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tv   Fast Money  CNBC  May 18, 2016 5:00pm-6:01pm EDT

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market. >> and wage growth. that's going to be key. >> we have to let carol go so she can get to the airport seven hours early. thank you both. that does it for "closing bell." "fast money" begins right now. "fast money" starts right now. live from the nasdaq market site, i'm melissa lee. we have tim, pete, steve, and guy. tonight on fast, noted short seller is here. could another financial crisis be right around the corner. plus, big tech, big beat. cisco and salesforce among strong earnings. we'll hear from both ceos in their own voice. what some are calling in the after-hours session a shady deal. goldman sachs updating to a buy ahead of the announcement of a $2 billion stock offering. get this, goldman is the
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underwriter. >> go figure. >> first, we start off with the fed shocker. stocks closing off the highs as the federal reserve basically said the june rate hike is firmly on the table. look at the big winners today. banks, health care, technology, the big losers, bonds, utilities and gold. with june now on the table, are we starting to see the beginning of the next great rotation? what should you do with your portfolio right now? you give up the winning trade for 2016 and cycle into the other one? >> obviously pete can speak to the banks. but i thought the soft in the tlt, i understand it, but i think it's going to be short-lived. i still think inflationary pressures -- we had the conversation last night about is june on the table. i said yes. i think tim was sort of with me a little bit. today clearly puts the fed back into the june mode, right? i think this. i still think the yield curve is going to flatten. obviously didn't do it today which is why the banks rallied. everything else sort of makes
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sense to me. the gold move is suspect. i do think gold is trying to tell a much different story than a stronger dollar sell-off. >> i think it was very impressive to watch the banks. jpmorgan actually raised the dividend as well. all of a sudden you're matching up against wells fargo. no doubt about it, it was goldman, morgan, jpmorgan, citi, bank of america, across the board we had some of that playing out. on the tech side of it, it really wasn't all of tech, but some of the big names in tech, microsoft and apple. and the chip space, the suppliers to the apple world. that really did stand out to me as suddenly apple doesn't look quite as bad as it did three, four days ago. amazing how fast things turn. it's not everything all about warren buffett. tony was up talking about it today. talking about the idea of possibly even having a subscription model for apple on the services side. very interesting. kind of a compelling thought.
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services is the one area of growth. it was great to see the banks moving op the day. it says a lot about what they think in terms of the fed. >> what is different about what we got today than what we got after the last fed meeting? in april the fed took global markets out of their statement, basically indicated there was wage pressure. we've gotten the same statement today. we've gotten the fed which typically is a lagging indicator of anything, we're talking about a meeting that happened a month ago and today we're all excited. this is crazy. if i think about the movement of banks, and i'm -- look, i'm not one that says the banks have huge credit problems, but the real question is, the yield curve at 210, six weeks ago, at 110, why are banks better off today than they were when people were selling them down. >> the moves we saw in today's session were ill conceived moves. they should never happen. nothing's changed. >> i think people are all over the place. people can now say, oh, the economy is better, so the fed can move. these are the same people saying we're going into recession. and the same people saying the
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dollar is stronger because the fed's going to move. meanwhile, if the fed moves too fast, the dollar goes back down. >> what has changed, though, is that june wasn't on the table for most people. now it's back on the table. if it's not june, it's july. i do think september gets a little too close to that political cycle for me. but i do think to your point, anything that happened today, should be reversed. you have xlus up 16%. >> a buying opportunity? >> i would definitely be a buyer on anything yield related. >> utilities,telcom -- >> everything. i sold my disney yesterday, more as a market call than a specific stock play. i'm out of apple, i'm out of disney, but i'm keeping the yielders. >> i don't think there are headwinds for the financials. i get it. i see what's going on. tim makes a very good point. yesterday we had 210s, i think
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it was at the lows in terms of -- that's a pretty strong headwind for the financials. there are a lot of things working against them. i see what people are chasing. i get it. if you believe the economy is improving, then you do buy the financials. see, i don't think the economy is improving. >> you're also in the camp that everything we saw today in terms of the rotation, so to speak, is going to be reversed? nothing's going to change -- >> quickly, i think the tlt will be reversed and the move lower in gold will be reversed. >> people should be buying commodities, reflation, buying the things that the fed is trying to successfully engineer. if people are buying that -- >> but the dollar is moving against the trade. >> the dollar has been way oversold. it's now back at the top end of the range. yes, clearly the dollar's going to have a move on a day when we think the fed is suddenly going in june. >> why don't you feel that a reflation trade is long in the tooth at this point? you've gotten a lot of this junk that's really reflated higher. so why wouldn't you feel -- when you look at copper and iron ore
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that hasn't really reacted, if it was global growth, iron ore would be ripping. >> this has been a five-year trade we've bounced off the bottom that no one believes in. the fact of the matter is, a lot of commodities are going through structural shorts. oil demand is going to be up 1 1/2 percent today. it's all about supply. >> we're looking at the canadian fires, looking at nigeria, transitory events. >> that's not what this -- canada didn't drive up the oil prices. nigeria didn't drive up the oil prices. the middle east, libya didn't drive up the oil prices. >> u.s. production down about 4%. >> every time we get an inventory stat, it's 80% supply glut. >> look, the point here for me, today, is that if people are onboard with june suddenly, people that weren't onboard with june, suddenly june is 24% where
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it was 4% last friday, big deal. a lot of people now say, the world's a much better place. where were they two weeks ago? two months ago? i mean, it's -- >> i think they just know they have to raise. like december. i think their back is to the wall. >> the position they've got to make a decision. william talked about the economy looks great. he didn't say good, he said great. look at what williams and lockhart and these guys are saying right now, they're out there right now in the last couple of days basically signaling, this is going to be a hike. didn't say exactly that. but they certainly are giving us all the reason in the world as opposed to a month ago where we were -- >> are you saying coincidence that it's happening on a day when we get the fed's current statements in the market saying the same thing, but realtime? >> reemphasizing, yes, giving it realtime, exactly. >> they're raising in your view because the economy's getting better. >> that's what they're saying. >> there is a difference in how you position your portfolio. if you think the fed's going to raise because that's what they
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think, but that's not what you think, but you still acknowledge june is on the table, those are two completely different trades. >> i'm not so positive that the economy looks as great as what they're saying. i would not use the word great to describe our economy. low unemployment is obviously playing into this as well. it is an interesting thing. you can understand why the banks were up today. you can understand the interpretation, in my opinion -- >> do you take profits here? >> i still believe in jpmorgan. >> it's interesting, global commodities, look at freeport over the last couple of -- look at u.s. steel today. these stocks, u.s. steel was a $20 stock a couple of weeks ago. now it's trading 13 and change. those stocks indicate a completely different story. they had big runs. they've basically cut the run in half. >> wouldn't you call that -- >> you were right. but i don't know what, again, there's so many cross cards in terms of is it a strong economy or not a strong economy. >> up next, tesla tanking
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after-hours. the lead underwriter, goldman sachs. the same firm that just upgraded the stock to buy earlier today. noted short seller in muddy waters. one big warning for investors. find out if the next financial crisis is right around the corner. conference calls now under way from cisco and salesforce.
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welcome back to "fast money." cisco at the highs of the after-hour session on earnings. dom chu with the latest from the conference call. >> up 6% on 2.7 million shares of volume. people seeing bullishness about the conference call right now. it's still ongoing. we're in the analysts' q&a portion of it. we are ramping a bit higher, though some would say the setup is we're still down 2% year-to-date. on the conference call, chuck robbins, the executive team at cisco, talking a little bit about where they see the growth. perhaps a little about the macro economic environment. this is the part of the report people pay attention, because
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it's the bellwether portion. and what are the growth drivers, and he was asked about the current environment the company is operating in. this is what he said on the conference call just about 15 minutes ago. >> in the near term, we see obviously a mix of a pretty cautious environment still, because we do see customers spending where they need to spend. but don't misunderstand, there's still amount of caution in the market. but i think we've executed well this quarter. we had five of our seven product categories that were in positive growth. three of those in double digits. we had all the g.o.s in positive growth. >> this is a company that like many others out there is trying to make a transition from being more of a hardware company to being more of a software and services company. two of those divisions that robbins spoke of that are in double-digit growth mode are the security division, like cybersecurity, data security, that sort of thing. and service provider video,
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helps big companies manage their video assets. a company looking to make the transition and see more subscription based or recurring revenue streams down the line. we'll keep listening to the conference call right now. >> dom, one quick question. talking about cautious environments out there. was he talking about product lines caution, or customer sort of industry caution or geographical caution? a lot of people were listening to what they were going to say about asia. >> they did make some comments with regard to geography. they said they saw some signs of growth and positive signs across all their geographic regions. they did make note, though, the facts that they saw perhaps some showing signs of slowing, in terms of hardware demand. some of their clients cutting back a little bit on that spending. they did make a note that the two biggest contributors, the two biggest revenue components, router businesses, showed modest decline year over year. so they are trying to say that
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they are growing in the right places. they're trying to move a lot of that business around here. of course, the asia business will always be a focus here. they did show and they did say a little bit about the geography. but they didn't go into a lot of detail with regard to that specifically. >> dom, thank you. dom chu, up 6% in the after-hours session. music to pete najarian's ears. >> this is one of the names that i've liked. when i really do like something like this name, i actually own the stock. i plan on owning the stock probably, unless something happens that i'm not foreseeing right now, i'm probably in this for the next couple of years. the reason i say that is, i love the transition. it sets up so much like microsoft did when they started to make some of the turns. they moved out what was the old line business into the new. you could hear it in the call. talking about the growth, the double-digit growth in video, in security. and they're actually holding on, maybe losing a little bit in the old line, but that's expected. you've got to grow where you're
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looking for that demand growth. that's exactly what they're doing. they're executing at a great rate. look at the revenues, the projections for next quarter. look at the numbers they put up this quarter. that's why the stock is up 6%. >> $135 billion company. i don't know if it can switch as quickly as you want it to. >> but microsoft, if you go through and watch how microsoft -- >> i think that when you look at this, this is a yield play. close to 4% yield. >> sure. >> if you look at juniper, it's down 8%. what's the difference? >> one is winning and one is losing. >> but i don't know if you can get big enough in software. their margins aren't going to be as big as where they are in hardware. $37 billion in hardware revenue. >> juniper, i think it was april 12th, the stock got crushed. one of the things we said was, juniper specific, it's cisco down to 23 1/2, 24, you probably have an opportunity. that turned out to be right. the last time we had a conversation, tim said he likes
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this. he was dead right. one thing real quick, 29 1/2, 30 area was resistance all through last year in cisco. that's going to be a critical level if it gets up there. >> do not miss the ceo of cisco chuck robbins on "squawk on the street" 9:00 a.m. eastern time. a news alert on tesla, falling in the after-hours session on $2 billion secondary offering. phil lebeau has all the details. >> melissa, there are some things we know about this offering and a number of things that we still don't know. here's what we do know. te tesla will be offering 9,577 million shares in a second offering. the goal is to raise $2 billion. you do the math here, the estimated share price on this offering, estimated, is 208.81. it has not officially priced yet. i've had people tweeting me saying, there's no official
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price, you can't say it's 208. that's the back of the envelope math as of right now. what is tesla going to do with the $2 billion it will be raising through the secondary offering? it's all about the model 3. remember, they began final production in july of next year. first delivery is at the end of next year. and, oh, by the way, that's going to be the bulk of their deliveries as they try to hit their target of 500,000 annual deliveries, not just of the model 3, but the model s and x, all of them coming out of the plan. they'll likely need one or more two in the line. more stamping, paint shops, all of the things that go with expanding production. especially when you're talking about ramping production from what is going to be 80,000 this year, all the way up to potentially a half million in 2018. that's what the money will be going towards. $2 billion. one interesting note, melissa, goldman sachs is one of the underwriters on this offering. goldman sachs analysts covering
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te tesla today, said they will need about $1 billion for expansion for the model 3. that's going to get a lot of attention over the next couple of days, especially with that upgrade on shares of tesla. >> it's been blowing up twitter, phil. as you know, a lot of people are quick to point fingers at goldman sachs saying this is very, very peculiar for goldman to come out. it wasn't a catalyst space upgrade per se. the way i read the upgrade note. it just seemed like investor expectations are more grounded, so it will come out today with the upgrade, and it happens to be the day that it announces a secondary in the after-hours. >> yep. melissa, we know that there are chinese walls between the analysts and the companies when they're doing underwriting, or supposed to be chinese walls there. but it doesn't stop people, especially on twitter, from saying what is up with this. >> yeah. phil, thank you. phil lebeau. >> you bet. >> what do you think is up with this? >> when i heard the upgrade this
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morning, i thought that's kind of brave. bottom of the range, a company that, let's face it, this is what analysts are supposed to do. i'm not going to speculate on what this means. you would think they would lay off on this report knowing full well what the bankers are doing. when you think about the capital raise, though, is this alarming? not necessarily. to be clear, i've been very negative on this stock for valuation reasons. but the cap raise is bigger than what the street expected. people had between 825 million, and something that you would get through possibly reduced cap x and op x, there were other ways to do it. we felt this is bigger. i think the cash burn is bigger and the ramp up of the model 3 is exciting, but is this how you want it to go down. >> goldman said $1 billion, they thought, according to their analysis, would be the size of the capital raise. down 1% in the after-hours. >> a couple of things. see where it's priced. trade it against the secondary. that's been an opportunity
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before with tesla. to the other side of the -- phil just mentioned the chinese wall. i can make an argument that they worked exactly the way they're supposed to work. >> otherwise they would have delayed the report, or the offering. >> understand, the optics don't look good. people think there's something nefarious going on. but in actuality it worked the way it's supposed to work. >> they couldn't meet it with one car, two cars, now they have three cars. i will tell you, technically, it sets up for a bounce, 205 down to 190. >> we just heard from cisco. as we head to break, let's look at salesforce, which is also surging in the after-hours session. we'll hear from the company's ceo with the headlines from the conference call. here's what else is coming up on fast. >> that's basically what paying short seller carson block said is about to happen to the markets if companies keep doing this one thing. and he'll be here to explain why
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another 2008 crisis could be right around the corner. plus, big problems, and big debt. >> surely you can't be serious. >> i am serious. and don't call me shirley. >> tonight we're naming names on the retailers with the biggest debt loads that could be toxic for your portfolio.
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welcome back to "fast money." a news alert on several biotech stocks. investors watching the space. meg is back with a look at what is moving. >> just out at 5:00 p.m., let's take a look at some of the
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stocks that are moving. on the smaller side you've got xia pharm is up, from a very early preliminary study. it is moving up there. 8.6% in the after-hours. the other one that's moving is ariad. folks say the real update from ariad will come from the actual conference. a big pharma meeting, hearing from bristol-myers, and pfizer. not moving so much in the after-hours. the real update could come at the conference in two weeks. >> thank you, meg. 5,000 data sets. interestingly, biotech was on the move in terms of a sector. we were mentioning it at the top of the show, a lot of sort of risk-on sectors were moving today. biotech was one of them. >> trading 262 now. i still think that 285 level tim cited numerous times is critical
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it gets back above. i don't see it happening anytime soon. i still think it's sort of mireed in this level. interesting options activity, when the stock was 208 or something, i think it's in the 220s now. i still think the top stock is way too cheap. i get the whole pfizer thing. but i still think allergen sets up well. >> i'm curious when meg starts to hear the rest of the information start to roll, it's huge. asco, that is the event of the year. i'm looking at names like insight, they have a huge pipeline of drugs they're talking about. cancer drugs mostly. just about everywhere from lung to ovarian to whatever. but phase two, that's what people want to know about. phase two, phase three, how are these drug pipelines looking. that's what biotech is all about. >> the good news for the sector are people separating the women from the men, the men from the boys, the girls from the ladies.
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but the point here is, if you look at 245 per sector, growing earnings 25%, there's a lot of great in here that are cheap. but not in unison. >> what would be good or bad? >> the female would be good. >> i want to get that straight before we go to break. shades of 2008, what one short seller is playing that he sees right now. put some distance between you and temptation
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welcome back to "fast money." a wild day for the dow, up more than 100 points, reversing direction falling 100 points after the release of the fed minutes, which basically said a june hike is in fact on the table. ultimately, though, the dow ended the day just about even. the s&p 500, the nasdaq closing in the green. financials the best performing sector in the s&p. here's what's coming up. retail under pressure. it could be worse than you think. we'll tell you the two stocks
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that could be about to get buried in their own debt. the one beaten down. you might not need to worry about right now. the tech sector could be about to take a major leg lower. that's later on. the corporate buyback near record highs. carson block founding muddy waters, a noted short seller. carson, welcome to the show once again. >> thanks for having me once again. >> why are you seeing a parallel to the financial crisis? those are awful days. it conjures up terrible memories for most traders on the street. >> sure. to be clear, i'm not saying that the collapse of the financial markets is imminent or anything like that. the parallel that i see, the financial crisis, i mean, it massively impacted most everybody's life on the planet. and at the end of the day, very little of what happened was
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illegal. there have been very few prosecutions. and so what i see at my ground level view when i look at companies is that more and more of them are using very aggressive accounting to create financial statements that are actually really misleading as to what's going on with the company's economic health. and at the end of the day, a lot of this is legal. and there could not be prosecutions for it. so the point that i was making the other day is that it's very similar. it creates a lot of financial risks for investors. but probably nobody's breaking the law in many of these cases. >> why are buybacks bad? is it your contention that it's masking a weaker financial state? >> sure. well, buybacks are one of the issues. and a lot of what we look at gets even more aggressive than that. the problem that we see with buybacks is that a lot of times these are funded by debt. so if a company's borrowing to
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buy back shares, a lot of times the valuations in which these companies are buying shares are kind of stretched. if they're creating earnings growth in large part because of decreasing the share count, that's not sustainable. i mean, it helps managers get their bonus numbers. i mean, senior managers. but at the end of the day, it can leave the company in a weaker position with the additional debt on the balance sheet. and so that's one of the things that we see. but we see things all the time where companies are creating what appears to be profit. but it's really accounting-driven profit that often is linked to debt that's piling up on the balance sheet. >> okay. so we've actually been watching this go on at this point, carson, for years. so how does this turn into a crisis level? and how are you expressing your -- i mean, are you expressing your views through a short of the market? >> sure. again, i want to be clear,
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because i know there was a headline the other day that, you know, about my analogy between what we saw in the financial crisis to what we're seeing at companies. but that analogy was really about how this is misleading, and it can really hurt investors. but, you know, it's legal. so, yeah, i don't see that this is -- you know, what i see happening, it's really going to be more company specific. and we've seen some companies in the last year kind of have comeuppances, because their investors have lost patience with their accounting, which hasn't been really that accurate. and they have a lot of debt on the balance sheet. and there is a point at which the chickens come home to roost for most companies. >> carson, it's tim seymour. drilling down to the positions you've been talking about.
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you and some other splart guys out there think this is a major problem. why is it i see bank of ozarks' name all over huge high-rise hotels in york, when i would expect it was underwriting eric estrada from eight years ago? the minute we see any backup in rates, is there going to be a massive problem for guys like this? >> well, i think you see some -- you know, i don't think it's as widespread a basis as it was in leading up to the financial crisis where everybody and their brothers were overextended. what you're seeing here is banks like bank of the ozarks, and there are probably some other examples, who have stepped in and they've become the aggressive lenders. and so, you know, bank of the ozarks as an example made it through the financial crisis in very good position. and what happens when you have financial institutions that make
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it through a financial crisis unscathed, that can lead to husband ris. so they overexpose themselves going into the next downturn. i think that's what's at the heart of what bank of the ozarks is doing. they've taken their new york lending book from zero to -- to mostly construction lending. it borders on ridiculous. >> carson, we've got to leave it there. great to speak with you. >> thank you. >> carson block of muddy waters. so there are two things to unpack here. the call on buybacks, and accounting, aggressive accounting. >> dan nathan talks about this all the time, the difference between nongap, and gap. when companies disclose, they talk whether it's gap or nongap. so it's out there. he just said, there's nothing illegal about this. it's for you to do your homework. i think the point is, the chasm between the two continues to widen. i don't know how wide it can get. but that's the direction it's
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headed. at some point something comes home to roost. >> the other aspect is the buybacks. we've heard that for so long. carson said that. it's been in practice for so long. i don't know where that line is, where companies decide they have better use for their cash. buybacks will stay. and i believe cisco has got a willy mammoth buyback as well. there's a lot of these companies that are old names, old tech names or hardware companies that continuously use their buyback program to force their stock stability. >> i think on buybacks, we're seeing it in the oil sector, the growth is through the shares and earnings. we know the status where earnings are. this is about a company doing whatever they should be doing. less shares outstanding. the company is earning more per share. that's not what you want to see all the time. but in this environment, i've got no problem with companies doing that. it's better than overspending. >> if they've got the cash, if they've got cash and it's just sitting overseas -- >> and they're looking for the
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best ways to spend it. it's their decision. to steve's point, i know you're more on the negative side. >> i was on a realistic side. >> i'm more on the positive side of my view. there are some cases i think they're just trying to hold up their stock. i think there are other times the folks out there are saying, this is the best investment for us right now. i think cisco and some of the other names in tech specifically, that's the direction they're taking. >> still ahead, the retail wreck is raging on. not just with stocks getting crushed. we'll show you which companies in the space could be about to crack. that's next. plus, check out shares of l brand and salesforce on the move after earnings. much more "fast money" right after this. you both have a perfect driving record. >>perfect. no tickets. no accidents... >>that is until one of you clips a food truck, ruining your perfect record. >>yup... now, you would think your insurance company would cut you some slack, right? >>no. your insurance rates go through the roof. your perfect record doesn't get you anything. >>anything.
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"fast money," i'm courtney regan. we've got earnings after the bell. let's start in the teen space. shares up pretty sharply post-market after putting up a surprisingly good quarter. up almost 13%. the shares beating on the top and bottom lines, comp sales up 6%. the standout so far for a pair of retailers in that key comp sales metric, ceo as to then calling the quarter strong saying he's optimistic about the future. shares of urban outfitters up as
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well after hours. up about 5% or so. but they were up as much as 12%. they've lost some momentum after noting on the conference call that may sales started out slower than expected and slower than the first quarter, at each of its three brands. urban outfitters show record q-1 revenue. comparable sales up 1%. consensus was for a slight decline. richard haines said he's pleased with those results. the owner of victoria secret and bath & body works, the experiment retailer still surprised with a beat on the bottom line. lower earnings guidance, though, for the full year. and second quarter guidance well below consensus. so shares are down here as you can see, more than 5.5% after hours. analysts have to wait until the morning to hear more on the conference call, because it doesn't start until about 9:15. melissa, back to you. >> courtney, thank you.
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grasso, are you in aeo? >> i've been in and out of aeo. you can do the fireman trade, rush in when everyone else is running out. this is a stock that you buy, and you can get real quick 10 to 15% clip off of this one. this is a little bit overextended. i would let this one breathe. >> i'm glad you explained the fire thing. i wasn't sure what that was. >> good metaphor. >> l brands, you're just noting even in today's regular session it was already low. >> it was already terrible. april numbers weren't great either. this was setting up very much. what it tells you about is the malls. how bad the malls are. this is the crown jewel of malls, victoria secret, they have been teflon. they literally, they have stood tall while many of the others started to slump. the best way to play what's going on in retail -- >> look at that. i'm not listening to you anymore, i'm sorry.
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>> i covered them yesterday. the malls are having a difficult time right now. >> your hair looks so much better down. >> i like to let it down. there's a little bit back there. >> shares of the s&p retail etf, falling more than 1.5%. a buzz kill across the board. check out the year-to-year losses in revenue. from some of the big boxes, department stores, retailers. amazon with year over year revenue gains of 28%. quite the divergence. perhaps one of the biggest signals, if you can't beat them, join them, gas ceo telling investors at the annual shareholder meeting that he may begin selling merchandise on amazon. take a listen. >> to not be considering amazon and others would be, in my view, delusional, and around the customers' behavior. and so what i would say is that
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we are always considering all of the opportunities beyond our traditional mix of channels and stores. and looking at all those. amazon is certainly one. and there are others out there as well. >> of course, this will be a real divergence from the current strategy they have. although they do this in china on t-mall. >> art's been a revolutionary retail leader. think about what's going on here. the problem is, you lose control of your brand and you get into a place where i think they care very much about how the product's disseminated. target today was a further indictment against at least the places you go buy them. at least the apparel retailers who can control their own distribution are in a better place. target, to me, that's scary. >> i talked to a retail analyst today on "power lunch." she was in favor of the retailers or the brands that could control their distribution channels. not just -- not stores. but the ones that they say, you know what, we're going to sell
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in plamacy's, wherever we want sell -- >> that's important. >> we call our destiny on that. >> that's very important. but what the last couple of weeks illustrates, home depot reported, lowe's reported, it shows you how well they're doing. i know the price action at home depot wasn't great. but it traded north of 140 after they reported what i thought was a tremendous quarter. it just goes to show you where people are shopping, where they're spending money. i've got to tell you, i think the sell-off on home depot is going to be -- >> did you sell your zoomies online? >> don't you? doesn't everybody? >> of course. >> is there more trouble than others when you look at the balance sheets. we're talking about the names of the biggest debt load. larry mcdonald is the editor of the bear trap's report. in relationship to the equity value. >> we've gone through a period of leveraging, a lot have issued
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debt to buy back equity. when the sector goes under stress, you have to look at the whole company. a lot of investors at home just look at the stock. take jcpenney for example. $7 billion company, $7 billion, but only $2 billion of that is equity. so in other words, $5 billion is in the debt side. talk about very leveraged company relative to some of the other retailers. >> and then -- so you've got two others. one is the middle of the road. not a problem yet. the other one is a bright spot in the sector. >> you think of a pie. 12 pieces. macy's right now is 6 and 6. so about $9 billion of debt, $9 billion of equity. when it starts to cross over to 60% debt that's where the real danger sign is. but they're going 50/50 now. target, strongest balance sheet. $52 billion company.
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out of that $52 billion, $40 billion is equity. so it's the complete opposite of jcpenney. >> let's take jcpenney. what do you tell people to do with that then? is the debt load concerning enough where you would say, you know what, don't be in this stock, or short this stock? >> i think if you're -- tim can tell you this, because tim knows about the high yield market. when there's that many seats at the table that are on the debt side, you're in a dangerous situation because the equity is such a small part of the pie. you've got to stay away from it unless you have a real strong credit background. but for a trading perspective, the xrt of the etf, of the retailers, i'm getting a strong capitulation reading. we mentioned this on the financials back in february. some saw the same thing. i'm seeing a very strong reading for a pop on the sector as a whole. but i would stay away from some of the leveraged companies. >> trading pop on the xrt but
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stay away from the debt-laden companies. >> exactly. >> larry mcdonald, thank you. >> that's a more interesting statement than a lot of others we've had over the last couple of days. things are way overdone. nordstrom's was down another 2.5, 3% day. it's way overdone on sentiment, and they're not going out of business tomorrow. i think sentiment has swung to a massive extreme negative. >> is this a fireman's trade, as you like to say? >> well, xrt is a little muted. you can basically level out your risk to this. but if you want to go safer, i think you play target. if you want to go fireman's trade, you go jcpenney. you also use a real tight stop on the way down. >> you need a hose, the water ready -- i'm just trying to use the metaphor. >> a powerful stream, what are you talking about? >> the nasdaq is in corrections -- i'm going to keep
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welcome back to "fast money." i'm susan li. salesforce has only missed twice in the last five years. their stock rockets afterwards. they get a whole lot of momentum behind it. a beat on earnings, revenue and full year guidance. the best quarter ever for the company. salesforce's ceo explained the quarter on "mad money." >> you look at our competitors, dramatically weakened by not shifting aggressively to the crowd. just look at oracle. look at s.a.p. look at the messages they delivered right here on the show, but they haven't transformed their businesses. >> shares first quart billings figures, it measures revenue plus any change when it comes to deferred revenue. it came in way ahead of estimates. up a third. cash flow, another important
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metric for cloud companies. close to $1 billion in the quarter, adding $300 million in the three months. that's very impressive. it helps bring down the expense of stock. significantly down below the ten-year average. a big order to help drive earnings in the first quarter. >> we love amazon. we've got a great relationship with amazon. they're a huge users of salesforce, and that certainly has been a huge part of this quarter as well. we did a very significant and very large transaction with amazon. jeff and i had a great meeting of the minds of the future of the cloud. >> shares rallying 40% and close to record highs once again. >> thank you, susan li. valuations obviously an issue for this one. >> right. people have been paying for growth in this one. this has been the -- >> they've been getting it, haven't they? >> totally. i wonder where that runs out of
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gas. we know the other ones, we know s.a.p., oracle. i don't know if slow and steady is the way to transition, but this one definitely valuation at some point -- >> almost in the price, you could say. >> okay. what do you mean by that? >> that's a great question. 500 times i think is a lot of great news in a stock that is a similar game to what's going on with amazon and facebook. these are people that are disrupting, destroyed the competition. they're so far ahead of everybody, they're led by innovative leaders. nothing bad you can say except it's in the valuation. >> do not miss the full interview with marc benioff at the top of the hour on "mad money." mi mike, what are you seeing? >> we saw really interesting trade earlier today in the qqq. specifically what we saw was an
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august 109 caller. somebody sold 16,000 of the august 109 calls. they collected just over $2 for that. then they spent $1 apiece to buy 34,000 of the august 10196 put spreads, creating this ratio put spread caller. what's interesting is if you had a quarter of a billion worth of stock and you want to hedge it, you could ensure you get your protection down to 96, which is a decline of about 10% and still preserve a little bit of your upside. >> mike, thank you for that. in austin. full show friday at 5:30 p.m. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second.
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you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
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"final trade" time. tim? >> i think starbucks is a case where you have a retailer that's oversold. they control their destiny. >> cisco's earnings absolutely crushed it. i like what they put up tonight. i think the stock will go higher and break through the levels. guy talked about it 29 1/2. >> xlu on weakness. continued to hunt for yield. the market will do so as well. >> valuation smalutation, crm.
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>> wow. >> i'm melissa lee. see you back here tomorrow for more "fast money." do not go anywhere. catch the exclusive with marc benioff with jim cramer my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. my job is to entertain and teach you. tweet me at jim cramer. what gives? how could monday be so horrendous for everything and the next day yield some


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