tv Closing Bell CNBC May 17, 2012 3:00pm-4:00pm EDT
hi, everybody, welcome to "closing bell." i'm sue herera in for maria bartiromo, but she'll be right back here tomorrow. >> welcome aboard. glad you're with us. i'm bill griffeth. stocks are getting hit by a one-two punch today. the weak economic data out on the u.s. this morning, and continued concerns about europe's political situation. if the dow closes lower today, it will be the 11th loss in the past 12 trading sessions. and right now as you can see, the dow is down 89, about 90 points here, near the lows of the session at 12,505. the nasdaq has been even harder hit, down 1.4% today. ironically, i guess, if you want to put it that way, ahead of the facebook offering tomorrow.
there is the s&p down at 1312. >> speaking of that, we're count do you think to the ipo pricing of a company that you just may have heard a little bit about. it is called facebook. we're expecting facebook to price at or above the $38 high-end of its range. and keep it right here on cnbc. we have the story covered from all angles in the next two hours of "closing bell." >> yeah, we're probably going to get that pricing not long after the top of the hour. >> right. >> will facebook live up to the hype, though? investors will certainly be watching closely. they're also watching shares of jpmorgan. that stock is down 3% as fears continue to mount that those trading losses on that ill-fated hedge position they put on will most certainly surpass the additional $2 billion estimate. in fact, last week, remember this? one of our guests, analyst mike mayo said he would sell jpmorgan. listen. >> the banking industry is a lighter version of what has taken place in japan. and you cannot escape the pressure on margins, loans, and overall revenue growth.
so jpmorgan might be good. jamie dimon might be good. but he cannot escape the environment where he is operating. >> all right. so let's get some reaction to jpmorgan and facebook in today's "closing bell" exchange. with us the man himself, mike mayo of clsa. also with us are bob pisani and rick santelli. mike, i'm going to start with you. we just ran that sound bite of you saying you would sell jpmorgan. now it looks like the loss will be bigger than $2 billion. and worrisome to me is whether or not jpmorgan is going to be able to unwind or exit some of the trades that were put on. given the move in the stock lately, i believe you still would sell the stock, certainly. but what is your outlook for it in the near future, given these latest developments? >> the $2 billion loss for a $2 trillion firm is just not that big a deal. jpmorgan has had $60 billion of losses. that's $60 billion of losses at jpmorgan.
you know what that is for? that's for the prior three years due to making loans. >> but you know what is going to happen, mike. they are becoming the new lightning rod for congress. >> exactly. >> to tighten the regulations in dodd/frank. and isn't it ironic that it happened to jamie dimon's company. he has been the most vocal critic among the major banking executives of the coming regulations. >> well, that's the issue. jamie dimon himself reassured a month ago that these investments would not be a problem. they are a problem. so it raise as concern of being too big to manage, too big to regulate, too big to fail, and perhaps too big to understand, if even the ceo, jamie dimon doesn't have his arms around the situation. >> still sell the stock or is it down enough now? >> there is other names to own. i would rather own wells fargo than jpmorgan. >> okay. stand by there. we'll get back to this. let's get to this other story, this facebook thing. bob pisani, it's all the talk today. >> price talk has been around $38 in the last few hours.
i guess that would value what they're floating, and $18 billion. i'm happy they're pricing it at the higher end, but there is a lot of skepticism about this, and there should be. it's not clear they're going to be able to suddenly create some magic formula to turn into all these likes into people going out and actually creating ad revenue. 3.1 billion in ad revenues? i don't know. that's 100 times earnings for the company. tomorrow at $50. >> josh, you want to address that? although the company is exciting, you're not motived to buy it. how much of it is because of valuation? >> i mean valuation really is something that going to be ignored tomorrow, and that's only natural there is a ton of excitement about the stock, and that's great. it's great that this story happened in america and we can still produce things like this in our country. but that doesn't translate into me wanting to buy the stock at 20 times sales, 25 times sales, especially when you consider the dynamics of how many more shares are going to be dumped on to this market over the next half a year. so i think it's great that it's coming public.
but i would not be jumping head over heels to be plowing in at tomorrow's price. >> you would be waiting on that bob, that seems to be a feeling around a lot of the professional circles here. they want to take a wait and see attitude on this ipo, don't they. >> they say 2015, instead of 50 cents a share now, they're going to make $2. instead of 3 billion in ad sales, they'll have 8 billion in ad sales. there is a line they keep pushing. you got to believe they're going to create some magic formula, like the formula for coke to monetize all this information. >> you could get that kind of earnings growth right now with apple. >> thank you. >> at a much lower multiple. you don't have to wait. >> thank you. >> for 2015 for $2 in earnings there. you can get that same growth in google and apple. so, again, i think bob is right. how far are grow you've going to push this out. >> all right. hang on, gentlemen. we have some breaking news on jpmorgan. let's get to mary thompson with some of the latest development there's. mary? >> bill, just "the wall street journal" reporting that jpmorgan's ceo jamie dimon is going to be asked to testify
before the senate banking committee as early as next month. in a statement released by senator tim johnson, who is the chairman of the senate banking committee, he said that the -- our due diligence has made it clear that the banking committee should hear directly from mr. dimon. following are two oversight hearings i plan to invite him to testify. the two hearings are may 22nd and june 6. we should expect to hear an invitation extended to mr. dimon some time after june 6. once again, jpmorgan's ceo, according to "the wall street journal," or actually according to chairman johnson will be invited to testify before the senate banking committee. bill, back to you. >> mary, thank you very much. mike mayo, what would you tell jamie dimon to say here? he won't exactly be among friends. >> or not say. >> well, i would say that the issue here is a crack in the business model. i mean, if you have this crack, what other cracks are there? the whole premise behind these big banks, behind the financial
conglomerate model is you have a strong infrastructure that centralized and integrated. in the case of what just happened, that's not the case so fully at jpmorgan. the regulators probably missed this too. i can't imagine that this loss was any stress test done by the fed. >> well, you know, he needs to, perhaps as you did put things in perspective. the size of the loss relative to the size of their balance sheet, and let's face it, it's not illegal to lose money. when you place bets such as they did with these. head banks do it all the time and they lose money all the time. just not to the size they do here. bob pisani? >> a very good point. he has to hoe a very fine line. he has to look contrite. he has been doing a good job of doing that. but he has to defend the business model. he has to go out and say we have to take risks. we were dealing with a hedge position. this wasn't gambling. and this is the decision we made. it turned out to be the wrong one, i'm very sorry, but he can't cave in on the business model.
>> josh, he can bristle quite a bit, and he is very plainspoken. eis known as one of the best risk managers out there. but capitol hill will not be a very trendily place for him certainly, given the losses that they're getting right now, and that apparently will worsen. so what is the collateral damage to the stock as this hearing goes on and as he is called to testify? >> there is a long-term collateral damage here that i think is what we're seeing the bank stocks price in, which is here is the poster boy for hey, you're regulating us too heavily. now he is going to go in front of congress. i don't think he is going to be as bristly as far as the volcker rule and some of the provisions of dodd/frank. what you're seeing now is hey wait a minute, it turns out that regulation is not going to subside. now the push might become even stronger for us to even be talking about things like glass-steagall again. >> right. >> so i think that's what is being discountdown here. >> and rick santelli, we haven't forgotten about you, my friend.
but now in light of the developments as jamie dimon heads to capitol hill and almost certainly faces greater scrutiny for his company, what about the market and its anticipation of tighter regulations in the financial services industry? >> there you go. >> it's not going to get any easier. i think whether it's jamie dimon, you know, this trade is going to be on a long time. and every time it's on, i agree with mr. mayo. it's going to be a public relations nightmare. it's not a trade to get out of. and it's a poster child not only for regulation, which is really sad, because if they enacted the piece of legislation that were appropriate almost two years ago, maybe this would have been a different ending to this story as to what banks should and shouldn't do, whether taxpayers are involved. but real quickly, to your note, bill, about 30 base points. it's a month and a half high. if you look at tens, 169. this is going to be an all-time new low close. and if you look at boone's at 140, new all-time low close.
the evens of europe, the uncertainty of our own banking system all seem to be coming home to roost in three markets, boone's, gilds and treasuries. >> it's like a record. we went nine minutes without mentioning europe. unbelievable. >> quickly, one of the issues for jpmorgan is their ability or inability to unwind these trades. a lot of people on the street are figuring out where those trades are, and they're not making it all that easy. >> no. definitely not. as a matter of fact, i used to trade derivatives in another life. and pretty much who you do it with, and bilateral relationship, you have to go back to the same people. waiting this trade out is a losing proposition, in my opinion, for jamie dimon and company. >> all right. gentlemen, thank you all. i know josh brown, you're going to be sticking around with us here as we get ready on the facebook story, which we'll be covering a lot over the next couple of hours here. so it's not the first time i would remind everybody that we anchored together. >> this is very true. >> i was asked how long we had been anchoring together.
and i decided not to reveal that number. >> oh, you're very kind. >> so they wanted to come up with video of us back in the day. and this is the one they came up with. from 2004. watch. >> uh-oh. let's see. oh, god, remember this? >> throughout the day at cnbc -- >> hey. >> excuse me. >> yes? >> we're on live television here. >> oh, is it live? this just in. ge is bankrupt. i don't know if you heard that. >> in that case. >> and kenneth lay likes to wear makeup as a woman. sue herera. >> how are you? >> ooh! >> are we going to make hot spanish love right now? >> well we -- i don't know. >> any time now. >> i don't know. maybe. although this is going to haunt me for the rest of my life. >> stocks and bonds. >> you're going to come up with anchorman 2. does that mean he is coming back
again? >> i don't know. he never writes, he never calls, he never sends me flowers. unlike you, who always write, always call and have occasionally given me flowers. >> the anniversary of that day right there. who was that masked man. anyways, it's great to have you with us today. >> it's great to be here. but maria is back tomorrow. so there you go. >> a big day tomorrow. and the market is going lower right now. the dow down about 97 points at this hour with about 50 minutes to go. >> the nasdaq of course also on the downside. we're just getting started on this special eedition of "closing bell." we're back in main. verizon wireless is hanging up on its unlimited data plan. it's bad news for cuss meres, but will it help dial up profits for shareholders? and here we go. >> facebook's red hot ipo is set to price after the bell. how high will the stock trade when it opens tomorrow? and are you a stooge if you buy into what some analysts are already calling an overvalued stock? we want to know what you think.
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about 45 minutes left in the trading session. time for a quick market stat check. if you're just joining us, the s&p is on course for its first five consecutive session losing streak in over a month. a round of weak economic reports on the u.s. didn't mix too well with the jitters about europe that continue today. right now the s&p is down 12, almost 13 points, almost a full percent at 1311. the last time the broader average closed below 1300 by the way was back on january 17th. the dow falling for the 11th time this month. it has closed higher only twice in the month of may. right now down 96 points, just off the lows of the session. not so far from the session low when it was down 110 points earlier in the day. well, that horrible sound you may have heard today were data hogs squealing. and that is because unlimited mobile data may finally be reaching its limit. verizon wireless pulling the plug on existing customers who were grandfathered into the unlimited data plans.
>> ouch. >> yes, indeed. the company will eventually move the customers to a tiered data pricing. so watch out. it also leaves sprint and t-mobile, which throttles usage after five gigs as the only wireless carriers still to offer unlimited data. many believe they will soon follow suit, because customers will basically have no choice but to pay up, which will only boost the company's bottom lines. verizon's stock is up soundly in an otherwise down market. it's up 1 1/4%. jonathan schaaplin of credit suisse. gentlemen, thank you for joining us today. kevin, why are they doing this now? >> well, there is about 5% of the customers on verizon's network that are high usage customers who are consuming a lot of data. and the unlimited data plan is simply not profitable for verizon. the growing usage is growing 70% year-over-year. and they have to get more
economic revenue from these customers to justify the capital investments and the specter needed to support those customers. >> so they were losing money on those customers? is that the idea? >> on a certain portion of those customers, yes, they've been losing money on them. so they're just asking people to pay what you're consuming. and if you pay what you're consuming, they can go ahead and pay and afford to pay for additional spectrum and network that is required to service those customers. >> so jonathan, who is the big winner in terms of an investment play? we see verizon certainly moving smartly higher today. but with sprint and t-mobile probably eventually left with no choice but to follow suit, what would you do from an investment standpoint? >> we like pretty much all of them. we just upgraded the whole sector a weaker a week ago. based on the premise, more disciplined around subsidies. it's going to drive better
revenue growth, higher margins pretty much across the board. we upgraded at&t and verizon on friday. but actually, this benefits sprint more than the other two for a couple reasons. first, starting off with much lower margins. so a small benefit to margins has a much benefit to sprint because they're so leveraged. it has a much bigger benefit to their market cap as well. >> you don't see a decline in demand with this migration away from unlimited data pricing? >> if it -- you know, if it dampens demand a little bit, the carries will much more than make up for that. demand is growing at a phenomenal rate at the moment, as kevin just mentioned. i think he threw out a stat of 70%. it's been doubling on carrier networks for the last couple of years. it's -- that's what the carriers are basically extracting.
>> jonathan says that he likes everything in the group, kevin. but if you had to pick just maybe one or two who you think will be the most successful with this new plan, which ones would it be? >> well, we do agree with jonathan that sprint has the most leverage and upside here. i think sprint is going to be in an interesting position, because they're going to be the only unlimited offering for data in the market that should give them when the iphone 5 on lt rolls out in october, november, that should give sprint a marketing advantage. now verizon has the big marketing advantage because they have about 2/3 of the country cover order will have by september on lte. at&t, on the other hand, will only have about 1/3 coverage. and sprint and t-mobile will be well under 10% at that point. so at&t, verizon is going to be able to go out and aggressively market with superior lt coverage saying they're going to have the best phone network on lte.
and i think that's going to allow them to take a lot of subscribers and upgrade a lot of subscribers in the second half of this year. one point i would make in the overall market, you've seen wireless margins be very strong in the first half of this year as iphone and smartphone units have declined. we think that when the iphone is launched in september/october, that will pressure margin for the carriers. so you should expect earnings to fall in the second half from higher levels in the first half for all three of the major carriers. >> all right, kevin and jonathan, thank you very much for joining us. we appreciate it very much. >> no problem. >> it doesn't matter for me on my smartphone because i don't use it all that much. >> exactly. >> but the ipad, then it's a different story. heading towards the close. just off the lows with the dow down about 91 points at this hour. >> and the nasdaq is lower as well. and if you think facebook is a layup to be a successful ipo, we have something to show you that might make you think again about that. then, we're wondering whether advertising as we know it is a dying model.
and what does that mean for facebook going forward? >> as we head to a break, here is a look at facebook's recent revenue trends. back in a moment. .hyundai genes. in a new, faster-acting formula. s tio-y siin lxtes zemethan a porsche panamera s. the 429 horsepower genesis r-spec. from hyundai. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge.
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at a couple of other recent hot internet companies and how they have fared since their public offers. i'm talking about linkedin and pandora. linkedin is up 137% since last year and pandora is down 36%. so let's talk numbers on these companies and the impact that facebook may have on those and others as well. on the technical side, we welcome back mark newton, analyst with gray wolf execution partners. and on the fundamental side, it's mark mahaney. mark, what impact do you think facebook would have on a linkedin or a pandora for example? >> probably pretty limited. we've had about a dozen high profile ipos and we haven't seen an impact, whether it's an ebay or amazon. i wouldn't expect this ipo to have an impact on those two particular companies. >> no halo effect then. what about mark newton do. you like one or the other in
terms of linkedin or pandora? >> i do, bill. i don't like pandora as much and i do like linkedin start with looking at pandora. you see the stock since it came public last year, the stock has moved in a slow small downtrend from the highs. if you look, you've had lower highs and also lower lows. the stock has been in a downtrend channel. and it has recently moved up about 40% to a level that is really unsustainable in my view. >> okay. >> based on today, it's starting to show signs of pulling back a little bit. near term i think it will pull back down near $9. that's a better area to take a look at it. >> linkedin has been more successful. >> linkedin continues to be a real winner. if you look at this uptrend, it's been a up place for quite some time. it got up to right near the ipo price intra-day of 120. it's backed off a little bit. but it's still good to be long in the stock and buy dips. the area i'm looking at a 105 initially and 101. i still think until the stock shows further signs of deterioration, you really have
to stick with the stocks that are doing well and buy those. >> mark mahaney, with the valuations we're talking about here, the hoopla of facebook, are we revisiting the bubble of the '90s do you think? >> i think largely. no i think linkedin and several others that are somewhat of a mature business model, nice high margins, generating a lot of cash. there is real fundamental trends, there profitable trends there that you could track and you could forecast. pandora was maybe a little bit bubblesque this is a concept stock. it's not going to be profitable for a few other years. that's why one thing goes wrong, that stock corrected as much as it did. that's the exception. the rule has been you've had more fundamentally sound names. >> all right, mark mahaney, mark newton. thank you both. sue? >> all right, thanks, bill. right now the dow jones industrial average is off sharply. as a matter of fact, we're off almost 100 points. the nasdaq is also sharply lower. and we're not all that far away from the closing bell. as we take a very fast commercial break, there is a battle brewing that could end commercial ads as we know it.
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well, that $2 billion bad trade for jpmorgan could be as high as $3 billion, and it probably is going to go higher as well. the stock down another 4% today, meaning the company has lost roughly $20 billion in market value since this story broke after the bell about a week ago today. and now congress is looking to put jamie dimon on the hot seat. mary thompson is here with the latest on that story. mary? >> thank you, bill. let's start with the reports of the growing loss. people familiar with the bank situation say those reports loss grew by another billion aren't true. the reports saying with hedge funds and other big investors
looking to profit from the bank's problems, the trading loss has accelerated over the last couple days. despite those people close to the bank are familiar with the bank situation downplaying the reports, they are pressuring the stock. as bill pointed out, it's down 19% since the news of those losses first broke, and underperforming its peers in today's session. when the bank's ceo, jamie dimon first announced the $2 billion loss tuesday, he said it could grow by more than a billion dollars. he said the daily value would be volatile, but the bank wouldn't be fool initiative exiting a position. all of this making a final tally on the loss dependent on the markets and the bank's efforts to unwind the trade. the bank has said up a command center in new york to monitor its efforts to unwind that trade. as far as the public? well, it will hear more from dimon as the senate banking committee plans to invite him to testify about the loss some time after june 6. he said he will testify if asked and cons to be open and transparent with regulators and congress. all of this coming as a growing number of regulators and
administration officials, including fed president james bullard and treasury secretary tim geithner. they're saying the losses strengthen the case for financial reform. bill, back to you. >> that's for sure, mary. what is the market saying about the jpmorgan trading mess? do they think the problem is going to get worse before it gets better? joining us stephanie link along with ben pace of deutsche bank. senator sandra levin is on the wires right now that the intent of dodd/frank when it is implemented is to ban the kinds of trades that jpmorgan has on right now that is it losing money on. what impact, is there a dampening effect on the banking industry that is going to be a fallout from this fiasco, ben pace? >> well, bill, it's hard, you know, working for a bank and commenting too deeply on this. from a market perspective we always thought that the ramifications of the financial crisis in 2008 was going to be more regulation, difficulty in financial services coming back to anywhere near where it was as
a percentage of the s&p 500. a 21st century version of glass-steagall, which is, you know, dodd/frank volcker rules to the extent that jamie dimon was out there being one of the guys fighting against that at citibank, and now maybe not able to fight so hard. we think that the regulators have the advantage right now. >> stephanie, weigh in on that if you would, and also the market as a whole, it's been a string of down days for the dow jones industrial average. today of course we're down almost triple-digits on the trading session. >> right. and i think that we would be down even more if there wasn't speculation that the ec would come in. >> right. >> and the be the back stop. i don't think the jpmorgan news is really that new in terms of the additional loan problems, the increased amount. you're trading close to tangible. the stock is definitely a value. it could stay a value for a while. you need a positive catalyst, and certainly more regulation isn't going to be the positive catalyst. >> right. >> you're going to be involved in bank, it's going to be a
struggle, but you want to own some of the domestic only like a usb, like a suntrust, like a bb & t. in terms of the market as a whole, we have known that europe is bad. it is getting worse. the global markets are slowing. so the u.s. is still the best neighborhood to be. in although we got disappointing data today on manufacturing, it's still in a slow recovery mode. and i think there are still places that you can buy and make some money. >> and ben pace, what about that? the dollar continues to strengthen here. it's had an unprecedented rally the last couple of weeks. does that put a cap on our own market here in the united states, or does it present a buying opportunity in your view? >> it's more of a function, bill, of what has gone on over the last couple of weeks. when risk is off, the dollar strengthens. it's a pretty good place to hide. not so much of a problem at this level for international corporations. i think we're looking at about high single digit returns, total returns from markets in january. we got all of that and then some
in the first quarter. so we expected a bit of a pullback here based on the fact that price to earnings ratio is going to have a tough time expanding with all this night that is still out there. but they shouldn't contract too much more. so we're viewing this pullback as more of an opportunity to pick our spots in asset classes, sectors, and individual stocks. >> what is your favorite sector, then? >> favorite sector right now continues to be, we still think economic growth will be reasonably good. so we like technology, and we like industrials. >> what is your best idea right now, stef? >> i think the companies are going to benefit from the lower commodity costs. there is a bunch of them. it ranges from the transportation companies like a boeing to the chemical companies like a dow or dupont, to even some of the consumer companies like a disney, a colgate, a general mills, those kinds of names. there is plenty of opportunity. it's a stock picker's market, though. you have to be doing your homework. >> all right. stephanie link, ben pace, thank you both. the dow jones industrial average having a tough time of
it today with the dow now down 124 points, and the nasdaq is down 50 points on the trading session so far. is advertising a dying stream of revenue for companies like, for example, facebook, or even television channels, gulp. >> gulp. >> both sides of that debate are straight ahead for you. >> ups as you know has been around for quite a while. in fact, more than 100 years. but facebook is about to be worth more than the giant shipping company if things go as we think they will. so how does the ceo of ups feel than? he is going to join us. >> he is ringing the closing bell among others today. plus, the man who lost out on getting facebook to list on his exchange. and duncan meter also joins us coming up. stay tuned. but first, before we go to break, the dividend. which financial stock is the worst underperformer so far this year? aflac, mbia, or morgan stanleyly? the dividend pays off, after the break.
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part of the dividend, we asked which financial stock is the worst underperformer so far this year. aflac, mbia, or morgan stanley. now the payoff. mbia, which has fallen more than 20% year to date. brian schactman here. the dow is down more than 130 points. sunpower, spwr. earlier there were reports that apple will use their panels for their solar farm. you see that first leg up after lunch, and the second leg up is from the other report about how the u.s. is ruling that chinese solar companies are dumping panels into the u.s. market. those two legs up are a plus for sunpower. by the way, good business for apple, bill, to do that, because sunpower has their hq in san jose, california. >> how do you like that? brian, thank you very much. let's talk about advertising. as a revenue stream, bread and butter from everything from television to radio to the
internet to "closing bell." it's a model that has been around since the early days of radio. william paille of the columbia broadcasting system one of the pioneers there. now it's navigating new media, smartphones, tablets. but many are questioning whether it is a model that is still going to work. >> because a new dvr box from dish network is causing some tremors in the advertising world. the device is programmed to skip over all the ads. maybe good for you. >> as a viewer, i love that. >> totally true. >> as an anchor, i hate that. >> hate that is this a major red flag depend for my business dependent. traditional advertising is dead, and larry woodard of graham stanley advertising who says it is alive and well. welcome to both of you. diana, make the case. why it is dead? there are still a lot of people out there who do watch tv in the traditional way. you know, there is a market, is there not, for that viewer if you will? >> first of all, it's dana.
>> i'm sorry. my apologies. >> no problem. common mistake. so i would say welcome to the participation age. this is the world that we live in. that people actually expect to have a relationship with you, not just have a message that is spoken to you as the old traditional way that advertising used to work. >> larry? >> well, i think that there is always a new paradigm. i mean, that's sort of the watch word of every era. but ever since milton burl decided to put a model in front of a refrigerator and created modern television advertising, it takes the advertiser and the platform to figure out how to use whatever platform you're using. 900 million people, you got a fish there. you just have to figure out how to fish there best. >> daina, i get what you're saying. and have i often questioned the model itself there is a lot of faith that goes on with companies advertising, getting a
direct return on its money. but you have to admit, the revenue that existed for television, cable, facebook, isn't a traditional advertising model effective for that reason? >> i think the model is shifting. it's not about region frequency anymore. it's about how do you participate with these new constituents. and really, the onus is on us to make the experience really about a relationship. and it's not that it doesn't work, it's that it's very fundamentally changing from the way it used to be. >> so what is it going to look like in five years? what is the more effective model? >> the more effective model is that we are engaging in relationships with our constituents. it's not just about a message that we randomly send out, or as larry talks about going fishing, i would say that's more of a hierarchical i'm going to catch a fish. they expect you to be in the pool with them. you're engaging them. you have a relationship with them.
>> i wonder if people really want a relationship with an advertiser. >> exactly. i think it's all of the above. i believe that advertising is still is informational. and the old adage says that, you know, only 50% of my advertising works. i just don't know what 50%. the fact of the matter is that if you need the information, if you want it, then it's there for you to have it. so intrusive advertising is always going to exist. >> do you think that facebook will be able to use traditional advertisin a -- an effective revenue stream going forward here, larry? >> i believe so. i believe that it's just going to be -- someone is going to be innovative with it. >> even with the general motors cancelling their advertising contract with facebook? >> well, i think what general motors did was really not -- it doesn't have anything to do with anything. general motors has a long -- there is a long buying period. they were using it incorrectly. but if you ask ford, if you ask hyundai, they're doing a wonderful job, and they're very bullish on what they're doing with facebook. i think what people have to do is they have to figure out how
to use engagement. you need to make customers right and consumers your people. you need to make them to be people who actually want to see ads. >> i'll give you ten seconds, daina. >> look at the fan base on gm versus ford. ford has 1.4 million fans. to larry's point actually, they have learn how'd to successfully blend the model. gm has 350,000 fans. >> all right. thank you, both. >> thank you. >> enjoyed the conversation very much. something near and dear to our hearts, advertising. >> advertising. >> market is going lower. down 143 points now as we head towards the close. about 14 minutes left of trading here. >> consumer confidence, retail sales on the rise, along with walmart's stock, one of the bright spots in a triple-digit loss in the dow jones industrial average. what does that say about the state of the economy? coming up. we're in no rush to have an ipo or anything like that. we're just focused on building something good. >> ah, the good old days. that was just two years ago after that interview with our
julia boorstin. a is that a stock you cannot afford to miss out on, or is it already overvalued? >> and where do you think facebook will close tomorrow? submit your guesses to us at facebook.com/cnbc for your chance to win a cnbc "closing bell" prize pack. the winner is announced on this show tomorrow. >> i want one of those prize packs. do you think facebook can live up to its sky-high valuations? we asked. tweet us your thoughts on that at. stay tuned. looking for a better place to put your cash? here's one you may not have thought of: fidelity. now you don't have to go to a bank to get the things you want from a bank. like no-fee atms -- all over the world. free checkwriting and mobile deposits. now, depositing a check is as easy as taking a picture.
okay. ten minutes to go before the closing bell. and the is off is intensifying. bob pisani here. any developments? we're down 135 right now on the dow. >> no. and i'll tell you what i think is going on. for three years, bill, traders have been accustomed to buying on dips. you go down 3, 4, 5% and you buy on the dip. this has not been working for last week there is no 1130. the there is no 3 to 4:00 p.m. rally. buyers who have been buying on the dip start seeing this and say heck, i'm not buying on the dip. i'm going to step back. eventually you get a day like today where all of the sudden you get an air pocket and the volume picks up and the
volatility picks up and the selling intensifies. if you take a look at the transports today, and sue, this is very important. transports versus industrials, transport down 3%, and the industrials down 1%. that is a very strange number there. that kind of difference. >> bob, how much of this started, though, earlier today when we did the bulletin about the fact that greece was downgraded once again? and i was talking to a currency analyst. he said, you know, when this whole european situation started, everybody thought it was unthinkable that greece would actually exit the eurozone. now it's becoming so increase willing i likely, that the aspect of systemic risk and chaos is back in the market vocabulary again. >> yes. and i think that's been around for a week or so. right. fitch downgraded ccc. it means high default probability. that's a slightly different tone when you go down to a c level in fitch. i want to emphasize how unusual the trading is today. >> right. >> volume is a little heavier. buyers strike means the buyers step away and you don't get
heavy volume. today you're getting a little bit heavier volume. if you look a little further out on the vix curve, you'll see the percentages have changed. i also want to emphasize, bill, the retailers and the home builders are notably weak today. the home builders were one of the last real market leadership groups left standing. >> and bob, you wonder whether where is this money going if they're sell in the stock market. brian schactman, they're buying bonds. we have a ten-year yield that has never been this low. >> this is an all time closing low. 1.702. as i look at the screen, it's below 1.7% as you can still trade electronically. >> holy cow, look at that. >> it's incredible to note that. i don't even know what to say. it's obviously going to be positive for mortgage rates. >> you bet it is. >> a little bit what bob said maybe in terms of the volume here, the rotation clearly still into bonds here. it's pretty pronounced and it's dramatic in my opinion. >> we got a dollar that has been on fire for the last two weeks, an unprecedented 12 straight gains for the dollar versus the
euro. >> right. >> and now yields are at record lows on the ten-year. this is definitely a safe haven play right now. >> we were just at 2.4%, bob, not even two months ago. >> you know, though, the interesting thing also, and bob pisani, you follow this very closely that is the gold market had a big rebound today. you know, there is this whole situation in the market where you would think that gold would be the safe haven play. in the past couple of weeks it certainly has not. and that was back on the table again today. what do you make of that? or brian, maybe you can weigh in on that. >> the fascinating thing about gold, obviously, the dollar continues to strengthen, and we saw gains in gold. >> up better than 2% on the spot market today. >> so it's behaving the dollar was correlating, a stronger dollar was weakening gold just as much as yesterday. so clearly it was emerging as a safe haven. a lot of people even questioned sharon when she said that this
morning. in fact she has to be correct because it wouldn't do that with a stronger dollar if it wasn't a safe haven. >> you know, guys, it's interesting. on this day before the facebook ipo, if i'm the ceo of any other company that is going to come public tomorrow, i'm ringing my hands right now because these are not exactly the kind of market conditions that you would want to bring your company public. >> right. >> but i think we all agree it's pretty obvious that facebook is the exception to the rule. it's going to come public no matter what the market conditions are, and successfully so, right? >> i think the way to judge facebook is obviously in the longer term. it's the way we talk about apple. it's its own ecosystem unto itself. i think it's going to be so separate. and it's not going to move the broader market, right? >> nope. >> it's not a part of any of the major indices. it's going to be fascinating to watch the facebook action, but keep an eye on the broader mark action because they're going to be operating completely separate. >> and you wonder, bob pisani, if there is a coincident factor here seeing the nasdaq. as much as we're making of the
sell-off on the dow, the nasdaq is even sharper decline here, decline of about 2% on the day before the facebook ipo you. you wonder if there is a coincident factor there. >> i'm more interested in the fact that for example they're selling consumer names. the retailers and the home builders are on the weak side today. i can't tell you how unusual it is to see three-two-one difference between the transports and the industrials. normally they'll trade within certainly a percent. over a 2% difference between the two of them is a little bit on the unusual side. by the way, i was asked about how far we are from a correction. the s&p is 7.8% off of its recent highs. so we're a ways away. but some big names, bill, like caterpillar and some of the big financial stocks are 20% below. >> one quick question, i'm sorry here. >> i have a lot of questions here. if you could put a 20 second synopsis of why we're selling off like this, bob, what would
your response be? >> as sue said, there are concerns about the macro situation in europe, particularly in greece. but selling at eventually at some points begets selling there has been no buying there has been buying on dips and been no bounce for the last week. people who play the market every week say that and say i'm not buying on the dip. i'm stepping aside. at some point you get a bit of an air pocket, they notice that and selling accelerates and you get morselling. >> thanks, guys. we'll be coming back to you as news warrants. and trust me, news will warrant. >> news will warrant, especially today. up next, we're coming right back with the closing countdown for you. >> and sue, have you heard about this facebook story? >> just a bit. >> we're going to expect the pricing to come back in the next hour or so. it will be eminent. facebook could price literally at any moment after the bell rings. you'll hear it first here. we have a special full hour coming up on facebook. as we head to a quick break, here is a list of the biggest u.s. ipos ever. and facebook looks likely to crack the top five. we're back in a moment. almost every day i walk into the office
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