tv Wall Street Journal Rpt. NBC May 20, 2012 2:30am-3:00am EDT
"open house nyc." hi, everybody, welcome to "the wall street journal report." i'm maria bartiromo. the facebook frenzy. one of the most anticipated ipos ever goes public. we'll go behind the hype. lpj's legacy. politics, power and lessons learned. i'm talk to pie grapher robert caro. is college worth the cost? an ivy league university president has surprising answers. "the wall street journal report" begins right now. >> this is america's number one financial news program. "the wall street journal report." now, maria bartiromo. >> here's a look at what's making news as we head into a new week on wall street. it was the most eagerly awaited initial public offering in recent memory.
and on friday, mark zuckerberg rang the opening bell at nasdaq from facebook headquarters in california. on thursday, the facebook ipo was priced at $38 a share. the upper end of the expected range. it opened much higher than that. that valued the company at more than $100 billion, making it the largest internet ipo ever. company raising $18 billion on that ipo. the company began trading on the nasdaq on friday. take a look at how the stock opened and how it closed. the facebook anticipation did not help the markets much. by thursday the dow industrials closed at 4-month lows, mostly on concerns about greece and weaker economic data in the united states. as well, concerns about jpmorgan. jamie dimon will have to explain himself in front of congress. the senate banking committee is calling on the jpmorgan chase chairman and ceo to testify next month on the company's big trading losses, now valued at possibly as high as $5 billion. the company has lost some $30
billion in market value in a week. it looks like the possibility of additional economic stimulus by the federal reserve could be growing. the fed's open market committee releasing the minutes from the april meeting this week. more members of the fmoc now say they are open to additional quantitative easing should the economy falter further. retail sales up in april. weak clothing and building material sales helping keep that number low. facebook flies, the market tumbles. what happens if greece leaves the euro? a busy week and joining us to help explain what it means, richard bernstein, ceo of bernstein advisers. good to see you again. let's talk facebook. big day on friday, obviously. the company going public in a highly anticipated offering. big day for the stock. is this something the retail investor should consider buying? >> i don't think so and i'll tell you why. first of all we've seen massive outflows from equity funds is louisiana six, nine months. it appears individual investors believe they've found the
investment. so you won't invest in a diversified mutual fund but you'll invest in one stock? that doesn't make any sense to me. the other thing is i think, look, you want to be the banker in a town where there's no other banks and there's 100 lenders. you're the only one in town, you're going to get a great rate of return on your lending. what we have here is the exact opposite. we have 100 lenders and only one borrower, your rate of return has got to be over, it's supply and demand. >> in other words there's so much money going into this stock right now. priced at $38, it opened much higher, it traded wildly all day. is this going to have an overall impact on the markets? what does it tell us about what's going on now on the markets? >> it's somewhat limited. our theme at our firm has been that people have been too bearish on the united states. and if is an indication people are starting to appreciate that there is growth opportunities in the united states, i would say that's bullish. >> there's money moving around the technology mobility sectors. startups are soaring.
entrepreneurialism is alive and well. that's a positive. >> i think it's broader. i think the united states is on the verge of an industrial renaissance. wage rates are competitive, energy rates are competitive, that's bullish. >> i want to ask you about that in a moment. let's get to europe. it feels like deja vu on europe. it was on the front burner for concerns. then people were feeling better about it because of the european central bank. now everybody worrying about greece leaving the euro. are you still optimistic about the market and how big an issue? >> we're in the early stages of long-term performance of the u.s. equity market. part of that is we believe we're going to benefit from the problems around the world. our ten-year note is 170, 180, all-time low this week. that's not because of problems in the u.s. economy, that's because of problems in the european economy. the u.s. is benefiting from the rest of the world's problems.
short-term, yes, europe can drag down the market. long-term, i think it's bullish for the united states. >> if europe decelerates and we see this problem accelerate, we're looking at this debt crisis continue, greece is pushed out, doesn't that impact the u.s.? >> certainly from the point of view of multi-national companies, absolutely. we've tried to focus on more domestic, smaller and made-cap companies that have no exposure around the world. >> that's important. that's where you want to be allocating capital. smaller mid-cap names that are exposed to the u.s. the federal reserve this week which released the minutes from the last week seemed to leave the door open to further stimulus because of europe. >> right. >> once again, they discussed the european problem perhaps impacting the u.s. do you think it's likely that we see qe3, what's your thought on the fed approximate with the ten-year at 170, it's less likely than if the ten-year were
at 230, 3, something like that. i think the fed is being handed a different here. europe is doing quantitative easing for the united states. ten year at 170, 180, not because of u.s. problems, because of european problems. we're feasting to some extent on their problems. >> do you think that greece does leave the euro? is that going to have a big impact? >> hard to say. it's a political decision. in politics, who knows, whatever happens. economic point of view, i think they probably have to. >> but it's a small country, relative to the other ones. and the worry is a domino effect, that port gal, spain, italy could follow. then you're in trouble. >> right. my guess is if greece did leave, that the european, the main part of europe, would really band together and try to make sure the whole system didn't fall apart. as each country falls out of the euro, it hurts germany. germany has been aided by a weaker euro because of greece. their exports have become very
competitive because of greece. as greece leaves, the euro begins to look more like a deutsch mark which will appreciate, that will hurt their export markets. >> what about housing? we're starting to see signs of recovery there. do you buy it? >> i think housing activity is definitely picking up, no question about that. but that's different from home prices. i think if people are waiting for home prices to go up, i still think you're going to be waiting a very long time to get back to '06, '08 levels. but that doesn't mean housing activity won't pick up and that's good for the u.s. economy. >> in light of all this how do you want to invest? what sectors do you like? how do you allocate capital? >> we're focused on smaller cap stock in this the united states. we want exposure to the domestic u.s. economy. we have very little exposure outside the united states right now. in terms of sectors, we're still defensive. we like staples, health care, utilities. much more defensive-type stories. >> what about technology? that's been an area that is seeing lots of money flow. >> absolutely.
look -- mr. zuckerberg is not giving away his company for free. there's rich valuations in social media companies. older technology i think is worth looking at, with one caveat. i think you have to be careful about this. technology is the most foreign exposed sector. if the dollar continues to appreciate, which it has been doing recently, that's hard for them to overcome and we could see earnings disappoint if the dollar continues to appreciate. >> thanks for being on the program, thanks so much. up next on "the wall street journal report," what history reveals the legacy of president lyndon johnson. on today's landscape of power and politics. two-time pulitzer prize winner robert caro will join me. one school is betting big on a future generation of science majors. take a look at how the stock market ended the week.
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and this administration today, here and now, declares unconditional war on poverty in america. >> from those words on the american academy the 36th president has a legacy that lives on to today's political times. robert caro is the author of the epic biography "the years of lyndon johnson." "the passage of power" is complete. the third consecutive "new york times" best-seller as well. thanks so much for spending time with us. >> great to be here. >> it's a fantastic book. this is your fourth book on president johnson. let me ask you about focusing on a five to six-year period from the 1960 campaign cycle to his first seven weeks in the white house. why this slice of life, more than 700 pages? >> because my books each try to examine a particular form of
political power. here we see a president taking over in a time of real crisis after kennedy's assassination. and taking all the reins of government into his hands and in that first seven weeks, ending with the speech you just showed, not only getting kennedy's program started again, civil rights and tax reform, also launching his own war on poverty. >> president clinton in his "new york times" book review on your book said about your work and president johnson's that power ultimately revealed character. what was johnson's character like? >> it's interesting that president clinton said that. >> yeah. >> that's what i believe. power revealed. when you have enough power to do what you want, you find out what you want -- the man wanted to do all along. lyndon johnson wanted to get the civil rights bills passed, help poor people and particularly poor people of color. >> how would he fare in today's legislative environment, where we've got such infighting? when he came to office was he able to get both the civil
rights bill and a major tax cut through congress? of course, these are issues that we're still talking about in 2012, which is actually so fascinating. >> people who talk about this legislative deadlock today being unprecedented really don't remember that for 25 years, from 1938 till kennedy's assassination, the southern democrats and midwestern republican conservatives kept congress in the same deadlock, stopping president after president. johnson broke that logjam in the seven-week period. >> amazing. you started living with linton johnson, if you will, in the 1970s. are you still learning things about this man today? >> yes. i was astonished to learn the sheer legislative genius which he got, for example, the civil rights bill started again. >> what are your big questions that you hope to address in the next volume? >> in the next volume? the next volume will be very darker in tone. this is really about the finest moments in lyndon johnson's life. when he takes over the government and really asserts himself and starts these
wonderful programs moving. the next volume is how vietnam comes to gradually overshadow these programs and how his presidency really ends, not in triumph, but you might say in tragedy. >> that is going to be a lot darker. >> yes. >> when will that be out? >> my publisher tell you that? two or three years. >> what about publishing right now. are you seeing a lot of changes in publishing since you started? so much information flow happens all the time. we're in this huge digital movement. what's the value of digging deep as you do today? >> well, you know, if you find out something, i'm trying to talk about political power in my book. if you find out something about how it works and you try to explain it to people, and you manage to explain it to people, i don't say i have but that's what i've tried to do. you don't want to explain to just one generation, you want the book to last. i've been frig books 40 years.
"the power broker." the greatest thing for me is to see college students reading it on the subway in new york, going to columbia, nyu. that's why you want something -- that's why digging deep is worthwhile. if you can do it, it endures. >> what can we learn from all of the study that you've done in lyndon johnson's life and how he approached big problems? what can we learn today? should president obama be taking something away from those years this. >> i'm not giving president obama any lessons. i happen to think he's doing better than many people do. but johnson, he conceived that the function of the presidency was to, as he put it, to write it in the books of lore. he said, we've been talking about civil rights for a hundred years, it's time to write them in the books of law, to get legislation passed. that was his idea of a president, the lawmaker. >> always great to have you on the program, we so appreciate it, the book is terrific, congratulations. robert caro joining us, "the passage of power."
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the technology field. david skorton is the president of the cornell university. >> wonderful to be here. congratulations on all you're doing. >> thank you so much. i am thrilled to have you because this university is going to be something to talk about. but the big front and center issue right now for so many of us is the expense of college and the steady increase that we're seeing for many american families. cornell runs about $52,000 a year. why has it become so expensive and keeps getting more expensive every year? what are we paying for? >> there's a whole bunch of reasons for it. technology is certainly one of them. there's also this concept that people always want the best of everything. we want our students, our children, to have extracurricular activities and facilities and residence halls that are good. there's another concept, and that is that we like the relatively small student/teacher ratio, which means it's very, very hard to increase productivity if you have a
human-intensive industry. some of the market forces don't work that well in some of the campuses. for example, the overwhelming desire to get our children into what are perceived as the best schools mean the lines soar long, even when the price goes up it doesn't have the usual market forces. cornell, for example, we've got 38,000 applicants this last year for 3,200 slots. so with that much excess demand, if you want to look at it that way, usual market forces don't app apply. for a lot of the reasons the price has got up. >> let's talk about student loans, how to pay for it. student loans have become a political issue. like so many other things. so interest rates on some loans set to double july 1st. what are you hearing from students and prospective students about this, about these loans, their ability to pay for their education, and whether or not that's dictating their behavior in terms of foregoing school? >> there certainly is a change in this generation. as "the wall street journal" itself reported the last couple
of weeks, the number of years of education that young people are getting now compared to their parents is less than it was a generation ago. >> wow. >> less than a generation ago. >> scary. >> it is scary and it's scary for the future of the country. because of innovation. because the 21st century needs these skills that you can only get with an education. to get back to the issue of loans, we have to do everything we can to keep the rates low. it took me -- my dad didn't even finish high school, he was a russian immigrant. in one generation, a lot of wonderful things happened to us because of education. it took me 20-some years to pay my loans off, it was the best investment i ever made. nonetheless, this is a big burden. during the recession when the chances of getting a job are less, even for those who are educated, we have to do the best we can to lower the cost of running the universities, so that the price of college will be down. in the meantime we have to stand up and make sure those loan
rates don't double. >> my favorite story of the day is cornell building this $2 billion technology campus on roosevelt island in new york, partnering with techneon, israel institution of technology. tell me about the plans. will we see eventually 2,500 students here? >> yes. when it's fully built out, which is going to be a couple of decades, during my ninth president as cornell. we'll have around 2,000 students when it's all built out, about 300 faculty, on roosevelt island. we're not going to wait until 2017. we're going to start teaching this fall, the fall of 2012, in temporary space in manhatt haha that we'll soon announce. >> new york city and the bloomberg administration kicked in $100 million for the project. you and techneon chose to work together. tell me the legacy you're hoping for. 30,000 to 120,000 jobs created, a big range but how do you come
to these numbers in terms of job creation approximate over the years. it depends how many spin-off companies occur, what size companies they are, what size. there will be construction jobs and jobs related to getting the campus up and running. we expect 500 to 600 spin-offs over the years as we go forward. that's not just dreaming. that's based on our record. the last five years, from '06 to '11, cornell alumni started 2,600 companies worldwide. capitalized to almost $11 billion. and at techneon, i believe pound for pound or kilo for kilo, is the best entrepreneurship shop on the planet. 4,000 startup companies in haifa. more companies on the nasdaq related to this institution than the whole european union combined. so this is a win for everybody. >> my thanks to cornell president david skorton. we'll take a look at the news this upcoming week that will have an impact on your money. and the class of 2012 heads out
into the world. my advice for tomorrow's business leaders today. does any mother ever feel like their kids are adults? i have twins, 21 years old. each kid has their own path. they grow up, and they're out having their life. i really started to talk to them about the things that are important that they have to take ownership over. my name's colleen stiles, and my kids and i did our wills on legalzoom. [ shapiro ] we created legalzoom to help you take care of the ones you love. go to legalzoom.com today and complete your will in minutes. at legalzoom.com, we put the law on your side.
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thank you, joey, for writing that song. look at the stories coming up in the week ahead that may move the markets and impact your money. tuesday the nation's realtors report the number of existing homes sold last month. wednesday the sales of new homes, a real window into what the housing market is doing right now. thursday, the latest report on durable goods will be out. those are consumer products meant to last three months or more. heavy-ticket items. a tip of my cap to the class of 2012. congratulations. at the commencement ceremony this week for my alma mater, new york university, i was thrilled as a trustee of the school to escort honoree doctor of law and supreme court justice sonya sotomayor to the exercises at yankee stadium. the next day i addressed newly minted mbas at the stern school of business graduation. a commencement speaker, a fantastic opportunity to spend time with the next generation of leaders and innovators.
>> find your passion. whether in business, in nonprofit, in starting your own company. change the world and innovate. believe in yourself. do what you love, have confidence. you are exactly where you're supposed to be. >> congratulations and all my best to the graduates this spring. that will do it for us today. thank you for joining me. the travel season begins. where to find the best value for your vacation dollar. keep it right here where wall street meets main street. have a great week, see you next weekend.