tv Closing Bell CNBC December 4, 2013 3:00pm-5:01pm EST
mcallen. >> wow. great stuff. it's smoother than a "street signs" show tease. >> if you need more money, check into "mad money," jim will be talking to the founder of avian tequi tequila. i'll see you on "fast money" i'll be speaking to the ceo of lifetime fitness. >> cheers. and welcome to the "closing bell." i'm kelly evans at the new york stock exchange where we may yet have another down day with the dow off 62 points. >> looks like it. in fact, today's fun fact, you can write this down or impress your friends at tonight's cocktail party, the last time we started any money with three consecutive down days was back in september 2011. that didn't even happen in 2012 at all. >> that would have been in the middle of a pretty sharp correction as well. >> in fact, that month, september of '11, we were down 7% in the market.
so, we're not saying we're going to see it this month, necessarily, but we are off to a down start for the month so far. >> sure we'll get into that and market reaction. plus, exclusive reaction to the selloff with pimco's bill gross. he has an eye-opening opinion of how investors should be playing this market. he'll tell us what keeps him up at night. >> the minimum wage is back in the news. we have a fast food worker walkout scheduled for tomorrow. the president was demanding an increase in the minimum wage. today we'll talk to a major e c exective to a major food chain about what would happen if they were forced to pay all workers $15, which is essentially double what most fast food restaurants pay. what do you do? cut jobs? make burgers smaller? >> sliders for everyone. with the dow off about 60 points, off the low of the session. it was down about twice as much
at that point. the nasdaq only off about five points. the s&p 500 off three. interestingly enough, there have been some social media names, bill, bucking the trend today. >> let's talk about today's market action with our "closing bell exchange," lance roberts, jonathan brodsky, and jeff cox and rick santelli. jonathan, you're feeling as, listen, we've had good gains, you're telling your client, take some profits, but money somewhere else. >> yeah. our perspective is the u.s. markets have done well. there's a lot of opportunity around the world. a lot of inefficiencies to be sought out. we're telling them to rebalance some gains they've seen in the u.s. markets. >> which you're saying to people, maybe we have more to go here on the selloff. buy the dip crowd not here necessarily, but you think they're lurking? >> yeah, i do. the first couple weeks of december, mutual funds distributed out capital gains, dividends and interest.
it's not unusual to see selling early in the month but a lot of mutual funds are behind the curve, so i think we could see a rally into the close. >> jeff, we've noticed that the market doesn't have the kind of oomph, they're not buying the dip. you've noticed a rather ominous statistic at the new york stock exchange. >> at the new york stock exchange, a lot of people are using borrowed money to buy stocks. we're actually at precrisis highs. about $412.5 billion in margin debt now. so, that tells you if it's another one of those indicators of frothy investor sentiment. you know, bill, the funny thing about margin debt is it's only bad for you until it starts to go down. it's going up. it's always a very good sign. when you first start to see that margin debt go down, that's usually the smart money telling you that the market's getting overheat. this is a very good signal back in 2007.
just even incrementally when those margins start to come down, it's the scientist say, hey, maybe it's time to take a break. >> at the same time, there's -- for everyone who says, this is a sign that sentiment's too high, some saying sentimentism is too low. rick santelli, i'm wondering to you, what do you glean from the bond markets? >> well, you know, alex was talking about margin debt. i think that many are marginalizing the influence of debt. i think the debt markets, even in a managed form, continue to exert pressure. whether it's the steepening curve. as you look at intraday, the stick yns of ten-year. once that rate moved on the jobs, jobs, jobs, it stuck, hardly moved. real tight range since. as you look at longer term charts, whether it's year to date, remember, we closed over 100 batsz points lower at 1735. a bigger chart, we rarely look at, look at a 20-year chart.
fy erase this was a ten-year and told everybody out there it was a tech stock, that pattern looked aggressive to the upside. you want to keep thinking about that. last but not least, you want to talk quickly about what's going on with the dollar. it went up but came right back down. it's confused just like the equities on good data. >> quick point i would like to make here. we just went over -- we had $1.60 trillion in corporate debt. that's a new record. we have about $4 trillion about to come -- come due over the next four years or so. so, if rates start to continue to move, even just, you know, modestly, that's going to present a very challenging environment for companies that want to roll that debt over. >> jonathan brodsky, i know you're taking profits anyway, but isn't it possible that until the fed starts signaling or that it's imminent, which they're not doing here, couldn't it market move higher? >> yeah, we're not saying to
remove yourself from the market. we're saying valuation is king, especially in the market conditions we're seeing right now. the objective from our perspective as value investors is to take our profits from what we think are expensive securities, scour the globe for opportunities, and put our capital to work in securities that are trading at a much lower value we think have good prospects. >> lance, there's actually a raging debate about the valuation of the market because there are two pieces of this, i should say. >> we keep hearing this. there's price and then earnings. what you think the earnings projection is has a lot to do with how expensive stocks look here. what's your take on it? >> that's a great question. if you look at the revenue growth, top line of income statements for corporation, it's only grown about 25% since 2009. the bottom line profits have surged by 230% during the same time. and that's because of all the cost-cutting, wage suppression,
low interest rate environments have been very beneficial for corporations and profitability. and if rick's right about what's going on with treasuries, that could continue for a while longer. but ultimately, we have to pay the piper for cost-cutting environments because it's impacting economic growth. >> i think this raises an important point about misallocation. >> i have breaking news you want to comment on, jeff. go ahead. >> misallocation of capital. what are companies doing with all their money? are they using it to grow or are they using it to simply reward shareholders? i mean, that presents the growth question further down the road. >> let me -- let me ask the guys to put up the chart of apple. let me see what it's doing. we just got word carl icahn has tweeted. it's not doing anything. maybe they'll hear about it right now. carl icahn tweeted gave apple notice it will be calling for a vote to increase the buyback program, but not at the $150 billion level. he's been calling for that -- an
increase buyback and maybe as much as $150 billion but now he's saying he's going to call for a vote but not at that level. >> let's take a look at the shares, if we can. part of what's happening here is this expectation or this combination is not new. we've known for months, carl icahn wants to do something on the size of this buyback program and the market has already priced that information in. in other words, if they think it's likely or not. now we're hearing the size of the program he's pushing for may be considerably less. if that means it's more likely to happen, that could start to see the shares move, guys, potentially a little more. >> that stock was up 20% in the last two months. >> his last tweet on apple was met with a thud by the market, too. it's doing fine on its own. >> lance roberts, would you buy apple here? >> two things. we have to consider the fact that you have a guy tweeting about a stock that he owns and
he knows that his tweets can push the price of the stock. >> amen. >> something is not quite right about that. that's not a fair playing ground. i like apple. i think it's great. i'm really watching the competition from samsung to see how it erodes their profit margins. that's the only real concern i've got with apple right now. >> rick santelli, i think i heard you jumping in there with an amen. i just want to throw this out there. i mean, there are -- there's an element of transparency involved here, so, you know, talk us through a little why you think this is so pernicious. >> we know carl icahn is a big name played out there. we also know we're less than an hour away from the close. we also know that there's a lot of issues with stocks and tech seems to be leading the way in terms of net change year over year. i just think it's like throwing a match on a gasoline can. kelly's point is well taken. this stock is not moving. this was probably already in the
market at this point. and the fact he's not calling for that maximum $150 million buyback he'd been discussing, maybe that's the reason it's not moving right now. >> i think it's indicative of the excess cash on the balance sheets. we're seeing increased activism to put that cash to work. it's a signal management is just not quite ready yet given the profile of growth around the world. so, it's indicative of a lot of what we're seeing in a number of companies. >> we also know, jon fortt has pointed this out well, apple has stepped up the pace of acquisitions lately. they are putting the cash to use to that extent. this isn't about the cash. what carl icahn wanted them to do is take advantage of debt markets here and borrow to fund a lot of this. and a lot of companies have been following that strategy. >> they floated a huge bond earlier. it was -- >> back in february. >> very, very successful to finance a buyback at that time. >> and that goes back to manipulating bottom line
earningings. how do you increase earnings? you borrow cheap. >> it has to -- >> this low? >> you have to ask yourself, how long can this game go on? the point i made before about all the debt maturity that's coming up, you know, we're seeing some pretty aggressive moves in the ten-year, as rick as charted for us very well, that, you know, this game is almost over in terms of just being able to take out unlimited amounts of debt and keep rolling it over and rolling it over. the day of reckoning is coming. >> you say that but japan has been doing it for 30 years. >> exactly. >> god forbid we end up like japan. that's not the template we want to follow here in the u.s. >> thank you all. i don't know if carl icahn was expecting this stock to move with his tweet. hasn't moved a bit. >> we'll keep an eye on it. meantime, we have breaking news on the banking industry. kate kelly joining us with the story. >> thank you so much. the securities industry and
financial markets association, among others, is suing the commodity futures trading commission over the rules governing overseas swaps trading. specifically, a cross-border rule guidance set of paperwork issued in july that the industry finds objectionable. essentially, they think it's an owner yous set of guidance, and this will be treated as law, was deeply flawed on the cftc's part. more details on that, kelly and bill, as we get them. we understand this suit has just been filed or will be imminently. it's certainly big challenge to see cftc chairman gary gensler in his final weeks of the job. >> all these countries, whether it's u.s. or europe, trying to move to indrese regulation but all these banks exist in so many jurisdictions. who do they have to listen to? what happens when rules conflict?
a big financial trade association is pushing back to that ability to extend regulation beyond the u.s. >> we have a guest coming up we'll talk about that issue. >> heading toward the close. 50 minutes left in the trading session. the dow was down about 125 points at the low. we've come back. down 60 right now. it is our fourth consecutive down day here. >> and some new housing numbers out today. sales surging but a new bag of trouble could be brewing in the mortgage business. that could change the sales story in a hurry. the winter chill can be a very good thing for retailers. courtney reagan will be here to tell us why. plus, why are investors so warm to discount chain tj maxx? the story behind that stocks just ahead. and after the bell, president obama entering the minimum wage debate a day ahead of a planned walkout by fast food workers. the president of white castle said such a move would hurt jobs. he'll join us after this.
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housing sales been pretty good? >> it was the biggest in three years. some housing experts poking holes in the numbers. diana olick joining us with the numbers. >> poking holes is a nice way of putting it. some are calling the numbers outright wrong. deutsche bank put out a note saying we're skeptical of the strong october reading because it runs counter to nearly all over an exdoelgts and macro data. we expect revisions to october or some reversal of october's significant gains. contracts jumped 25% in october, month to month, after falling 6.6% in september from august. these numbers are highly volatile with a 20% margin of error. plus, the numbers are so small that any slight moves make for a big percentage change. now, we saw a slowdown in august and september. august's original reading was revised down by 15%. september was a drop from there. then the crazy 25% jump in
october. whether you believe it or not, it's not as great as it sounds. >> this number will likely be revised down as well. even if you take it at its face value, you're still only going back to the april levels of new home sales, which is nothing stellar. it was a better market but it certainly isn't a market that's soaring. >> now, the wild card now, of course, is rising mortgage rates. some say they will knock buyers out of the market. others say they'll pull buyers in, that is buyers who might afraid rates will go even higher. more at realtycheck.cnbc.com. thank you. bankers association is warning small lenders could go out of business because of a part of the dodd/frank regulation that goes into effect in january that requires lenders to verify a borrow's ability to pay back their loan. necessity say that would be an additional cost that these small lenders just cannot afford. >> david liken of mortgage
banking solutions joins us saying this is a very real threat and will limit choices for borrows. chris thornburg who thinks the whole principle is ridiculous. thank you very much. why do you think this will put the smaller shops out of business? >> first of all, it sounds like it's something they should be doing all along. and they have been. >> exactly, right? >> we're having credit risk all along. the reality is it's not the fact they're asking us to revere fi this information or go to great extent, it's really new requirements of a poorly written law that are bringing up -- dodd/frank the law i'm referring to and consumer financial protection has the impossible task of putting out there regulations on this industry. we have banks that are too big to fail. now we have companies too small to comply. because of the litigation that's coming at this industry. it's the litigation and cost
surrounding these poorly written laws that are the problem. >> you don't buy that. why not? >> two things. i dough agree these laws are kind of unnecessary, but i disagree it's going to have a differential impact on small and large lenders. when you think about these kind of costs, they are per loan. it's the marginal cost. that means more or less it's an even playing field. why i don't agree with the law, i don't think it will have a substantially negative impact on small lenders compared to large ones. >> we've had barney frank on the program several sometimes. one of the last times he was on we talked about banks pushing back. i can hear him say now, let me get this straight, banks, lenders, small ones, are upset because we're forced to do our job and the due diligence to make sure the money we're loaning out is actually going to be paid back? he would say that is precisely the point of dodd/frank, chris.
>> i agree with that. and at some point these regulations had to go into place. we knew, of course, that there was a complete breakdown in credit standards in the middle part of last decade. we have to make sure we don't repeat that again. some regulations need to be put into place. i think everybody would argue the pendulum has gone too far in the other direction and these numbers are a little onerous. small lenders did better in the crisis than the big boys did. it was indeed, the big, big boys that suffered the largest level of defaults. >> and big, big guys dealing with higher capital requirements who are starting to get out of this business. david, the story in "the journal" today how smaller mortgage lenders are leaving the field here. doesn't sound like they're necessarily the ones suffering. >> well, they're selling out, as they look at litigation risk, the legal risk out there is the issue causing -- our firm is one
of the largest m&a firms in the nation. we have never seen the kind of activity where guys owning these small businesses are throwing in the towel saying, we've had a good run, it's time to get out. we cannot sit and deal with compliance rules coming at us. it's getting too costly. the biggest impact, it's going to be passed onto the borrower. i agree with chris' statement, incremental, per loan. guess where that per loan cost gets pushed? right back to the consumer. >> david, a line from the piece. in the third quarter alone the smaller lenders, those outside the top five, gained 6 percentage points of market points. that's an fbr number. that sounds like, if anything, they are gain -- making significant inroads into this business. >> they have made good inroads. independent bankers association, i'm in miami, we have our conference starting tonight, this very group, that's been growing in numbers. they're looking at this litigation that's out there. their legal risk, compliance legal risk.
and they're seeing this and going, it's just too much for smaller company to reserve. the class action lawsuit that are certain to follow poorly written laws. >> you know, chris, you made the point that maybe regulations go too far sometimes, even as the pendulum swing too far the other direction when they were taking advantage of the situation before the financial crisis. don't you think that going too far is maybe the point that you're trying to restore confidence in an incredibly important industry in this u.s. economy? >> well, no, i wouldn't say so because if you look at the housing market today, we just saw that story, i agree. i don't believe those new housing sales numbers. overall, the single family construction market is still completely in a slump. you can blame that completely on the fact that it's very hard to get credit out there in the housing market today. and that's really suppressing what should be a big boost to the overall u.s. economy. so, we're really suffering as a
result of this. it isn't helping. >> guys, thank you. >> this is only going to make it worse. >> appreciate your thoughts. have a good convention. >> thank you. >> thanks, guys. we now have a little more than half an hour to go before the close. we're keeping a close eye on markets as we head into the close. >> we're coming bang here. >> about 34 points. more than 1030 points at the low. >> we'll see if we can come back in the last half hour. why did merrill lynch fail back in the crisis, you ask? former president of merrill lynch international is out with a new book with never before revealed details on that story. he's here first coming up on "closing bell." and with just 21 days, can you believe it now, to go before christmas, we're also just a few hours away from the lighting of the rockefeller center christmas tree. take a look. this is a live shot of rockefeller sister. this year's tree is 80 feet tall. it's fitting since this is the 80th tree lighting ceremony. we'll show you more throughout "closing bell." stay tuned. americans take care of business.
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more breaking news on this story we told you about earlier about investor carl icahn and apple. david faber has the latest developments for us. >> we can confirm, of course, carl icahn will submit a shareholder proposal to shareholders at apple at the annual meeting. he'll have to do it on his own by sending his own proxy. more importantly, we can tell you his new ask is significantly
down from his previous ask. that being he is now submitting a shareholder proposal that would say, buy back $50 billion worth of stock in the current fiscal year. his suggestion previously had been for an immediate $150 billion buy back by apple. he's now asking for $50 billion in the current fiscal year, ending with september 2014. interestingly, icahn if he chooses to move ahead with this shareholder proposal, will be asking for $100 billion less in buybacks from the company. perhaps more modest, more realistic sum. for its part apple has already committed to, if you recall, $10 billion capital return program. $40 billion of that through dividend. they have bought back $23 billion of stock. have another $37 billion to go on that. and have said they will revisit their capital return plans early next year.
news of course, icahn shareholder proposal down to $50 billion from $150 billion. we'll see if he follows through. >> maybe he'll ask for buyback in tranches. $50 billion now and then we can go from there, right? thanks, david. see you later. >> nice weather we're having lately. >> going to be 60 degrees here tomorrow. >> weather has been an excuse for retailers when they miss the numbers. >> seems retailers should be warming up to cold temperatures as we're seeing in many parts of the country. courtney reagan joins us. >> this year's black friday was the coldest in more than 20 years for many parts of the u.s. temps were 3 to 15 degrees cooler for average per week, to jumpstart sales of winter apparel. in fact, the only apparel searches in google's top ten search trends over the black
friday weekend were vf corp owned ugg and timberland. jcpenney's boss things the weather is impacting what people is buying. macy's ceo has mentioned increased outer wear opportunity into the holiday season. in fact, weather channel survey shows consumer demand for heavy outer wear increased 125% over black friday compared to last year. stronger demand suggests retailers can more easily sell winter apparel without deep discounts, especially important in one of the most highly promotional holiday seasons in 1078 time. weather channel's paul walsh forecasts colder than normal temps will continue for the next couple of weeks. the snowstorm will hurt foot traffic temporarily but then again it is christmas. gifts have to be bought somehow. bill? >> somehow. they'll have to be delivered by
drone. >> whatever it takes. >> what a concept. thank you, courtney. you know, one retail stock that's been on an incredible run no matter the weather has been tjx, parent of stores like tj maxx and marshall's. look at the chart so far this year with a gain of 47% as it enjoys this ride. will it stay red hot, no matter how cold it gets. you're ready? we're setting ourselves up with a stock brawl. >> stephanie saying she's not buying at these levels, but chad morgan continues to add to his positions. welcome to you both. stephanie, you not interested in tjx, why? >> no. just to be clear, we own it. we were buying this a couple years ago at $38 share. with 47% gain year to date, if you look at the valuation at 19 times forward estimate, that's well above five and ten-year historical average. >> you're not buying it right now? >> not right now. if it were to get to 60 or below, i would definitely pull
the trigger because there are multiple ways to win with this story. particularly the macro situation, as wage growth continues to be flat and pressure, the consumer is very choosey and they're looking for bargains and quality merchandise. this company has both. >> chad, you would be buying from here, yes? >> right. like stephanie, we've owned this position for three years and we've done very well with it. what we like about it, though, is that you have rising top line growth as well as you have rise in gross margin and operating margins. our price target is roughly around $22 a share. we think you're getting -- paying well for a good margin of safety at this inflexion point. now, would there be a pullback in the stock? yes, obviously there could. for long-term holding, i think investors will do quite well with that position. keep in mind, tjx has been buying back shares. they've roughly retired 25% of their outstanding shares over the last six years. that's without taking on any
debt. >> i want to go back to the point courtney was making about the weather and the effect that will have here. let me ask this. if retailers don't have to get rid of a lot of excess merchandise, they're able to turn it over because the weather is in their favor this time of year, doesn't that mean a tjx might have as good a selection this time around and potentially hurt shares? >> i don't believe that to be the case at all. look, they're going to go through some inventory issues from time and time again. have you sfo keep in mind that the management team here over the last five years has been exceptional at being able to manage their merchandise as well as supply/demand curve. >> he said 72 is stock price target. you? >> upper 60s. >> you wouldn't see it go up? >> i could see it over the long -- absolutely, over the long term. it is a great long term story. it's hard to brawl on this one. >> i was going to say, we just brawled. >> i'm sorry. i would love to be your bear. i would love to be, but i can't be. >> it was very nuanced stock
brawl today. >> exactly. thank you very much, guys. >> thank you. >> market flash on social media stocks now. let's get out to julia. >> twitter is leading a mini rally in social stocks, up more than 5%. why apple's $200 million acquisition of topcy shows value of fire hose of data. investors are speculating why apple would snap it up. facebook shares are up more than 3.5% after ubs speculated it could be soon moved into the s&p 500. and reports that more than 2 million accounts from facebook, twitter and others have been compromised haven't impacted the stock one bit. meanwhile, pandora shares soaring today on streaming company's audience network.
they say the number of active listeners grew 16% from a year earlier. this is huge. it shows that apple's new iradio streaming service would cut into pandora. it is not doing that. >> julia, thank you very much. look at this market. we were down 125 at the low. we're going to be -- if we sit here in a moment, maybe it will turn positive. >> dow down nine points. >> some indexes back in the green. it's been a roller coaster day. it's not often top executive in the financial sector says his industry needs more financial regulation. well, meet gary parr, vice chairman of lazard. you will meet him up next. i have low testosterone. there, i said it.
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the nasdaq has turned positive. the s&p down just a fraction right now as we head toward the close. we have not seen three consecutive down days to begin a month since september of 2011. we've had two consecutive down days to begin september. today would be the third if we finish that way. >> looks like we could be on
track to end that eight-week win streak but a lot depends on what has happened from here on out. >> we're counting down finally to next tuesday's vote on the volcker rule, which would usher in a new era of stricter oversight on the banking industry. our next guest is critical of that rule, but he does say -- he says regulations do fall short and that we actually need more regulation. >> lazard vice president gary parr joins us exclusively. thank you for being here. >> thank you. >> it's taken years, 950 pages. but you're not happy with the outcome here. >> the volcker part of dodd/frank was 11 pages now and has turned into 950-page, roughly, document. that's too complex. it is addresses a lot of good issues. the concept was a very good concept. >> the whole idea was to end proprietary trading by banks so that it takes some of the risk off their balance sheet. >> right. a very good idea.
completely supportive. but if it takes 950 pages to describe what all that is, it means it would be the full employment act for lawyers and regulators trying to decipher its meaning, i fear. that's the issue. >> unfortunately, we do live in an era where there are complex institutions that need specific rules written to deck tat behavior. so, maybe it takes 950 pages but if it finally lays out in detail which banks can and can't do, perhaps that's just what it takes these days. >> that would be -- my guess is, while that's a noble objective, my guess is that's not what would be imbedded in 950 pages. as you know, it was five different committees working, trying to come up with something, a consensus view. that's unfortunate. because, again, the concept's a very good idea. for that matter, a lot of dodd/fra dodd/frank, a lot of good ideas imbedded in dodd/frank to add regulation to the industry. >> there was talk of maybe bringing back a modified glass/steaga glass/steagall, which was repealed just before the financial crisis.
that put up a fire wall so that banks couldn't commingle risk assets with their savings deposits. you wouldn't want to see a glass/steagall come back? >> i would say the following -- actually, it's interesting, being at a firm like lazard, we would be a beneficiary of a glass/steagall being implemented. as a taxpayer, i think it's a false premise. the idea that glass/steagall would have prevented this last financial crisis is, i think, wrong. bear stearns was the security firm, lehman brothers is a security firm, and on the other hand, washington mau actual and wachovia were banks. the four institutions that became insolvent had nothing to do with glass/steagall. by that time we had a systematic problem. that's the point i'd make, that wasn't the issue. to put it in place, i could sort of say, fine, doesn't affect me negatively, but people believe they're solving the problem. they made a mistake. there were other issues. >> between regulation and market pressures generally, your industry is shrinking.
it's consolidating. how do you continue to thrive to -- are you growing? in that case, how will the industry look in two, three years? >> the very big financial institutions are struggling. they are dealing with this avalanche of regulation. dealing with in particular the capital requirements that bring down the returns. so, you know, the average return on equity for big institutions last year was like 8%. that's not good. lazard, pure financial advisory, there are others, alternative asset managers are doing very well. in fact, they are taking advantage of all the regulations of the other banks. they can then step in and provide as intermediary, do credit, lending. there are a number of places where there's growth. you have to segment and say who's -- you know, there's more change -- by dodd/frank, more change to financial services
industry since the 1930s. by the way -- >> a lot of people might say that's for the better. >> oh, yeah. a lot is for the better. >> it is fine. the only issue i would wish regulators would focus on the big deals. if they want to make the financial institutions more like utilities by requiring more capital, fine. that would be fine from my point of view. i could be an advocate. but zglass/steagall was 37 page long. we're now over surpassed 20,000 pages. >> government by committee. >> gary, thank you so much. >> it's a pleasure to be here. >> we're keeping a close eye on markets as we head into the final stretch of the trading day. going from deeply negative, triple digit loss, to slightly positive. 15918 is the level there. s&p adding four points.
>> they did buy that dip after all. insider selling is picking up steam as the markets have risen. when he can we come back, we'll tell you who is selling what and if it means that maybe you should follow suit as well. >> after the bell i'll talk with pimco founder bill gross. he's talking about what's keeping him up at night and it might make you lose a little sleep as well. sorry. looking at covered call strategies to generate income? with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. with my united mileageplus explorer card. i've saved $75 in checked bag fees. [ delavane ] priority boarding is really important to us. you can just get on the plane and relax.
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if company insiders are selling shares as stock prices rise, question is, should individual investors do the same thing? >> sheila tracking who's selling what and tracking a pattern. what are you finding? >> let's start off with the numbers. there's definitely big numbers in november. in fact, $7.4 billion of insider stock was sold by companies. now, yes, you can say this is a trend that happens whenever markets pick up steam or at the end of the year for tax planning purposes. keep in mind, this is an 85% increase from the numbers we saw in october and the highest levels we have seen since may. definitely, a lot of selling happening. here is some big names we saw the most inside selling over the past three months. best buy, $200 million worth of shares sold by insiders over the past three months. amazon saw $400 million worth of
shares, including jeff bezos selling a chunk, and google and microsoft, $830 million. some top dogs, eric schmidt, larry page,er is sergey brin. retail with coach, ceo lew frankfort, and biggest was richard kinder bought nearly $8 million worth of shares in september. the biggest buying we saw was in davida health care, the dialysis health care, warren buffett's berkshire hathaway added a huge chunk to their stake. they've been steadily adding over the last couple of months. maybe not a big surprise. traders said, some of this is seasonal, some is tax planning. when you've had stocks with such a big run, always interesting to
note which stocks are seeing the biggest insider selling as well. >> absolutely. thank you, sheila d. markets stumbling, down fife points. we'll keep an eye on that as we head to the close with 12 minutes left. the last time we started any month with three consecutive downdays was september of 2011. the reason we point that out, that month the market was down 11%. if we finish lower today, that's three in a row. >> that was the last time we had a 10% correction. all those cars driving off show room lots aren't necessarily driving into mall parking lots. phil lebeau and our all-star panel has a lot to say on this story. tdd#: 1-800-345-2550 trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help
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welcome back. eight minutes left in the trading session. we thought maybe we would turn positive here. we did momentarily but we're coming back. looks like the nasdaq would be the only positive of major averages at the moment. the dow is down 13 points after having been down 125 at one time today. joining us as we start to close out this day, rick lake and bob
pisani. bob, really did come back. we thought they were buying the dip here but more faltering here. >> i think the problem is the jobs number today confused everybody. the adp, stronger than expected. ism services. employment component was weaker than expected. and i think the market's not quite sure which way the job's report is going to go on friday. if you look at the vix, you can see the vix spiking up and collapsing late in the day. i think the overall -- the good news we got today is maybe a budget deal is near. >> that's been a rumor. >> mr. bernanke did say before, one of the reasons they didn't taper in october was because uncertainty over what the government would do. move that uncertainty, i think it's good news. you know, maybe taper a little quicker. >> you like this market here, rick? >> markets always prevent challenges. markets have been punctuated by the uncertainty. we seem to have a little whiff in the air. but resilience brought us back to the close. >> there's a rumor that maybe
the committee of members of congress who have been commissioned to come up with some sort of a deal before the debt ceiling crisis may have come up with a budget framework of some kind here. that seemed to help bring the market back today. assuming that gets out of the way, is this market cheap for you to want to buy things right now? or you want to take profits here? yes to both. there are risky parts of the market. investors are more selective. s&p stocks, some have earnings that are pretty weak and some are strong. it could be an interesting period for equity managers moving forward. >> retail stock this is week, it's been basically sell the news. all of those big retail names that have been up in the last few months, take a look here. this is this week. urban outfitters, ross stores, walgreens, buckle. it's been basically sell the news on those thanksgiving
reports. they're down again. >> we lost the upward momentum we had, but we'll see what we can do in the month of november. thank you. we'll let you get back to work. we'll come back with the closing countdown. after the bell, the president enters the fray in the battle over upping the minimum wage one day ahead of a planned walkout by fast food workers over that very issue. in fact, a top executive with the white castle burger chain says such a move would cook his restaurant profits and eliminate jobs. we'll talk with him coming up next hour. you're watching cnbc, first in business worldwide. i don't just make things for a living i take pride in them. so when my moderate to severe chronic plaque psoriasis was also on display, i'd had it.
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a research tool on thinkorswim. from td ameritrade. two minutes left in the trading session. this is going to look familiar. it looks a lot like yesterday. a positive opening in the morning. as we head toward the close, as europe is closing for the day, they were weak again. then we keep going south. we were down 125 at the low of the session. we have come back. but we're failing right now, at least, to finish positive. at least for the dow. the last time -- we've been pointing this out, last time we had three consecutive down days to begin a month was september of 2011 and the market was down 7% at that time. i know i'm quibbling over less than 1% at this point, but we're looking for subtle changes in the tone of this market. it's clear the momentum to the
upside is waning right now. what is going on? >> i think it's the perfect reflection of a market that doesn't know what to make of the approach of tapering. the downside can be expected. i think the bias still has to be to the upside. if we're going to be tapering because the economy is stronger, that has to give an upside bias to the market. >> very strong housing market, which nobody believes today. a lot of skepticism on that. the jobs data, private number from adp, a stronger number. fridays could be stronger. still likely to be first quarter but it's coming and that's what the bond market is telling you today. >> what are you going to do with this market? >> we think any setback is an opportunity to buy. >> you're going with the dip? >> we're going with economic strength. >> even if they start to taper, the feeling is, once they start thinking about tapering, it's all over. >> we think tapering will be coupled with forward guidance. we think that's a very good policy for the fed to pursue.
steepen the yield curve. pushing money out into the friday. >> thank you. that will do it for the first hour here. looks like we'll finish negative except for the nasdaq, although that's very close right now. we'll keep an eye on that. second hour of the "closing bell" with kelly evans and an all-star panel of market experts. i'll see you tomorrow. >> welcome to the "closing bell." i'm kelly evans. the dow down 120 points, came back but fell short of finishing in the green. here's a quick look of how we're finishing the day on wall street. 15890 is the level there. s&p shedding a couple, 1792. nasdaq trying to stay positive. social media stocks had a little better day. that certainly helped. let's get straight to the panel. joining me today, our very own phil lebeau here in the flesh, i'm so excited, carol ross,
dominic chu as well as david sauerby, and "fast money" contributor, guy adami. thank you for being here and being with us. guy, first to you, we were moving around earlier today on some budget news out of washington. what do you think is really driving the market? how significant is it we've had the first losing stretch since 2011? >> the three-day deal isn't significant. the budget deal is why we rallied back to where we did. people are trying to wrap their arms around, good news for the market good news? i think you had a lot of everything for people today. on the data, the margin is improving. if you're bullish and i'm ambivalent, but if you're bullish, you need the market. you need the s&p 500 to trade down to sort of 1750 or so and see what happens if and when we get there. that would be the constructive
thing, especially if you believe in the long-term rally. >> that echoes what we've heard. let me correct myself as well. i think we're talking about a three-day losing stretch at the start of the month, not a three-day losing stretch, period. >> it's four if you count the s&p 500 overall. but what guy is saying is what a lot of market traders, a lot of strategists have been saying. they look at the numbers, the odds, play probabilities. markets have been in this area. you'll hear overbought out there. the momentum doesn't get to where they can stay in that trajectory, that level, that long, without some kind of a pullback. that's why this might be healthy for the overall market even if you're bullish with what's happening on the stock market. >> interesting to see financials up today. technology up. some other consumer sectors. we saw the ten-year move up, 8 2.80%. housing but your baby, the auto
market, appears to be shaking these rates off. >> what you're seeing with the automakers and the most recent ism data, and i'm hearing this from manufacturers, particularly in the midwest, there's a strength there that i think has not been given enough attention. as more data point out come, you'll hear people say, this is much stronger than it's getting credit for. your point about the three-day stretch, i hear more people when i'm taking the train into chicago say, we're due for a selloff. people are waiting for it. not that they want it to happen but they're waiting. >> is that what happens with santelli? >> no, if i was with santelli on the train, everybody would know it. >> we're in december. a lot of funds have done very, very well year to date. when you look at the risk/reward probability here, there's a temptation to lock in some fantastic returns to be able to do window dressing. it's a little early this year but from a risk/reward
standpoint i can understand where these managers are coming from wanting to lock in great returns saying, look how great i did for 2013. >> we've been asking for people about this. in great 11 months, nasdaq up 35%, why not go to the beach and enjoy the rest of the year. apparently mutual funds to some extent, hedge funds, lagging benchmarks, needing to make up a little extra into the end of the year. >> if you're a mutual fund -- first of all, the real money, asset manager is doing this, right? your flows, your trades are driven off client flows. you're not selling stocks unless there's redemptions for your funds and you're not putting money to work buying stocks unless people are putting money into your funds. as you watch what's happening with mutual funds, those equity fund flows are parnt because that's whats you whether or not these fund managers, are buying. >> we've made this point before but we'll keep making it.
when you want to get away from, are we the next big japan kind of thing, when they have minimal expect to equities, it's in the range of 50%. u.s. households, generally people know there's not that kind of exposure to the stock market. >> there's still so much money on the sidelines, money left to work. whether it's 10%, 15%, 20%, we can argue about that. i don't see what the catalyst is for the market to -- >> i'm not sure how much the fund flows. >> david, i want to let you get in here. your reaction as we sift through all of this. for the money flows -- institutionally, customers are warming up that long-only stocks
is the best place to meet your liability needs. the early trade this year was from more traditional octane to opportunistic bond, bank loans. the trend is developing in the fourth quarter and continues into 2014 is institutional investors warming back up to the expected rate of stocks relative to traditional bonds. that, i think, is still second or third. >> what do you mean by that? >> i think that institutional investors, for so long, were being taught to embrace, quote, the yale model. more alternatives. go passive in equities. fixed income has some merits but i think perennial mistrust in the stock market boast 202, certainly in 2008. given the last 4 1/2 years, so the rapid rise in stocks, i think we're still a long ways to go in this where stocks can return between 8% and 8.5%.
quite frankly, where else are you going to get that? >> what's so siminteresting abo that, if there were certainty, let's call it 8%, imagine what a different world that is if you're a pension fund. you don't have to woesh about alternative assets and this and that kind of credit. can you basically put your money in equities. i think a lot of people running these things say, we're not sure we can count on that kind of return. >> i think if you look at the average return on equity for corporate usa, return on invested capital, better capital uses and return of cash. growing dividends between 10% and 13%. yes, even valuation is positive if you look at companies on a cash flow or a free cash flow basis. all that adds up to me that we can still see a market after an incredible 4 1/2 year run that returns between 8% and 8.5%. this week is a microcosm of it with what whoa saw on ism manufacturing numbers and as
phil mentioned, auto numbers. >> we're stopping the filibuster there. nathan joins us. i'm curious what you make of the last couple of days, this losing stretch, what you're hearing from clients? >> i know from clingts is they can't do two things at once. they can't shop and they can't invest. you can't invest and spend money at the same time. they're trying to get over cyber monday. by and large, out in the rest of the world, the average investor is not back in this market yet. we saw $550 billion of outflows from 2009 to now. in 2013 we saw $125 billion go back into equities. where's waldo? where's the investor? they're sitting around in cash even when it's not paying anything and they're waiting for some great indication it's okay to rotate out of bonds. i think we'll see great repricing when dividend stocks won't be -- >> highway are we going to know?
>> i'll tell you, free asset. >> i mean, it would be nice if someone rang a bell. unfortunately, they don't do that. let me push back. there's a lot of reasons to own stock. there is no other alternative to me is the last one. i don't think that holds a lot of water. i know it's glib and sounds good on television but they're probably more alternative than have ever been. there are a lot of things that could happen still. i don't want the people at home to feel the only investment option they have right now is u.s. we can it'ses. that's dangerous. >> that's true. i want to ask you about something else too today. even as nasdaq was outperforming, twitter up back to the mid-40s, facebook doing well. why do you think this sector is staging a rebound in spite of the rebound or is it because of that? >> facebook, third quarter was one of the best, and stock went down, for me facebook was due
for this low. twitter, i'm in the camp with most people, it's going to the mid-30s. it won't get there in the short term because i think everybody is looking for it to move lower, which probably will happen but not when people think it will. >> i will say this -- >> guy, 15-year-old kids are saying snapchat. >> that's true. >> it's interesting because on cnbc futures just yesterday we spoke with blackrock chief investment strategist, jeffrey rosenberg, he says he likes stocks more than bonds in this coming year and he's a fixed income guy, right? what does that tell you about the market? >> a certain element of that. >> where is the enthusiasm right now for stocks? where is it? because i have to tell you -- >> not among the general public. >> it's not in the general public. >> it's large cap growth. that's the only underpriced sector. >> i think the fact that this is not an overexuberant market, the
fact that people still kind of hate this market and that the average person isn't excited is actually a very bullish sign. >> at some point you'll wake up and say, i've still got my money sitting here. oh, my goodness, the market's going down, what did i do? i sat around for the last four years. >> or a lot of people, phil to your point, waking up and saying, i'm glad i weathered the last couple of years but -- >> there's still a mistrust for the stock market, for the average investor, given two 55% declines in the last ten years. that mistrust still permeates. and i think that can be n a contrarian way, an indirect catalyst to get equity prices higher. >> and what's interesting, david, is that if that's happening, you know, how do you get people involved, then, when they're just so wary they're going to come in right at the top again? >> they're going to look at the end of 2013 and see, my stock returns are up more than 25%. if i was in small cap, they're up more than 30%. and my traditional bonds, not my
high yield or opportunistic bonds, were down 1%. we haven't seen that in more than 25 years to that degree of separation. >> kelly -- >> hang on. hold on. >> investors will get back in this market when they see wage growth. wages haven't grown in 13 years. when someone starts to see a raise, they might have discretionary income and might have a good attitude about investing in equities. until then you're seeing divided class of society and seeing divided investor class, too. >> that's an interesting point. nathan, thank you for joining us. guy, i know you have to run. another show coming up at 5 p.m. you don't want to miss it, guy will be on "fast money" with melissa lee. bromance in the work, bill gross touting index funds. these are pioneered by vanguard pounder jeff vogel years ago. bill gross will be with us. jack bogle will be with us nex
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the dow just posted first three-day losing streak since september -- four-day losing streak since september. first three-day losing streak to the start of the month since september 2011. jackie deajoining us with big movers. >> we begin with airplus today because it's lower in after-hours trading after reporting wider than expected third quarter loss on weeker than expected revenues. cgi group, a big move today. the main contractor behind the glitch-plagued healthcare.gov website moving lower on news that short-seller james chanos it as han a big stake in this stock. intuitive surgical after recall for their davinc irobot.
mcgraw hill with a buyback plan. deer offering buyback by $8 billion. las vegas sands, s&p 500 raised from triple b minus to double b plus raising it from junk bond to asset status. bill gross may be the last you'd expect to praise investment fund index of fund pioneer jack bogle, founder of vanguard but his latest outlook does just that. bill gross joins us now. >> hi, kelly. nice to see you. >> nice to see you, too. if you read through the investment letter you just wrote, it's interesting. you talk about how you're worried financial conditions are generally bubbly, not sustainable, not going to end well. does this have something to to do with this move or admiration, almost, for passive index fund strategies? what's going on here? >> not really. you know, jack bogle's logic
speaks to the market not being able to outperform itself. we know common sensicly that's true. index funds do better than the average mutual fund and the average fixed income investor. you know, what the exception is why i'm at liberty to talk about this is jack bogle himself a few weeks ago said there was the pi pimco exception. i thought he meant pimco has been able to beat vanguard. we're on the same team in terms of admiration, but certainly in terms of performance, pimco still wins out. >> bill, the signal is important to a lot of people. are you saying you don't think can you understand the market in the same way because of the fed's involvement to be able to time it the way you have in the past? >> no, i don't think so. as a matter of fact, pimco's strategy is based explicitly on timing what the fed is going to
do. we think, for instance, janet yellen's fed is going to be focused on exiting qe, tapering and exiting and initiating forward guidance policy which encourages bond investors like pimco to take its place. why would an investor do that? only if janet yellen and the fed basically anchored policy rates at 25 basis points for a long, long time. so, that near certainty, in our opinion, leads to a strategy of outperformance going forward. >> you're not losing confidence, bill? you're not a ballplayer who's not sure if he can hit the next homer or something like that? >> oh, gosh no. total return fund is 1% better than the market this year. although the market has a minus sign in front of it. no, you know, we've constantly been able to move ahead of the fed, move ahead of the market. i think going forward, as long as can you properly analyze, you know, the important anchor to this market and to other asset markets as well, you know, and
that would be the fed, that you can actively manage and produce alpha, as we talk about it. >> part of the reason i asked, too, is i recall this summer some of your writings about the captain going down with his ship in rough waters. of course, the seven months now of outflows that you guys have seen. obviously, you're not alone. double line, a lot of other bond funds have seen the same kind of thing as a lot of retail investors think maybe they don't want to be in this space. is that sense of nervousness reflecting a broader change in strategy for you guys? >> well, i don't think so. i mean, we priced the fixed income market going forward in terms of future returns at 2%, 3%, 4%, depending upon, you know, quality and the alpha generation that i spoke to in terms of pimco's historic results. so, you know, the 3% to 4%, it certainly pales relative to the 25% in terms of the equity market. i appreciate your prior debate. it was a lively one. but going forward, you know, our expectation for stocks is, you know, 5% to 6%. it's a low returning asset
market. we understand why investors might not want 2%, 3%, 4% yield. over a longer period of time demographically, you know, the country's getting older and they prefer fixed income as opposed to the risk of the equity market. >> a quick fire question. do you think the ten-year yield will go back below 2%? >> no. i think the ten-year belongs close to 2.5%, 3.. that's where it is. >> do you think the u.s. employment rate is about to fall to 7%? >> i think it will. it's on to some extent artificial in terms of how it's measured but i think it will fall to 7% and perhaps below. i do think the fed will not move until it's at least 6.5% and then, perhaps, even lower. so, we have a period of time going forward where policy rates of 25 basis points will be with us for another two, three, maybe even four years. >> wow. or beyond. bill gross, thank you so much for fielding all of those
questions. great to have you with us. we'll see what happens with rates. of course, with the fed and with that jobs report coming up on friday. bill gross this afternoon. jackie with the market flash. >> i just want to draw your attention to shares of disney. the company just announcing it's going to increase dividends by 15% to 86 cents a share. that's moving the stock in the after-hours session. up about 0.25% at 70.13. back to you. >> thank you very much. coming up next, storming the castle. a minimum wage debate backed by president obama could have devastating consequences for one burger chain. a top executive will explain how a move to increase the minimum wage could shudder restaurants and hurt jobs for his chain and others. don't touch that remote. over the next 40 years
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and maximize resources in extreme conditions. our current situation seems rather extreme. why can't we maximize our... ready. ♪ brilliant. let's get out of here. warp speed. ♪ welcome back. president obama talking up the merits of a minimum wage hike in washington. john harwood joining us about what the president's been saying. why now? why the timing? >> president obama is trying to get out of the defensive crouch he's been with the struggles over the healthcare.gov website. now that the administration believes it has turned around that website, it's trying to go on offense and stalk about his economic agenda for narrowing income inequality. part of that is health care itself. part of that is investments and infrastructure and education. part of it, as the president said in the speech today at center for american progress, is a raise in the minimum wage.
>> last month voters in new jersey decided to be the 20th state to raise theirs even hi high higher. that's why the d.c. council decided to do it, too. i agree with those voters. i'm going to keep pushing until we get a higher minimum wage for hard working americans across the entire country. >> note, president obama invoked new jersey, the state of governor chris christie, who may be a republican candidate for president in 2016. this is a difficult goal to accomplish because many republicans, even though the president disputes this argument, make the ar umeguments is going to cost jobs. i know our next guest will make that ar ument as well. >> lawmakers nearing a deal on the budget. we know today being the 4th, the 13th being the deadline, does it
look like we're going to have an agreement? >> it does. modest agreement, two years, $90 billion, raising the budget caps about $45 billion of ee quester relief for defense department, 45% for domestic programs. does not decrease the deficit. offset by additional revenue and budget cuts. they would not be tax increases and not cuts to medicare and social security or agriculture program but much more mundane things like fees and asset sales and cushing federal retirement, all ways in which the congress hopes it can avoid a shutdown in january and get us back into more stable budgeting environment. >> when is a fee a fee and a tax a tax. john harwood will explore that in the days ahead. we've heard from fast woodworkers, economists on the debate. today an industry executive to tell us what it will really mean for his business. joining me, jamie richardson, vice president of white castle. thank you for being here. >> good to be with you, kelly.
>> you say if we raise the minimum wage, president says from $7.25 an hour to, perhaps, $10 an hour. what the direct effect on white castle? >> groups pleading to raise the minimum wage to $15 an hour. to more than double the mandated minimum wage, it would be catastrophic for white castle, our team members and neighborhoods. we've been part of the cities we're at for more than 90 years now. >> can you give us the numbers, jamie? >> sure. we have 406 restaurants. we know that would result in closing more than 200 of those restaurants. the ones remaining would be glowing embers, dying stars. what we also know is it would cost thousands of jobs to take a starting wage and double it, as some of these groups are advocating for, is absolutely beyond the fringe and doesn't take into account what this does for teen unemployment. we want to give them the first
step on the ladder of economic prosperity. we're lucky enough to keep them. one in four of our team members have with us for more than ten years. >> are the ones that have been with you for a longer period of time making significantly more than that? >> yes. it's important to know when it comes to restaurants, less than 5% of restaurant workers are making minimum wage. at white castle our average team member, not management, folks working retail jobs, earning more than 32% minimum wage. health insurance, profit sharing plan, a holiday bonus we invested over $100 million in over the past 20 years. so they have a great career. >> i want to bring the panel in on this topic. carol, you've been champing at the bit here. i mean, can you -- the politics aside, because there are plenty of people who say, i just want free market, full stop.
why is this a bad idea to raise it to, say, $10.10 an hour? >> i think it's not getting at the root of the problem. i'm somebody who always prefers empowerment over entitlement. the big issue is we have a skills gap. throwing more money at people for an entry level set of skills doesn't get people the critical skills, doesn't build innovation and doesn't grow the economy. frankly if you give minimum wage workers a higher amount, all of a sudden everybody else wants a higher amount. their earning power isn't any higher. you end up losing jobs. >> are we in wage inflation right now? >> yes. we need some wage inflation. with all due respect -- >> you need it from innovation. you need it because people are coming up through the institution it's easier to start small businesses, they're hiring more people for -- >> i don't dispute that. but you need some wage inflation. >> you need wage inflation because of productivity gains.
>> right. >> it sounds so great to increase minimum wage from a policy standpoint but it doesn't work. back when it was introduced in 1938, and you ask yourself today, germany, sweden, switzerland, no minimum wage. cuba has a minimum wage. and we do this and we price people out of labor markets. if you want to help out, look at what small businesses say is the biggest hindrance to business creation, job -- >> it makes it risky for a small business owner to start a business. we want to encourage -- we have 28 million small businesses in this country. we want to encourage them to add that next employee and to continue to grow and not focus on a couple of big companies that everybody seems to always be -- >> attack the regulatory issues first before you go after minimum wage. >> jamie, one of the issues we hear from people who say, i don't like the idea of a minimum wage but what i also don't like as a taxpayer i have to fund a
lot of government transfer payments used for various different programs to make up for the income that employers, like a white castle, are not giving to their workers. i mean, there's a legitimate argument there, isn't there? >> you know, i would question that argument. there have been studies we question that make that case. when you get behind the numbers and look at it, when you look at restaurants, only 5% of restaurant employees are at minimum wage. for us, we look at it as a chance, we want to offer flexibility. we have about 43% of our team members under the age of 25. they're just getting started in the workforce. learning those skills and being able to apply that for later careers or often they'll stay with us. our top 500 people in our restaurant regions to a person, 100% started behind the counter at white castle. we're proud of that. we're humbled by their loyalty. >> i want to say one thing. i'm going to take the other side of this and maybe take the workers' side of this argument. not for anything else but to just to get that story out there. if you give us a chance to see a minimum wage hike, would it be n your opinion, a way to -- we
know the financial impact on your company, but do you think society becomes better off because people do have a little more discretionary income and then can have that triple or ripple effect throughout the rest of the economy? maybe that's a pro, an argument for raising the minimum wage? >> here's what we worry about. when that happens, it sounds good if you only look at the primary effect. look at secondary and tertiary. they have to find a way to cover the cost and prices go up. next thing you know, we have more inflation and less earning power. for us, the real cost is, what happens to those kids who never get a chance to get that first job? never get a chance to learn the skills they might learn in a restaurant or retailer. >> we have to go. just to go back to one quick point on the numbers here. what's your restaurant profit margin? can you give us a ballpark in terms of what, again -- how much this eats into that profitability you're talking about? >> let me share something i think is startling. the average restaurant earns $750 per team member where a
typical business earns $10,000 per team member. that was before 2008. the whole industry has been under attack in terms of regulatory and tough economy, things we're all dealing with. >> all right. it's a fascinating topic. jamie, thank you so much for sharing some of your experience on this issue. by the way -- >> carry on, my friends. >> workers striking tomorrow, jamie? >> you know, we have incredibly loyal people and we haven't had any challenges. we know we're communicating with our folks every day and listening to what they tell us. and taking that feedback. >> thank you very much for joining us. thanks to the panel as well. they'll stay with us. still more straight ahead. one is what is hot on cnbc.com. the hot list coming up next. plus, will black friday spike an auto sales lead to fewer gifts under the christmas tree this year? big ticket purchases eat into smaller ones? as we go to break as well, here's another live shot of the biggest christmas tree in manhattan. official lighting ceremony for tree at 30 rockefeller place is taking place just a few hours from now. we'll be right back. tdd# 1-800-345-2550 searching for trade ideas that spark your curiosity
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allen joining us from the site. >> you know what's on our number one leader? it's a story you broke at the top of your show. carl icahn making his $50 billion buyback offer. when we put this up, it was drawing in more than 100 readers a minute. it's cooling down a little bit now. still a big draw for us. still our number one. our number two, very nerve-racking story if you're a doomsday prepper like me, you know those red gas cans, nbc did an investigation of them and apparently they can explode unexpectedly. apparently a combination of gas vapor and static electricity on certain kinds. people have been diving into that story. it's been a big puller all day. pulling in readers at the rate of 60 to 40 a minute. that's another top one right there. our third best story, a solid performer for us, went up a few hours ago, an op-ed piece we got from sam graves. he's the chairman of the republican -- of the house small business committee.
he wrote an op-ed piece pointing out there's another small business problem with obama care. this one has to deal with the definition of employee. that's on top of new paperwork rules, new definitions. those are our top three right now. >> our viewers have their homework assignment during the break to go look that one up. thank you very much, sir. i hope my parents are watching because i know we have a couple of red gas cans in the garage. coming up, merrill lynch was one of the largest financial snugs on wall street. up next, former chairman of merrill's international division, win smith on what led to their collapse during the financial crisis, of course it to be bought by bank of america. the american dream is of a better future, a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one.
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welcome back. so, what really happened that led to merrill lynch collapsing during the financial crisis? it forced a shotgun marriage with bank of america remains pretty controversial. joining me with a first on cnbc interview, win smith, former chairman of merrill lynch, current ceo of some adventures and author of "catching lightning in a bottle." thank you for being here. >> thank you, kelly. >> 3 1/2 years, the first book you've written. is this revisionist history? some people will say, isn't this a big pr exercise about how great mother merrill was.
>> no, i didn't want merrill to be known for what happened in 2007 and '08 and i didn't wanted to be known as characterized by the ceo. so, this is a story about the merrill lynch that brought wall street to main street. it's about the firm that was at the peak of its game in 2000. and it's written for all the families of merrill lynch and the people who are still there as well. >> what was the moment that you said to yourself, i got to write this? >> i thought about it for a while. i delivered a speech to final shareholder meeting five years ago tomorrow, and i got a call from a fellow whoe had actually been commissioned to write the history of merrill lynch when stan o'neill discontinued it. my wife said, have you to do it to bring closure and for the merrill lynch families. >> what's gone wrong with the narrative about the collapse of merrill? >> i think what people don't understand is what made merrill great. what made merrill great over the many decades is they had a set of values, a culture, north star, they stayed true to over the years and over market cycles. >> are you basically putting all
the blame on stan's shoulders? >> i'm putting the blame on his leadership and lack of proper oversight by board of directors at the time. >> a different leadership team would have led to what outcome? >> i think a firm would have been wounded like all were but it wouldn't have been mortal. the people i worked with never would have allowed merrill to get to leverage and would have had growth to get them into overleveraged. >> the entire financial sector suffered from doing the same thing. they were in the game, dancing while the music was playing. you would have been in an extremely difficult spot to try not to get involved in any of that. >> i think that's what good leadership does and that's what good character does. merrill went through many difficult cycles. the crash of '87. suffered through long-term capital. many market cycles. as people experienced -- as i said, we probably would have been wounded but it would not have been fatal. >> do you think merrill should
be spun back out from under bank of america? >> that's looking back. >> that's looking forward. >> the fact s it's part of bank of america and i don't think you can try to undo something. that's the given reality. i think it can prosper, especially the private wealth side. >> do you believe brian moynihan is the person to be de facto leading that organization now? >> i don't know brian moynihan but i know john kiel leading the division side and he is key. >> the key difference? >> he appreciates the history, heritage, culture. he's bringing it back. celebrating 100 years. reaching out to some old guard and asking us to talk about it. he's trying to tie the past to the present and go forward in the future. >> there's also a lot of concern or skepticism, i don't know how you wanted to describe it, about what the future is for a merrill kind of business. the world has changed and the model of the brokerage, wealth
management indicates there's been a change since 5, 10, 15 years ago. >> i think that's what people understand. that's what merrill lynch was doing. they're very successful advisers are -- they're charging a fee rather than a commission. they're looking out for their clients' needs. they really are managing their money. >> and so if you -- when you're on the slopes in vermont and, you know, people are going to get this book and read it, what is the main takeaway you want them to leave with? >> i want them to understand what made a great company. how important values are, how important a culture is. and also that in leadership, you not only need technical skills, you need character. >> all right. we'll leave it at that, win, for joining us. again, can you find the book and perhaps change your own mind about just what happened five years ago. coming up, black friday may have been called black top friday because car sales were off the hook.
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black friday sales revved up auto sales figures for november, but will that put a dent in holiday shopping for everything else during the season? as we go to our panel, we have to start with our autos expert, phil lebeau. obviously, i'm having difficulty reading this. of the numbers tht were coming out of these auto sales figures for november, the run rate for the month was impressive, but black friday in particular, what's going on? >> a lot of things come together, and the biggest factor is that the mass brands, if you will, the toyotas, the chevys, the fords, they all stole a page out of luxury ballpark because the luxury automakers used to be let's run the end of the year promotions, holiday promotions this year. >> the big red bow on the lexus. >> that's what everybody wants, the big red bow on the car. >> this year everybody realized people are generally off on friday, why don't we see if we get them into the showroom. it's a good time to buy a new car. >> and by the way -- >> and they came together. >> 16.4 million, an annualized run rate. >> that's not the actual sales,
the pace of sales. >> the expectation was 15.8. now, that may not sound like a big deal, but it indicates all of a sudden there o's a pop. here's what i want to know. what is it mart marketing? consumer pent-up demand for big-ticket items or is it easy to understand how easy it is to get an auto loan? >> smart marketing and pent-up demand and that will be here for three or four more years. finally the auto interest rate right now for a new car auto loan 4.27%. that is the lowest -- that is the lowest expirion has measured since 2008. they can't go back before that. >> getting everyone's hopes up. all looking in the driveway. >> the perfect storm. lowest rates and people are driving around on average a 12-year-old car. >> a 12-year-old car drives great. >> my car is 9 years old right now, fair enough. >> they are holding up and lasting longer, no doubt about
that, but at the same point at some point when you're driving a 2005 civic you're going i don't have the connectivity. i don't have all the things that i want. >> david, do you have a 2005 civic? >> no. i think it's a function of a long-term recovery, secular recovery in motor vehicle sales, scrappage rates are going up because the average age of the car on the road is quite old, and that's a favorable factor. it showed up in november, but it's been showing up for the last couple of years. over 15 years ago i developed an auto affordability index. the number of weeks it takes to be able to afford a car based on income, and that's one of the best i've seen in more than 20 years. >> i don't know if you've had it off the top of your head. >> it's been a while but it's still one of the best that we've seen in more than to years because of low finance costs, affordability on the price and respectability. lower finance costs, right.
>> carol, when is the last time you bought a car? >> that's all good for sales. >> you have to understand that i'm in a family of excel spreadsheet junkies so my husband is doing excel spreadsheets on horsepower to dollar value so it takes us quite a long time to pie a car. my question for phil is how elastic is the demand, and as these interest rates rise into the future, if and when they rise, what do you think that does? is that sort of a perfect storm right now, or is that going to change as we hit the first and second quarters of last year? >> i'll tell you how off the radar interest rate concerns are in detroit. i've not had an executive mention that as a concern. >> rising rates? >> probably five years. >> wow. this fits into the theme of autos being the new housing. there's some subprime going on that's reminiscent of that as well. >> sure. >> phil back to get into it in the weeks, month and years to come. thank you, guys, all and i'll be looking into the driveway when i get home. a live shot of rockefeller
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welcome back. as always, keeping an eye on twitter and some of the conversation points make the rounds. here's a few of the favorites that hit on some of the themes we've been talking about today as well. our own robert frank tweeting earlier inequality irony. under obama america has added 2.3 million millionaires. an increase from 6.7 to 9 million plus, and he's been following a lot of that coverage for us. jeff hull tweeting the word strong appears 69 times in today's beige book, down from 99 in the october 16 release. haven't really had a chance to talk much about the beige book but did have an undercurrent of weakness, confusing given some of the other pockets of strength that we've seen. also this story. after uber saying it's going to deliver christmas trees in some cities conor saying i'm wonder if we'll look back at uber as just a car service as we did
look the at amazon as being just for books back in 1988. >> phil and i were talking how far we've come as a country, as a nation, as citizens, technology just in the last 0 years. just staggering. >> i think about warren buffett. remember when he was skeptical about a microsoft or about an apple as investments because they weren't -- didn't fall into his understandability. >> i don't know it. >> and today, and then he was saying to people as well, kids these days, if you get what uber is doing, if you use something like that all the time, why is that not a fantastic investment? in fact, david, i won't, when we start to talk about some of the names, bubble in social media, et cetera, some of this sounds like it kind of makes sense in a changing world, with the changing consumer habits. >> if you look at tech overall and the valuations on technology today as an investor, the free cash flow yield, the price to earnings, the price to sales, i think this is the secretary that you want to be overweighted. >> yeah. >> not on a valuation basis as
well as on we're all waiting for the next killer application. i'm not sure what it is. >> or the next killer drone. >> the modifications or a drone that drives the truck, not flies the package. >> they will be leaving that to uber for the time being. >> valuations are there, and revenue growth is there, and i think that's a sector you want to be overweighted. >> there is kind of an explosive combination of people with mobile devices in cities which drives a lot of it because of the density, phil. >> right. >> why not have these kinds of things delivered or have the ability to rent all kinds of different services you previously had to own? >> if you're going into a factory and it's coming into the consumer world in the world of automation and robotics and it will blow you away. >> it has to be a right timing. used to be a service back in the day, cosmo.com that used to deliver ice cream to you, first success story and then it went bust. >> true. >> it's a timing thing. there will be a lot of turnover
in technology. >> guys, thanks so much for joining us. phil, thanks for flying n.plenty more coverage of all these e-com coming up, minimum wage stuff, too. "fast money" is coming up in just a few seconds. and melissa lee, speaking of going long social media, you're batting around facebook potentially joining the s&p 500. >> had to separate fact from fiction. we'll give you the real take. we're expecting the news potentially within the next hour. so should be a big one. >> a telling one. >> exactly. >> "fast money" starts right now. live from the nasdaq market site in new york city times square i'm melissa lee. the trade of 2014. japan is shaping up to be the trade of this year, but one of our guys is making a call for next year's big trade tonight. and ten-year treasury yield on fire, rising to levels it's not seen since september. dennis gartman is here to tell us what moves he's making because of it. and watch out, apple.