tv Countdown to the Closing Bell FOX Business March 11, 2013 3:00pm-4:00pm EDT
>> countdown to the counterdown. large and in charge, the bulls have taken the dow to a series of record highs, four in just the last week. does that mean dow 15,000 is just around the corner? famed wharton finance professor jeremy segal lays out his dow targets for 2013 and beyond. is oil about to become an oily mess?
why one chart watcher says oil is about to be dead money, plus his contrarian call on gold. and jcpenney stripped in billions of market caps as the stock plunges in to four-year lows. a ratings rumble on jcpenney. "countdown to the closing bell" starts right now. ♪ liz: good afternoon, everybody, i'm liz claman on monday, it's the last hour of trading. money just keeps pouring into the blue chips but, okay, i'll be the one to ask, are we getting set up for a stock bubble to pop, or does this thing just keep charging through record after record? today the dow is on track to hit its fifth record in a row. right now we've got it up about 37 points, high this session about 45 points. either way, no matter what, just one point to the upside, and that's another record.
now, the s&p 500, that is also moving higher, but it's inching closer to its all-time high, 15,065. -- 15 65. the small cap russell struggling just ever so slightly, down just about a point, just under a point at this point. at this point -- [laughter] in terms of sector financials among the day's best performers, taking a look at some the exchange-traded funds where you may have some exposure. the spider etf, that's the select xlf, moving high or by about a third of a point, just under a point, so names in there like bank of america. that one is moving higher by a third of a percent, and then that's got drug makers like merck, pfizer, technology stocks are underperforming the market though a bit. the spider select xlk etf, while it's moving higher, it's just by a fraction. now, part of the reason may be apple. apple is part of the xlk.
shares are reversing, actually, higher by about five points, so we're looking at a real move to the upside compared to what we had seen earlier today. credit agricole downgraded the stock from a five to an outperform, but the people who are bullish on this one are in today. now, ford, let's look at that one. ford is moving up about a half a point. this is the spa day picture after the auto giant said deliveries rose 40% in january and february. that's better than expected. let's also look at valero energy, and you can see that one is moving down just about a dollar, fifth day in a row as gasoline prices are falling. so with the dow hitting yet another record high and the s&p 500 now within spitting distance of all-time highs, our traders spread across a whole bunch of trading floors around the nation have been watching the tapes, picking out the most interesting trades they have seen today. let's get right to the floor show, we begin with ben willis, most interesting trade you've
seen today. >> most interesting trade, to me, is a continue wigs of the more sophisticated managers looking to what we call relative rotation. it appears their money is flowing into the financials as you pointed out on the etf chart you just had up. but they appear to be raising some money or using the sale of some technology stocks in order to facilitate the trade to buy the financials. those are traditionally higher beta trades, as we call them, a little bit more volatility as opposed to the general average investor that continues to be putting money into, it appears to us, the health care regions, the consumer financials, the consumer discretionary stocks as well. so there's not much of a trade. the volume's relatively light, but that's the relative rotation we're watching right now. liz: bingo, that's the word i wanted, rotation. technology into financials. gary over at the cme, what interesting moves have you seen across the tape today? >> what surprised me the most today is the euro dollar -- is the euro.
okay, the euro after friday's announcement by fitch that they downgraded them to a triple b+, in italy again, you know, with their mess as far as their election was concerned, everybody was looking for the euro to pull back down again, it has not. at the end of the trading session here just recently, it has climbed back up slightly above that 130. now, the dollar has been that safe haven we've been looking at. how much longer? the drawer tried to break that 83, it got into the high 8380s, it's pulled back down. then we've got japan. new governor's going to start devaluing, buying bonds and doing some other stimulus work to bring that yen down. let's help our exappointments, our economy. -- exports, economy. those are some of the neat things going on in the currencies. liz: boy, it looks like you could short the yen for the next couple weeks, and it would continue to go down, right,
gary? >> they're telling you face to face, we're going to devalue this. liz: exactly. >> yeah. so we've got to play that one, definitely. liz: and there's the currency board right there. you see the japanese yen. and, you know, what's interesting is that's the one that is moving down against the dollar. again, we have told you guys this over and over you've got shinzo abi saying we will make this thing weaker because it helps our business. let me show you the energy complex numbers and, jeff, everything, whether it's brent, west texas intermediate, natural gas -- natural gas is moving higher -- but what do we infer from that? >> that was the trade of the day, the gasoline against crude oil has had a tremendous run in the last couple of weeks. today, as a matter of fact, it was up as much as $2, and it's closed down $2. that's a tremendous move in general. that's about a 10% move over the range of the day here. now, what that's showing you here is that this is a market that is really probably not
going to go any higher. it has been a sale on rallies, and it is one until further notice here. without any game changer coming into play, something let's say like the dollar weakening steersly, some positive -- seriously, some positive economic news out of china, this market probably still will be drifting lower. a long-term projection about $87.50. you must sell rallies in gasoline and crude oil. liz: all right. gentlemen, i want you to stand by for my next interview, i know you will be interested to hear because we are talking with the dow where stocks will be going. it's easy to get swept up in the momentum of what appears to be a serious rally that doesn't appear to have much in its path, at least right now. as the dow heads towards its fifth record consecutive close today, more and more people are calling for dow 15,000. what about 16,000? maybe even 17,000. the man "forbes" calls the best business school guru around is here to make his even bigger
prediction. jeremy segal is a finance professor at the wharton school of business. wonderful to see you again, professor, thank you for coming on the program m. >> thank you, liz. liz: if not 15, if not 16, if not 17, how high could this dow jones industrials go? >> well, obviously, over many years there's really almost no limit. but let's put a time frame on this. liz: okay. >> a year ago january i said there was a 70% chance by the end of this year it would cross 15,000. we are very near that. i said it was 50/50 that by the end of this year we would reach 17,000. people thought i was crazy back then. now it's not looking so crazy. i think by the end of this year we will be in the 16-17,000 range on the dow, and 18,000 looks to me 2014 like the best bet goal.
liz: okay. 2014 at 18,000. tell me, professor, where do you get your crystal ball? i mean, it's very hard to imagine certain risks that we cannot mitigate. and i pull out, for exaaple, friday. north korea said we're going to throw the united states into a burning sea. and i'm thinking to myself, can water really catch fire? and then i remembered i live in cleveland for three years, so we know water can catch fire. if something were to happen with north korea, would that not ce stabilize our stock market? there are so many what ifs as well. >> of course. there are always those risks out there. any, listen, any military action, blow-up in the mideast, we are still importers of oil. if oil goes to 300, 200, you know, all bets are off. and that's always the risk on equities. i mean, if you're not willing to put your money at some risk, well, today you can't get much more than a zero return.
and i think more people are saying i'm fed up with a zero return on my savings account. four years, i want to try to get something positive x that's why i think you are having the great rotation, and i don't think this great rotation is more than in its very infancy at this particular point. liz: okay. let me get you to the s&p 500 then. when do we hit 1565? we're only ten points away. is that a sure thing? >> yeah. that could come any day. i mean, if i were to put money on it this week, it will happen. you know, it is is hard. we know in the short run there's so much speculation, but you definitely see the market is gaining adherence, money is flowing from the bond funds, from the money funds, $3 trillion earning zero, $11 trillion in savings accounts that are earning zero. we don't have to have that much flow towards the stock market to reach these new highs. liz: where are the jobs,
professor? and people are wondering because while we did have a pretty decent jobs report number for the month of february that came out on friday, don't we need some meaningful job creation before we start to see some -- i guess a more solid foundation under this stock market? when you look back at previous bull markets, there were some very strong fundamentals. this time around it's very much, hey, thank god for ben bernanke, he's still there putting a bunch of liquidity into this thing. >> right. well, that's one reason why i think this bull market has a place to go, because we certainly can improve our economy. we are still operating well below our potential. 7.7 unemployment rate, i mean, the fed thinks it should be 5-5.5. we're at capacity utilization that is well below previous peaks. we have unused capacity. we can have more demand without overheating this economy. one also has to remember, you know, with 7.7% unemployment it does mean that, you know, we have almost 93% of the people
working. and with less fear than anytime in the last five years that they're going to lose their job. they feel more secure. with the housing market moving up, with housing values moving up, this is the primary asset of an american really more than stocks, is the value of their home. liz: sure. >> we know what the home indices say, and i've always believed housing is going to be leading the stronger recovery the second half of 2013. liz: second half looks good. we had a guest last week who said he was of worried about housing in the second half. you are not. i have to ask you, what worries you, aside from oil at 2 or $300 if there were some problem out there in the middle east -- >> yeah, in the middle east. well, you know, listen, 9/11 came out of nowhere. you know? terrorist strikes do come out of nowhere, and, you know, i think it's something that we have to live with.
i remember when i was a teenager the cuban missile crisis, we were all looking up in the sky for icbm bombs from russia. there are going to be these risks out there, clearly, and they could heat up temporarily, drive the market down. but, you know, the basic economy has so much room to improve, and the valuations, liz, i believe are still so low given the low interest rate that this bull has legs. liz: the potential is what i hear you talking about, professor. thank you so very much for joining us here exclusively on fox business. we appreciate it. >> thanks for having me. liz: okay, you guys, dow 18,000 by 2014 and within the week possibly we hit that all-time record for the s&p 500 according to dr. segal. he's one of the smartest out there. we appreciate him coming on. about 47 minutes before the closing bell rings. you just heard the fundamental argument, sort of the psychological argument for how much higher stock prices can really go, but if you were to
take out the emotion, what are the black and white numbers? the chart's telling us right now. bill have zoology low lives and breathes numbers and all-important levels to watch. find out why he's calling for a correction, how big it is, and he will tell us just how far stocks could fall. we'll get his correction protection playbook and where you can still make some money no matter what happens. that's next in a fox business exclusive. ♪ thank you orville and wilbur... ...amelia... neil and buzz: for teaching us that you can't create the future... by cliing to the past. and with that: you're history.
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liz: breaking news, we do have some news right now that it appears that that new york city soda ban has been halted. that's right, halted. there has been a judge who has, in essence, be you'll excuse me, a judge who is basically saying, guess what? those rules limiting sugary drinks that mayor bloomberg had pushed for anything more than a 16-ounce cup are not legal. it was to have started on tuesday. some pushback on behalf of fast food companies, certainly the big soda companies. but the breaking news is that the soda ban which was scheduled to really happen pretty much right now has now been halted.
you can imagine the mayor's going to be steaming mad about one. beverage giants not really moving on this news, pepsi cojust slightly down, dr. pepper, snapple up just a fraction, but perhaps it's really the mcdonald's of the world, that one moving higher just under a percent, four pennies, will be looking at this as well. very interesting. one insurance company, genworth financial. >> reporter: all right, liz, you know, i lost you for a moment. number one, this is my drink. my real deal drink, but it's a diet coke, okay? but a lot of people on wall street already talking about the soda ban being lifted. let's talk about genworth financial which is leading the s&p 500. it's up one-quarter of 1%, the company's outlook is certainly improving because of restructuring. they're talking about the mortgage business and spin-off units, that will push for growth. a new chief executive in the line to see the stock is up 6.3%, all of this according to barrons.
and can't leave out an upgrade to outperform from underperform. so that's, obviously, one that we'll be watching on a day where, clearly, all-time record highs for the dow jones industrials. liz, it'll be an all-time record new high for the dow across the board. you're seeing plenty of winners, citigroup and wells fargo are hitting 53-week highs, fedex and plenty of dow components hitting multiyear highs. so i don't normally walk around with this big drink, but today was one of those desperate days where i needed a lot of caffeine, so i went for it. of. [laughter] liz but it's diet, right? you don't drink full sugar. >> reporter: i would never drink full sugar. liz: well, that's what he has the problem with. >> reporter: its depends how many hours are you drinking it over, and the second thing is for kids i'm really -- liz: oh, not allowed. i don't know why people would ever let their kids drink sugar soda. thank you very, very much,
nicole. we made it through the fiscal cliff, we survived the sequester -- at least so far -- markets continue to climb and, as you know, the dow's making records. but there's a new cliff to worry about. , the s&p 500 cliff. will it stop the rally? first of all, what is this, bill strazzullo? over at bell curve trading. what is this? >> well, liz, i think when you look at the s&p you, first of all, you've got to be clear about what your time frames are. in the short term, i don't disagree. i think the short-term momentum's still bullish. i think you could see the market push back toward the all-time highs, 1576 in the cash s&p, 1586 in the futures. but when you take a step back and you think about where the s&p 500's going to be three months down the road, six months down the road, it has been a disastrous strategy to have your maximum equity exposure at these levels. look at the peak in 2007. look at the peak in 2000. liz: okay. so hold on. stop.
so the peak in 2000 had the fundamentals of the dot.com inflation, right? i mean, the inflated bubble, that was great, and then the peak in 2006, early 2007 as you see these points, that was the housing bubble. okay. so you're saying we, we don't have similar strengths here, but those were bubbles in and of themselves? >> right. but go back, liz, and look at what the economic performance was at those previous times. in 2000 xdp growth was --gdp grows was about 5%. unemployment was about 4.5%. in 2007 unemployment was a little bit over.5%, gdp was probably 2 or 3%. fast forward to 2013. unemployment's 7.7%, and gdp growth is, basically, flat. so understand we're back at the same levels with much weaker economic performance. if you're making the bet as many people are making right now that the market's going to go much higher from here, you're betting on one thing: ben bernanke and
the central bankers around the world, quantitative easing -- liz: huh-uh. didn't you just hear professor jeremy segal? he said there's potential. there's a long runway, bull, and you know i adore you. but you had said back in february that, in essence, 1500, or that was going to be an opportunity to really get out. but look where we are now. it's so much better. i would have lost money if i listened to you, no? >> no question. look, we played the rally from 1350 up to 1500 and caught a nice move there. liz: right. >> 1500, we thought that would be the upper end of it. we got back in, and we're going to play it all the way back to the old high. but the question you really want to ask yourself is bigger picture, is this a place where i want to have my maximum equity exposure? and historically when you go back and look at those peaks in 2007 and 2000, that has not been a good or smart thing to do. liz: you are saying that oil energy is dead money. why?
>> well, look, if you look across the commodities space, oil right now is probably the least interesting. i think right now crude oil trades probably 80-$100 is the range. if you want to widen it out, maybe 75-105. but what's interesting about this is typically when you see the markets breaking out all-time highs, you'd also see crude oil go along with it. in fact, if you go pack to the 2009 lows -- back to the 2009 lows, in many instances crude oil and the s&p trade in lock step. you're not seeing crude oil make that breakout move. i think it's a range game, and it's not giving you that breakout -- liz: we've got to go, but where's the smart money going, bill? are you watching the hedge fund guys get out of stocks? >> well, actually, the hedge fund guys have been piling in. their long exposure's back what it was in 2007. i think that's a mistake. i think at these levels you want to play defense, biotech, consumer staples, utilities
until we can take out those all highs. liz: he's hyperventilating, i love it. bill strazzullo. the closing bell ringing in about five minutes and change. from the anchor desk to the boardroom. morgan stanley has added a new executive to its management team. charlie gasparino has got the details on that. ♪ ♪ she's still the one for you -
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liz: sweet action here, well, morgan stanley has added a new executive to its management team. charlie gasparino joining us on the phone with some late breaking news on this. charlie? >> reporter: well, we should point out this is pretty close to the c suite as you get, this is a vice chairman. as we were first to report that gary cominsky was in late stage talks with morgan stanley, our report essentially forced affirm
to basically speed up the hiring, it has hired gary cominsky, worked for newberg and berman for years, cnbc until, i guess, today as their capital markets editor. he is now going back to wall street to be vice chairman of morgan stanley's brokerage department. what's interesting about this job, liz, is that, you know, morgan stanley has a strategy. the strategy is to be the main part of the firm, the driver of earnings. and this is why it is a big story. i mean, gary is the guy that's going to have to take 'em there. he's the guy that's supposed to coordinate with the various brokerage division with the various parts of the firm. for example, make sure when a broker who handles a high net worth individual, which a lot of the brokers at morgan stanley do, when that broker's clients got a deal, you know, there's the ceo of a smallish company, that deal is inside the morgan stanley company, it gets done by the morgan stanley investment banking division. you wouldn't believe how much business at major wall street
firms these brokerage firms get done outside the firm from their brokerage department. gary's job is to keep that internally, work with the brokers to deal with different parts of the firm. this is a fairly coe job in the firm. -- key job in the firm. he will report to greg fleming, but if you take the top five people at the firm, i think you could probably say gary is one of those right now, and it's kind of an interesting transition. he went from money manager, longtime money manager, i knew him well when he was at newberg and berman. newberg and berman was a unit of lehman brothers. he was one of my sources during that time. he saw the lehman brothers stuff come very r5er. he left in september of 2008, and then after that he had a two-year noncompete, and, you know, after taking some time off he's been, he worked at cnbc, and now he's here. so this is a, this is a pretty interesting development. if you own morgan stanley stock, and i think this is where this becomes key, i mean, this is a big publicly-traded company,
this is a big deal. because this is the guy to make the brokerage department work, and the brokerage department is key to the future of morgan stanley. liz: well, and i think that he's leaving cnbc because they made him cut his beard. he's like that guy at disney where disney said no facial hair alive. >> reporter: i thought you were going to say because he had that big brawl with warren buffett. liz: well, that too. he made a statement about something regarding warren buffett, and they med him on -- made him on air apologize. already well, here's the thing, no. they published an apology. he refused to do it, from what i understand. gary refused to apologize because it had something to do with buybacks and whether buffett does a lot of buybacks or -- liz: right. and he pretty much does not. >> reporter: he does not. gary said he does not. buffett came back and said, well, if you read my 1986 annual report, you'll know that i care about them in certain
circumstances. liz: all right. >> reporter: but it was kind of a ridiculous thing to apologize over. it was not a material error as far as i was concerned. you know, we, you and i watched it, you know, in aghast because we were, we wouldn't -- i mean, we wouldn't be asked to do that at fox business. liz: no. listen, fox wants to be correct, better to be right than first, but they stick by their talent, right? >> reporter: yeah. we would be asked to get it right and explain why we said what we said. liz: there you go. >> reporter: i don't think he was given that chance. i don't know for sure. i don't know all the story. i have a lot of friends over there still. i'm friends with a lot of people there. i don't know exactly how this thing went down. liz: right. >> reporter: i can tell you that, you know, gary wasn't happy, but that's not the reason why he left. the bottom line is he left -- liz: it's the beard, i know it. >> reporter: it's the beard and the job. this is a great job. [laughter] i mean, you know? luz luz good for gary. >> reporter: hopefully, we'll come on.
obviously, he's no longer working at cnbc -- liz: do you think they'll threaten him? >> reporter: you know what they'll do? they'll threaten him. they'll say if you go on fox business, you can never come on cnbc again, and you know what he'll say? this is what he'll say, he'll say i run a brokerage firm that has 18,000 brokers that deals with millions of investors. think about that for a second. liz: yeah. >> reporter: that's, when you threaten him, that's what he's going to say. liz: good to see you -- well, good to hear you. why are you not here? >> reporter: i couldn't catch the train. liz: flooding on the fdr. >> reporter: is there flooding on the fdr? liz: no. >> reporter: dog ate my computer. [laughter] liz: thanks, charlie. it's a content revolution. netflix original series "house of cards," have you watched this? took the streaming world by storm, so which competitors are playing copycat? and is that bad news for netflix
>> i'm sandra smith with your fox business earnings preview. we're watching shares of urban outfitters moving higher ahead of its earnings report after the bell today, up about 40% over the past year. analysts expecting 57 cents on revenue of $848.24 million. investors should be watching for a sharp increase in the retailer's direct to customer consumer business which is expected to grow about 44% during the quarterrer. watch for strong signs in its e-commerce business as well with web exclusive products and an
online launch in europe. and finally urban outfittersshas grown to 400 stores with more stores on the way. rumors surfacing that they have already signed a new deal in downtown manhattan as well as williamsburg, brooklyn. for full coverage on urban outfitters coming at you in less than 30 minutes, do not miss after the bell starting at 4 p.m. eastern. now we continue our "countdown to the closing bell." liz: breaking news on pimco's bill gross. dow jones industrials saying that the bond king cut back on his holdings of treasuries and mortgage this backed securities last month. when dow jones news wires is saying this, what is important to point out is that anytime bill gross makes a move, it's rather important here. so he is cutting back on, as we said, treasury and bond holdings. that was in february. so this is according to, i'm assuming, to an sec filing of some sort. but he has cut his mortgage-backed securities and treasury bond holdings in february. the bond king moving it back.
tlt is just slightly higher. okay, let's get to nicole petallides. you kn a different strikeout for a retailer here. shares of dick's sporting goods, what is happening here? they came out with some less than expected exciting news on sales? >> reporter: very clever, right? when you talk about dick's, we're talking about dick's sporting goods, obviously, a retailer that sells sporting goods and the like, and it turns out the profit missed analysts' efforts, the stock today down about 11% at the moment at 45.12. and so when you talk about dick's, their profits numbers came in, they missed the analyst estimates, they misjudged the season overall for the cold weather season. they had planned to sell a lot more gear for the cold weather and in turn it was more mild temperatures than they had expected and didn't sell that gear. i mean, ultimately, they didn't meet the numbers, liz, and the stock certainly is showing that today. back to you. liz: i go there all the time, but i depress that's not enough. -- i guess that's not enough. one person does not improve a stock. the move toward online streaming
has some companies banking on the trend for the long term. now many like netflix are making the move toward producing original content to stream for its viewers. they figure they can do it better than the production houses or studios. "house of cards" is one of those. it released all 13 episodes at once, completely bypassing the normal television ecosystem. the show stars kevin spacey as the house's democratic majority whip, and we know, of course, imitation is the sincerest form of flattery. amazon already announcing its plans to invest in original programming to compete with netflix. and over the weekend reports surfacing that coin star, parent of red box, may be making up a similar play in the space. coinstar did not get back to us but, of course, coinstar has redbox, and redbox, and they've got these deals with verizon, they need content. so who will be named king? is seems it maybe up grabs. netflix shares dropping on the
rumor of increased competition, but year to date it still looks pretty darn good. investors seem to like the report on coinstar. important to note that shares of netflix are up more than 65% this year, so a pullback may be no surprise. i would ask you guys to tweet me, who do you think is going to come up with original programming? i'm@liz claman on twitter. apple is probably building a studio right now up north in california, put together some original programming. they want in on that netflix plan. the closing bell ringing in about 17 minutes. how long can the ceo of this next company possibly? investors have lost patience with ron johnson after shares of jcp fall about 60% over just the past year? this guy was supposed to be the wonder kind. the stock just keeps getting crushed. he's made misstep after misstep. we already gave the company our advice about bringing back coupons and adding hot fashion
you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. but that doesn't mean i don't want to make money.stor. i love making money. i try to be smart with my investments. i also try to keep my costs down. what's your plan? ishares. low cost and tax efficient. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes poible loss of principal. ...amelia... neil and buzz:
for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above. we're not simply saluting history... we're mamaking it.
liz: the mere survivability of retair jcpenney as a publicly-traded company has been hotly contested lately, and the stock has been tanking. with the launch of a new designer in stores friday, we're wondering who's penny wise on this stock? the buyers or the sellers? let's have a ratings rumble. in the bulls' corner we have
paul, morningstar equity analyst, and the bears' corner, rick snyder, maxim group senior consumer retail analyst. welcome to you both. i will begin with paul. you get to sell me on why you think this is a good company when they keep making misstep after misstep. >> well, i think the most important thing to my thesis is that the shops and store concepts that they're putting in are actually going to make a difference. now, the tough part is the sales decline and that worse than expected sales declines might have damaged the companioned repair already. but -- the companioned repair already. the company's reporting positive signs from the stores or the shops that they've installed in the stores. liz: rick, can that do it? they already had a bit of a fight with the martha stewart issue. can they use those little mini sort of -- i dare call them kiosks, but little stores within stores to save the entire problematic company? >> i think it's too little too
late, liz. they have had tremendous traffic dropoffs, and they have no conversion, and most importantly they have no cash flow. liz: okay. but they've got real estate, do they not? isn't that worthy of something? i know there was a piece in barrons saying, eh, it's not quite enough to get it going, but is that a possibility? >> not for the stockholders, in my opinion. i believe that the real estate is worth an average of about $50 a square foot which at 43 million square feet would not be enough to cover the bondholders, so there's nothing left over at that point. liz: paul, let's talk about ron johnson. can he survive this? >> well, i think he is on a much shorter leash, and i think part of the problem is the fourth quarter, the company had sort of forecast that they were starting to test coupons to drive the traffic, and then the traffic still was bad, and the comp was even worse. so i think he's on a short leash. i think he's got to prove that he can move the needle on the
comp store sales. but i guess the other thing i'd point out is that the cash flow burn is actually not as bad as people expect. a lot of it's due to their cap ex which they have some flexibility in spending, and then they've also got a good line of credit. so the real issue here is if vendors start to cut them off. and right now the vendors are supporting the program that actually is contributing to the -- liz: rick, how long does that last though? >> i think they're going to have to tap in to their revolver this year, and if sales don't pick up, they could be at the end of that leash very quickly. liz: okay. have ye no faith, rick, in ron johnson? he was from apple stores, and we know how successful those were. >> yes. but here's what i would say about that, it is a lot different selling ipods than it is selling an ipod. liz: meaning that's one of the big labels. that's one of their shops in shops, and it's a commoditized type of product as opposed to the ipod which creates its own demand. liz: you have been right and bearish on the stock since it
was $40. all you have to do is look at it now and realize you were right on the money there. i would think that he would speak to you. have you picked up the phone? have you talked to ron johnson, what does he say? >> i've tried to talk to the company several times, and they don't return my calls. liz: at all. >> no. liz: paul, do they talk to you? >> well, i haven't spoken to johnson directly in the last week, but i have spoken with the company. and i think you mischaracterized me in your introduction as a leading an cyst. i'm -- analyst. i'm a lonely analyst. [laughter] liz: you're lead anything the bull corner, how about that? >> to be fair, you know, the company has said some things recently which i've found a little disconcerting. i thought johnson was a little bit defensive on the last analyst call which is a big difference. so i think he is on a short leash. i think that the first quarter, also, don't forget they're constructing new shops in 30% of their space, so that's 30% of
the space that's out of selling stuff. so i think they've got another bad quarter ahead of them. i agree that they're going to tap the revolver this summer, that's usually the peak draw. question is, can investors see the, you know, the turn around happening and some improvement? i'd also point out it's one of the top shorts on wall street right now, and the subject of a tightened hedge fund battle as well. liz: paul, what would it take for you to switch your bullish outlook and change your rating? you're the lone wolf there when it comes to the lone bull, i guess, but are you close to changing your rating? >> yeah. i mean, obviously, a lot of, a lot of what i'm saying is dependent on the assumption that the shops are still getting great sales per square foot. liz: okay. >> so we've got these new openings like joe fresh. if that can't do $300 a square foot -- liz: forget it, right? >> or the new home doing 58 like the old home -- 85 like the old
home, then it won't work. liz: rick, what would it take for you to get to change your rating to a more positive one? >> it's all about sales. traffic, conversion, then i would have no choice, but i don't see it down the road. and the joe fresh comes in this friday which is march 15th, and i would say that if it doesn't work, jcpenney could have the worst eyes of march since -- ides of march. liz: oh! i want to thank both rick and paul very much. we so appreciate how honest you've been on the stock. we're watching it closely. joe fresh, honestly, we've seen some of that in the editorial pages of vogue. their trying hard. maybe somehow this turns around. paul and rick, great to see both of you. thank you. six minutes before the closing bell rungs, the dow is on track for its fifth straight session of record highs. we're up 40 points right now. the s&p fights to hit a new record. we're not too far on that one. and one stock we don't usually see in the green joining the
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