45 billion or $50 billion or 200 plus in sales. it's not about having a fundamental edge on what an iphone replacement segment is going to look like. that's what it tells you about the kind of company that these prices apple has become as an
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investment. >> mark? >> come on. give me a break. the fact is that if the sales of ipad and iphone go down, the stock's going to fall. what's his theory on that? how's he going to do that? if they have a monopoly, all right, he can predict the earning. >> it does so, yes. >> this is so far away from fundamental principles that all of these worshippers should be very concerned here. >> mike, a word here? >> we should stop saying him. it's not buffett's investment. also google trades at more than twice the valuation and so they feel like there's some sort of a cushion here. >> got to go, guys. thank you. lively discuss there. scott rothbort and mark headaak
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and is the offer to take over publishing about newspaper or about the digital side of the business? that's later on the "closing bell."
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oil is looking up. for where we go from here, let's get to jackie deangelis.
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what are people saying over there? >> good afternoon, kelly. that's the million dollar question. where do we go from here. we hit an intraday high of 4785. goldman sachs says we're going higher from here. there are a couple of supportive factors. disruptions in nigeria, canada as well as venezuela. they're always pointing to a demand increase. they say we're picking up globally. and also we've got that beak dollar. goldman on wti is saying the second quarter price will be 35 to 45 in that range we've been in for the second half of the year they're looking for $50 crude. 2017 they think wti could hit a bumpy patch. then for the oversupply to potentially creep back into the market in 2017. there are some risk factors out there, hour, and we do have to point them out to you. number one, we've got an opec
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meeting coming up june 2nd. certainly if we don't get a freeze, the prices could move lower. also the shale producers, they might be itch to produce a little more with oil at $48 a barrel. finally season alt kicks in too. summer driving, we're going to peak in july and that's when the prices will start to come down a little bit after that. remember, look at the charts last year. in june we went all the way up to around 60. by august we were back down to 40. so it could be a bumpy ride ahead and a lot of people cautioning today that goldman doesn't always get it right, kelly. >> nobody does. stay there, it's interesting. there's sort of two minds about this. on one hand you could go through a great analysis, on the other hand you step back. we hit a boon and a bust. where does that leave us. >> there was without a doubt an overshot. therefore you don't know how much it was under stating, you know, the actual true value so to speak of oil at 26 or
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whatever we got. >> right. you think of it. how many people jumped out of the entire trading or investing or commodity space and what that does. >> we're seeing bankruptcies every day in the oil and gas sector. i was reading remarks. his preparation for 2017 is a $50 brent price. >> by the way, the dollar has a big role in this. you want to see the whole complex. >> well t dollar is very easy to predict. >> exactly. >> jack kentucky, it's true though. people there must be going crazy. you can have these sort of supply and demand analyses and it wipes it all away. >> absolutely. the dollar is a big factor. of course, what's moving the dollar is the fed. we're all keeps an eye on how many rate hikes we may see this year or not see because that is a big part of the oil trade and commodities in general. the reason we got down to that
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level is we had such an oil glut on our hands. the skeptics in the market are saying, it's great we're seeing a little bit of a pickup and demand. yes, we have some disruptions, but potentially these could be cleared up soon. we may be back in the same place that we were in not too much time. >> well, as ever. jack jackie, thank you so much for joining us. it's like the confusion is clearer than the clarity. time now for a cnbc news update with sharon epperson. >> nbc news signing a course close reporting that the national transportation safety board has reported last year's crash in philadelphia was caused by the engineer being distracted by radio dispatches. the ntsb is holding a hearing in d.c. tomorrow where they'll vote on a final report. secretary jack lew urging china on economic reforms that
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will help ensure fairless with economic exports. he called on beijing to level the playing field. police say irish born pop star sinead o'connor was found safe after being reported missing in the suburbs. they were concerned for her safety after she went for a bike ride sunday morning and didn't return. a man pulled up to a ranker station with a bison calf in their car. because they thought the animal was too cold. they were ticketed for breaking park rules. park rangers say they repeatedly tried to unite the calf to the herd to no avail. the calf was abandoned. it had to be euthanized. >> geez. that's so sad. >> they probably thought they were doing a good thing, but not. >> exactly. thank you, sharon. >> sharon epperson. coming up, we'll discuss whether a high priced earnings multiple is a sign of a growing prospect
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or a major bubble warning sign. first, how carree tail brands be to walmart and procter & gamble. that's when we come right back.
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welcome back. here's how we finished the dow. the dow was up 175 points. gains of about 1% or more. the nasdaq was the outperformer and the s&p added 20 points. oil, gold, too, still a lot of talk around here. amazon may be gunning for a supermarket sweep. rolling out new private label brands in the coming weeks with products from snack foods and teas to baby products and laundry detergent. they'll hold a share meeting tomorrow. for more let's bring in jonathan feeney. jonathan, look, they tried this with diapers. it didn't go so well. sounds like that didn't stop them here. >> well, food is something everybody bice and it's something everybody needs and they think it's going to be gateway to other products. they're not the first ones to give it a try. they've gotten a lot of things right, so we'll see. >> it seems like the consumers are more comfortable with private label and maybe that's a trader joe's effect.
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>> i think consumers are getting a little more savvy on the kunld ki kinds of brands they can choose. >> it's so interesting. it was really only after that period people felt comfortable and we've seen the dollar shifts go. if i'm a retailer on amazon, i'm pretty scared right now. not only do they have brought they have a means of delivering it with amazon fresh, amazon prime direct which is another market. if i'm a grocery store, i'm really thinking hard how amazon is going to be in my space both geographically and by products. >> and we've brought this up a time or two. you know if there's any hint they're prioritizing their own goods rather than others, at what point -- >> i do think we have some familiarity with it. our physical retailers have regular brands, national brands co-existing with their own on the same shelves.
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it doesn't mean you can't price yours at an advantage, but maybe you can't privilege it in searches, but i guess i would be interesting in jonathan's thoughts on exactly how much margin amazon can capture here because that's obviously the play. amazon is doing it mostly for its prime members and maybe this is yet just another kind of throw-in feature of the prime subscription. >> well, in terms of percentage points, your traditional retailer private label is about double, maybe a little less than double depends on the price point. so i think you could use that as a kind of guideline. and, you know, your average category in packaged food, you're talking about 15% or so unit share for private label so that would be the size of the opportunity. >> we're showing you. they're going into computer mice and dumbells, jonathan. is there anything they can't do? i go back to the point of diapers. there is a risk of not executing
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here. >> sure there is. there are some products that lend themselves more clearly to private label penetration than others. i mean what's your leading favorite dumbbell brand, right? they all weigh 50 pounds. some products are a little more intimate. chewing gum is a little bit more classic. candy is a little bit more differentiated. you can go down the list. you look at the top 90, 100 categories, they vary a lot. >> we know, kelly, amazon is the second largest apparel retailer in the united states. i think it's a matter of time until it's number one. in terms of market share, amazon is just slowly eating away at every single market segment whether it's electronics, media, food, clothes. >> you know who used to say software is eating the world, now amazon is. we have to go, jonathan. in a word or two, which of the companies are most exposed here to the downside? >> well, i'd have to probably
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say walmart. i think, you know, this is going to make the importance of location and the importance of in-store experience higher than ever for supermarkets. because now that amazon is providing a little bit more value, that's amd directly at them. >> and store experience has a lot to grow if that's going to be the selling point. thank you for joining us. >> thank you very much. >> new equity crowd funding regulations kicked in. how this could boost small businesses next. and you've been warned, corporate america. while your stock is trading at a high multiple, it might look like a sale of approval. watch out. we'll tell you why coming up.
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did you finish your derivatives pricing model, honey? td ameritrade. welcome back. kate kelly has more. >> one thing we've been following, the end of the first quarter has been apple. apple has been the huge theme. it continues with david einhorn's green light that they've added almost 2 million shares of apple that their total holdings am to 8.2 million shares. this is a stock he's been in for five years. his side in term of the holds have been fluctuating. that continues to be it.
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selling 3.5 million shares. he said he had exited that position with small loss. they were disappointed at the costs and concerns about long-term profits. he essentially bought 5.5 million new shares bringing his toadal holdings to just shy of 9 million, kelly. a number of interesting moves from david einhorn. >> thank you, kate. what do you think? >> it was a real beaten down stock in the third quarter. this was more than cut in half. so clearly he's in there basically taking the other side. the apple thing. if you owned apple three years ago and mostly it was for financial reasons, it's pretty much in tune with what you were
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looking for. >> they spun off a lot of the chemical business. so much consolidation in the chemical business. speaking roughly i would say that's another opportunity to consolida consolidate. >> right. there was monsanto involved. a lot of things unsettled. >> a lot of moving chairs. >> you mentioned apple. but obviously the larger question for people is, okay, well, if carl icahn was in the stock for financial reasons reportedly but got out, why would somebody like him stay in? >> if you look at carl icahn's initial thesis and where he said it was going go, it was all about this very granular forecast, how many watches were going to be sold and they're going to introduce another tv next year. i don't think his position is about the business strategy but more what they're producing
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right now. >> to mike's point earlier, we're seeing a rotation from the growth investor to the value investor. they say they're giving back more in dividends and buybacks. think i we could see more ahead of that if it weakens out. >> 2.5% dividends. i effective today, let's get to kate rogers with the details on this one. hi, kate. >> hi, kelly. the good news is you no longer have to be rich to get a stake in a startup. startup investors had to be accredited meaning they had an annual salary of at least $200,000 or more or a net worth of at least $1 mill but now equity crowd funding will be open to smaller investors. for startups that means a larger pool of potential funders. companies can raise up to $1 million in a 12-month period in a credited and noncredited investors. under these regulations in individuals who make less than 100 k can invest either $200,000 or the lesser of 5% of their annual income or net worth.
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people who make more money can invest more money. so how can potential investors find these opportunities? well, the smt e.c. and fin rah have to approve it and broker dealers to connect investors to these new companies. as of this afternoon they have to do their due diligence. these are risky ventures which could lead to loss of their entire investment and since it became legal in september of 2013 among credited investors, $1.3 billion has been poured into about 6 rkds 500 projects. back over to you. we know these kickstarter portals exist. this is something very different? >> actually kick starter is something synonymous with crowd funding. those have been donation funding. you get a t-shirt or coffee mug. now accredited and noncredited
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investors can have a stake in these emerges growth companies. it's definitely exciting for small businesses looking for funding. >> i saw restaurants. bad business. >> do not. do not. >> very risky. >> do not. i don't know. every now and then. >> get ready to lose it. >> thank you, kate. >> thank you. >> kate rogers. extra extra, read all about it. gannett, increasing its bid after the first one. will this deal be fit to print? that's next.
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you wouldn't take medicine without checking the side effects. hey honey. huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck? check your broker with brokercheck.
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shares of tribune publishing, opener of the "l.a. times" and chicago rallying today. you can see them up almost 23%
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as gannett offered to buy. trading at about 14. it's been reluctant to listen to biotalks. rejecting an initial bid 12 days ago. they're tribune's second largest shareholder. i actually sat down with him recently and he spoke about the newspaper industry. >> we used to say 30, 40 years ago, it would be newspapers. people would say how can newspapers be disruptive. the answer is first you start having national newspaper, "usa today," "wall street journal," national, and then we had the digital substituting for newspapers, and so, you know, now the future for newspapers is uncertain. >> and so this play appears to be a roll-up of digital properties with print on the
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wane. but few companies have been successful in making that transition. let's bring in cole smead who's been sitting there forever and cnbc contributor kevin 9. welcome to you both. >> thank you. >> why shouldn't tribune do this deal? >> they should do the deal. the best analogy is, two smaller ice cubes melt faster than one big block of ice. these are both melting. the assumption in this space about a decade ago if you had $1 in advertising, it would trans late to $1 digitally. all you had to do is conversion to a digital platform. that was 100% wrong. $1 turned into 2 cents of digital. so few of the print platform brands made it to a place where you could pay for it. "wall street journal" i paid for, barons, sometimes "the new
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york times," everything else i just get free. i think this is just a long end game of cutting costs, banging together all the ice together that you can, slashing costs. gannett brands i don't think mean that much to the millennial right now. >> do you agree, cole, on this one? >> i'm glad mr. wonderful got the rear-view mirror out of the way for the listeners. the transition to digital was a tough thing. the pay wall, and that kind of technology, that took up until about four years ago for that to be meaningful to these businesses. the millennials have not engaged in a major way. then again, if you're 25, you're drinking craft beer, and you're not interested in local news. you buy a house, pay property taxes, have kids, local affairs become much more important. in terms of the platform, gannett is the superior operator in the business. to kevin's point, though --
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>> when we talk about gannett, primarily talking "usa today" here? >> "usa today" actually i would add is not the premier part of their business, it's daily news, the local communities, the tennessee and nashville free press. back then they used to underprice goods to kill their papers. today i don't know if the ftc could prove they have a monopoly, because as kevin pointed out to the viewers, it's a dead business today. >> mike, what were you going to say? >> cole, i was going to ask you, when it comes to tribune, they're really skewed toward big city metro newspapers. does the equation also work there, or is it really the smaller local paper that has that lock on the community? >> you know, the best communities are 500,000 to, say, maybe 2 million person town. also to bring national advertisers on a local level to
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get a mix of nationally oriented. in terms of this idea that they're going to go in and cut the daylights out of the journalism budgets, no. the content is valuable. one of the things that kevin didn't mention, the millennials are the same size as their parents, the boomers. newspapers are going to have a tough spot, just like housing was, whether or not you had what's gone on in the industry go on, because you had fewer people at the age of 40 with kids caring about local news today. >> kevin? >> this sounds like a business plan that is handed to you when you finally descend into hell and you know you have to live there imperpetuity. who would want this challenge. this is brutal. >> that's why you get in with free cash with no debt. who's going to start a new newspaper anytime soon. >> i'm just saying, i would like to have a moment of silence for the money that's going to die in this project. >> what's the alternative? >> there isn't. that's the whole point. sometimes you have to say, look,
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it's going to go to zero eventually. i'm going to milk as much cash as i can, by combining all the zero candidates together and put them on life support, trying to make the refrigerator a little colder so the ice melts a little slower and suck every last dollar out before you turn out the lights. that's what's going to happen. >> maybe it's a better analogy, perhaps radio. when television came along you could have said radio should go away in some respects. and it got rescaled. essentially on a local level. it still has a life. >> it's very cheap to advertise on radio. some people would make the case that it's a good return for your investment on advertisers. but it's a heavily levered business. gannett has the balance sheet that other newspapers only dream of. go ask the newspaper in dallas how the pay wall is going. it's not going well. so there are good operators, there are bad operators. just like any industry, there are going to be people who have success over the next ten years.
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we own them. kevin can watch them. >> dad, uncle, brother? >> oldest son, i get my looks from my mother. >> such a whippersnapper. thank you so much for joining us. >> thank you so much. appreciate it. >> thank you both. the warning for companies is next. don't miss it, exclusive interview with andrew left, why he is now long shares of valeant, tomorrow at 12:00 p.m. eastern.
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welcome back. former ge vice chair, my latest piece said, the higher multiple company is trading in the stock market, especially once it reaches 25 and 30. something he learned the hard way at ge during his tenure. no surprise to the two of you who lived to report through it. what does it mean for some of the companies today? we're not talking about the netflix. big established companies trading at those levels. >> it's interesting, because it goes right against exactly what
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i think most ceos and cfos think about this type of thing. their goal is to essentially get a full multiple. so it's a ratification of what they're already doing. i think it's really hard as a mental exercise to tell yourself, you better go out and try to earn that multiple in a different way. >> almost like it has to be ingrained. the people who brought you up need to be replaced with the people who can manage you down. how do you know when you reach that inflection point? >> of course, to mike's point, you want to grow, grow, grow. your compensation is usually tied to that. the board of rewards, shareholders, and management who deliver for shareholders. i think it's very difficult -- it's very rare to see a ceo who retires with full glory, celebrated by everyone involved. it's usually almost like a basketball coach who gets shoved out the door when the season is over. >> how many companies have bought into the pack. like ge, you never would have thought they would collapse. maybe there should be more thought around it.
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some more institutional practices. there's more on the spark at cnbc.com/the spark. >> who wrote that? kelly evans wrote that. >> there she is. dennis, mike, thank you so much for joining us. "fast money" begins right now. "fast money" does start right now. i'm melissa lee. traders on the desk are tim, karen, steve and pete. tonight on fast, noted investors raul paul is back. he's been waiting all year to get toward the market. he just did it. why now? he's here to explain. berkshire's $1 billion bet on apple. if history is any indication, buffe buffett's bets don't always turn out for the best. we'll discuss that. first, we start off with a rally. while everyone was obsessing over berkshire's latest buy, what really dro

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