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tv   Squawk on the Street  CNBC  March 15, 2013 9:00am-12:00pm EDT

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miller and the stock you talked about this morning at the top of the seven was apple. why don't we talk about that because you were telling us interesting things when you compare apple's valuation to google. >> it's got know obsessive about the quarter, about earnings revision and margins and the valuation has been completely lost on people. so google is the stock of the day. google and apple will earn about the same per share this year and next year. google is 800 and apple is 400 and something, so apple, as i mentioned, i don't remember if i did or not, apple is better in ebitda than safeway, kroger and -- >> what's it going to take for investors to shift their view? >> the stock has tracked estimate revisions and people are worried about the quarter. so when the quarter is over the estimate revisions will be done and there's a new product cycle with the iphones this summer and that tends to get the stock going and i do believe they're
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going to do something fairly dramatic on capital allocation. i talked to them about this a few weeks ago and they're actively, saz they said, soliciting input and we've got it -- when i mentioned to them, you take a look at something like texas instruments and it trades at a huge premium to something like apple and a microsoft for that matter because their capital allocation is so clear and texas instruments unlike apple and unlike microsoft they actually repatriate and pay the tax on their overseas earnings. >> and you like to see them do that? >> if they actually believed there would be a change and there would be a territorial tax system then leave it there for the time being and if there isn't, they should pay the tax and bring them back. >> for anyone who missed it. you did have a position in apple and you sold out of it last fall. >> no, we cut the position. we are now overweight apple and we completed the position just a couple of days ago. in fact, an interesting thing on
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an willel, the apple 2015 leaps for the 500s trade around 40 bucks. if apple goes back to where it was six months ago that is four to five times your money. >> bill, thank you so much for joining us and brian, thank you. >> they dragged me in. >> make sure you join us on monday. "squawk on the street" begins right now. ♪ ♪ ♪ the big question, will today be the day? the s&p 500 surpasses its all-time closing high or should the bears beware the ides of march. i'm melissa lee with carl quintanilla, jim cramer and david faber from the new york stock exchange. it does look like we are backing off of those record highs that we had yesterday on the dow and the s&p 500. meantime, we are contending with some economic data. the cpi number coming in hot and
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core was in line and empire manufacturing eased for the month in march. as for the picture in europe, take a look. stocks are backing off a four and a half year high although just marginally to the downside. japan in focus as hiroda is confirmed as boj governor. we have the nikkei up 1.5%. it is the seemingly unstoppable bull. the dow closing at new highs and the s&p 500 two point away from its record closing level and the markets getting a buy rating from alan greenspan who says the irrational exuberance is the last phrase he'd use right now. samsung takes the wraps off of the s4 complete with the tap dancing kid. the stock in south korea pulls back by 2%. apple gets price target and an estimate cut this morning from ubs and stern. banks moving this morning off of the stress test results. bank of america set to open at new highs and j.p. morgan under pressure as it gets conditional
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approval from the fed and as its former cio gets set to testify on the hill about the losses. >> and the fresh face from jc penney. the latest store within a store launched in 681 stores, but can they help rev up sales and we ginn with the markets and a chance for history-making moments on wall street. the s&p 500 enters two points away from the all-time closing highs and dow posting an eighth consecutive record close if the streak was extended to 11 and it will be the longest since the one that began december 18, 1991 and that ran through january 3, 1992. what an amazing run we've had, jim cramer. >> this is unprecedented and we try to find something in the 90s and i think it's better than those buzz it's been so broad. people are selling stocks. then they realize holy cow, i don't have enough exposure.
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i can't keep pace with this galloping s&p 500. this is performance envy and they'ring draing stocks just to be exposed to the s&p 500. >> right. so the typical game of catch-up to a certain extent, just make sure it lags the broader averages. the fbfh is figuring up big. that's all anybody talks about which is the fed bull from hell. >> everybody comes on and says, listen, the fed bolt from hell, it will happen memorial day. in other words, if people keep waiting and they all feel they've got to get out before the fed bolt when bernanke does -- >> the meeting is next week. the money managers are pulling back and selling because they say i can't be in ahead of bernanke and then the averages go up and they say oh, my god, i have to rent stocks ahead of bernanke. they don't want to rent bad stocks.
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they want to rent good stocks and they use best buy and upgraded every day now. it is so far beyond the mark and it is jc penney and this is the performance issue. i can get out ahead of the fed and it is -- >> best buy another 2.5%. >> the sentiment is turning and the short interest is declining on that stock and technically speaking we had carter in from oppenheimer and he said it is one of those charts that is so bad that it is setting up for a bounce. in terms all of the things aligning all of a sudden best buy is a new darling. >> they couldn't get it at 17. imagine if that one had gotten and we'd had an announcement and a special committee. here it is. 21.5, whatever. >> i was on best buy's site with the magnolia and i keep
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thinking, amazon does not have a system and listen to bill miller this morning. he likes groupon. and you have to get something on. no debt. 1.2 billion in cash. analytics, he says are good and the stock's almost 5% a day. people give me stock. >> is it a good sign when somebody is saying buy groupon? >> give me stock or give me death. these people are -- the managers are now scraping situations that i would not feel investable. i've got to have something and the actress who on worldwide exchange is having been in cash. did not know that. and then there's alan greenspan.
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here's what alan greenspan said about the market earlier today. >> right now by historical calculation we are significantly undervalued. the reason yet stock market has not been significantly higher is there are other factors compressing it lower and irrational exuberance is the last term i would use to characterize it at this moment. >> '96. >> i remember when he said it when it went up into the 1,000 points like that it would be an ironic book everyonend if this says the opposite. >> that would be something, wouldn't it? >> you call the top like you call the bottom there, but i just -- i think that this is a market where people are saying i can buy bank of america. it used to be at 50 and now it's
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a 12 and before the mortgage pushbacks and i'm using bank of america and best buy because these are not the highest quality. they're not best in class. hewlett-packard has a bit underneath it and what that says to me is give me something that was down a lot that i haven't really missed. when i see alcoa move, and today goldman upgraded freeport. freeport has done everything it can to destroy itself and it put a $9 billion, and alcoa can no longer wait and then i've got to tell you, we really have scraped everything and i do like claus kleinfeld. >> he's hilarious. >> isn't he? it's that rye sense of humor we never focused on. >> it sure is, the lives of others was not that much of a comedy. i didn't find it that funny.
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>> then there's samsung this morning unveiling the galaxy x4 at radio city. the new phone goes on sale some time before the end of april and the end ever june and scroll web pages with eye movement. the predecessor was a key factor in propelling apple in cell phone sales. why disparity of reaction today? piper calls it an incremental evolutionary update and one person said that apple's been woodied like buzz does to wood ney toy story. >> i like that. whatever. he came out today and he said seriously, it's a snoozefest. he used the word snoozefest and if phil can fall asleep with a smile on his face. he's the attack dog and it will
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be an incremental thing and maybe alan greenspan with the irrational exuberance. this is a momentary top in the moment of samsung and apple has a dead-cat bounce. i had a cat by the name of comag and they made the disk and it was hit by an 18 wheeler and it did bounce. it did. it was a horrendous scene right in front of our house and it bounced. so you're talking about an actual dead-cat bounce. >> it was one of the most horrific things i've seen and i've always felt to use that dead-cat bounce was very insensitive. it happened. i couldn't believe it. >> comag. bill miller overweight apple, and said he got out in the 600s and he's going long again. and let's just say it and it had
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a period of underperformance and apple, this week is revenge of the nerd trade. samsung is the hot guy on the street and maybe we should look at apple again. >> at the same time we knew these reviews the next day out of samsung were going to be like this. so many of the details of the phone were to be leaked prior to the event that we knew it would be a revolutionary product and the fact of the matter is they don't need to be revolutionary because they have exclusivity in the high end and the smartphone market from the end of april when it comes out to whenever apple comes out with this iphone 5 until june, july and they have those months when they have the eyeballs on them and not a new apple product. >> they need the eyeball products to move the screen. >> their version of siri is more commune katif and speaks the language better.
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look. i'm severely disappointed in the first 30 seconds of sales of the samsung. >> your channels indicate that -- yeah. >> it could be like jc penney. maybe 29% behind the plan. samsung has the momentum, but apple as bill miller said is through hewlett-packard. if apple did something today, a big buyback, and i keep doing that twitter. that stock could be a spring and they have to do something to attach it. a low-end phone to attack the international market in order to appeal to the samsung users and the use of the capital. one of the above. >> i'd give anything. anything, a phone connected to, like, a water pistol. >> you're saying an cell a rope-a-dope, is that what they're doing?
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>> butterfly, sting like a netflix? >> are they playing dumb here? boy, i like that, and come june, after the june carter kaboom? >> maybe the whole thing is just a gigantic smoke screen for the nuclear, the thermonuclear phone. >> that was a possibility, but momentum doesn't back that up right now. i like that thesis. it's a painful rope-a-dope. when we come back will fresh economic data lift the s&p to record highs and we've got a pretty hot cpi and we'll talk about industrial production moments away and also ahead a new milestone for one james j. cramer. we will tell you all about that and show you a moment you will not want to miss. take one more look at futures here and haven't done 11 in a row since '91. we'll see if it happens today.
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>> back in a minute.
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buckle up. you know we have multi-year highs in the s&p and now capacity utilization at 79.6 for february is the best number in exactly five years, march of '08 and industrial production headline ramped up .7 of 1%.
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these are strong numbers and probably underscored in some part due to the energy boom that's going on. you know there's a resurgence going on in manufacturing and we saw techdata robe out of total net. lighter and still positive on net, long term and we still have data yet to go, university of michigan sentiment survey about 9:55 eastern. back to you, melissa lee. >> rick santelli, thank you for that. this morning it is jc penney's turn for a depot. the store is announcing boutiques within its stores and here is what ron johnson said about how fresh fits into the company's growth strategy. >> last year we had the same purchase priced dintly and this year we have a lot of new merchandise. joe fresh comes in six weeks and
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the new jcp is coming out of the ground and we think that will allow us to return to growth. >> a turnaround can't come soon enough. shares of the department chain are down 58% in the past 12 months. do you think joe fresh is the key? the key to the turnaround here? >> i'm focused on joe balance sheet and judge wapner did serious work on the balance sheet and the issues, and, look, i like the joe fresh line. i have never heard of a new line of clothes ever saving a department store. i think that that is -- you don't come out and say, you know what? i'm going to make a beeline to jc penney because they've got a new line of clothes and banana republic did help turn and that say smaller company with a new line, but can anyone recall when a new line came to a store and you decided to change your mind and go there? >> it's a series of things and decisions. mickey drexler certainly did some things with the gap that you can argue helped to change
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the willingness. >> the balance sheet at the gap the whole time. i do want to add something i picked up recently and it's anecdotal, but in talking to mall operators, ceos and some retail senior managers. traffic doesn't seem to be very strong for february and march. i'm not talking jc penney and i'm talking in about retail and we have numbers unexpectedly strong and at least when i'm hearing in term of traffic it is down from february and march. it may be weather. last year we had a very warm period than even in january, but early spring. we'll see, but something for people saying hey, things are great in retail and i've heard it enough times to start to believe it. the mall traffic versus what macy's is saying, versus home depot. >> you're right. >> you're right. this is the same battle we've
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been having that the aggregate doesn't seem as good as the individual. >> we had stories out of dow jones using the letters cit and generally not a positive when you're talking about a retailer. >> that came early yesterday that we were taking a look at before we were able to confirm it on this show and we watched jcp go down 1% and they were on invoices by jcp and they erode confidence to a certain extent and it is very important for jcp to get on it when it comes to the balance sheet. >> cramer is reaching one of his own. tonight marks the eighth anniversary of "mad money" and on this evening's program you willy see eight of the most memorable moments since the show began. here's a look at what cramer said, for instance, about the flash crash. >> we've now broken dow 10,000. >> the p & g is now down 25%.
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>> if that's true, if that stock is there you go and buy it. you can't be there. that is not a real price. >> that is liquidating -- >> who cares? 49.25 bid for 50,000 proctor. proctor just jumped serve points when i said i liked it at 49. i just paid $500 gs. the machines broke down. you'll never know what happened there. >> still don't know. >> we still don't know. >> proctor was at 36 when i told people to bid 49. if you did buy below 49 you did make 18 points. a lot of people email mead saying that was the greatest trade they ever did. >> i'm using this as a -- >> euphemism. >> the trading mechanism broke and it was a great opportunity and my friend erin burnett was out there and people were
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confused and you just have to say procter & gamble shoudn't be down 50% unless they recalled every single product because there was some sort of rash and colgate. everyone switched to colgate. that did not happen and morgan stanley downgrades colgate today because of the valuation. >> what? >> it's just funny, the idea that everyone would switch to colgate. >> crest, i hate it, and that's why proctor was split in half. >> forget it. >> yeah. they went to burt's bees. >> anyway, go to to vote for your favorite cramer moment and of course, that is 6:00 and 11:00 p.m. eastern time and still looks as young as he did on day one. >> thank you. >> when we come back, how do you end a record-setting week on a profitable note? follow the mad dash back. futures are here after a better than expected industrial
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production number and still more data on the way. "squawk on the street" from the "squawk on the street" from the nyse straight ahead.
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we are a few moments before the bell on a friday morning and cramer's mad dash watching a name you'd like to top. >> david faber and i have often said alta salon is the stock. these are two retailers that came out of absolutely nowhere and became the darlings. february 14th gary said get out
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of ulta. that's good research and that's what you want and still be careful, ulta, but he did do a victory lap and i congratulate gary. >> knock them when they're down. >> gary is a very good guy. he identified blockbuster video and gave us 1,000% gain when we were at goldman sachs. >> you made a controversial call and liked air last week. >> raymond james, i was enwrapped to bill miller this morning on squawk. what a great squawk they had and this combination with amr is going to be the game changer and the airlines which have been uninvestable for decades will be investable. this is not the one you downgrade. this is the one you buy and i would use any weakness to buy lcc because it will be amr. >> this will be tough, but america west made an acquisition once in this area. it did go up 50% after the deal
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closed on a bankrupt airline. i am sticking by this. this is not a trade. this is an investment. >> the dow has hit an all-time closing high for eight straight sessions and the opening bell is coming up next. recognize me.
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we're watching cnbc's "squawk on the street." we're at the financial capital of the world and the opening bell set to ring in one minute's time and we're all watching the s&p 500 today. the number to watch, 1565. 1565 is the all-time closing high on the s&p and we're just a couple of points away at this point. your guess? >> oh, boy, i don't know. there is so much momentum going into the weekend that it's almosta as if people are rediscovering this market daily. we the pleasure of watching maria bartiromo yesterday and there is a kind of unreal sense that the people are just beginning to recognize we're hitting highs and so different from the old days where everybody seemed to know about it and just not there yet in terms of hitting the consciousness.
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>> yesterday. 57 s&p components hit all-time highs and that's a tenth of the s&p. [ bell ringing ] >> the cnbc real time exchange and here at the big board they celebrate ireland day. sunday is st. patrick's day a. >> you see wilbur ross in the capital and we are taking a shot of iena drew's expected to arrive shortly on the hill from j.p. morgan to testify in front of the permanent subcommittee investigations, but there's wilbur ross, the great dancer as we like to call him. >> and what a turnaround story ireland is, i was there this time last year and getting my degree in guinness university, to be candid. there were votes to go for off thor arity and a year later they're back and they're in the bond market and the economy seems to be turning around and it is the great lesson of being able to deal with tremendous
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adversity. irish people are much tougher than people realize all of the way back from 1847 when the british cut them off. >> take a look at colgate palmolive. you had mentioned the downgrade on valuation concerns and the stock is down 1%, but this tells an interesting tale of the markets as well where people are looking at best buy and bank of america for performance. they continue to pile into some of these stocks. >> take a look at the former cio of j.p. morgan making her way through the halls getting set to testify about the london rail losses. >> 50 interviews and 90,000 documents and essentially alleging today that the bank hid losses as far back as january 2012, and ignored multiple warnings and ignored metrics and that even jamie dimon withheld information temporarily regarding the whale loss. >> the conclusions of the committee do not read well.
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another reminder certainly, when you revisit this and you look at the fact pattern or at least how the events went from let's call it january 2012 until we learned about it in may, it's just another reminder of the lack of transparency, i would argue, for many of these banks and many of us did not even know of the existence, frankly, of this unit that was managing hundreds of billions of dollars and you are, at least taking to a certain event the word to manage the banks and to manage risk. >> as we know well 6 billion on j.p. morgan's balance sheet and for the bank of that size did not end up being in any way, shape or form a transformational hit and senator levine will argue and many in the committee that, you know, it would have been and we would have had to come to the aid and it is yet another example of the need for the volcker rule. >> it was too big to fail the
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other way. >> the balance sheet, this was a -- >> i want to go back to that unfortunate phrase and i'm sure jamie dimon would take that bank and the bank size itself was something good here. >> it's important to point out. the pay packages for drew over the last two years. 29 million. 30 million and almost 31. bruno, some 14 million. the word we've gotten informally from some of the reporters on the ground is that iena drew can get emotional in a group and we will see if this turns into something dramatic, so to speak. >> the pay packages have always puzzled me in the sense that the unit is not supposed to be taking great risk and not generating enormous return and why would you pay those kinds of numbers conceivably, for returns that were -- you weren't looking for somebody to outmanage the s&p. >> i just think they were stupid. i remember michael semibless, a
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great strategist for public wealth with was selling short when they were going along. this is a stup ed, stupid move. it was dumb. i don't think it was criminal. there are a lot of people who make mistakes. this was one of the bigger mistakes, but i do still don't find it nefarious. i do think it's stupid. >> when you look at the findings they are shocking when you consider the panel, the report found that the cio blew past advisories and risk limits 330 times in four months. value bar doubled one month over the next month. i mean, some of these things are why didn't this hit the radar of anybody? >> their lettay not forget, this is the same panel where lord blankfein appeared three years ago if memory serves. sometimes i do get confused with my dates about not just the advocate ceo, but the basic idea of trading against your client
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or as he famously said -- >> we remember counterparties. >> we remember the carl levine-lloyd exchange and he will be back again today. there was a discussion this morning as a banker would you rather go in front of carl le n levin. >> i was in that room. >> simply having to avoid the bathroom is legendary. the man can go on and on and on especially for a man of his age. >> paul ryan -- >> just noted it. that's all. >> there he is. >> he didn't think it was funny. i did actually mention that to him. >> there are 100 of them and we hold them with respect and the banking industry itself some did not -- they did a disservice because they didn't recognize that the guy is a senator and senators should be treated with a little more reverence. >> j.p. morgan down 2.8% and conditional approval for the stress test and that's something else to keep in mind today. let's check in with beob pis an
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owe what's moving. >> we have excellent movement, almost 100 million shares have changed hands and that's practically a full day's volume for the new york stock exchange. we'll get volume and we'll see what, if any, volatility we'll create here. have you noticed here financials? j.p. morgan is down. we've got a number of them that were sitting right near new highs, bank of america, wells fargo, regents and i'll tell you what was interesting about the bank capital return plans and some of the banks are returning as significant dividend players and to me what's significant is over 3% because so you notice wells fargo's dividend is at a dollar now and that was the largest of the banks that i was able to find right now. as i said when you get over 3% that gets significant. j.p. morgan's dividend is $1.52,
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and i have exactly 3.0 on the dividend yield and with the dow lower it might be higher than that and others are headed in that direction. capital one, i said i'll bet it will be over a dollar. it is $1.20 and i have 2.2% yield and they're heading in that direction and nobody else is at 3%. the other nice surprise is bank of america. no dividend increase, but 5 billion share buyback. i had some people estimating $1 billion and $5 billion was above everybody's numbers and that was a pleasant surprise. no meaningful dividend. still, bank of america and citi is still diminimus and that's not great news. the big question is what's next? we'll get earnings for the banks and have you noticed the bkx and citi is up 12% in march. just in march citigroup is up 12% and everyone that i called that trades bank stocks said it's probably time for a rest
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now that the numbers are out right now for the banks. >> and let me close with the global indices here. have you noticed up fractionally, europe's up fractionally and all of the big emerging markets are to the downside because money is coming into the united states and out of china because of concerns about tightening in china. we had 2% to 4ers. upon peru, south africa, brazil, china was down 3.2% and remember, the dollar rise has been a major problem for people investing in these foreign countries using etfs and it reduces the value of the holdings and we're continuing to see inflows into stock mutual funds and only modest inflows into bond mutual funds. david, it's not a great rotation yet out of bonds and into stocks, but definitely the inflows are slowing down into those bond mutual funds and speeding up into stock mutual funds. become to you.
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>> important to watch. thank you, bob pisani. >> look at that. dell requires that only 42% of existing shareholders vote against the deal, given the opposition it faces from southeastern asset management and carl icahn who favor a leverage red tap talization or investors who are betting on a raised offer and it is fair to say the lbo is in doubt, but what isn't in doubt is that dell was in the midst of a painful transition of a business model that few companies in the technology have managed to navigate with success. it is the uncertain of its financial result which is is likely to be made plain when the merger proxy on the deal is released the last week of march. they would net it for their benefit than the perceived benefit of its purchasers. there is plenty to come in this battle. the vote on the deal is not going to take place until likely mid-july and between now and
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then, dell will report another quarter of earnings. first up is the voluminous federal filing that will detail the aks and the thinking of the four-person special committee of directors that led michael dell and silver lake and agreed to the $13.65 deal. people with knowledge of the merger proxy say it will show not just the blow by blow of the deal making, but the challenge and unpredictability that dell is dealing with as the pc market faces computation from tablets and smartphones and lenovo who happily operate on operating margins from as little as 2%. that is best encapsulated by one detail expected to be in the proxy. >> the management's plan called for operating income of $5.6 billion in the current fiscal year. sources tell me the most recently called for 3.7 billion for fiscal year 14, while dell
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has spent $13 billion in acquisitions and designed to move it away from its reliance on pcs, they still represent 56% of the company's 56.9 billion in revenues and sources familiar with the situation tell me the proxy will cite the july plan. that three-year plan presented by management, prior to michael dell's engagement was a bottom's up view of the business that increased revenues and margins in fiscal year '13 that ended in january. only three years later that plan proved far too ambitious. it wasn't long after that after discussion the idea with his neighbor in hawaii george roberts of kkr, that michael dell approached the company about the possibility of a management-led buyout. a special committee of directors was formed to negotiate with dell and one of the first acts was try to get a handle on what the company was really worth.
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a new financial and strategic forecast was announced in september, but as dell's performance continued to deteriorate in the fall, and even that plan which called for far lower margins and revenues still forecast 4 important 2 billion. that seemed optimistic. sourcers tell me the special committee made the unusual choice of turning to the consulting firm of bcg to help and understand the future of the pc business and the prospects for dell to transform itself. bcg gave the special committee an appraisal, that approached dell would not generate operating income of $4 billion for years to come and would pose roughly 3.4 billion in operating income this year. that's a number that sources tell me looks optimistic now. >> we'll have more on the potential, the back and forth between silver lake and the other parties that may have been interested. you can read all of this as well
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on >> how can you not buy puts in this right now? what is the upside? maybe 50 cents and the down side five bucks? how can you not buy puts? >> this is a special committee and i've seen them operate many times and it seems they did everything they possibly could to arrive at a reasonable deal and try to transform a company in the public realm versus what it would sell at and letting them to try and do it privately. michael dell said or my understanding is we could add debt. we could try and do this transformation publicly, but what do i do if my stock hits four? how are my customers going to react then? that's something else people need to keep in mind. this battle is far from over, but the acquisition is significant. you're not going to want to miss where the ideas originated. >> allied, federated and they all had it while the deal was going on. david, this is -- this is a put --
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>> i think what is very important is 5.6 billion planned fiscal year '14. that's the year we're in right now for dell and now my sources tell me it is well below that. that makes you whether customers are already saying -- >> fabulous reporting. stay away from this one. let's shift to bonds and the dollar. rick santelli at the cme group in chicago. >> good morning, jim. there's always something unique about fridays. just consider the utilization rate in five years. inflation, higher than expected. these argue for higher yields. what do we have? the exact opposite. we're like count eertrend frida and it's normally countertrend tuesday. >> after the data came out, most of which should have been traditionally bearish bonds, you see what yields have done. they dropped. we are now lower on the day, lower on the week. the bund, each though the spread
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has widened between the two yields they certainly relink the way interest rates relink to equities at a different calibration, but exact leet same pattern. let's switch gears to currencies. if we take a look at the euro versus the dollar, guess what in the 129 hold and the 130 pivot and now let's go to the pound versus the dollar. a huge surprise move considering the last seven or eight weeks it lot of 3.5% versus the greenback and we have the best bounces in close to a month and marvin cane from the think bah of england says hey, guys we're not trying to lower the currency's value. i don't know if i believe them, but on a friday the market does. back to you. >> thanks so much, rick santelli. we are keeping our eye on the hearing, of course, the senate subcommittee on the special committee in washington, d.c. there's carl levin as iena drew takes the mike in the next few
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minutes. here's what's coming up next on "squawk on the street." coming up, before you start kicking off your friday trades, take a listen to what cramer says. don't worry, it will only take one minute. six stocks in 60 seconds. "squawk on the street" will be right back.
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let's get "6 in 60." we'll do this at the table. >> a change of pace. >> let's start with number one, cablevisi cablevision. >> citi comes out and says it will likely be sold at $20. they have a lot of debt on the balance sheet. >> unilever. >> the the europeans have been dunn more. unilever is undervalued. >> arm holdings. >> maybe we go back to the apple. i did the teardown of the samsung. maybe the old guys we'd tear down the apple. >> surgical news. >> this is the da vinci. is it worthwhile? the be on stet rigzs say it's not. interesting comments out of
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lennar. we need more homes. stewart miller, i would focus on him and agree with him. >> got rail traffic data yesterday. >> csx is saying fracing sand is a huge, huge business and maybe perhaps replacing coal one day? >> we already mentioned it is a special day. >> hey, i'm cramer. i can't believe i've said is for eight years. i'm very proud of my network. i want to thank everyone from our network all of the way for the support to allow to do a show that was a song and dance man about business. thank you, cnbc, for allowing me to have that hour. >> there's been a lot of comments on twitter. going eight years in cable tv is like a 30-year broadway run. >> my friend henry blodget said that and i was very proud. thank you to the well wishers. >> you are the freed as tear. >> i'll take that. let's face the music and watch
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the show. >> or hugh jackman. it's hard to tell. >> can i be frank? >> maybe not. >> thank you, guys. >> of course. former and current j.p. morgan chase executives on the hot seat on the hill and a senate panel holding hearings on the london whale trading scandal. a live report from d.c. is straight ahead.
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live picture there of senator carl levin on j.p. morgan chase's $6 billion trading loss is under way as you saw there on capitol hill. among those scheduled to testify ina drew at the center of the london whale scandal. kate kelly is on the hill with the latest on this. >> thanks so much. this hearing just got under way and we're hearing an overview of senator levin in terms of what his investigation found. we got a hold of the prepared statements that we're likely to hear from former ceo ina drew who just arrived a bit ago.
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>> i was and i remain deeply disappointed and saddened that such significant losses occurred in the business unit i oversaw and a unit i managed diligently for many years. it involves regular ups and downs i had never before experienced a situation like this one, though i did not and do not believe i bore personal responsibility for the losses, it goes on to explain why she thought it was best for her to leave the firm and that ceo jamie dimon reluctantly accepted her resignation and they were dealing with this synthetic credit portfolio that was at issue and led to more than $6 billion in losses were mostly fired. i think they spray had one person leave under different terms. >> but anyway, carl, it's likely to be an interesting day and we'll be hearing in a drew break her silence in terms of her view of what went on and i would expect a rigorous question and answer from senator levin and senator mccain and possibly
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senator johnson from wisconsin, the other member who is present. >> kate, a lot of people watching j.p. morgan, the fourth worst lose or the s&p. thanks so much. rick santelli is in chicago. busy day, rick. >>a busy day. the sentiment survey is a big one, but in a different direction than industrial production capacity utilization. it is down significantly at 71.8. we were looking at levels 78, 78.5, this is, according to my notes like the lowest level since december 2011 when we were at 69.9. so as you see, equities add to losses. as you see a 2% trade on ten-year, that is the culprit and once again, it's a bit ironic. the markets seem to ignore some good data and they certainly didn't ignore this and the countertrend friday seem to
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continue. >> we made our way through michigan, industrial production. cpi and empire and it's been a busy, busy morning and simon is here to talk about how the ten will be even more busy. >> we'll take in a drew and important testimony on capitol hill and we'll talk about the flows that we have into the market and why we're not rising still further today and talk about samsung and apple after last night's big launch of the new galaxy phone and a fifth grader will be hereaking the case for a long-term stock pick, but all eyes really now on j.p. morgan on the hill and what could be some very earning mobile testimony. stay with us on cnbc. e've embrad a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done.
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dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. welcome back to "squawk on the street." let's get the road map. the s&p is inching away from record highs. the dow's down 67, but the turnarounds in the index into record territory. the number to watch, of course, is still 1565. >> the biggest lose or the dow is j.p. morgan. ina drew is getting grilled over the london whale losses after
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getting conditional approval from the fed for its dividend plan. we are live on capitol hill. >> samsung unveiling the galaxy s4. what does it mean for them and for apple? >> we'll hear from an executive coming up. >> are you smarter than a fifth grader? we'll introduce you to an 11-year-old who may be young. she is considered a savvy investor and hear her long-term strategy and which stock she wrote about. >> first up, the samsung galaxy s4 has been unveiled and unpacked after radio city in new york and what it could mean for the company and its competition. >> alex joins us at post 9. always good to see you. >> thank you. >> a beautiful phone. >> yes. >> can you be more specific? >> it's a wonderful piece of hardware and it's pushing the envelope and it will have global 4g lte capabilities and it will have a higher performing wi-fi
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standard and it will have a big, brilliant five-inch active matrix display. >> evolutionary or revolutionary? >> it is evolutionary within a revolutionary category. so smartphones are transforming communications. it has not only the interpersonal communication issue to it, but it also has infrastructure implications to it. so the way that we are now interacting with our devices, transmitting data globally and between people, between communities for work and for play, i think it's a revolution. >> we're watching video of their marketing campaign including the little kid who tap danced at radio city last night. that was a glitzy affair. >> yes. >> today the question is, okay, the phone's nice, some of the hardware features are nice and is that enough for people to leave an ecosystem where they do feel at home and where their lives are tethered. >> today, compared to two years
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ago, there are two very important ecosystems what samsung is achieving and what apple is achieving and they both have their fan bases. i don't think there will be a lot of mix between the two and i think what's very exciting is that there's buzz around both camps, very high-volume buzz and what j & p securities has been saying is it's difficult to predict who will win this war and we've been recommending playing the arms dealers that will win. >> why do you say it will be thoord determine who wins the war and by what measure are you using? is it market share? is it revenues and is it the stock price move? what's the metric? >> that's what i'm trying to judge right now, and i think that right now samsung has just set a high bar for apple to match. we'll see what they can do later this year. we're expecting an iphone 5s and we're also expecting an iphone that's appropriate for the china mobile tdde network and we're
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expecting qualcomm and skyworks, names like that to come out winners when the phones come out, but coming back to how you play the winners and losers here, i think that this round right now samsung's first with the galaxy s4. this round goes to them and now it's up to apple to claw their way back. >> apple is positive by more than a percent and a half. some are reading that as a sign that they have nothing to worry about after last night. >> i don't know that a 1% move says nothing to worry about to me. i think a little bit of a relief bounce here. i think what people are more focused on is what kind of dividend we have from them and we're a few month away from knowing what the apple retort will be on the technology side. >> inevitably, we painted an apple-samsung battle and whether it's more about htc and nokia anda black berry is keeping those guys at bay as they catch up with smart phones. >> that's some of it because right now it looks like a two-horse race and i don't see
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anybody else closing the gap at this juncture. it's really apple's and samsung's game to drive the technology forward. >> what about in emerging markets or china? >> china is really opening up now. we just saw china mobile announce a massive increase in infrastructure spending to accelerate their network. so that's another race. i think apple has very good potential to win in china. their brand resonates there and so does samsung's number one-selling phone in china. i think it's a rising tide and we're both good wins. >> the price points aren't right for that market. in order to really be right for that market they need a lower cost phone, don't they? >> i think they need both. i think they need to keep the brand as high in sterling as it is there and then, yes, expand their brand. >> we have very clear indications as you would expect from apple and they're innovating at the higher end and i believe they're working on larger screen phones and they're
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working on something that you call iphone mini and more economic. and apple isn't blind to this. the country woke up this morning and said there's a company called samsung. >> that's right. it's all over the morning shows and arc mazing to watch. >> appreciate it very much. >> as you said, we were at the event in new york city and we had the opportunity to speak to nick decarl owe and samsung's vp of private planning and he commented everything from the s4 features, why bigger better and the cell phone industry at large. take a listen. >> what makes it distinctive, we made the camera bigger, the battery bigger and the overall device is thinner, lighter and smaller which is just an amazing feat of engineering. you add into that all of the sensors and the really cool software features like sl, the dual camera and it's an amazing piece of technology that is really easy to use. the thing that will kind of wow
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your friends is when you can move the screen without even touching it and that will really impress people. >> we found it in inventing the really big smart foen because it's easy to type and easy to see the things they're doing on the phone and we know people love big screens. when you buy a tv you buy the biggest ones you have, right? with the phone it's got to fit in your hand, right? we found ways to make it even thinner and even lighter and you get the biggest possible screen and the smallest device that's the best of both worlds. >> i think it's the most competitive industry out there and so we just try to do everything that we can to make the best device that we can, the galaxy s3 was a good template in terms of big screen, big design and a lot of cool features and the tap to share and i'll just ratchet that up and make the device cooler, more compact and
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add thefrngs that aren't just features for the sake of features, but you can say i see myself using that. >> that's from the samsung event overnight. >> it was like the oscars for phones in radio city. there was a pit orchestra. >> wow! >> they were drowning in media. >> they made the front page. >> they made the front page of "the post." that's an achievement to be on the front page of the popular press with the launch offa i consumer product. >> that's a launch what is expected to be $20 million -- excuse me, 20 million units per quarter in 2013. >> interesting. >> that's a lot of sales. >> markets are at session lows, but within striking distance of the all-time record closing high and we've seen record inflows and let's get the latest from the trading desk. david seaberg is at cowan. >> thanks for having me. >> the most recent couple of data points have indicated outflows.
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what does that tell us about the rally? >> full disclosure on the complete bull. the markets will continue to try and hire over time. woef seen true buy interest on the desk here across the board. if you look at last year we had roughly 25 billion out of the equity market and we've seen roughly 40 billion into the equity market year to date which is incredible. i think the risk trade into equities is occurring and even if you look at the picked income market i think theray investment grade and high-yield investments being made and you see people get more comfortable with risk and i think that trade is on. i also would point out that when i look at money market funds which i look at and say are traditionally in my view sort of the -- >> let me interrupt you if you don't mind. ina drew of j.p. morgan has started to talk in front of a senate panel. >> on the losses incurred in the synthetic credit portfolio of the chief investment office. as you know, i have submitted a written statement discussing
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many details which i find important. i would like to take a moment, though, to talk about my career. i spent over 30 years at j.p. morgan and its predecessor institutions in the field of asset and liability management. i joined shortly after receiving a b.a. from the johns hopkins university and a masters from columbia university. over the course of my career i had the privilege of working for truly great ceos such as walter shipley, william harrison and most recently jamie dimon. during this time i helped build what i believe to be a world-class asset and liability management organization. i am very proud of the many successes we had in protecting the bank's balance sheet, offsetting risk and investing prudently. i had a oned -- i had wonderful mentors who helped me grow and
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develop my leadership skills and to them i am very grateful. this was my life's work with. we had seven mergers and during many fine automobiancial crises did my firm in a diligent manner. i loved the firm and institution and gave it my all while raising a family, balancing my home life, charitable and educational board work and many other demands. on friday night may 11, 2012, i walked into the office of mr. dimon with whom i had a close and respectful relationship. i told him of my decision to resign from j.p. morgan. it was a devastating and very difficult decision for me. it marked the end of three decades of hard work at an
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institution i loved. we talked about the decision and how important i believed it was to let the company move forward with new leadership. i accepted responsibility for the events that happened on my watch in one of the portfolios in my division. my overwhelming sadness and concern was extended to the 400 people who worked for me, many for more than 20 years. it also went to my colleagues throughout the firm who are now leading the company going forward. there were many people from the front office risk, finance and quantitative research who worked on and analyzed the synthetic credit portfolio. in particular, i relied on the expert experts -- to vet and supervise trading in that book and elevate important concerns to me.
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ultimately, my oversight of the synthetic credit book was undermined by two critical facts that i have come to learn only recently based on the company's public statements. first, the company's new model was flawed and significantly understated the real risks in the book that were reported to me and second, some members of the london team failed to value positions properly and in good faith. it minimized reported and projected losses and hid from me important information regarding the the true risk of the book. throughout these events i did what i tried to do all times during my career, face difficult issues with dignity and integri integrity. i had many months to think long and hard about what happened. i don't have all of the answers, but what i can tell you is i
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tried to do my best. i tried at all times to approach the issues presented to me thoroughly, thoughtfully and transparently. clearly, mistakes were made. the fact that these mistakes happened on my watch has been the most disappointing and painful part of my professional career. i thank you for the opportunity to appear today, and i will be happy to answer any questions you may have. >> thank you very much, miss drew and now we'll call on mr. bacon. >> good morning, chairman levin and ranking member mccain and members of the subcommittee. my name is ashley bacon and i'm the acting chief risk officer of j.p. morgan. i've been at j.p. morgan for 20 years and have spent six years in the firm's risk management function. i appreciate the opportunity to come before you today as part of your inquiry into the cio synthetic credit portfolio and
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tell you what i observed after being asked in late april to independently assess the cio trades. let me first start by expressing the entire firm's commitment to the importance of effective risk management and turning to the cio portfolio at issue. at the request of senior firm management i was brought in from the outside of the chief investment office in late april 2012 along with other individuals from the investment bank to lead a team of professionals conducting a detailed assessment of the synthetic credit portfolio. the purpose of that review is to understand the persistent losses being experienced and to help chart the course forward. the team worked long hours and reviewed and reported back to senior management at least on a daily basis. after initial reports we were asked -- >> senate committee hearing continues on capitol hill. we just heard from ina drew, the
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former cio of j.p. morgan saying clearly mistakes were made, but she had no knowledge that the mistakes were being masked. meantime, we'll monitor this hearing and bring you back when the q & a period starts. david, thanks for sticking with us. >> no problem at all. i'm sorry, i think i was cut off in the middle of my -- >> you were talking about how you are a bull and yet the past couple of weeks we've seen outflows from the equities. so i'm wondering how you interpret that. >> no, we've definitely seen outflows and people have taken a little bit off the table and more thematically i'm talking long term and what i've seen in the marketplace are a lot of institutions sticking with their longs and i think the minute date has been from a lot of institutions is not to turn the portfolio over like they have in the past. past years they've gotten burned by doing that and this year specifically a lot of the
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mandates have been let's hold our winners. that seems to be the trend. you know, i was talking to you earlier and mentioning earlier as far as what i'm seeing with money coming into the market from different, you know, types of alternative investments and, you know, i think people are waiting for the fixed income trade where they'll come into equities and i think that's going to occur, you know, over the long run. i think rid now we're seeing money come from money market accounts which has traditionally been the safe haven and the fear money coming back into the market. if you look at the sectors that we talk about here the money flow has been right in and straight in and people adding to their long positions in a meaningful way. i'm bullish and i'll continue to be bullish and i do think there will be near-term pullbacks. the near-term pullbacks will be met by buyers and there are people on the sidelines waiting for a 3%, 4% pullback and when that occurs they'll be in there buying stocks. >> which stocks, though? which sectors, david?
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we have seen what's working continue to work and we haven't seen that handoff into the cyclical growth areas of materials, technology and industrials. >> right. no, i think in general, one of our strongest sectors here has been health care and bio technology, specifically, we've seen an incredible run in those names and we were talking a few weeks back and our theme for the last couple of quarters, our accounts have beena asking analysts questions and they just want to rush into the sector and find opportunities that they can make bets on. i think over the past quarter or so we've seen a lot less calls about some of the smaller and midcap names and the large cap biotech names are still in demand and people are still putting money to work there and i think that's going to continue. >> it's interesting that we had such low volumes at the moment. >> and i wonder whether people sitting at home don't trust what they see at the moment and jan had a note out in the last 24 hours when he said he thought
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that the inventory stocking might be a temporary feature on growth and the job growth associated with that and we could give back further down the line and if you look at what janet yellin was saying about qa? it benefits healthy people and it may not benefit the ordinary person in the street. they may not believe the recovery is as strong as other people? what would you say to that? >> what i'd say about the low volume and that's something i keep my eye on quite a bit and there's always the fear that they'll have the volume and i'll bring back the mandate by the individual firms we work for. the mandate has been the turnov turnover. as i talked to institutions across the street. they talked specifically about the fact that they're holding winners and they're working and they continue to get new money in and as they do they'll put it into the ones that are working. so i'm not super concerned about
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the fact that we're not seeing the volume to the upside. i think eventually that's going to come. right now i'm really just happy to see the market trending higher the right way and everything that's brought us down and is starting to lead us out and we're seeing a recovery in housing and we're seeing a recovery in the employment numbers are getting strong every day and it's just a very encouraging sign and i remain bullish and i continue to have that stance. >> david sieberg. >> thanks very much. >> here is a live shot of capitol hill and the senate panel hearings continue into the london whale at j.p. morgan. we will have more from ina drew as she prepares to give further testimony. that's ahead on cnbc.
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the q & a between in a drew and senator levin have begun.
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>> they were made on a long-term basis, is that correct? >> senator -- >> your horizon here is the shorter investment horizon and they were bought so regularly and frequently, is that not correct? >> that is correct, however, the core position in the book which was a short high yield position was a long-term position that had been held for many years and the intention was for it to be held longer. >> right. but, when this portfolio grew in the first quarter from 51 to 157 billion i take it most of those positions had been purchased during that quarter, is that correct? >> they had. is that correct? >> that's correct. >> these trades were made out of london and the 6.2 billion in
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losses that took place in 2012 that affected j.p. morgan's balance sheet and its earnings, is that correct? those losses, even though the trades were made in london. >> yes, certainly it did. did the london traders have to get approval of the cio risk managers like you to put on positions? >> let me ask mr. wyland that question. >> did the london traders get risk managers like you to put on those positions? >> not for individual trades. the traders in london worked within a set of delegated limits. >> so they didn't get approval from you for the positions they were putting on? >> not individual trades. as long as they were working within their limits. >> is that what you call positions? >> that is what i would call positions, sorry. >> the individual trades are the positions they were taking they didn't get your approval, is
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that correct? >> not one by one. no. >> the -- on january 30, 2012, the cio met with the occ at their standard quarterly meeting to discuss the cio's upcoming plans. the cio's chief financial officer represented the meeting at the occ. miss drew, take a look, if you would at exhibit number 58. exhibit 58 is the occ summary of that january 30 meeting and interviews both the occ examiner mr. berg who attended the meeting and wrote the summary and mr. willmot who attended confirmed to the subcommittee
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that the notes were accurate. about two-thirds down that page, exhibit 58, the occ reports what it was told by j.p. morgan. quote. the mtm book, that's the -- mark to market book consisted primarily of the synthetic credit portfolio is decreasing in size in 2012. it's expected that the rwa will decrease from 70 billion to $40 billion. so you see that, by the way, that note two-thirds down the page where it says mtm book is decreasing in size in 2012? do you see that? okay. miss drew, in fact, the sep was rapidly increasing in size in
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the first quarter of 20 with 12. is that correct? you can see on the chart over here exhibit 1, is that correct? >> yes, sir, that is correct. so, again, this meeting took place january 31st and the occ was told that the book was decreasing in size. in fact, it was increasing in size. also on the first quarter of 2012 the cio stopped sending standard data to the occ that might have alerted the agency to the portfolio's growth. for four key months from january to april, the cio did not send to the occ its executive management report with its financial data. in february and march it did not send to the occ its valuation control group reports with verified profit loss data for the synthetic credit portfolio.
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is that true, miss drew? those reports were not sent during those months. is that true? >> i did not know, senator. i had no part of reports being sent to any regulators. certainly, if i had known they were being sent i would have considered that the wrong thing to do. >> all right. >> so you don't know whether they were sent or not. >> i do not. >> and if they weren't sent you don't know why? >> i do not. >> who was in charge of getting those reports to the occ? suddenly they're missing during february and march. who was in charge of getting those reports to the occ? >> it's my understanding that both risk and finance -- >> people. give us the names of people if you would, who would have been in charge of it. >> i don't have a specific person, but within the risk and the finance organizations, any and all contact was made with the occ. >> mr. wyland, do you know the answer to that question? >> i don't. >> do you know why those reports suddenly weren't sent?
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>> i do not know -- i don't know why they weren't sent, no. >> who was in charge of sending them? >> i don't know the people who were responsible are for sending the reports to the regulators, the individual people. my understanding is that normally that's part of the finance function. >> okay. maybe we can find out later from our next witnesses as to why suddenly reports weren't being sent to the occ during those critical months. mr. wyland, take a look at exhibit 47, would you? >> sure. >> there's an email dated march 2, 2012, that was sent to you by
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one of the quantitative analysts at the bank mr. krug talking about cio/crm results and it stands for comprehensive risk management and the banks are required to calculate how much money could be lost in a year in a worst-case scenario. it wasn't a requirement in 2012, but it was about to become a requirement in anticipation of that when this email was written, j.p. morgan had already begun requiring its offices to start calculating their comprehensive risk management because the occ was going to require and now does require to use the crm results for capital requirements and how much has to come from shareholders to retain earnings. mr. wyland wyland, on march 2nd received an email at the bottom
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of the first page, that quote, crm numbers increased significantly. these results, if i understand them, suggest there are scenarios where the cio trench book, another name for the sen thetic portfolio could lose $6 billion in one year. you then forwarded the email to jfier martin and tahoe in london, the head of credit trading and you all called the result garbage. you wrote. we have cio numbers and they look like garbage and it's two to three times we saw the month before. you and your colleagues complained about the crm analysis to the head of quantitative research for the whole bank, a man whose full name is mr. vencot. if you look at exhibit 49 which includes an email dated march 7,
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at the bottom of the page from mr. vencot to all three of you and others explaining that the cio's portfolio had gotten $33 billion bigger in january and february which is why the risk of losing so much money also shot up. now here's what he wrote which is at the bottom on that page of exhibit 49. based on our models, though, we believe the 3 billion increase in rwa which was referenced to the crm is entirely explained by a $33 billion increase in short protection, long risk in your portfolio between january and february. pete wyland and your mid-office confirmed this 33 billion increase in long index risk. mr. wyland, since the scp portfolio increased in size by about $33 billion in january and february, the scp wasn't
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decreasing as the cia told the occ on january 30th. it was increasing, is that correct? and miss drew has indicated that. do you agree with that? it was increasing? >> yes. they were purchasing long positions. >> the portfolio was also increasing, is that correct? >> yes. >> mr. wyland, the bank's quantitative experts said the portfolio's comprehensive risk measurement or crm numbers shot up to $6 billion in large part because its portfolio shot up in size. i understand that you had questions about that explanation at the time. do you now believe that the analysts had it right especially since the portfolio actually did lose $6.2 billion in a year. now now acknowledge that they got it right. >> yes, i acknowledge it now with all of the information that we have today that that was correct. >> all right. and do you think it was a coincidence that the crm
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predicted a $6 billion loss in a year in a worst-case scenario and that's what happened? is that coincidence? >> it's hard to believe it's complete coincidence. i don't know the scenario that generated the numbers at the time, but it certainly agrees with the way things unfolded. >> senator mccain? >> mr. chairman, if it's okay, senator johnson has to go, and i yield to him. >> of course. >> thanks, mr. chairman, and senator mccain. mr. bacon, it seems you were brought in kind of to assess what happened here and do the post-mortem, i would like to ask you a question. did the management of j.p. morgan and people at the trading desk, was there basically a pervasive attitude that j.p. morgan was too big to fail and they could drive up their risk portfolio? >> i don't believe that played a part at all. i think this -- this was aest is
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egregious mistakes that was much regretted and not at all placing reliance on too big to fail, no. >> we'll keep a close eye on the q & a as it continues in front of the senate permanent subcommittee, a trio of jpm officials answering questions from carl levin and senator johnson. david, i think you'll take it over to dell, right? >> a story we've been following you this morning bringing new details that are included in the merger proxy. the battle continuing with many months to go between a significant opposition to the $1365 deal and the dell's board of directors is so important here in terms of how it came to decide that selling a 1365 was the right thing to do. earlier, we told you about some of the details that may, in fact, be in that proxy involving the significant changes in dell's business over a relatively short amount of time and change is not for the better. they want to get to the some of
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the back and forth that may be contained in that merger proxy in terms of who bid when and how the whole deal came together. >> the process itself and sources tell me while silver lake and kkr were the first private equity firms to discuss a deal with michael dell whob gan the process on august 16th and it first proposed to him very interestingly by southeastern asset management. that was last june and southeastern, a large shareholders that opposes the deal and back then they approached mr. dell, and if you did, we would desire rolling in our equity into any transaction. so the thinking of a deal may have begun as early as june. kkr bid between $12 and $13 a share and that was when first indications occurred in october, while tpg entered the process and never submitted a bid. silver lake started at $11.22 a
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share and it was at the bottom of the range between working to the $14 deal price. none of this is to say that the dell deal will get done at that price. >> they justify their own perspective and perhaps the greatest single impediment to the deal the market itself. >> take a look at hewlett-packard. they have soared this year and the multiple has moved up along with it. investors have gained confidence that dell, therefore, is simply worth more. so the actions of the special committee trying to navigate not just a typically conflict-ridden process, but a business that continues to change quickly and not for the better should provide for insight into the real battle that is shaping up to be like one we haven't seen in a long time. >> fascinating enough that southeastern is one who opposes it. all right. let's move on here, public and private sector leaders gather in new york to tackle challenges to the housing industry.
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diana olick joins us with a special guest. diana? >> that's right. we're at the j.p. morgan housing summit, just talking housing where the talk is of lack of supply, rising demand and easing mortgage credit and who better to talk about that than kevin waters, the ceo of j.p. morgan banking. thank you for joining us first and -- >> are you seeing this credit thaw and this easing in credit that folks are talking about, because the ceo of lennar said that was helping the recovery. >> they haven't changed in terms of solid fundamentals and documentation. consumers' balance sheets have included and there are debts down ask there are areas arc cross the country where housing prices have gone up and in distressed marks we think housing prices will fall and that's easier than it's been in the last six to 12 months. >> as we see mortgage rateses rising, that's taking away the refi business. >> we don't think we got out of
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the purchase business, but as a share of the purchase business, clearly purchase is getting bid better for us and harp, one of the government programs who helps folks when had fannie or freddie loan, that is coming on because we've harped a lot of the customers already. >> especially for j.p. morgan, tell us first in the foreclosures that you still have that you're facing delinquent loans, how closer you to meeting your obligations under the $25 billion mortgage settlement? >> we expect early second quarter to be completely done with our obligations and examiners have to confirm av all of that, but the march standpoint, we'll all be done. >> that required principal writedown. do you think after you're done that yooubl able to writ down principal which is the loan of the justification. >> we continue to look at foreclosures as a last resort. if it's principal reduction as long as the homeowner can show that he or she can stay in the house and it can sustain payments over time. >> we are starting to see
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foreclosures ramp up. is j.p. morgan ramping up foreclosures now that they've done so many modifications and home prices are rising so you can sell these properties for more money. it's really a last resort. >> that's not the business we're in. we're trying to keep people in our houses more and we're seeing the inventory come through the system. >> i'm going to kick it over to them. >> kevin, it's melissa here at post 9 at the new york stock exchange. in terms of rates how competitive do you think j.p. morgan is versus some of the other banks and is there a huge competition between you guys to get the qualified borrowers? >> yes. so i think our rates are very competitive and we look at it on a borrower by borrower basis. if you look across the banks all of us are trying to offer the best rate for the customers. is there competition? absolutely. >> is there going to be more competition when you see private
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capital coming back in. i know you talked about private capital back into the market. once we increase the guarantee fee, because that's how you price risk. that will start in back into the marketplace. >> what do you think will be the future of fannie mae and freddie mac now that they're becoming profitable again? >> we support the bipartisan commission and if you want to think about the fdic fund the way we use it for the deposit of the house, with some private guarantors similar to what jenny may does, and then you'll get private capital back in. >> kevin waters, ceo of mortgage banking at jvp morgan chase. back to you guys. >> thank you so much. still ahead, we're asking you if you're smarter than a fifth grader. one of the members of the competition will tell us why and why their pick for the best
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long-term investment is truly your best bet. the stock may surprise you. a quick check of commodities on this last day of trading for the week. back in a minute.
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equity markets down this friday morning and commodities are doing well partly because of the dollar. let's get to sharon epperson on big moves. >> good morning, simon. that's absolutely right. it looks like gold wants to get to the 1600 level today though some traders are wondering if they should save this move higher. we're seeing some consolidation. some traders are saying in the gold market as well as buying from europe europe. we're also seeing a nice move higher in brent crude. that's $110 a barrel and there are some geopolitical concerns out there. what will the u.s. do if there is some type of issue with iran and, of course, obama has said military action is not off the table. that's something traders are talking about today and they're talking about the huge move in natural gas over the last month and particularly over the last 24 hours after we got that very
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bullish storage report yesterday from the energy department. we're looking at natural gas futures that look like they want to go toward the highs they saw last year and breaking out toward that $4 target. that's what traders are looking at right now. simon, back to you. >> thank you very much, sharon. when we come back, selling treasurys, is it more talk than action. our rick santelli is on the case and he'll join us next.
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let's get to rick santelli at the cme group. good morning. >> we will go fast. we have lots of surprises today. does anybody out there think i'm not a passionate guy? well, if you don't think i am i have a bridge to sell you. yesterday i was -- i don't know, hurt, shocked that the chinese, and i have nothing against them, but coming out here and putting nat gas stations and i did have something in the reuters yesterday. and gary foster for clean energy fuels and he's absolutely correct. my frustration shouldn't undermine my positive emotion because i love nat gas, okay?
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and here we go. one out of every two new trash trucks so last year in the u.s., had a natural gas engine. this is expected to grow 60%. waste management says 80% of their trucks will be nat gas. half of the municipal busses in the u.s. are now nat gas. tens of thousands of vehicles are powered by nat gas and we're seeing more added every week and this is the line i love the best and all of this is being done without the u.s. government. my hat's off to all of these companies. did you see industrial production pass utilization! we have a special group here. we have a group from the university of missouri investment group. they're students. they just raised my heart heart think they're interested markets. they're smart. this is a generation that will take care of us. i want to ask them a couple of questions. luke, you're a sophomore, correct? >> correct. >> tesla motors.
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all right. you know i wouldn't have that one. i want you to tell me why. >> well, tesla has the best technology. their cars are second to none. and the technology will become the best cars. >> you think it's a hot car. >> it is. >> you own any remote helicopters or airplanes? >> absolutely. >> they all have what? >> battery. >> you ever fall asleep and forget to charge your telephone? >> sometimes. here's my issue. but battery technology, if my kid has an appendix burst and at 3:00 in the morning i forget to plug in the electric power, it's practicality. it's cold in chicago. i top off the battery of my computer.
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you have to give tesla motors an "a" for a design. let's see how tesla motor does. now we have tracy here. what position do you have in the markets? >> right now we are shorting again. we've been shorting it since about november. >> let me tell you something, folks. if you put on a short position in the dollar yen in november, my hat is off to you. you couldn't have picked a better level. what was your level? >> definitely evaluating politics in this trade. in japan and china you see the government politics really describing the shortage of the yemen. >> let's ask the group a couple of questions quickly. is there anything you see with regard to news, whether business or politics, that you like? what gives you positive hope for the future?
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>> eflgts. >> evaluations. >> so stocks. anything out there that is as it should be or makes you nervous? volatility. all right. okay. you should be a spokesman for the cbo contract. listen, it's great to have a young group of people interested this the marketplace. boy, they think on their feet. i would have never guessed that. back to you. after the break, our fifth grader finalist in the long-term investment competition did our finalist choose? the name might surprise you. we got it right after this. it's delicious. so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom.
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i never really thought i would make money doing what i love. [ robert ] we created legalzoom to help people start their business and launch their dreams. go to today and make your business dream a reality. at we put the law on your side. how did i know? well, i didn't really. see, i figured low testosterone would decrease my sex drive... but when i started losing energy and became moody... that's when i had an honest conversation with my doctor. we discussed all the symptoms... then he gave me some blood tests. showed it was low t. that's it. it was a number -- not just me. [ male announcer ] today, men with low t have androgel 1.62% (testosterone gel). the #1 prescribed topical testosterone replacement therapy, increases testosterone when used daily. 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
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[ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ]'ll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ here's my take. profits are the mother's milk of stocks. you've got to grow the pie larger for everybody. free market capitalism is the best pad for prosperity. >> this is the kudlow report. >> all morning long we've been telling you we were going to speak to a finalist of invest right competition. the competition asked students to analyze a publicly traded company and write an essay, arguing why it's a solid, long-term investment the time has come to introduce you to an 11-year-old. a fifth grader from naperville,
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illinois, who has clocked in as a finalist. her name is rachel kelly. she joins us from chicago. it's good to have you with us. >> good morning. >> i want you to tell us about the stock you chose and why. >> i chose honda because -- >> honda motor. that's right. you went through a couple of reasons. one, you said it's a very diverse company. got a lot of products. and you really zeroed in on robot. i'm wondering what you find interesting about the robot. >> well, i like it because it has mechanical. -- because it's a mechanical product. >> you say the stock has been a good long term investment for the past 25 years. the stocks have gone up and up and up over time. if the price of gasoline goes up you don't think it will hurt
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honda that much. why? >> because the fuel efficient cars are -- the fuel efficient cars are not -- they don't have gas. so that's why if people start switching to those cars, then they won't -- the people won't need to pay for gas. >> yeah. i mean, we had this discussion all this time about whether or not electric cars are really the future. would you drive when you get your driver's license, which is still a few years away. would you drive an lek rik car? or a car that runs on electric? >> i probably have a car that wouldn't have gas. it would save me some money that way. >> so you were one of 20,000 contestants. you're on the air now. i'm supposed to tell you at this
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moment, that you, in fact, are the winner of the elementary school division. you did not know that did you? >> no. that's really cool. >> it is cool. anybody who is interested in reading your essay, which is a great read, it's available on our website at the full text of rachel's winning. the smile on your face says it all. congratulations again. >> thank you. >> rachel kelly, 11 years old. fifth grade, fry elementary school in naperville, illinois. that's great. >> that's education because people are going to need to trade stocks long after we're gone. >> and when you read through her essay, she makes a lot of good points. it's really well constructed. it's inspiration for other
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11-year-olds out there. that's for sure. >> i don't know what is harder. writing the essay or getting on live television where i think she was having ifb issues, which is hard for grown-ups. >> s&p 500, we continue to watch the all time closing high level of 1565. we are about six points off of those levels. we have big movers we should talk about. apple up by 1.7%. he has overweighed apple once again. that has helped as they had gotten a couple offest pat revisions downward today. >> can i point out that carnival is also having a bad day as a result of them cutting their guy dance. they had to clearly lower prices in order to shift their inventory. we'll talk about that later on. >> stock is is now down to less than 2%. then people talk a lot about the
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rally. if it is 11 days, it's about a 3.5% gain. last time we went this long it was a 10% gang. zbloo ba >> back in '91, when we were in high school. >> you're going on vacation? >> i'm hoping to. my son may be holding that up. >> got to get better fast. >> you are gone, have a great time. >> and you as well. >> exactly. you got your work cut out for you. >> hold down the fort for you. >> if you're just joining us this morning, here's what you missed. welcome to hour three of "squawk on the street." here's what's happening so far. >> if ten-year treasuries go to 4% or 5%, which is where they ought to be. we had 6% and it was a huge bull market. i don't think that's an impediment to stocks. >> the reason why the stock market is not significantly higher is there are other factors compressing it lower.
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this is the last term i would use to characterize wast going on at the moment. >> this is a lot of performance envy and it's hurting people and find stocks to be able to be exposed to the s&p 500. >> apple is, i think today, is kind of revenge of the nerd trade. samsung is the hot guy on the street. that wasn't so interesting. pab we should look at apple again. >> some members of the london team fail to value positions properly and in good faith. they minimized the reported and projected losses and hid the important information regarding the true risks of the book. >> i think the mandates from a lot of the institutions is not to turn over the portfolio like they have in the past. in past years they've gottenen burned by doing this.
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this year the mandates are, less hold the winners. that seems to be the trend. >> good morning. we're live at the new york stock exchange. let's get a check on the markets. the dow is going for the 11th straight up day. it's 11th friday up, which would be every friday this year. tough sledding at this point. dow is down 41. s&p 500 is down almost 4 and the nasdaq is down 11. b of a is announcing a reduction of $5.5 pl billion in deferred stock as part of the second stage of the stress tests. our road map goes like this, pulling back, going from the first negative close on a friday all yearlong. bank of america's head of economics ethan harris tells us why he expects more slowing from the markets.
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plus the samsung galaxy s4 is here. is it all that it's cracked up to be? >> then a big day for jcpenney. the pivotal joe fresh brand. one analyst is getting a read on the success and will join us live with her thoughts. first, as the market heads lower, bill miller is saying now is the time to invest and stocks are cheap. >> if ten-year treasuries go to 4% or 5%, which is where they need to be, we had huge treasuries. i don't think that's an impediment to stocks. then normal is about 8% to 10%. and given that growth rates are double digits.
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they will turn things around. 1580 on the s&p 500. tom, welcome back. >> yeah, thanks for having me. interesting to hear bill talk like that. greenspan as well this morning on the show. this is the last term he used to describe this market. what are you thinking right now? especially after the last ten days. >> i think there's a short-term view and longer term view. one of the things we noted today is stocks are more safe than investors realize. it reminds me of people being fearful of tomatoes 200 years ago. i would agree with the comments i heard that we expect economic data to weaken in the next month or so. that should lead to a cause or pull back in the flea market. >> yeah. we have a couple of potential
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land mines, right? who knows what the committee could say? there's notes that say the inventory cycle means production is stronger than spending. you would expect the macro data points to soften. do you think that will have an effect on equity in the short term? >> the inventory accumulation is helping us. it's going to really be a drag in q2. and then we have to layer in the idea that we still expect some effect from higher gasoline, higher tax rates and sequestrati sequestration. those will be felt. we'll see it in the payroll numbers in the next coming months and week. >> how do you couple that with the admittedly very an ecdotal points? being in cash is so painful. >> well, that's a really big
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factor. what we have seen this year, and it's been a theme over the last four years. there's a lot of performance anxiety. and if they're benchmarking you, that's a real pressure. it's a problem for hedge funds and mutual funds. it's going to help stocks really enter the quarter. but one of the issues is once you get everyone bullishly positioned, then the economic data becomes the prevailing force. and if it's weakening, that could set us up for a pull back. you've been calling for a mid year pull back for a while. you seem to have held steady with that view. if the macro softens, is it a mad rush for the exit or?
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>> that's a good question. we were thinking originally a 1400 or 14550 pullback. i think waer really talking maybe 5%. so something below 1,500. >> so nothing severe. >> not a crash. >> roig. right. finally. you lay out a really interesting -- i would argue almost archaen method as a tool to look at stocks right now. you want to go into it briefly? sure. it's really pointing to a company with a lot of flexibility to do something good for stocks. we found in the fifth year of a bull market, we're hearing this from client this is year as well. it's been a big source of out performance.
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we call that the colonel johnson. >> good stuff. always good to talk to you. we'll see you soon. >> thanks for having me. >> meanwhile, revising up the first and second quarter on retail sales. the firm sees full-year growth of 1.8%. ethan harris joins us from new york. great to have you this morning. >> thank you. >> an interesting note. your overall point appears to be equities might drive spending on the high end, the wealthy. but you need more than that to get the economy truly going. >> we need sol wage growth. we need a better waiver market to really have sustained growth we need a broader, more democratic participation in this consumption pickup. >> despite half of households owning stock and maybe some of
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them not afraid to open their 401k statements. even if they spent a sliver of the wealth created this year. >> i think it will make up in the stock market and housing market. people feel better about their balance sheets. but in thor in material we have to deal with a major speed bump in terms of tighter fiscal policy. so these wealth effects are good for the economy in the medium term. but short run, we still have some challenges. >> i bet one of those might be getting through the fed meeting next week. you say the fed has a lot more work to do. they keep telling us they're far from done. isn't the market going to be nervous if and when the statement says something that we're not used to? >>. >> i think the markets are always watching and waiting to see when the fed will pull out
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of the soup easy policy. i don't see that coming from the fed. i think they are determined to make sure the recovery is fully in place before they pull out from this policy. right now the fed is looking at very low, below target inflation. we had still significantly high unemployment rate. so from their perspective, it's way too early to be thinking about pulling out from super easy policy. so i think the fed is going to this be there for quite a period of time. >> one of the thing that you said today was the notion that the market has really become unat the timeerred from the economy at large. it's hard to make statements about the economy by looking at stocks. t a transition mechanism through which to spur spending. do you see that as being
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dangerous? >> i think right now the stock market is mainly driven by reduced risk aversion. stock investors are looking at the u.s. economy. they're seeing healing in the private sector. but they feel europe is less dangerous. the fed is providing less liquidity. so i don't think this means we have an overvalued market. i do think those forces are what's driving the forces now. >> finally, you're pretty candid. you say the economists decided it's too hard to pinpoint it. i assume because it's happening over an elongated period of time. >> i think the agencies and the government haven't told us who they're going to fire yet.
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but they're going to figure that out. we'll see which contractors get laid off. which companies that supply services to the government get big cuts in their contracts. we're not there yet. they're still planning that. this is something that starts in april. >> yeah. you do say it's going to be a q2 story which we're going to watch closely. i'm glad we got you on today. thanks so much. >> thank you. >> the galaxy s4 is here. did it live up to expectations last night? two tech gurus will tell us what they think when we come back. first up, rick santelli going to talk a little housing today, rick. >> yes, we're going to talk in depth on mortgages. but not just in the traditional way. when it comes to the fed, for example, a lot about how they're
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purchasing of treasuries may affect ultimate interest rates. well, obviously the purchasing mortgage securities. how will that affect rates? how will it affect risks? what happens if everybody refis and the interest rates go up. the answers to these. come back in about 15 minutes. r be a name and not a number? scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience."
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take a look at consumer staples today, trading lower as most of the market is with the dough down about 42 points.
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but up some 10% so far this year. one consumer staple stock is whole foods. josh lipton has more on that. >> consumer staples the second worst performing. in that group, whole foods is your worst performer, slippi ip into the red here. this week we learn the ceo john mackey sold 50,000 shares worth $4.4 million. he still has more than 700,000 shares. whole foods down 1.5% right now. down some 4% this year. >> the senate sub committee hearing on jp morgan's $6 billion trading loss is under way on capitol hill. we brought you a portion of the q&a segment a few months ago. let's get our own update with kate kelly who is live with that. >> we're in the midst of a very short break with the former cio.
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there's a theme unfolding here. these very much defended her own management capabilities. said it had to do with an outdated risk model. but also because her own team did not do what they were supposed to. let's take a quick listen to what she said there. >> in particular i relied on the exper experts to vet and supervise training and elevate important concerns to me. >> so this is a theme that we're also hearing about from the senators today. senator mccain and levin giving harsh critics. in a later exchange mccain was talking about the fact that no one on the panel could seem to figure out who was directly responsible at the the individual level for communicating with the regulator of the occ.
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let's listen to a compelling exchange heard there. >> you don't know who the individual might have been. jp morgan is so big that you don't know who has a serious responsibility to make required reported to the occ. is that correct? >> that's correct. it could be one of the memorable sound bites. it forced him to acknowledge the size of jpmorgan. b . >> i just wonder if you thought the line of questioning, kate, they keep talking about egregious mistakes not being too big and people will be debating, have been debating if the two are exclusive. >> i think that's right and jpmorgan is a huge bank. i'm not surprised they wouldn't
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know the direct person involved for sending the e-mail ls off. then again, this was a huge problem and saying i was relying on my staff and they didn't show us the problems may not ring well for the american public. >> goo insight. we'll come back to you kate. when we come back a firsthand look at the new galaxy s4. we'll find out what one retail analyst thinks of the brand and what it might mean for the stock. "squawk on the street" will be right back.
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vp of product planning about some of the s4's new features. >> the first thing that makes the galaxy s4 really distinctive is we made the screen bigger, the camera bigger, the battery bigger, yet the overall device is thinner and lighter and smaller, which is just an ameezing feat of engineering. you add all the software features, the sl, the dual camera. it's an amazing piece of technology that's really easy to use. the thing, i think, that will wow your friends, is when you can move the screen without even touching it. that, i think, will really impress people. >> so how is the phone? joining us to weigh in the senior writer of wire and author of in the plex. holding one up. the editor in chief has the new galaxy galaxy s4 in your hands. they say at first glance you could mistake it for the 3. >> it does look quite a bit like
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it, but they did make it smaller, then ir. it does have a five-inch screen. they did that by cutting away the bezel. it feels good. it's 4.6 ounces, which is heavier than the iphone. i can't do it because i have to look at it. it detects your face and eyes and you can tilt it to scroll, which is a really cool feature. it also has this other thing where air gestures, you don't touch the screen, and the sensors are up top. so i just did that without touching it. you know, it basically -- i can do that and i can switch browners. i'm not touching the screen to switch tabs. so that's pretty cool. i mean, it's a powerful phone. supposedly decent battery life. one thing samsung did tell me is this is very preproduction. so some of the stuff works weirdly. the scroll takes a little time to work, but you are going to impress friends if you have this phone. i do believe that. >> so steven, the big debate
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this morning is, what's more revolutionary? what they unveiled or what siri did for the iphone a couple cycles ago? >> it's interesting to contrast the two companies. these really are the two key company miss the mobile phone war right now. an apple event tried to focus on one thing where they released siri and the iphone 4s. they focused a presentation on it. it's it's right. there's a lot of value in the phone. it comes at a time when people are wondering is the iphone going to have radical changes coming up? so it's a delicate point for apple in a lot of people are wondering maybe it's the first time since they used the
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software, if they should test out an an droid. >> i totally agree. i'm getting messages from buddies right now. i have the soundoff. does lance like it? so for those people that are at home. they kvshl with the max, is this enough to get them to migrate out? >> that's a difficult question to answer. it's do you like big phones? do you like small phones? do you like the eco system? the platform is really everything that you need. that put in a 13 megapixel camera with dual view. i can capture pictures that way. i can capture video that way. i think on the tech front if you're looking for cutting edge, bleeding edge, because it has a higher per pix l inch count on the screen, this is probably the phone for you.
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of course, we expect apple to answer. that's the whole gain here. you have to choose. big phone? small phone? both are sexy. this is powerful. i'm not sure what this doesn't do right now. apple is up. google is down. >> in the early android launches you would always see the handset manufacturer appear with some google executive there. in a partnership there. i don't think the word google was mentioned last night. and a lot of the pieces google offers on its own. so i think in a way they got what they wished for in not such a great way by making the android so popular and open.
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samsung came up and is such a dominant player that google has to figure out what to do with it. >> well, a lot more people know who jk shin is today than they did 24 hours ago. have a great weekend. thanks for your insights. still ahead, rolling with rolls royce. we'll look at the half a million dollar phantom and take it for a spin. these are nice cars. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.
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couple hours into trading. directv is the biggest gainer on the s&p 500. up almost 6%. they are pulling out of the bidding for gvt. going among the flu blue chip winners, the university of michigan's consumer sentiment index coming in weaker than expected. the survey indicating the consumers are dissatisfied with the wrangled in washington over these matters. for the first time in a while to this the downside. >> yaer, we're still up for the week. doing nice today. five to four advance in the declining stocks. big volume. 're going to do well. the big story this week and it's
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happening again today. money into the united states and out of the merging market. this has been the big story. it's happening again today. south korea, south africa. the emerging market index is having a real problem. in fact, the whole week here. let me show you how the emerging markets -- remember, were up for the week. china is down 4%. south africa three. brazil, asia, russia. these usually can play off of what's going on in china. that's the story. we're up and they're down and the money have been very noticeable on that. how about the banks? by and large, positive comments. bank of america in particular. nice surprises. bank of america is the big winner. what is bigger than anticipated?
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a little bit of a disappointment no the downside. somewhere around 3% and above you start paying attention. jp morgan is now paying 3%. capital one is moving in the right direction. a lot of others need to play catch-up. ive been asked can i comment on what the new volume is like. the first quarter of 2013, average daily volume at the new york stock exchange, 6 hnt 4 billion shares. i'm sorry, this is total stock market. in other words, it's still
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dropping. now let's talk about trying to x out. what about high frequency trading? if you take that out, where are we in terms of volume? you and me every day here. i asked him to take out all the high frequency trading. we hit a high of 3.7 billion shares in 2008. this is the real trading. this is the lowest number since 1999. unfortunately if you look at the reasons, the lower volume and overall interest in the market is still causing people to stay out of basically heavy trading. i keep waiting for it to come back with the new highs. i still do not see it. >> yeah. the debate rages on as to how much it matters. >> a lot of people argue it may not matter as much. >> rick santelli is in chicago with the latest economic data,
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what it means for the feds. >> yes. absolutely. we have a fed meeting coming up next week. and when i think about the fed, i always think about housing. can you tell me what you're seeing in the prepayment arena that may give our viewers and listeners information about should they refi? >> well, what we're seeing in mortgage back securities and prepayments is the last prepayment report, much slower than the street expected. the rates have dropped just 12%. >> why would the prepayments drop? >> because a lot of the borrow we areers have refinanced. they have very low mortgage rate rates. >> so when they don't refinance
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that, that does what? >> okay. so when matures or duration gets longer and interest rates creep up, what happens next? >> losses get bigger. all the holders have food what? >> they start selling ten-year spots and sell mortgage backed securities as a hedge. >> would that ever get enough traction at a time where we have the fed purchasing not only treasuries but mortgage securities. the prepayments continue to change. >> absolutely. they call that convexity event. and that's when those mortgage holders start hedging and they all start hedging at the same time. and that drives rates back up. >> now to get back to what we talked about a few times
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already. i can't get a good gps on treasuries or stocks because of the programs. what are you seeing with the mortgage purchases? are you seeing similar issues? absolutely. >> we're seeing the fed buying $40 billion a month. negative issuance into the market. investors have less. that drives the price up high. >> real quick. we're out of time. if you haven't re-fied. when is the best time to do it? >> now. >> that's the question everybody has. >> chris krispy kreme down hard
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this morning. the company has some 700 locations selling doughnuts did miss adjusted earnings expectations. analysts said expectations were really high going into the quarter. and they note they've had a huge run of some 70% in the last six months. >> all right. thanks a lot, josh. it's a big day for jcpenney. can the debut of the joe fresh brand freshen up jcpenney we're live to find out. and why virgin boss richard branson just put in millions in halo. maybe it's the 2.5 million passengers it transported. the ceo will give us the inside story when we come back. omnipotent of opportunity. you know how to mix business... with business. and from national. because only national lets you choose any car in the aisle.
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♪ >> coming up in just a bit on the half, the rational rally. alan greenspan says stocks are cheap. should you continue to buy the banks? and bill miller's bullish call on groupon. whether you should follow this respected investor. see you in about 20 minutes or so. >> sounds good, scott. thanks. jcpenney kicking into high gear as it continues the
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transformation. >> last year we had the same merchandise priced differently. this year we have a lot of the fresh mds. so the new jcp is coming out of the ground. >> so it's been about six weeks since then. the day has come. we have an analyst on the ground liz dunn has a neutral rating on the stock. she lowered her prize target from 15 to 19 earlier this month. good morning. how are you? >> hi. how are you? >> good. we had a discussion about when was the last time a kind of brand truly rescued a retailer on a large scale? i'm wondering if this will be it. >> i don't know if it's just this one brand, but this is certainly an exciting brand. the product looks great.
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the prices are really affordable. i don't think it's just about this one brand. this is the first really transformational brand that they've added in the readvantage of the retailer so far. >> your overall view then, it doesn't sound quite as pot. why not? >> well, i think it's going to take some time. there's going to be a lot of disruption in the third quarter. there's no mds upstairs. it's all tented off. you have to wait for the home transformation. you only have a small portion of the store transformed so far. not enough to move the numbers into positive territory in terms of the bottom line impact. >> right. johnson said it will be positive this year. you think it's doable? >> in the back half it will be
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possible, sure. they've had improvement in conversion trends, and as i've been standing here today, there are certainly people shopping joe fresh. it sounds like there's a lot of traffic this morning, in the early hours of the launch. i do think the traffic will pick back up. >> that's all contingent on some capital plans that are aggressive. there's the issue of cash and this revolver they would prefer not to touch. >> i think they're looking at it as a cheap source of financing. they've upsized it and it's there and available for their use. a lot of the capital plans are around the first half. so i think we'll see them tap that revolver.
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>> so assuming you want to get on this before everyone else figures out this is going to work when do you move off the neutral rating? >> i envision a point where they turn slightly positive and people are still not convinced. slightly positive is not going to get them back the $4 billion in sales that they lost. it's probably not going to generate bottom line profits. when traffic turns positive, that's when penney's is positive again. >> thanks so much for theading down there and checking it out for us. >> reporter: sure. thanks for having me. >> tired of standing in the street trying to flag down a cab in new york city? well, the people of halo, are, too. they created an app that lets you get a cab, pay for the ride and review the driver.
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it's backed by the same firm that funded twitter and foursquare. and if a cab isn't your style, how about this? half a million dollar rolls-royce. we'll take that for a test drive in a minute. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away.
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it has been hailed as one of the most promising european start-ups and is looking to change life in the cities by transforming the experience of hailing a cab. the halo app helps riders pay
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automatically with a credit card and secure a cab on the go. since launching, halo has signed up 30,000 drivers in cities around the world and has served 30 million passengers. now looking to take over new york's $2.5 billion tax industry. jay is the cofounder of halo. he joins us this morning here. you can't come here soon enough. this is crazy. >> absolutely. >> i was trying to think of an industry more fragmented than this. that is more right for efficiency. you point out it's one of the most inefficient businesses around. >> the taxi market, 40% of the time new york taxi drivers are looking for are spendings did prattly looking for fares when people are desperately looking for taxis. i went to london for graduate school, started a business and got the band back together to
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start another one. it is one of the biggest and most iconic taxi markets in the world, the drivers all pass the knowledge. it's icon nickic in a different than new york city. it's a great start to build a business there in that market, you can build a business new york style or anywhere else. >> how do you bring a driver into the fold? does it happen one by one? each medallion owner by medallion owner? >> we deal with drivers directly, not medallions. hailo is the world's biggest taxi app but it's also a social network and tool for drivers started by taxi drivers. we have taxi drivers in every city that go out and actually go out and recruit drivers on to the system to download the app on to their personal phone, be vetted and become part of the network. >> once they're on, their revenue you've proved goes up by a third? >> we increase the value of
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their day, their shift by 30%. that's incremental business. that's people who are not using cabs before are using cabs because of this technology. it's opening a whole new market. >> you brought on starbucks, a major player there. we mentioned branson's interest. what do these guys see you in do you think? >> i think they see -- it's a tough question, sorry. tom and i will joke about this later. i think what they really see is the potential of this business to be much more than just taxis. this is a business that started out and starts out as just a business that connects passengers and tabsies together using smartphones, it's a mobile commerce business but our vision for it is much greater, it virgin, it's starbucks. it's what else can you do with that network and that trust and that wallet that you create and that experience that you can create for consumers. the unlimited nature of the opportunity. >> when does new york go live? >> new york goes live.
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we are ready to go, we have 5,000 drivers already signed up using the community aspects of the hailo system, ready to be turned on to customers. we're just waiting for the regulatory approval, there's a lawsuit, as there always is in new york. >> there's a lawsuit to put your big toe on the sidewalk. >> nothing good ever came to new york without one. >> but it is cost-free to the city? >> suitlabsolutely. consumers pay a small tip, everybody wins. >> jay, welcome for your time. hailo, you'll hear a lot more about that soon. if hailing a cab isn't high end enough for you, how about a rolls-royce? robert frank got behind the wheel in today's "million dollar minute." take a look. >> we are rolling in the rolls
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with david archibald president of rolls-royce of north america. >> if you're going to spend more than half a million dollars on a car, you want it to be yours. >> it's got to be an expression of yourself. >> these mod els are over $500,000 each. the phantom model, let's take it for a spin. >> it is so quiet. we talk about it pulling away smoothly. >> when you're driving these 14 ton mega cars on the road, you'll get 14 miles to the gallon. >> a cooling box for your champagne, the star light roof
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and walnut veneer. >> and the man with the best job in the world, robert frank, joins us from headquarters. i remember driving one when we were doing bmw story a while ago. i was nervous. you're nervous because you know that denting them is going to be a very big deal. >> a half million dollar deal in my case. you probably knew, driving them, they are two and a half tons, these cars, but they feel so light and so fast, 450 horsepower. they're just engineered so they don't feel that weight. it's one reason why rolls-royce has tripled sales by creating cars that are a little more to the taste of sports and the bentley crowd. they like performance. >> right. and then of course a huge part of their business isn't just the ones th ones that roll off the production lines en masse, they're ones that are personally
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ta tailored to a person as taste, no matter how weird they are. >> now it's the excitement of driving it and that experience. everything, especially in the phantom, not so the ghost, but the fant on, everything down to the metal used on the dials, the stitching on the seats, every color, you bring in a pant chip, they will match it. everything about the phantom is custom to the individual. it's amazing. and they still make huge profits. >> it's been a good year for them at large. robert, i love seeing the video and those doors that open backwards. >> when we come back, find out what the financial crisis was like for the cfo of leman. those details after the break. [ lorenzo ] i'm lorenzo. i work for 47 different companies. well, technically i work for one. that company, the united states postal service® works for thousands of home businesses. because at® you can pay, print
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