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tv   Fast Money Halftime Report  CNBC  March 19, 2013 12:00pm-1:00pm EDT

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transparent before you put on the checks. >> nobody did that. >> they made it to the stores, and it's 17% of the pants. >> and then people came back complaining. >> yeah, as they should. if you're paying a hundred bucks for yoga pants, they better not be transparent. >> i bet there are some who came in and bought more. melissa, what's coming up on "fast money" tonight? >> we're going to handicap the fed. what is the fed trade tomorrow ahead of the press conference? and it is the biggest week for ipos. fascinating, huh? you didn't know. biggest week for ipos. so we are going to watch what to watch. they called out groupon before they went public, so they're one of the few firms on the street who said with groupon there could be -- >> why do we think we're getting this record number of ipos now? are they trying to clear the decks and fear the markets could become unstable? >> because we're in a bull run. even though we are down today, we're in a bull run. companies want to get out there
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when the markets are doing well. >> let's just -- speaking of markets doing well, we're now down 42 points. so we've had a big swing in the course of the conversation. we were able to rebound nicely at the open as cyprus fears were pushed to one side. now, down 44 on the dow. the s&p falling to 1,542. so failing really to gain upward traction to say the least, as you can see. negative territory. if we're able to break that down, i think financials were doing reasonably well early on. you have your individual stock stories. but still, perhaps, a desire to take some money off the table after we had that substantial run. >> caterpillar, by the way, the biggest loser on the dow jones industrials average. we should know despite the down drop in the mark, a number of stocks managed to hit all-time highs. amerisour amerisource, bergen, and in terms of multiyear highs, bank of america, which we pointed out before, up .4%.
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that's multiyear highs at this point, i long with igt and norfolk southern. so a lot of important milestones being hit in the market as we are at session lows. >> a big week for the fed, of course, ahead. for the moment, that's all for "squawk on the street." thank you very much for watching our program. >> let's get back to headquarters for the "fast money halftime report." all right, guys, thanks very much. welcome to the show. we're watching wall street very closely today. right there is where we stand. the dow is negative by about 39, taking a leg down in about the last 45 minutes or so. the s&p following suit. some real questions about this vote in cyprus scheduled for around now. however, as i said, questions remain. the euro has fallen on that news. that's what you see right there.
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1.288. that's about the lows of the day. the breaking news at the screen. the ruling party to abstain from that vote according to the dow jones according to a spokesman there. that's the downward move there dragging our markets lower. here's what we're following on "the half." what happens when the house loses? stick with stocks, a man with 116 billion under management tells you where your money will work best right now. first, our top story, in ben we trust. as the fed begins its two-day meeting, will bernanke and company save the rally? we're trading today's action with steven, simon and josh brown. josh, what do you think? it's all about really the fed over the next couple of days and what they say. >> it's all about the fed, i guess, for a long time. you know, one of the things we've consistently talked about is that right now we're up against the '07 highs. there's no reason why we should be able to cut right through like a hot knife through butter. we should struggle at this
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level. we should maybe even pull back. so i think this is perfectly natural action. if they want to point to cyprus or point to this or that data point, that's fine. they always need a reason. they always need a narrative. but realistically, i think the market is doing exactly what it should be doing in order to set up the next leg higher if we're fortunate enough to get one. >> weiss, this is in ben we trust, isn't it? >> it is. >> we're looking for bernanke to save the rally, give us a decent read on the economy and keep the market moving higher. >> and despite bitter economic news that's come out since we last heard from him in his testimony before congress, i just can't imagine he's going to say anything different than what he's been saying, because a month is not enough of a trend to change your thought. so i don't think he's going to add any more to the stimulus program. there's enough going there. but what we've seen in the last couple of days is some strategists come out and be bullish. adam parker, who's been a real bear, comes out and looks for 1,600 now. that's why the market is
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pausing, in addition to cyprus. you never know what the reason is going to be. i'm light in exposure now. but if the market does sell off, i'll add back, or it stabilizes. >> joe terra nova, bernanke has your back. a real buyer today of the stock market? >> am i a buyer of actual equities, yes. i am long. am i seeking protection send sunday night via of the derivatives market? and as we set here, i'm getting stop the protection. back to bernanke. i think what's important is when is it exactly the 85 billion monthly qe purchase program will end. i think you will see an acknowledgement the economic data has been much better in march than the last meeting on january 30th, when it was actually decelerating economic data. in terms of risk assets, i don't think it will reverse the uptrend in the dollar. i don't think you'll see a large move in u.s. tenure treasury yields. and i don't think it jump-starts
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gold. >> we had the scare yesterday. maybe the scare isn't of the magnitude that could cause anything dramatic and drastic in the stock market. but it's a scare nonetheless. >> yeah, i think we have fallen asleep a little bit about what was going on in europe. cyprus is a tiny little country, a very unique issues over there. but clearly, there are problems over in europe we need to be aware of. i think bernanke is the big calling. joe kind of hit it. this big move, rally in the market has been all about expansion. it's not about earnings increases or whatnot, up 3% last year. so the big question people will be looking for is how early is going -- how early is to withdraw and any signs of that? otherwise, i think the market continues to go higher. >> anybody afraid to pull the trigger on a bank right now? >> today? >> yes. yes, right here. >> yes. >> why? >> -- been positive on the banks -- >> i would be hesitant with a morgan stanley or jeffries, knowing when they ramp up volatility and they start to talk about systemic risk, those are the two stocks that bear the brunt of it. whether they deserve it or not -- >> they don't deserve it.
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they don't but they do. >> they've actually reduced their risk-weighted assets and their exposure. >> keep in mind it takes a few weeks for the markets to realize what you're saying is correct. in the meantime, it's probably not the -- >> the question was, would you buy banks today? >> would you buy today? >> that's the question. would you buy the banks today? no, i don't think you buy them today, because i don't see what's going on in cyprus ending in the next 24 hours. there's a real chance that cyprus will default. they need to step and go into -- and have the conversation with the russians. what are they going to do with the $2.5 billion loan that they want restructured? there's concessions that have to be made. >> are you saying you won't buy the banks because you're worried about contagion? >> yes. >> or wait for them to come lower and then buy -- >> well, it's not being worried about contagion. it's being worried about other people being worried about the contagion. you allow that to play out. it takes more than one day. >> in that case, if you are worried about contagion, go with wells fargo, that has no international exposure. >> the question was -- the
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question was, would i buy banks today? the answer is, no. because i am concerned that this is not as a -- as i said yesterday, this is not a one-day event. the sentiment in the market has changed. do i think goldman sachs is going high? yes, i own it. do i think citigroup is going above 50? yes. do i want to own morgan stanley? yes. i don't want to buy them today. >> i think the biggest issue to me is china. it's not cyprus. it's china. they had their first default ever in china. 500 million in bonds on suntech. they've got disastrous banking over there. property loans makes our bubble look like nothing. >> let's do this. let's bring the fed back in focus. debate still raining as to what's more responsible for the rally in stocks in the fed or fundamentals. steve liesman with answers. steve? >> scott, thanks. i want to give you a heads-up. when i come back over to the table, i'll fail two of your traders on their fed analysis. okay? i'm going to grade the trade. i want to show you what our cnbc
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fed survey says. 54% respondents, here's what they were looking for in the january survey for total qe this year. 858 billion. and now, here's the latest survey, 917. so adding about 60 billion. they're still running below, if you do the math, about 76 billion compared to the 85 that the fed is doing. i want to show you, also, what's happened to the timeline of what the market expects. the market's got a little more in their expectations. in january, qe november, and now here to may. they pushed ahead by about six months in 2014 when it stops. when does the tapering begin? that's what the market expects. it was back in december -- in january, they said december, it would start december 13th and now moved ahead to a month, to january 2014. how about when the fed will finally hike rates and sell assets? the first one here, sell assets, moved back. i will tell you that only half of the market thinks the fed will ever sell any assets. finally, one more thing here, hiking rates.
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that remains a first quarter of 2015 on average. one more thing i want to show you. what's responsible for this rally according to our respondents? what you see here is, let's start over here, earnings improvement. they say about 18% of the market improvement for that. economic improvement. the data getting better, 24%. financial stabilization, 12%. the biggest one, 28%. i agree some of this is related. but according to, like, for example, the economic movement could be related to the fed. but according to this panel, not everybody thinks that all of the market rise is from the federal reserve quantitative easing. scott? >> all right, steve, you'll make your way back to the desk. >> sure. look, there are different factors that are at play into the rally, right? the economy's getting better. the message we get out of this is qe's not going anywhere. but yet the economy's improving. isn't that the perfect state for what you guys want to do in the market? >> it is. and i think the fed's going to give us the cover tomorrow, because they are going to acknowledge the improvement in the economic data. but i think they'll use the cover of a weather snap-back, the cover of maybe this is just
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temporary because we're soaring inventories are contributing. so i think they use that cover to remain overtly dubbish. >> are they getting better? >> probably not in those words. >> isn't that what you're going to interpret, though? >> they'll say continue buying. there's no risk if there's tightening anytime soon. the u.s. is the most attractive market, and that's the bottom line. europe, it's not china. >> here's where the rubber hits the road. >> who failed? >> you and baker. it's bernanke. rhymes with yankee. >> hold on. >> i know you're british accent. >> it's english, my man. >> you have less of an excuse. >> i'm from long island. >> you have an excuse a lot more than that, joe. >> we don't have another 51 minutes to go over -- >> -- people who mispronounce his name. >> all of congress were -- >> save these guys quickly. >> quickly, here's where the rubber hits the road. the fed has done a
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precommitment. it's told us that they wants -- even when the data is improving, if will maintain qe. so to steve's point, i think you're right that that's what they will do. but i think we're going to hear more doubts like we had during the minutes. but i don't think that's going to really change policy. so it may be an opportunity, scott, for the next time one of the doubters comes out. the next time the market dips on the doubts, that could be a buying opportunity. if you have the faith that the fed in the face of improving economic data will keep the faith on qe. >> what about possible discenters inside of the room tomorrow? and what kind of statement could we get related to that? what are we going to take from the overall -- >> i am looking at a federal change, scott. i really think they're going to maybe bump up the outlook. i think what you said at the beginning of this program is probably what we're going to get. better economic improvement, but still dubbish on policy. this is the moment when rubber hits the the road. but still a very easy -- >> yeah, i think it will be a choice on his words because we
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saw what happened a couple of weeks ago when he gave the suggestion -- >> but if, in fact, that's what happens, you guys are going to say that it's time to buy the market and it's going to take that next leg higher. >> but the conversation hasn't changed from last week. housing is very much intact. m&a activity is there. lots of cash on the bond sheets. it's a good season. news over the europe. dollar is getting stronger. u.s. equities look good. everyone is talking 3%, 4% correction. it needs to be longer. yes, he's our friend, but there are other good tailwinds behind us. >> all right, steve. thank you. coming up on "the half," will the rally continue after earnings tonight? do traders want stock? yes, one heated debate is coming up. and deal or no deal for dell ahead of friday's deadline. we'll weigh the odds of a higher offer with one of the street's top analysts. with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies...
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all right. welcome back. we want to show you what the euro is doing here as the u.s. stock market is at the lows of the day, largely dragged lower on the news out of cyprus, which we continue to follow as we wait for a vote that may or may not happen. there's stocks at session lows. the euro taking a leg down, although it can pop -- pop just slightly off its lows here. let's go to mandy drury at the breaking news desk with the very latest on the situation over there. >> hey there, scottie. at this stage, we're hearing lots of headlines out of cyprus.
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the votes we're talking about on the bailout plan was supposed to start at noon hour time. i do believe it is just commencing now with the debating just kicking off. we also have some other breaking news out of cyprus, and that is that the finance minister has submitted his resignation. we're hearing from government sources that have told cnbc that even though he has tendered his resignation, it has not yet been accepted. of course, we'll continue to monitor the situation for you. lots of headlines, as i say, from that small island of cyprus. back to you, scottie. >> all right, mandy, thank you very much. again, the headline there, the ruling party is set to abstain in that voting process. you can see the euro again is near the lows of the day, dragging the s&p 500 and the dow jones industrials average lower along with it. we'll continue to follow that story and bring you any update over the next 45 minutes or so. meantime, a good run for shares of fedex. earnings looming, where is the stock likely headed from here? it's time to debate it. josh brown is our baby 90 seconds on the clock.
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baker, make your case. >> it's a great, great story. it continues to be the way to play the u.s. economy on good growth and also ecommerce, ecommerce growing, also. had a hiccup the last time. it had seven consecutive earnings of increasing growth. it had this big restructure affect going on. so it took a trip over there. we'll recover. oil prices are coming down, so in terms of costs looking good. it's eating the lunch of u.p.s. u.p.s. is trading much higher in terms of valuation. and their operations are 70% more effective. it's a great way to play it. usfx, fedex. >> yeah, no. i disagree with almost all of that. other than -- other than they've made substantial inroads into u.p.s. let me walk you through -- first of all, the trade has been made. stock is up 13% year to date, 25% since thanksgiving, and quite frankly, almost all of the steam in this name is because of cost cutting. there's a limit to how much of that you can do. 25% of the business is international. slowing growth overseas
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unfortunately. it is not a growth story whatsoever. and then, the last thing i would like to point everyone's attention to, this is a double the return of the s&p already. i would not be looking in this area, in the transports, for new longs. i'd be looking at areas that lagged. if you have fresh cash, it's not that fedex is a bad company. it's just that you need a time machine in order to have a good entry. >> i mean, in this market, stocks were hitting 52-week highs and continue to hit 52-week highs. there's a lot of momentum. technically it looks strong. fundamentally, a good effort. it's the next biggest competition, it kills u.p.s. what other area -- >> well, that's a great comp. you missed the trade. >> all right. the gavel comes down. steve weiss, who made the more compelling argument on fedex? >> well, they're both sort of blase arguments, to tell you the truth. it's purely a growth story. >> you're going to debate both of us? >> i'm dinging both of you. u.p.s. has a bigger yield. fedex has somewhat of a yield. but really, nothing to get your rich half percent versus u.p.s.
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at 3%. that's why the valuation is higher. i'm concerned about china, which is more exposed to fedex. it has been cost cutting, but they're getting into new lines, and oil doesn't mean anything, because they pass along the cost to the shippers. >> so you're a strong neutral on -- >> so i'm a very strong neutral. however, i would own them both, because there are elements of the story for both of them. i think the valuations are reasonable. fedex hasn't done that much over the last few years. >> we'll make that the last word from mr. switzerland. tell us who you want the debate, give us a tweet @fastmoney. we'll have the results for you at the end of the show. a few days remain for a few bidders to hit the dell sweepstakes ahead of the friday deadline. how will this play out? tony covers the company and joins us live from new york city. tony, welcome back to "the half." nice to talk to you. >> nice to speak to you, scott. >> how will all of this play
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out? >> look, there's lots of speculation there could be another offer. i think what investors have to realize is, this is a humongous deal. we're talking about a $25 billion buyout. so it's not as though a company or a set of investors can casually bid for this company. you're talking about likely needing $6 billion or $7 billion in equity, $15 billion-plus in debt financing. and that's difficult to pull together. so i think problemistically, the odds are, there is not another competing offer. >> yeah, what is it, every dollar the bid is raised, you raise the overall offer by a heck of a lot of money, right? like a billion at least, or a couple billion dollars. >> almost 2 billion, correct. >> what is carl icahn's presence mean in all of this, and how may that have changed this process with just a couple days to go, as we said, to the deadline? >> well, look, i think there have been large shareholders of dell, principally southeastern
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asset management and t. rowe, who believes there's fundamentally a higher value associated with dell. i think carl icahn has taken that lead and suggested a leverage recapitalization strategy, which means the company would take on even more debt and pay out a dividend. and while that could be very nourishing for investors in the short term, he's proposing a $9 dividend, it would leave the company saddled with considerably more debt going forward. and a business, i think, was always questioned by investors. certainly, he is bringing more attention to this deal. i think he's capitalizing and following some of the momentum of large shareholders. but i think, again, when push comes to shove, this is an exceptionally large deal for mr. icahn or for anyone else to provide a competing offer to. >> a chance the whole thing collapses? >> i'd say relatively limited. our analysis suggests that almost all of the shareholder base outside of this -- you know, the major holders that i
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alluded to, has turned over since the deal announced. so the cost basis of most investors is likely in the $13 to $14 range. so to the degree that the offer can be bumped up to $14.50 or maybe $15, my guess is a majority of shareholders will vote for that deal. >> if for some reason the whole thing does go away, if it does collapse, what happens to the stock? >> the stock was trading at $11 prior to news leaking out, and the company's earnings performance last quarter was -- was, at best, disappointing. so i think we revisit those numbers. >> let's talk apple. a year ago today they instituted the dividend. where do they go from here? so much seems to have changed since then, right? >> a lot has. this is a company that's clearly transitioning from being a hypergrowth company. and, you know, we think it will be a much more modest-growth company going forward. cash return is a big issue for investors. i think apple has been talking with its large investors, saying that it thinks it ought to
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return more cash and soliciting input from investors on what to do. so my guess is, you know, in the next zero to three months, or zero to two months, apple will announce it's returning more cash to investors. and the question is the timing and magnitude of what that cash return will be. >> tony, one of the most respected analysts around. i mean, people listen to you when you talk. the stuff about apple losing some of its mojo, or however you want to characterize what's happened to this company. is it all nonsense? i mean, is it noise, or is it real? >> look, i think the jury is out. clearly, growth has slowed. but apple's a humongous company. it's almost $200 billion in revenue. so the ability to grow at the same rate is mathematically impossible. no one can do that. and right now, they introduced a series of new products, and the big question is, is there more to come? our belief is that innovation is still alive and well at apple. and over the next six to nine
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months, we'll see examples of that. whether it potentially be something that might be a low-priced iphone, whether it potentially might be a converged device, whether it might be a watch device, i think we'll see examples of that. but right now, with growth slowing and nothing for investors to hang their hats on in terms of a new product, skepticism abounds. >> oh, it certainly does. tony, good to see you, as always. >> my pleasure, scott. nice to be on the show. >> all right. coming up on "the half," a cold stock falls and a bank stock flies. we'll have the names on the trades making it today. and is the price drop a warning signal for equities? how do traders using technical analysis streamline their process?
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one of our traders was ahead of the trade last week on "the half." let's listen. >> it's time to shore up the stock. we're starting to see a crack in the stocks. we saw michael koors down 4%. we started to see multiple compression, multiple margin squeezes. as soon as you start to see a stretch, it's going to be down. this thing could be down 25%. >> it's not down 25%, but the stock is certainly taking a dip. dropped 11% since simon made that call. what do you do? you have the head of the earnings later this week. now what you do? >> you continue to put a short on them. i think it will go lower from here. this thing was priced for three times the earnings. that's what we saw with michael koor's. 100 bucks for a pair of pants. if there's any issue with the quality control, people are going to lose that and move on to the athletic gear, the gap's, and the nike's. that's the problem with that. when i was at the airport, there was black standard outfits everywhere. you're starting to see a little bit -- you see a little bit of a breakdown, and it's a game over.
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lululemon is -- >> you guys just want to debate this one, too? i mean, you picked it as one of your stocks last week. >> no, no, i've been in the stock since 10 bucks. i've liked it. i think simon is right. here's the problem now with lulu. i think there will be a low-conviction bounce here. ordinarily i would say this has created a great opportunity. here's the problem. the growth weight is not what it was, and the belief factor when the momentum disappears, the risk-reward changes. i actually agree with simon. i would be on the sidelines at this point. let it set up again. let expectations come down further. >> let's turn our attention to copper, falling like lead today. the industrial metal dropped to a seven-month low this morning before turning positive on the day. for more, let's go to jackie deangeles now, the host, of course, of "futures now." >> that's right, scott. this is why it may be troubling. look at this chart. over the past five years, copper and stocks have tracked each other closely. but over the past month, copper's gone straight down while stocks have rallied. is copper flashing a big red
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warning sign for the market? anthony, you're at the imex, and even though we've had decent numbers on the housing, those are future permits. and that means the houses will start later down the road. right now, there's a huge supply of copper, and economics in china and europe are not good for it. >> okay, jeff killberger, are you concerned as a stock investor about what's going on here and how these things are tracking? >> absolutely, jackie. the portfolio managers and traders alike are always looking for leadership. copper is receiving some pressure in equities, but we're concerned with the inventory spike. we're seeing a doubling of inventory in copper right now, and that's really a alarming. the last time we saw an inventory jump like that, it was 2008. we know what happened after that, jackie. >> all right. a lot of supply on the table, an also watching china. that's their take. now we want to hear yours. do stocks have room to rise? head to futuresnow.cnbc.com and
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vote while you're there. you have to catch our program live at 1:00 p.m., because mary ann bartels has a shocking call on where the s&p is going next. scott, back to you. >> jackie, we will be there online at the top of the hour. we're watching everything that's taking place over in europe today. simon hobbs is tracking the close and the overseas action from the new york stock exchange. markets closing in europe. simon? >> the european markets are closing now. >> and as we come towards the close, scott, i think the tenor of the markets in europe is changing. it is clearly negative. it was negative through -- but sort of the moves we're beginning to see, the sort of trades trying to erupt, are concerning. let me just take you to the capital of cyprus where, of course, the parliament is now debating whether or not to impose these one-time levies, on bank accounts. we know cnbc has learned that the finance minister, who, of course, is part of brokering that deal with the rest of europe, has tendered his resignation. we understand that is not at
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this stage been accepted. it appears to be a very fluid political situation, and, therefore, some people are getting worried. certainly, the euro has broken lower. in fact, we came down to $1.2861, an area we've not been to since november. so the euro inevitably is under some pressure. we'll see if there's a decision to further shore that. $1.2879 is where we are at the moment. we rebounded very slightly. i would point out to you that in the flight to safety within europe -- it's not huge. but it is significant. we've seen the yields on the two-year german note turn negative again, and we've not had that -- i mean, we were there for a lot of last year at those sorts of levels. but we're now slightly positive. we came in to negative territory as people just -- a little bit of a flight to safety there. and a little bit of selling immersion on the periphery of the european debt market. so you see the yields on the spanish and the italian market just beginning to move up. though at the short end of the spanish market, exactly the
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opposite happens. the banks towards the end of the session in europe have also begun to extend their losses. credit agrico down 6 1/2. some of the italian and spinnish banks in negative territory, because the new rules of the european union, people will look more closely at what the local bank guarantees are and the local structures of an individual bank. and today, the greek market, because yesterday was an orthodox holiday, reopened, the greek banks have really taken it on the chin. a double whammy there. yesterday's losses and today's added in, national bank of greece, scott, down 15%. back to you. >> all right, simon, thanks so much. simon hobbs for us there. coming up on "the half," blackrock's chris levy with $116 billion under management has a list of names you need to buy right now. "the half" is back in two. ♪
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all right, welcome back. time now for the top three trades as we make the turn on "the half." getting hit on a downgrade at goldman and, weiss, both of the stocks having tough luck today. >> yeah, look, i'm short bhp, short rio, short valley. it's growing at leaps and bounds. it's getting huge. china's investing over 30 billion increased capacity in australia. so despite iron ore prices recovering everything they lost, you're going to see them go back down from what was 150 to 80. so i still think you want to be short these stocks. plus china infrastructure's slowing down. by the way, rio is putting goldman's convictions sales list. you'll see more downgrades. >> simon baker, yesterday on
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with maria yesterday, bank of america, she says she's still bullish on. the stock is up nearly 1%. >> yeah, you said it right there. she cited a couple of positive things. interest rates going higher. noneffective loans doing better. and she likes the space. we're happy, too. >> josh, what's happening with cardinal health today as we take a look at cardinal? walgreen and amerisource bergen. >> so cardinal health is the second-largest company in the space, distribution of drugs. walgreen's said they would not renew their contract. so obviously, cardinal health, the numbers going out past 2013 are in question. i have a feeling this stock sees below 40, unfortunately. great company, just a really bad day to be a shareholder. at a certain point, it gets too cheap and there's a decent dividend yield. but i wouldn't buy it yet. >> all right. well, blackrock's chris leavy who manages over $100 billion laid out a bullish case for stocks last september right here on "the half." >> looking ahead to next year, we think it'll be another good
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year for equities. >> why? >> we think the operating earnings grow in line with nominal gdp around 4%, 5%. if you combine those two thing the, a return for equities next year. >> all right. a spot-on call, but with cracks forming in europe, is it time to get more selective, perhaps more defensive? joining us again is chris leavy. chris, welcome back. >> thanks for having me. >> you were right on. what do you think today given the backdrop of what's happening over in europe, combined with the fact that we've come so far in the stock market? >> sure, so in the very short term, we are -- we are overbought. so in the short term, some kind of modest pullback would be perfectly natural and normal to see. longer term, though, we still think equities have further to go. you're only at 13 times next year's earnings right now in terms of what we see for earnings. and that's just not a demanding valuation. and when you factor in all of
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the share-repurchase activity that keeps a bid on this market, combined with some of the positive flows we've seen, we think that any corrections along the way will be reasonably modest and that you'll end the year higher. >> you know, the fed obviously will come out with its statement tomorrow. do you believe, as we talked about at the top of our show, that the scenario which we could all get pretty decent news on where the economy is heading along with the dovish statement that tells you the fed is not leaving the party anytime soon? >> right. we're still -- we still have a ways to go before we hit that unemployment-rate target. so we would expect in the short term for the fed to remain accommodating. but, look, i mean, when you step back, inevitably we do think we're going to be facing higher rates. and that's one of the reasons why we like some of the bank stocks, because they're one of the few areas of the stock market where the business will actually improve due to higher rates. >> so a modest pullback. and you'd be a buyer, obviously,
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given your commentary on any pullback, correct? >> yeah. and i think if there's one thing to remember about the market, with modest earnings expectations for next year, you're only at 13 times next year's earnings. that's still very reasonable and compelling. >> let's go specific picks here. tell us some of the stocks you like. because it's across a broad array of sectors. what's your top pick right now? >> well, we really like all the areas we're about to talk about. the banks, i think, are particularly unique. two in particular we like are bank of america and u.s. bancorp. some for different reasons. bank of america's earnings power, we think, is going to become more transparent to the street as the services expenses tied to poor loans improves. u.s. bancorp we think will continue to grow their loan book. they have a real competitive advantage in the marketplace when you look at their expense ratio. that allows them -- and they also have a very good capital position. but there's one thing that these two banks have in common in
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addition to being attractive in their own rights. i'll say two things. first is the financial sector is still cheap. we used to be really cheap in the summer when we were cheaper -- the financials were cheaper than they've been 99% of the time. now we're cheaper than we've been 90% of the time. still very cheap. secondly, from a portfolio diversification perspective, there's just not a lot of ideas out there that truly benefit from higher rates and a steepening yield curve. and these stocks will benefit from that. and so, we think that there are good ideas in their own right, but they also bring a real benefit to a portfolio. >> the other names that you like, it seems like everybody is now falling in love with the airlines again. or maybe for the first time. for that matter. google as well. tell us about each. >> yeah, so airlines is an area that we've been in for a while, and we really -- and we still think you want to be there. one of the things that we really love are when industry structures change dramatically, for the better or for the worse. in the case with airlines, we
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call this an emerging olligolop. now the top carriers merge, the top four carriers will be 90 -- almost 90% of the market. that's tremendous industry concentration which we thinks creates a backdrop for the group. ual is unique within the group because ual had some execution issues last year that we think they're going to rectify, and as a result, ual has margin catch-up potential relative to the industry, so you'll get an even better result there. >> chris -- >> and -- >> i have to wrap you up real quick. just give me a quick sentence on goog. why do you like google here? >> 15% revenue in earnings growth, at least. and 15 times next year's earnings. still a buy. >> all right. there you go. chris, great to talk to you. thank you very much. a lot of names for our viewers, certainly to chew on today. guys? comments? >> i own the airline, still own
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them. i have u.s. air, because the american -- i don't think they'll make the same mistakes in terms of combining with ual and -- and the banks, also. it's almost as if i paid him to come on. >> i think he's right on google. i can't find a fly in that story at this point. >> i like all of the names. missing a name in the housing space. >> what about joe? >> the financials, if you like usb, you have to like pnc. that's the one name he left out. coming up on "the half," activist investors are back, but are they taking on too much risk with the public's money? hedge funds are falling in love with the dollar, but is the trade getting too crowded? 64 stocks, but there can be only one winner. from favorites like google to major comebackers like netflix, it's time for "fast money madness." who is the best stock in the land? the traders and you make the picks.
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[ male announcer ] when it comes to the financial obstacles military families face, we understand. our financial advice is geared specifically to current and former military members and their families. [ laughs ] dad! dad! [ applause ] [ male announcer ] life brings obstacles. usaa brings retirement advice. call or visit us online. we're ready to help. learn more with our free usaa retirement guide. call 877-242-usaa. well, i guess i better put the paper down and tell you what's coming up on "power lunch" before i have a nice cabernet to get warmed up. what are the chances of a recession in the united states? we have the exclusive results of the cnbc fed survey. they'll surprise you. housing, of course, hot
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again in many parts of the country. and get this, in miami. which went from boom to bust. back now to boom. condos there are nearly sold out. good news for donald trump. and an incredible developing story in the art world. the mystery of a $500 million heist that took place more than 20 years ago. closer now to being solved. back now to scott on "the fast money halftime report." scott? >> people thought you were joking about the wine, but you have the bottle over your left shoulder. >> i know. and it's a screw-top. very easy. very convenient. >> very convenient. we'll see you at the top of the hour. some investors are used to taking risks in their portfolios, but what happens when it becomes part of the public gamble? some are asking ackman. simon lack wrote the hedge fund mirage and joins us here on the set. thank you for being here. >> nice to be here. >> should pensions even be invested with hedge funds? >> they have too much money. i sympathize.
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pension funds have 7% return, and you won't get it from bonds and stocks won't do well enough to make up the difference. so hedge funds look attractive. there's too much money. the industry is overcapitalized. $2 trillion, 7% return expectation. that's $140 billion a year before fees, 200 after fees. hedge funds have never made that much money in a year. the world is not that inefficient. it's not going to end well for a lot of the pension funds. >> if you look at some of the specific investments that we're talking about now, whether it's the herbalife thing or the jcpenney, the point is it seems pension funds are taking on a lot more risk, and whether that's a bad thing in the current environment to be doing with what is essentially the public's money. >> yeah, i think it shows how short they are of opportunities to invest money and what hedge funds are having to do to try and achieve those returns. there are gray henl funds and happy clients, but there's too much money in the industry overall to achieve the objectives that people have.
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>> simon, one of the major trends in asset management right now are products that are supposed to be able to deliver hedge fund-like strategies, but obviously, without the performance fee, but just taking an internal expense ratio. i have two questions for you on that. one, do you really think that that's something that can possibly be delivered in that manner? and, two, is that something you think large pension funds will ever take a liking to given how pedestrian an etf is, versus, you know, a $6 billion hedge fund? >> sure, a lot depends on the quality of the manager running the money, right? >> right. >> everybody knows fees are ridiculous. i worked out in my book, 98% of all of the profits that were made by the hedge fund industry went in fees to managers and fund managers. so they made a lot of money, but it didn't get back to the clients. it stayed within the industry. obviously, fees are just wrong. i mean, they're -- the knuckleheaded level. >> can i -- a couple of things. i couldn't disagree more. if you go back to 2008, you had
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the s&p down 18%, the hedge fund down 16%. you had 75%, i believe, and that may be dated a year, of managers underfunding the s&p every year. and fees are ridiculous, because nobody said you have to pay them. pick the manager you want to go to. >> that's true.to. the facts are, the 16% i'm quoting to you are after fees. >> so how about this -- >> so the good managers can still report fees they want to get more mentions actually going to hedge fund not the other way because they agree with me as opposed to you. >> i see where the money is. but how about this, they found they couldn't deliver absolute returns. so then they changed the name to the uncorrelated and then they found uncorrelated wasn't that good because they were correlated with stocks. they keep changing what the gold posts are. in 2008, hedge funds lost all of the money they made in the history before. i used to look at hedge funds before 2008. i said, what is a year going to
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be like? 10% would be really bad. hedge funds lost more than anybody reasonably expected. >> i think it's really -- i mean, the fund to fund business, it's dreadful. because mildly underperform and then you tag along a 1 in 10. >> call it 1%. i think they are going to have to be more consultants to take out the fact that they are handling the money, take out the fiduciary element. there's too many fees. >> it might save you money but if they trail the market as they have, what was the point of being ten basis points better? >> you could have had a 60/40 portfolio, not just over the last ten years, every year. you could have had your own hedge fund portfolio. >> >> there are great hedge funds. you should do that. on average, treasury bills have
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done better. on average, like we are not all better drivers than average, we are not average hedge fund managers. >> thanks for coming in. >> my pleasure. coming up on the "half," four stocks you asked me for on twitter when "halftime" comes back in a couple of minutes. [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪
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well, when the viewers ask,
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we deliver the four stocks that lit up my twitter page. u.s. steel. first to you. >> u.s. steel tried to rally and get up to 26. there are secular challenges for the steel industry. the commodity space is littered. no one wants to touch it right now. fundamental weakness, no etf. >> josh? >> this is the company that essentially controls the wall board industry. the stock has done nothing since january 1st. the knock on this company has historically been, too much debt and over the last three years they have restrucked that, cut costs by 25%. i like this name. >> give me the scoop on norfolk southern. >> the scoop is that you're seeing crude being shipped by northern rail. it's going to help rail and
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earnings. norfolk is right in the middle of it. if you look at it in a couple of years, i think you can own it. >> simon, cat? >> it's an increase on infrastructure globally and gdp growth trading at ten times price earnings. the weakness in china is going to have a better entry point. i'll hold off right here. >> we asked you to weigh in on our fedex debate and decide whether the bull or the bear won. we tallied the results and you said, drum roll, please, the bull won the debate. congratulations sir. >> final trades when we come back after this short break. otherworldly things. but there are some things i've never seen before.
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