tv Fast Money Halftime Report CNBC August 14, 2012 12:00pm-1:00pm EDT
on the s&p. gap, believe it or not, is up 111% over the past 12 months. that does it for us here on "squawk on the street." let's get back to headquarters, wapner and the halftime "fast money" report. >> four hours until the close and here's where we stand on wall street. let's show you the major averages. and we are in the green right now. the nasdaq good for one quarter of 1%. s&p up by a third of a percent at 140 and the dow jones industrial average, 42-point gain of 13,211. following on halftime now, retail rebound. consumers shopping again. should you be loading up on retail stocks or returning your merchandise? and look out below. doug kass explains why you should be betting that stocks will fall from here. we're trading all of the big movers today with guy adami, brian kelly, steve weise and josh brown. our top story. reservations over ryan. hedge fund ledge end john taylor
on why mitt romney's pick is bad for your money. speaking out on wall street, washington and, of course, the debt crisis in europe. great to have you back. thanks for coming in. >> thank you. >> how does paul ryan hurt mitt romney's chances? >> well, i think that paul ryan makes this a -- makes this is a vote entirely on his tax and spending package. and i think that that's very difficult, because you're going to lose all the old guys. i mean, i'm an old guy, and my friends are saying, gee whiz, i like what i've got. and you can argue that oh, it's not going to change so much. but they're scared and you're going to lose florida. >> because of his stance on medicare. >> yeah. exactly. >> so, what, we can't handle the straight talk is too straight for some? >> right. you do this -- you know, sort of on the sly. you don't do this as a public opinion poll. this is a very, very public poll, and, boy, there's going to be -- a good argument. it's going to be fun to listen to. but they're not going to win. >> because he's going to cost mitt romney the election in your
estimation. >> i believe so. >> who would have been a better choice? >> i believe that romney would have been better for the economy. and i was looking forward to the bane sort of thought. and, you know, fixing up the bridges in the country. you know, the airports. putting them out to competitive bid and doing the kinds of things the country needs. >> but who would have been a better pick for vp? >> oh, for vp. >> running mate. who makes sense to you? >> somebody like pawlenty, somebody in the quiet, middle. they were going to slide in, as far as i'm concerned. >> you think obama is going to win, we go off the fiscal cliff, and then what happens to the markets and folks' money who are watching you right now? >> we're going to be very close to the fiscal cliff, because republicans are going to control the house, and maybe -- certainly going to be able to stop everything in the senate. and so we've got this road block. >> let's listen to jeremy seigel. i'm sure you know mr. segal from the wharton school on the show yesterday.
had these thoughts to say about paul ryan. let's listen and get your reaction. >> i'm very pleased with the choice. it's real substance. it takes guts to touch the third rail of politics, which is medicare. and i think the choice is a bold one and a good one. >> you wholeheartedly disagree with the professor. >> yeah, i agree that we have to do this stuff. but you don't want to do it in public. >> but when in the heck are we going to do it? isn't it time to stand up and say something no one wants to hear and do it? other politicians have done things that are not popular, christie, walker up in wisconsin. >> exactly. but normally they do it on the day after the election or the month after the election. when they've got a couple years running space. rather than before the election. and i think he's going to lose. so therefore, if you think this is a good idea, this is not the way to do it. and as a result, you know, it's never going to happen. and obama is going to run further done this track. >> steve weise, do you agree with mr. taylor that paul ryan
is bad for your money? >> i don't agree with that. and that what you're saying is that he would be good, but it's just the wrong political tactic to play in the campaign. so comes down to the question of who is going to be the better communicator during the campaign? we know obama can communicate pretty well. we have seen him here on cnbc lots of times. i'm willing to bet they get the message out there. i've spoken to a few people that are older than you, because you're a very sprite young guy and they were not aware that if you're over 55, it's not going to affect you. i think you can get that message out pretty easily, and at the same time, convince the younger populus that you know what, it won't be there for your kids if we don't do it now. >> let's turn your attention, mr. taylor, to the market where we sit right now. dow jones industrial average less than 100 points away from a four-year closing high. largely we've gotten there, because the market -- i think believes the fed is going to come to the rescue soon, and
perhaps more importantly that mario draghi and the ecb will be there. what happens in europe matters to you, matters to our viewers. because it's going to take the stock market where it's going to go. how do you see things here? >> right. ingmar o-draghi is going to be there. but the reason he's going to be there is europe is going to get worse. because spain and italy are in trouble. and they basically cannot finance themselves. especially spain. and so draghi is going to handle that by printing a lot of money. and if you print a lot of money, it goes a lot of places. and one of those places is into the equity markets, commodity prices, risk assets. >> so you see the stock markets around the world going higher, specific -- speak to the u.s. stock market first. >> well, i think that the u.s. stock market -- is actually -- i would argue is in between a rock and a hard place. it's -- the economy is going to do pretty well. we've got what i think is the fiscal cliff now accentuated by the fact of this election. now, maybe i'm totally wrong and
that's not going to happen. but therefore, i think that the u.s. stock market will be kind of schizophrenic. >> will barason "squawk box" this morning talks about greece, we'll listen to him and react to that. will baras. >> i'm in favor of greece going out from the eu point of view. from the eu point of view, i think there are enough fire walls that have been built up. >> enough fire walls built up. so if greece leaves, do you feel better about the prospects for the eurozone? >> absolutely. and i've been arguing for a couple years that it's the best thing for greece and they should get out now. i've said that over and over again. and they've heard themselves by not getting out. a piece came out a couple days ago from the imf, praising iceland for the way they fought their crisis. which is exactly the opposite way the great extent have been fighting theirs. >> brian kelly, big euro watcher
on the show. your thoughts on what mr. taylor is saying about the eurozone. >> yeah, i think -- the problem you have is the deeper greece goes, the worse it gets for them and for the greek people. so there's actually humanitarian side to it. my question for mr. taylor, i guess, we have to get the germans on board with printing money. it looks like draghi has put thissen conditionality of spain asked for a bailout. how else do we get the germans on board if spain doesn't ask for a bailout, because spain can essentially at 3.5% for the next two years fund themselves now that yields have been cut in half. how do we get the germans on board, what do i look for to say the germans are there, time to buy risk assets? >> well, i think that's one of the problems, i don't think you can really get the germans on board yet. remember, there's an election in germany coming next year. and we're shuffling around to how that's going to fall out, right? and what the parties are going to do. the spd is likely to win and is also likely to be much more positive towards helping these
other countries out. so i think that that's what's happening. merkel has gotten into trouble before in history by being too honest, like romney/ryan. and she almost lost the election. so there is a lot of shadow boxing going on here in germany. >> josh brown, turn your attention to the stock market here. what is it, 13,279. or thereabouts. is where we have to get for that four and a half year closing high. we're about 60 points away. around there, anyway. where do you see us going? >> i think you see money come out of the bond market here. and that's why we're getting to these new highs. if you look at the sectors that have gotten us most of the way, they're really almost chicken bond reallocations. so tobacco, telecom. this is the kind of thing that will continue. to john's point, this greece thing in europe is never-ending. and so in the interim what you're seeing major asset allocator like pension funds do, we have to do something. so what they have decided to do is mega cap equities.
i would not be surprised to see a new high, we're at the spring highs here, may not pierce in this time around, but i would not be shookd if we see a new high between now and the end of the year, based on the fact that's what the flows want to do. >> guy's thought in a moment. let's go over to brian shactman watching the big movers today. hedge fund managers making some moves, brian. we're learning about them today. >> back to guy. too tired to talk today. so -- he's just looking there pretty. listen, let's talk about tiger management. i want to highlight something quickly as we take a look at some social media investments and divestments. they bought 2 million shares of facebook. and linkedin which has done better than facebook in a similar space by ten fold from 300,000 shares to $3.3 million. but yelp which has also done well, profit-taking there, interesting moves to look at. back to you, scott. >> thanks so much. you want to comment on some of these moves we're learning about today? tiger believes in facebook.
>> they better believe, long and hard. we've talked about that for a while. i just don't see any reason to go pouring into facebook now. you've got to give them two quarters where they can prove themselves and they haven't done anything positive since the ipo. so, again, i'll say it, we've said it for the last 12, $13, there is no compelling reason on that one. the only one you might consider now is linkedin, maybe. but i think all of them valuation-wise are just -- for me a little too risky. >> we will certainly have more on social media later in the show. give me a thought on amazon. as we see it today, again, with tiger news. >> amazon is completely -- to me, it's a great story. people have fought against on valuation. probably for the last $100 or so. and it's been a losing battle. i mean, you can make a great argument that they're way overvalued, 80 times forward earnings. but the great thing about last quarter, their margins actually went up, which is very encouraging for amazon. so i think you sell it here at
your own peril. >> josh brown on facebook? >> yeah, i agree with guy. i'm not sure if there is any catalyst in the near-term. there are a bunch of negative catalysts that may or may not be overblown in the form of lock-up expiration, but i can't see anything that can happen now that the earnings are past that can change the game. unless there is some kind of major partnership. but i can't invest based on that. this is the kind of thing where i would love to get bullish, but let them start doing some things right in had terms of earnings. i'm willing to pay up, but i want to see some evidence that there is a real business happening here. >> okay. coming up on "halftime," the next european country teetering on the edge of a financial abyss. and a new hot spot could translate into more market losses. plus, we'll go bargain hunting for retail stocks to buy right now as u.s. consumers regain some footing. more "halftime report" is coming up next. twitter.com/cnbcfastmoney. now, one of the most followed sites in business news.
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the thing that hasn't been talked about enough, maybe, with this stock, up 14%, gross margins, the expectation was 57.5%. they came in at 60.5%. operating margins, expectation 18.3%. 27%, scott. just incredible numbers for them. >> yep, no. great report. and steve weise, great in europe. >> yep. >> they're taking share from people. >> definitely taking share. so two thing. the brand is really thriving. they're taking share from coach. i'll give you a third thing to say, that the management knows how to manage the investors, because they set the bar so low coming out of the ipo that they set themselves up to beat it. and that is so critical. that's what's important in owning a stock as the fundamentals. >> josh brown, what do you make of this? they blew away expectations and perhaps the commentary and the actual numbers related to europe, the biggest surprise. do you buy it here? do you sell something else, do you get rid of a coach? what do you do? >> if you're in the -- if you're in the space and you're looking
for growth, i almost feel like you have to pay up and own some of kors here. every once in a while, this happens. you get everything lined up just right. you get a company where the fashion is right, they're opening stores at the right pace. these guys just doubled their net income, opened 76 more stores. and there's still a lot of room. 250 stores is not a ton. so you can look at this and say all right, it's not cheap. who else is growing like this, where else am i getting this five top-end, bottom line growth, this kind of optimism about the future. so that's what you're seeing taking place in kors. and when i get home and see the bags in my foyer, i can attest to the fact they are taking share from tory birch, coach, brands considered yesteryear. >> what is your wife buying you? >> buying me snnkts he's buying it himself. i disagree. i understand why he feels that way. i'm a value player. i can't buy it at this multiple. >> value player can't buy this. i agree. steven, i totally agree. you have to be a growth
investor. this is like lululemon. for three years, nobody could buy it on valuation. but all it did was go up. i think this is a very similar situation. the tough part is, it's really hard to tell when the growth might stall. but i think you have to understand, there are very few companies right now in specialty retail or even in the market that are putting up numbers even remotely like this. >> i'm glad you guys made that point. all right. according to wharton professor jeremy segal, there is further evidence of a recovery in housing. >> a third factor which i think is underestimated is the recovery in the housing sector. i think the evidence is now undeniable. i think we're finally seeing the rumblings of a real recovery there. >> well, home depot topped estimates today. also raised its outlook. shares there hitting a new 52-week high. guy, do you like hd? some people this morning were saying, you know, they're executing better than lowe's. is this a stock you want to own? >> we've talked about this stock
now for at least three years. and we've been steadfast in our belief, no reason it's not going to continue to perform. a tremendous job. their balance sheet is solid. want to play for the dividend, that is fine. valuation stretched but reasonable. and i think they're in the sweet spot for what's going on in the housing market. i think they're going to be in that sweet spot for quite some time. so home deep is kicking lowe's rear end and i don't see any reason that story is going to stop. >> can you own lowe's, as well? >> no reason to. that's what people will try to do. they'll say lowe's looks cheaper, hasn't moved as quickly. maybe it will play catch-up. and you know what, that's always the wrong trade. there is a reason why it hasn't performed as well as home depot. to think it's going to catch up now to me is a fool's errand. >> what's the issue here, why hasn't it performed as well as home depot? >> home depot has much better management. even if you look at home depot when the stock was flat for years, their financial metrics, cash flow generation, buybacks were still phenomenal. it's a different business. i think you stay with the winner in this case. >> all right.
bk? >> yeah. you know what i did, as soon as i listened to that conference call, i bought stanley we, swk, home depot talked about how hand tools were a big growth area, even with the tough comps to the hurricanes last year. i think that's a much better way to play this field right now. >> all right. let's stick with the consumer theme. americans boosted their spending in july by the largest amount in five months. so is the american consumer back? let's welcome steve concern crowd, portfolio manager at durbin capital, a firm that specializes in retail name. great to have you on the show. >> nice to be here. >> is the american consumer back? >> i think they are. i think the consumer is out there spending. today's numbers were real powerful and you're seeing that in numbers reported over the last few weeks and this coming week. >> so who do you like in the space? >> i think what you're seeing, you're seeing a real transition. a law of large numbers, frankly. i think you're seeing a lot of market share being contributed by jcpenney and a lot being gobbled up by the macy's, the
chico's, american eagle. but it's also being gobbled up by tjx. all across the board. gap. >> what do you make of what we got out of kors today and what does that tell you about the higher end? >> kors is a unique situation. i don't think you can look at kors and say the higher end is doing great. the higher end is doing well, but kors is an exception where they are gobbling up share. they're a unique product. the other brands are old. they can get 70% sales growth and they're new. if you ask any department store, macy's, dillard's, it's the hottest brand they can sell, they want to get as much as they can, it's being licensed in every other category. and europe is a virgin territory for them. >> did i see you're the former president of jcpenney credit services? >> yeah, i was. >> what's -- >> a long time ago. >> all right. that's all right. i'm sure you have a pretty interesting view about what's taking place there. do you have a belief in ron johnson and the job he is doing? >> i believe he's -- it's --
retailers have a difficult time making radical changes like this. no one has ever been successful making that kind of change. so you've got to look at it in a short-term, medium-term and long-term. long-term, the jury is out. short-term, it's a basket case. the sales are down 20%. and it's not -- you can't look at it in a vacuum, because you have macy's, kohls, tjx, gap, everybody else trying to attack and do as much as they can. and stealing their market share. and they're not going to give it back easily next year or the year after. so i think there's a lot of work. to pursue ron johnson's vision, it's real radical and, you know, whether or not the 10% chance of success, five years from now, that's probably how i would categorize it. >> scott, i'm sorry, my ear phone went out. can you just repeat everything he said? >> no, it sounds like a longer way of answering my question with a no. i mean, you're not -- you don't really believe in a strategy, but that's here nor there. brine kelly, you have a question? >> you know where the market share is going to. where is it coming from?
what don't you like in this market and what would you short here? >> i think the biggest market share contributor is really the likes of the jcpenney. it's -- they are giving up $4 billion in sales which is a huge number. when you look at $4 billion, you have really got to look at urban outfitters, and anthropology. together only $2.5 billion as a retailer. you look at ann taylor and lost together is only $2.5 billion. so a lot of share being given up and it's being stolen by some of these other guys. kohls should be a beneficiary, they haven't been yet but should be as well. >> macy's, you like lundgren, american eagle and chicos. speak to those. >> i think chicos is a case where women's has been a troubled business this last couple years. and tal bots has been in trouble and ann taylor has been difficult. cache reported terrible numbers. white house black market and chico brand. american eagle has been -- has new management in there, and
again, they're capturing share, selling jeans at $30 this week, and abercrombie & fitch doing terribly, arrest positive total doing terribly. you beau to pennies, levis being sold for $40, and why wouldn't you go to american eagle and buy for $30? >> what are your thoughts on gap? >> massive turn around, got to give management a lot of credit and a lot more room for it to run. and i think penny's again gives them the opportunity. >> hell of a year, 87% gain for shares of gps. great to have you on the show. >> thanks very much. >> guy, you want to touch the retailers? >> costco. a monster stock. i think costco still -- you look at their comps back from early august, their july comps were fantastic. stocks off a little bit today. but i think it's -- i think this is one of those stocks that's going to push to $100 valuation stretched. but, you know, what again, a
stock that's hard to fight against. >> john, we were talking offline about the retail sales figures, strong number. and jackson hole. your view, jackson hole is going to be a big doughnut, the hole, nothing to come out of that. how does that play into the currencies and into the market now? >> i think that's -- that's made the dollar stronger than it would be. because the guy driving the dollar down all the time is bernanke. because every time the u.s. gets to look a little piqued, he throws more money at it and the dollar sags off. now the u.s. is looking much better than the other guys. europe came out with numbers today, they look terrible. the american numbers look great. how can you not sell the euro and buy the dollar? >> let's talk more about europe. coming up, a look out below. the dow's climb raising some red flags. we're taking a look at some warning signs, next. and where the numbers european hot spot may turn up as global leaders try to contain the crisis. we'll be right back. ♪
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three trades. take a look at this stock, groupon and it is ugly. down almost 27%. all-time lows on disappointing second quarter results. investors are worried about its slowing down daily deals. business guy, what do you say about is this? >> lousy quarter, analyst down grades and they blame everything, including ryan kelly's recent purchase of hand tools in their report for their disaster, but will trade probably close to 70 million shares today, typically trades 8. if you're looking for a potential capitulation bottom this might be it. but that's the only reason. >> activist investor jana disclosing a new stake in ago reum, making jana the company's biggest shareholder. steve weise, stock getting a bump but we're learning a lot from these 13 fs. >> jana not that well-known. not a household name. i know them fairly well. consummate value player, behind the scenes activist. ago reum, unlike potash, has a
retail division. so they have stores where they sell direct to farmers, direct to the consumers. they think if you break it up and i think they're right, because retailers get a lot higher multiple, that the combined stock price would go a lot higher. that's what they're doing. >> yeah, bk, give us the lowdown on the vix, yes, up by 5% today after closing at a five-year low yesterday. >> yeah, the lowdown is that it's at its lows here. a lot of complacency in the market. actually, what it's doing from a lot of brokers i talk to, it's making people a little more confident, taking some long bets, because you can get some real cheap hedges here. this is the cheapest you've been able able to hedge your portfolio in a long, long time. so people aren't afraid to get longer, bet that the economy is going to get better and still be able to hedge everything out. >> all right. new numbers out of europe today show economic growth in the region. shrank in the second quarter. which country should investors be most worried about now? yeah, all right, so the numbers coming out of the eurozone, john, better than expected, though they were still weak,
obviously. spain, on everyone's radar. who do we really need to worry about next? >> right. well, i think, you know, italy is on people's radar too. >> yeah, spain and italy, sure. >> and both of those are bad, and are, according to citi bank, going to be rescued before the end of the fourth quarter is out. and considering the situation, i can't see any reason to not agree with that. but france is the one that's going to trick everyone. because you're looking at france and you say, well, okay, they're doing fine, the strong one, france and germany, the two have to be together. but france is now in the third quarter in a row with absolutely no growth. 0.0, three quarters in a row. and the forecast for the third quarter is down like .2, .3%. and we have this new government. we've increased benefits for workers. we have increased taxes. and increased tack taxes horrendously to the point that most companies are thinking of moving out of the country, or at
least they're having discussions like that. this is terrible spot. >> so let's just boil this down then. we'll talk about this more a little bit later in the show. you're worried about spain, you're worried about italy. you think greece may go. you're worried about france. so the eurozone as we know it will no longer exist as of when? >> well, in a way, as we know it, it doesn't exist now, because we have a bunch of basket cases being given money that never happened before. so this is new. and it's going to be new. i think there are maybe 10, 15 new eurozones in the next 20 years. i think the eurozone will survive, but there is a hell of a lost work that's got to be done. >> why is the euro at 123.5 or give or take? >> because bernanke is too smart, keeps the dollar down, helping the u.s. and the europeans are too disorganized to take advantage of the fact that their currency ought to be
lower. >> we'll go into fx later. let's talk markets. the dow may be within 100 points or so of a four and a half year closing high. but is the run about to come to an end? investor doug kass thinks it might. he sees some warning signs and joins us now on the fast line to explain. doug, welcome back to halftime. >> hey, judge, it's a treat to be with my boys. bk, guy and downtown josh brown. also, especially with john taylor, who obviously faced -- changed the face of the musical industry when he was reunited with did your duran-duran in 2001. >> it was fun. i enjoyed it. >> he plays a mean guitar. dougie, why should we be worried about what we're seeing in the market? we're right on the cusp of a four and a half year high. >> let's first go to technicals. can you show the s&p cash chart judge? >> we can do whatever you want. >> and you can see the potential for that dreaded trip al top that might be approaching. not as scary, of course, as if carrot top was approaching us.
but scary, nevertheless. then you see the -- if you go back to the april and early april, may highs, we're challenging them. so you see a classical triple top. secondly, in terms of technicals, you see a stalling out and very pumping pin action. look at the ioit chart and the russell index, the iwm. and thirdly, bk was talking about the vix. and over history, it's very fairly paid to buy equities, although long equities, when the vix is as low as 14. but technical discovery and technical analysis is really not my market weathervane. it's fundamental analysis and that's what really concerns me. >> well, wait, wait. so while you're pointing out that the technical issues that you see, you're telling me now you're more concerned with the fundamentals, as well? >> yeah, i said the technical issues aren't as quieting, but on the fundamental score, we have a pretty stormy outlook. if you look since june 1st, 52%
of the incoming domestic economic indicators were below expectations. 11% were in line. and 37% were above expectations. there's a general view that we have this global monetary put. but as we can discuss with -- with the -- my discussion of paul ryan, i'm not so convinced the fed is going to move towards qe3. and increasingly, people are looking at our leaders in washington, and hoping that they're going to behave like adults as we approach the fiscal cliff, which i think is unlikely. so i see basically five near-term market challenges. the first one is paul ryan. and i think that he represents market down side, getting back to what john taylor mentioned. he has extremely conservative views, if you look at nate silver's article in the "new york times" over the weekend. he is rated as the most conservative vice president nominee in history.
he has a clear opinion on the federal reserve's mandate. and he has a view that the easing by the fed qe1, qe2 is waning in influence and i agree with that. and i suspect that he's going to steepen the fiscal cliff, because of this ideological schism and division which is growing with his appointment. and as i said, i think his appointment reduces the probability that the fed is going to ease in the weeks ahead. remember, he's previously stated that he would replace bernanke when his term was up in 2014. so we have these stark differences in it policy. and finally, his austere budget views, which could raise concerns about the trajectory of domestic economic growth next year. >> so give me a bottom line. if you think the market is poised for some kind of a pullback, where do we pull back to? >> well, you know, rather than growing more constructive with higher prices and lower vix, i'm growing more cautious. and i suspect that the market
could move back to the -- i would say the 1300, 1330 area. i think we're in the process of making a high for the year right now. >> well, 1300 to 1330, so we could lose 70 to 100 points on the s&p. between now and the end of the year? >> yeah. but more importantly, i think we have seen the high for the year. >> yeah. all right, doug kass calling the high for the year. doug, always good to have your insight. >> thanks, judge. >> guy? >> we said last week, the markets had a great regular season, but the yankees could win 115 games in the regular season. but unless they win the world series, it's a failure. same with the market now. it's had a great run, but unless it can push through this 1422 level, might be all for naught, i tend to agree with doug. if we talk about last week, if the market can't get some mojo going here in the next couple weeks, he very well could be right. and i've said a long time, i think the world is an extraordinarily scary place in which the market can go up. and now we're at levels where it really needs to prove itself. >> mr. taylor, you think the
stock market has reached its best levels for the year? >> yeah, it probably has. i think ryan, again, is the biggest, you know, new issue here. because, in fact, if he makes it so that obama looks like he's going to win, then i think the market will see more liquidity out of the fed, and the european situation is going to create more liquidity. and that can hold the prices up. i'm not sure i agree. >> more halftime after the break. antisocial returns for retail investors. you know what that's about. red flag investors should be watching for in the social media space. and why the next few weeks may be critical for the dollar. we'll be right back. born with. something and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you.
the finale of 20 under 20 airs tonight. 41 finalists pitching their innovative ideas in hopes of winning a $100,000 fellowship. but will is something more valuable than money. it's access to peter teal's mentors. >> the mentor match is a very silicon valley thing to do. you meet people at coffee shops and you have to pitch them quickly about your idea and communicate very clearly and crisply. >> do you have a card? >> i think there were a lot of
very talented, successful people in business, technology, science, who would love to work with some younger people, and really see a way for some great new thing to be done in the future. >> where you start is really important in terms of where you end up. if you're starting with a short-term, get rich quick scheme, you most likely are not going to achieve that. >> all right. part two of "20 under 20" transforming tomorrow airs tonight at 10:00 p.m. eastern only on cnbc. let's talk social media now. those stocks continue to give retail investors antisocial returns. are the silicon valley darlings not quite ready for prime time? our next guest was an early investor in linkedin and others and knows the difference between a social star and a social flop. jeremy le vine of venture partners joins us from new york. welcome to the show. good to have you. >> likewise. thanks for having me. >> certainly seems as though most of these social companies
that have at least gone public are more flop than star. why? >> i think it's a classic tale of execution. so there's a bunch of companies, linkedin certainly one of them, that executed, beat and raised every quarter since they have been public companies. and another couple companies, groupon and zynga that haven't. they have missed and dropped. and so as is typical for wall street, the companies that beat and raise get rewarded with nice stock prices and those that don't, don't. >> i find it interesting that among the companies that your firm has invested in, linkedin and yelp are two of the quote, unquote stars of the social media group. the others are well-known, whether it's facebook, groupon, some of the others that have had huge issues in the public market. how are you able to identify winners from such an early stage? >> first, let's hope they stay winners. life is long. and so they have many quarters
ahead they still need to perform. but ultimately i think it comes down to really strong business models, setting expectations relatively low. the lower your expectations, the easier it is to beat them. and go old fashioned execution, focus on building the business day in and day out, rather than short-term capital raising or stock prices. culturally, that's well embedded into both those companies. >> are you saying the expectations for facebook were too high, and also questioned their business model? >> i'm not sure i would question their business model. i think given that they have hundreds of millions of people deeply engaged every day, they have the potential for lots of really strong businesses. but no doubt, expectations were extremely high. so many of these companies, when they came out, were essentially priced to perfection. they had to execute near-flawless quarter in, quarter out to maintain or increase the values from where they came. and that's just really hard to do. these are relatively young companies that are enormous pressure on them that would take zynga as an example. the company was founded in 2007. and so even though its current market cap which is a few billion dollars is a small
fraction of the expectations of 15 or 20, the fact that a few billion dollars of we get was created from nothing in just five years is pretty impressive. and so in general, these companies had really heavy burdens on them. >> what is the problem with groupon? >> well, it's growth stocks. i think they had an incredible machine, a juggernaut that was growing really rapidly and it was unclear, i think even to the managers in the business, how long that growth could be sustained. so they made a series of projectio projections, set expectations and we may be at or close to the end of the growth train. and wall street loves growth. without t it's hard to justify really rich values. >> is groupon going to exist three, five years from now? >> that's a good question. i suspect it will exist. they have $1.5 billion almost of cash on their balance sheet. even if there are flaws with their current model, they have lots of opportunity to adjust and pivot in new directions. and i'm pretty sure they're working on lots of those opportunities now. >> what should we be looking to next? you're on the board of pinterest and other companies as we talked
about as well that you're optimistic about. >> yeah, i think the big shift that's happening across essentially all the names we have talked about and then some with -- in the consumer technology world is the shift to mobile. just a few years ago, virtually all the traffic to all these companies was going from desk top web services. and today for many of them, it's half or more of the traffic going from the smartphones, the iphones, android phones we carry around in our pockets. so i think one of the key drivers for success for these companies in navigating the next several years will be whether they can transition to this new platform which i think over time will dominate computing and we'll see lots of new companies that exist first and only on the mobile platforms which may even give some couples a run for their money. >> jeremy, got to let you run. would you invest in facebook today? >> that's a fair question. i think in the price drops nurt, it might be an attractive by on a value basis, given the size and growth rate. >> jeremy levine, good to have your insights. >> my pleasure, thank you. >> steve weise likes mobile and i know you do as well. >> i do. my concern here, the entry for
these companies. google yesterday bought a company, they bought the fromers franchise from wylie. so trip traded down. so the big companies have the cash and balance sheet and the infrastructure they could leverage and lose money, and put tripp out of business. not saying that it will. same thing with groupon. >> john, give me your quick take on facebook as you saw it. i know it's not your cup of tea, so to speak. but i'm sure you have a thought on it. >> right. i think it's priced right now. this is where it should have been ipoed and then we wouldn't have had this storm and drang about its problems. it was pushed up too high. it's got a lot of possibilities. the point is, you've got all these people there all the time. if you can't figure out anything to do with them, there's something wrong with you. and they'll figure it out. >> all right. john taylor says facebook is priced too high. still to come, the potential scenarios which could shake the dollar's resilience. we examine what's ahead for the euro crisis when we come back. ♪
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i'd love to get your take where the markets are going, whether high frequency trading is good or bad for investors. i can tell you folks watching this program and every program on this network repeated ly twet saying this is not good for them. is it? >> i must agree. all of us have to do high frequency trading in order to compete with everyone else. it's like an arms race. i don't like the arms race but damn it, i'm in it. >> do you think investors are paying too much of a price in a negative way as a result? >> the strange thing, this high frequency trading actually takes liquidity out of the market. >> the argument on the other side is it's giving liquidity to the market, i say that tongue-in-cheek given what you've said. that's the argument you always hear. >> exactly. it's not true. what happens is, paul richards, a guest in a minute can tell you
this as well, the banks have to put out all these prices and they're out there. the prices are for small amounts. if anybody comes in to do a big amount, they pull back and they're not there. you can't get anybody to stand up to the market. it's worse in equities than currencies because there aren't so many currencies and so many more banks giving prices than in the equity market. >> you mentioned paul richards coming up. let's bring him up now. the euro is getting a little bit of a pop on the euro zone gdp data, what's the best way to play the euro zones. let's bring him in. it's good to have you and john taylor together. what do you make with what's going on with the euro recently? fairly resilient given these levels. people tend to think the deal is
contingent on someone like spain that says, i will help, sign up for the esf and know they will be behind you. but in the meantime, the market trades like spain will put their hand up and take the help. two weeks into august nothing is done. i wouldn't hold my breath waiting. i would be very very cautious of market fatigue. it typically means europe starts to fell. >> how would that trade in the numbers you're looking at? >> i think we're in a range in september. september is really big. the eu summit, constitutional court ruling and jackson hole in two weeks time. >> when you look at it, we're pricing perfection into europe, what if it doesn't happen and the market is starting to forget about greece again. we have people in greece right
now and what if germany says, no, i've had enough. that's why i want to sell the euro at least the next month. we're targeting 120 instead of 120 1/2 and if i'm wrong, i'm wrong at 125 and a 1/4 and i will be wrong if spain says yes. >> john, give me 10 seconds, 15 seconds your view here. >> i agree totally except i don't think 120 1/2 is the bottom. i think it will go lower because i think that is what europe wants and needs. as we get into the fourth quarter we will see the recession is worse than they thought, no pickup. few final trades after the break. okay, here's the plan.
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