tv Fast Money Halftime Report CNBC October 3, 2012 12:00pm-1:00pm EDT
interview with david faber. fine he'ally home builders doiny well. home prices in this country are rising fast. that does it for us. let's get back to headquarters and the fast money halftime. welcome to the halftime report. four hours to go until the close and here's where we stand on the street. green arrows across the board, slightly better than expected adp report leading to the gains you're seeing. nasdaq good for about two-thirds of 1%. there's the s&p and the dow, as well. here's what we're following. from bear to bull as the market melts up, is a long time naysayer about to jump into stocks? is apple the world's most valuable public company on the verge of making a big blunder? but first rage against the machines. kraft becoming the latest victim of erroneous trades. the stock zooming higher shortly
after the open and then quickly reversing forcing the nasdaq to cancel several trades as if investor confidence wasn't already hit. let's start things off with our traders. joe, here we go again. >> and mark cuban yesterday said it very succinctly to you. it is really the exchange's responsibility here to kind of police the environment that we have right now that's unfavorable for investors. take i think the exchanges it the right thing. they quickly canceled the trades that needed to be canceled. but let's understand these are exchanges that are making money in this environment, they're paying rebates to co-locate. i think the conversation begins with the exchanges themselves. >> but where is the liquidity in the marketplace? i'm not defending high frequency, but a lot of stuff is in these dark pools. i was talking with an nyse rep. where is all the liquidity that we talked about?
where are the people that own these stocks? where are the top ten holders? everyone is so concerned about anonymity, they don't want to show whatever they have. >> you know what the problem srk the sorry will be written that the rules worked in this case. the problem is we don't know what caused this and we don't know what caused almost every other incident that has happened in the market over the last several years. >> it's called top of book protection. you don't get to trade against it. so if that bid is only there for 100 shares, they buy 100 shares answer then it just drifts all the way down to wherever the support is. but if you own ibm at $200, you have a fiduciary responsibility to your shareholders to put in a where i had at $175 or $50 in case that flash crash happens. there are no bids. >> investor sitting at home is scratching their head, how the hell can this keep happening and here it goes yet again. >> the issue is not that -- the problem is that there should be preemptive rules, not post
reactionary happenings. this reality i think the high frequency trading community does offerly qubviously liquidity on term basis. there should be rules and regulations that say there's only is certain number of orders that they can send per second. >> what are you thinking as you're trying to and a half gate t navigate the market? >> one, either's one stock out of 7,000 different stocs.nd a h navigate the market? >> one, either's one stock out of 7,000 different stocs.d a ha navigate the market? >> one, either's one stock out of 7,000 different stocs.half g navigate the market? >> one, either's one stock out of 7,000 different stocs. gate e the market? >> one, either's one stock out of 7,000 different stocs.te na the market? >> one, either's one stock out of 7,000 different stocs.e nave market? >> one, either's one stock out of 7,000 different stocs. navi market? >> one, either's one stock out of 7,000 different stocs.naviga market? >> one, either's one stock out market? >> one, either's one stock >> that's not the point. it happens every day. >> just don't put a market order in. >> exactly. how many people on this desk would trade a market order? you're asking for problems. >> that's the simple answer. >> you can't be stupid and put in a market order with no liquidity there. >> i want to find out exactly
what the experts think happened this morning. let's bring in the founder of nanex, a firm that tracks unusual market eric, welcome to half tik. do you have any idea what happened this morning? >> it wasn't the market order, i can tell you that. it went up five separate buy events that were separated by about three quarters of a second. so it was something that was stopping up the liquidity and then waiting about three quarters of a second for the book to build and then taking that liquidity out and then rinse repeat. it just didn't seem to have a sanity check on how high it was willing to go. >> sharks are not supposed to look like the one where he just saw that looks like the peak of mt. everest. do you know what happened? is it a fat finger trade, is it something more nefarious? >> no, just the world's stupidst
algo. i take that back. it started out doing pretty well. in fact the first few buy pulses over the first two seconds sopped up liquidity without moving the price. it's just a second after that, and it could be another buyer that came in there is what sent it up a good $10. >> but you think this was some kind of algorithm gone wild? >> no, i think this is just -- whenever you want to buy or sell more than 100 shares because high frequency traders will disappear on you, you have to resort to the arms race and have technology that does stuff like this. >> you need to have a faster computer than the next guy i suppose. >> eric, how much of the conversation should be angled towards elimination of another bully in the school yard? the high frequency trader. in years past, goldman sachs,
morgan stanley. don't at that time risks to stand on the other side of the high frequency vad traders. how much of the conversation should be focused on the regulation introduced to remove the risk participation from these rprop desks? >> that's a very good question, but one i'm not qualified really to answer. >> i have a different question, eric. i'm curious from a current regulatory perspective, what would you do or propose to prevent situations like this from reoccurring? >> two things. one, and you brought this up earlier, that preemptive exchange knows they'll cancel a print that will appear like this. why even let it go through. the answer to that is it takes too much time. these guys are fighting over whether their cable is 500 feet or 1,000 feet because of time, there's no way they'll do anything like check something that has nothing to do with the
trade at hand. probably the best thing that could be done here is to not cancel these trades. let them stand. but -- let whoever put these orders in and was willing to pay and you the way up, make them -- let the market sort it out. i wouldn't cancel the trades. >> the nasdaq certainly has canceled the trades. eric, we had a trading summit yesterday where we're trying to get to the bottom of how to restore investor confidence. mark cuban was one of the panelists, pretty outspoken, as well. let's listen to one of mark cuban's sound bites from yesterday. >> do you worry that another flash crash-like event and so many other market events that have shaken investor confidence can happen again? >> oh, i don't worry about those things. i worry there could be a whole lot worse. >> a whole lot worse is what mark cuban fears could happen. eric, as you sit there and track bizarre moves in the market like the one we saw today in kraft, do you worry about the same thing? >> yes.
i mean, just yesterday brand new algo showed up that accounteded for 4% of all the quotes in the market yesterday. and this was one person. the problem here is every exchange sees things from their own little world. they don't see how things react outside of that world. and they have no incentive to. so when you have these complex systems interacting with each other and nobody's really paying attention to the aggregate, you set yourself up for times of market stress that you're only going to find out how the new systems all work together when you've got this really bad news event that nobody was expecting. >> eric, good to have your insights. thanks so much for calling in. even he can't say exactly what happened this morning with kraft. reports this morning that mass
production of apple's ipad mini have started. but could its next big product be a blow to its bottom line? let's bring in business insider ceo and editor-in-chief henry blodget. on the ift pad mini is coming down the pike. why to we nedo we need it is th >> because amazon and others have introduced a smaller tablet less expensive than the ipad and it appears to be resonating very well with consumers. obviously as you remember, steve jobs famously panned the smaller tablets. but people seem to like them. they're serving a purpose. so apple wants to play in that game and they should. that's a smart move. >> but why should they? they already lead in the tablet department with the ipad. why dabble in something that seems to be a fairly sizable risk? >> my guess is they won't dabble. they'll go into it. and the reason it's important, mobile, all of the devices from the iphone to the tablets, are
becoming platforms and folks are building apps on top of them, you standardize your household and your work around a particular operating system. in this case i chos. and this will be another one of those. if apple was missing a key device that a lot of people wanted, especially at a price point a lot of people wanted, that could hurt them over the long haul in term hes of market share. so definitely smart for them to play there. the issue is what does it do to their margins. with the mini, you may see this is a much lower margin product than the iphone. >> are they willing to sacrifice those margins or will they come out at higher price point because they're apple and they can? >> i think they might do that. that would certainly make sense given what they've done in the past. but the most remarkable thing about apple over the last few years of this renaissance at the company is they've not just been the leader in terms of product quality, but they've also been the leader at least on parity with the leader in terms of price.
so if the price point for this product generally is about $199, that's probably where they'll be. the question is what does that do to the bottom line. and the ipad as i said before is much less profitable than the iphone and you probably will have the same thing with the ipad mini. >> when you look at the management team right now at the helm of apple, do you feel like some of the potential missteps, whether the maps or how we're introducing a mini ipad, do you think the street will look at apple tv less favorably, less anticipatory, kind of less excited? >> i think that the mistakes they've made, obviously with maps being the big one, we had those with steve jobs, too. so there's really nothing there. apple has rolled out a bunch of dud products. they've survived. the issue is can they get the hits that really drive it, do they address the mistakes. and i think that they will. going forward, the apple tv,
everyone was tremendously excited about it earlier this year and it's disappeared from the radar screen. so the question is what happens with that. an that wi and that will be a key product early next year. we've seen this year all the rollouts, iphone 5, ipad 3, so forth. what will happen next year is the big question. and i think people will be looking for a tv product. >> is tim cook -- he certainly hasn't been afraid to go outside of where steve jobs' thinking would have been, certainly with the dividend, maybe not have the ipad mini. how about stock split, will we see that? >> i have no idea. the fact that apple hasn't done it to now certainly suggests that they are not focused on that. to apple's great credit, they don't seem to spend a lot of time worrying about the stock price. they let it take care of itself. and that's good. one of the reasons the company's been so tremendously successful by focusing on products. so i have no idea, but wouldn't surprise me. >> thank you very much.
talk to you again soon. what's the trade on apple? >> i think first amazon and google. i manufacture prefer apple. i think you'll get a big bid after the earnings report, not into it. >> why do you prefer it over google, a stock that has had a tremendous stealth rally. yet no one wants to focus on the fact that they've had a tremendous run. >> if you look at valuation of google around 22 times, apple's 15 times, growth rates are similar. i think apple is still the go-to on a valuation for growth basis. >> steve grasso, what's your pick, google or apple? >> google came out with a better advertising scheme yesterday. and it's for advertisers who want to market on the website a royalty base versuses a fee structure base. i love apple, but i think it's a little lofty here. can it go higher?
it's defied all levels of gravity since. i don't know about the ipad. i think they're forced in to it because they're actually competing against the samsung galaxy note at this point. they're forced into that. so if i were a buyer, i would either buy google or i'd be a buyer of amazon and i would wait to see what happens with apple. i think it can go $50 or $60 lower before you see the run back up. >> brian kelly, the trade of late has been impressive, a dramatic rise. it's outperformed apple. you can see that on the chart. it tells a really good story. are you buying the story? >> certainly if you're buying the stock here, you've missed a good portion of the run. >> if you buy apple here, you've missed the run, too. >> we have something to shoot against. apple you have something to shoot against. you have the 650 level which it seems to be holding against that. you can buy apple here. and we just heard that there is a product cycle here. we have the ipad mini.
we potentially have the apple tv coming in next quarter or the next year. and to me i'm not that worried about the margins. it's kind of like a king cut prime rib which bk likes to order and a queen cut which grass owe mig sgchlt grasso might want to order. satisfieses both. >> i think you buy google. why am i not buying google? because i've told all the viewers on the last couple years i'm the worst google trader there is on the planet. but what zuckerberg today is he highlighted on september 11th the importance of monetizing mobile. who monetizes mobile best? google. go with google. >> we want to know which tablet you think will come out on top this holiday season. the kindle fire, barnes & noble's nook, or the ipad mini. tell us what you think. facebook.com/fast money. on the way, taking the vital
signs of the health care rally. we'll tell you how to catch up if you've missed it. and he's known as one of wall street's biggest bears, but is david rosenberg changing his stripes? he'll join us live pep 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. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity.
take a look at shares of hp continuing to slide. meg whitman speaking to analysts. they cut their 2013 guidance. as you can see, we are down now 7%, some significant warnings here out of the company. i think we've got trades. >> joe, we'll hear from meg whitman tomorrow morning with david faber. does she have any cred left? she said it would work and yet take you a look at the guidance, ain't working. >> take a look at the model and clearly they're turning the model around. they're telling you this will 00
reduce the number of pc platforms. you'll have to wait a long time. when they mention to you that they will buy back shares in the condition of shares successfully exiting the position, funds will do that right now. it is a secular story. this is about p krchlc can balancization. >> do you want to buy here? >> just to joe's point, everyone lumps in dell with this, but hpq has a road map and strategy that they are leaning towards more of a cloud based system. but the problem is it's perception in the marketplace that they look like a pc company still. so no one's willing to give them the benefit of the doubt. so it will be a long time waiting for it. >> you're saying you like the fundamentals. you like what she's doing there? >> i like that she's moving more toward cloud space, but when you look at hpq, it still looks like
old traditional pc to the general public, to the retail public. all they want to buy are apples and googles and amazons. it's a hard sell for meg. >> if you look at the dictionary for value trap, you'll find hpq. >> just to remind everybody, meg whitman will speak to david faber exclusively tomorrow i believe on "squawk on the street." so you'll want to hear from meg whitman herself on exactly what's going on at hewlett-packard and where she thinks she can take that company. brian kelly, you're a buyer? >> no, because she's already told you it will take five years to turn the company around. for me that's a lifetime. >> it could take ten years. >> exactly. if you want to be in the space of them, this is probably the best place because she does have a blueprint and she does have a tremendous track record. so tomorrow morning you'll see where she thinks they are in the process.
maybe it takes seven years. but that's what the time frame you have to have in this stock. >> here's the number. cloud revenue, 8.2 billion. that's not enough. ibm made this turn, they recognized the future years ago. that's why they're at a 52 week high. >> from pain there to gain in the health care. hitting all time highs today. are there still ways to play it if you've missed that rally? kris jenner runs the five star rated. welcome back. >> thanks for having me. >> we're near all-time highs here. is it too late to join the fun? >> if you believe health care is always in vogue, science is making more safer medicines and we have a tremendous number of diseases to which we don't have good therapies, i would say
health care investing is a very durable theme. >> and the smoke has cleared at this point, right, from the affordable care act, so-called obamacare? >> we have the edits if you will from the supreme court ruling. and i think what stands to be determined now is which way does the presidential election go. so the consensus you view obviously is that obama will win. and if that occurs, the reform as essentially written will go into place. if romney/ryan win, i think all bets are off. >> so if romney wins, you have to change your investment thesis and your ideas for what stocks could work in a romney administration? >> no, not really. you've had me on the program several times and i consistently try to talk about did your only investment themes. and that's one category is innovation, that's important new medicines for grieve vus illnesses. and another theme that will be
with us regardless of who the president is and who controls the senate and house is cost of health care. yes, i would submit to you that if romney wins, it's going to have a knee jerk response to a few of those sectors, but what i'm really talking about and what we're focused on is things we think will unfold over the next many years. >> among your top five holdingses you have gilead in there, so that goes toward the technology and development of drugs. how about some of the other best picks in your portfolio right now? >> well, one that i want to share with the audience is a little small cap called pcrx and i'm really excited about this one. it's very early days. a single product company. so realize that there is risk here. it will be volatile. but they have an fda approved product for a long acting injectable anesthetic, all very fancy words to basically say when a patient has an operation,
this is something that the physician can inject that gives long extended pain relief. and i actually think this is a very elegant -- >> do you know what kind of market cap? >> sub a billion. we're in the very early days of launch. but it's this type of product that actually brings a very substantial benefit to a patient. reduction in pain medicines, possibly earlier discharge from hospital. hasn't been demonstrated in a definitive manner, but if those things play out, this is going to be an important product in the surgical care area. >> want to turn it over to steve grasso who has a question from the floor of the can exchange f you. >> we've seen the hospital stocks basically double specifically hca. do you think that's a trap to get into the names now because it looks like payouts will be
more to benefit them going forward with obamacare and also aetna, they've expanded medicaid coverage. i'm long the name, it's been working. does it continue to work. >> steve, to your first question about continued hospital performance, i think that really kind of reflects what my earlier comments about the consensus view that obama will win. and health care reform, let's make no mistake about it, is good for hospitals. so i think that that's increasingly being reflected in the stocks. i got to tell you, we have not really demonstrated excellence in hospital investing. it's just not how we have excelled. and i would say that if obama wins, you're going to see continued performance there. but there's other ways in the health care services areas that we think we can make money and maybe that morphs into your second question about aetna and specifically a medicaid play.
we have some investment in aetna, but on the medicaid side, which i think is a very durable theme of expansion. one that i'd throw out there for viewers, again, volatile, but i think as a multiyear play is cnc. the idea here is that you're just going to continue to see medicaid expand and this is a company that's very much focused and leveraged to medicaid expansion over a multiyear time frame. >> can i get your brief thoughts on cigna? david einhorn made a big tale out of it yesterday. c do you like it? >> we're pretty sanguine towards the managed care group in general. i know that's not the common view because if obama wins, the view is hospitals up, managed care down. but our view is longer term. we like cigna, but the one that i really have a soft spot for is
the 800 pound gorilla, which is united healthcare. and the reason i think that way is that in the dna of this company is a commitment to lowering costs and improving outcomes. and if you were to ask me what are the two issues that have to be most addressed for the next many years, it's throttling back the rate of health care inflation and yet not forsaking good quality patient outcomes. that's really the corporate mission of united healthcare and i don't see how they aren't a player at the table with that being the backdrop over the next many years. >> chris jenner, thanks as always. appreciate it very much. >> thank you. brian kelly, what's your health care trade today? >> i think in this area, you want to look at some of the new technologies out there and that means biotech. i would even go to some of the biotech etfs. if you're looking at pcrx, unless you're a doctor or you play one on tv, it's hard to
kind of analyze these. so just go with the xbi or ibb are the two biotech etfs. coming up, we're following today's slick move in the oil market and your best trades. plus is one of wall street's biggest bears going rogue? we'll find out when top strategist david rosenberg joins us. and later, we're live at the economic summit with alan fournier. [ male announcer ] the 2013 smart comes with 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan.
tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies. tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-800-790-3801 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get ted today.
syou know, i've helped a lot off people save a lot of money. but today...( sfx: loud noise of large metal object hitting the ground) things have been a little strange. (sfx: sound of piano smashing) roadrunner: meep meep. meep meep? (sfx: loud thud sound) what a strange place. geico®. fifteen minutes could save you fifteen percent or more on car insurance. [ male announcer ] the exceedingly nimble, ridiculously agile, tight turning, fun to drive 2013 smart. ♪
want to take you to the chart of hewlett-packard. there it is down more than 7%. company cutting it guidance, again meg whitman the ceo on tomorrow morning with david faber. so you'll find out exactly what ms. whitman thinks about the situation over there. in the meantime oil dropping for the second straight day and falling below $89 a barrel on soft china data. how are the pros making money? let's go he to jackie deangelis.
>> today's headline from the pits, sell oil. the tougher question with the presidential election just a month away, does today's selloff take an scht pr lease off the table. let's start talking futures now. rich, let's start with you. looking like an spr release is less likely. what's driving oil lower today? >> a couple things. certainly the technicals are deteriorating as we speak, but the spr release is way off the table. i'm hearing that even the white house is using the brent contract to gauge the world price of oil. and they're looking at 110 to 120. we're well below that for any risk of spr release. on the way up to the floor, i did talk to a couple big guys. their boys in new york are saying two macro fonts are lightening up on the energy exposure coming into this it first week of the month. whether or not that's the case, we sat down on the our trade
desk this morning, we saw the market start breaking 90. gathered momentum and made a bee line for our first band of support around 89. we're not getting much of a bounce. you may want to cover those positions. the technicals, spr is way off the table. and it seems to be a little delevering. and i think that's what's pressing the market here. >> anthony, let's get your trade on this. >> i'm looking at we're still a very range bund market and even though the china data was soft, you have to look at stimulus from china coming out of the market. so unless we break out of this range, i'm still going to play the range. so i'm looking to get long. november crude oil around 88 of this. i want to put an $87 stop in because that would be below all my support levels. and at that point, we could move a lot lower to $80. but i don't think that's going to happen so i'll be long at 88 1/2 and looking to get out on the up side around 93 and i think the market does work either way up there. >> scott, you you wanted to jump in? >> i'm just wondering what could
possibly take oil higher. pmis in europe and china weak, spr noise always hanging over the oil pit. >> yeah, you do have all that weak data coming out and that could mean more stimulus coming out. and the other thing is you can't put geopolitical on the back burner. you always have to keep that in the front of your head. and that could make oil go higher. >> nothing will take oil higher here, period. i'm a seller. every time we get up near that resistance of $94. we could go lower. >> that's why i say get out at 93 on this move. so thank you for confirming that. >> fair enough. now you know how our guys are making money. but what about you? is the slide only begun or is it heading higher? log on and vote in ourle po pol. and tomorrow, on the live futures now show, we'll have two very special guests, marc faber
and also jim rogers. they'll join us in a double header, one of the highest order, that's tomorrow at 1:00 p.m. on futures now.cnbc.com. >> they call that a double negative, i guess. both of those guys bringing a lot of gloom. jackie, thanks so much. and next on halftime, they say a zebra can't change its stripes. what about one of wall street's biggest bears. we'll find out. oh no, not a migraine now.
try this... bayer? this isn't just a headache. trust me, this is new bayer migraine. [ male announcer ] it's the power of aspirin plus more in a triple action formula to relieve your tough migraines. new bayer migraine formula. monarch of marketing analysis. with the ability to improve roi through seo all by cob. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above,
[ male announcer ] good choice business pro. good choice. extra curricular activities help provide a sense of identity and a path to success. joining the soccer team. getting help with math. going to prom. i want to learn to swim. it's hard to feel normal, when you can't do the normal things. to help, sleep train is collecting donations for the extra activities that, for most kids, are a normal part of growing up. not everyone can be a foster parent... but anyone can help a foster child. we make the turn on halftime, time for our top three
trades. next fwli netflix streaming higher. >> my screaming content trade is coin star and verizon, they have a partnership going forward. but looking at what netflix could do for you here, i think you'll see 75 before you see 50. i agree with the comments in the citi report. you are seeing a turn in customer satisfaction. >> big day for ipos, as well. lifelock making their debut. which of these three do you like? >> the one that caught my eye is javolin mortgage. the thing you have to worry about is as they roll those new mortgages organization t s on, lower.
>> we're coming off a year with the worst drought since 18956. think farmers and the have i wi industry looking for the biotech angle.56. think farmers and the have i industry looking for the biotech angle.56. think farmers and the have i industry looking for the biotech angle.956. think farmers and the have i industry looking for the biotech angle. >> david rosenberg is one of wall street's longest running bears, but is something about to turn him into a bull? david joins us on the fast line. welcome to halftime. >> nice to be back on. >> are you about to change your stripes? >> well, i'm not so sure that i've changed my stripes. i was never you're quite right a market bull in terms of the major averages. >> you've been a bear for quite some time. >> there's parts of the market that i have liked and i continue to like. >> let's be honest, you have been a bear for quite some time, haven't you? >> i've been a bear on the stock market for some time, but like i
said, there's other areas to invest in besides cash. i never told anybody to go hide under the table and by treasuif treasury bills. i've been bullish on god ald an there's parts of the stock market, dividend growth, dividend coverage. and those areas have played out very well. so you can become consumed by focusing on the headline averages, but the stock market itself is just another portfolio. but there are slices that i have liked that i am personally invested in and they're the areas that i think carry the best risk-reward characteristics. >> dividend payers are the place to be? let's say you've missed the broader move. are you surprised by how well the market has done in the face of some pretty significant headwinds? >> well, it's interesting
commentary behavior, but the answer is yes. at the same time, we've got this tug of war between declining earnings, texpectations, and at the same time bank liquidity. but you're right when you talk about the stock market itself, but we're talking about in a probability world, you want to be diversified. we can talk about the stock market all day long, but to have some which exposure to gold and also corporate bonds. and to have a slice of the equity market.hich exposure to also corporate bonds. and to have a slice of the equity market.ich exposure to g also corporate bonds. and to have a slice of the equity market.ch exposure to go also corporate bonds. and to have a slice of the equity market.h exposure to golo corporate bonds. and to have a slice of the equity market. exposure to gold corporate bonds. and to have a slice of the equity market.exposure to gold corporate bonds. and to have a slice of the equity market. absolutely. 2.3% dividend yield, ingwhen it gets to 4% to 5%, the story will be over. but my sense is that in a
deflationary environment which is what we clearly have and what the fed and other central banks try to fight against, you'd nordly think cash is king, but when cash is yields at zero, it's about cash flow being king. so my philosophy for years has been stable income at a reasonable price. collect the cash flows. and it's not just nominal returns which of course where he focus on, it's risk adjust returns that matter most. so i'm also concerned about the down side risk of the portfolio, inherent volatility, and generating returns that i still believe are appropriate. which is all we've done. >> although there's been more reward than risk i should say certainly this year. >> well, but take a look at the high yield bonds have generated equity-like returns without taking on the same degree of inherent equity risk. >> understood. david, good to have your insights. thanks so much. >> david and i have had many conversations in the direction of the market over the last
couple years. >> you mean battles? >> i think he's wrong. and i think the message he's talking about today is much different than where the market is going. sounds like he's talking about how to build a portfolio and diversifying in all the usual things that you hear. i will say one thing. i think what's missing from the market right now is the type of euphoria that signals a secular top that david and others are looking for. until we get that euphoria, maybe it's a grand compromise, i think the market goes higher. still to come, david faber is at the barefoot economic summit. roughing it. >> yes, as always. roughing is as you can see behind me, some very brutal terrain here in texas. we'll be speaking to alan fournier, he runs a $6 billion hedge fund. having a very good year. i'll say that. you probably won't. we'll talk to him about the velocity of money and some positive signs on housing. [ male announcer ] for the saver, and a big first step.
for the spender who needs a little help saving. for adding "& sons." for the dreamer, planning an early escape. for the mother of the bride. for whoever you are, for whatever you're trying to achieve, pnc has technology, guidance, and over 150 years of experience to help you get there. ♪ who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62%
is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or, signs in a woman which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are, or may become pregnant or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting.
t-mobile, how does its deal with metro pcs change the cell phone landscape. and live to denver. what do the candidates need to to do and what would a $17,000 tax deduction limit mean for you, for voters. and where to find the bargains, yes, bargains in the private skret mjet market. it's at the top of the hour. the barefoot economic summit is under way. some of the world's top asset managers and investors convening. david faber is there and joins us now with another exclusive interview. a beautiful backdrop, david. >> $6 billion long short equity hedge fund. but like a the lot of the participants, we'll start out on the macro. >> sure. >> you have been watching the velocity of money. maybe something people go what
are you talking about. but we know the fed is printing a lot of money. the question is it actually changing hands. >> right. did anything show up in your bank account? >> notrecently. >> mine neither. i mean, it's -- what i think is happening in the economy is that we're going through a deleveraging process. if you look at the velocity of money, you see that the chart looks like we're still in recession. it was -- there was a blip up in '09 as qe1 sort of had some impact. we're now at levels that are below 1960. >> reporter: going as far back as the data series goes. you have to ask what's happening. what's happening is the economy is delevering, which is leading to slow growth. i think one of the key macro considerations -- we tend to think of macro in risk management terms, we're an equity long/short fund, stock
pickers -- but the reality of is this environment is that you have to have a view and you have to manage risk and so one of the key considerations is when does velocity pick up, how does it pick up, what does that mean in terms of equity prices, what does it mean in terms of inflation. >> what do you think. >> what does it mean in terms of bond prices? >> we've just looked at that chart. it should pick up. there's good inflation and bad, in a way. >> that's right. and good inflation, ie increases in home prices, increases in wages, those would be positive things. positive investments as long as they were at a pace that made sense. bad inflation like oil prices, commodity prices, that would be a tough thing for the market. >> does this worry you? >> well, it worries me in the sense that -- i mean i think about this as all this liquidity that's if the system, it's like
the guy throwing lighter fluid on the fire at the barbecue. right? we're waiting for the match and the fed has effectively said i'm going to put the fire extinguisher away until mid-2015. so you have to ask the question, do they really mean that. will they start to pull liquidity out of the system sooner if it looks like we're getting bad inflation. i think the chances are that equity prices will respond favorably initially once velocity starts to pick up and the money in the system starts to move. but we have to be very careful and very flexible about how we respond to that. >> as you are, of course. we've talked previously. you're not bearish, bullish, you're flexible. unfortunately we don't have a lot of flexibility on time, so we've got to go. thanks. >> david faber. ahead on halftime, answers to your tweets. ♪ [ male announcer ] this is karen and jeremiah.
they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, they'll find some retirement people who are paid on salary, not commission. they'll get straightforward guidance and be able to focus on other things, like each other, which isn't rocket science. it's just common sense. from td ameritrade. [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it.
welcome back. you got questions? our traders have the answers. seema mody joins us with your tweets. >> we have a couple questions on equities and commodities. let's get right to it. where do you think oil prices will go in the fourth quarter and do you expect that to impact airline performance? interestingly enough, airline stocks all outperforming today after us airways reported that traffic rose 2% in september thanks to growth in its domestic and latin american segments.
joe, my friend, what do you think? >> in the airline trade, you are correct. ual has been the ride trade. delta's been the right trade as well. in terms of where oil prices are going in the fourth quarter, this has been an incredibly difficult year for the speculative community to figure out where it is going. folks saying it is in a range, $85 which is the bottom, probably slips a little further, goes down to $80. if you look at the airlines, last thing i'll point out -- sequester cuts. that could be impactful on the airline. >> defense. >> it could also impact the commercial airline industry as well. >> see ma, thanks as always. final trades, next. irbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.