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tv   Closing Bell  CNBC  December 12, 2013 3:00pm-5:01pm EST

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here. they should even do it in french here just to doubly confuse the customers. >> if we get polite guests, we'll keep them on for longer. if they're rude to us, we'll kick them off. >> thank you for watching "street signs," everybody. have a wonderful day. >> "closing bell" is next. see you tomorrow, same time. welcome to the "closing bell." i'm kelly evans at the new york stock exchange where it's another day in the red for the dow, bill. >> so far. but just wait. i am told, because i wasn't here yesterday, it was at this hour yesterday we really started to see the selling kick in. >> a billion dollars of sell side orders was the word going around the floor at the time. real money potentially looking to get out of the market. >> not today, though. dow is coming back. s&p positive once again. now it's turning slightly negative. nasdaq's positive. dow was down 120 points at low. down 52 right now. we'll keep an eye on this as we head into the final hour here.
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>> also get a pro's take. bob olstein will join us live and exclusively in a couple of minutes. a list of predictions for 2014, and naming stocks that are his best value plays. also, get this. jpmorgan has been fined $2 billion for not figuring out that bernie madoff was a fraud. $2 billion. wasn't that the government's job? why is a private bank facing consequences for allegedly turning a blind eye and not government officials who were asleep at the wheel, obviously, at that time, during the decades of deception? "closing bell" is getting into that a little bit later in the program today. stick around. in the markets, take a look at what's happening. diversion across major indexes. dow is negative. less so than session lows about noontime. nasdaq is positive helped by twitter, tesla. s&p 500 up about seven points -- sorry. that was the nasdaq.
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>> that would be up a bit. >> i'm sorry. now down about one point. >> twitter. while i was gone, it went to $55 a share. >> this is true. >> that is unbelievable. let's talk about today's market action. joining us in our closing bell exchange, heather hughes from sun america funds. michael yoshikami. sam stovall. jonathan brodski. rick santelli. michael yoshikami, everybody is trying to come up with a reason for the selloff. don't you think it's simple profit taking? >> i certainly hope so. i think that's what investors should be doing is taking profit. there's nothing wrong with a little profit and paying a little tax particularly given how far the markets have rallied at this point. we have treasuries at 2.8. that really suggests maybe the market thinks quantitative easing is, in fact, going to be tapered sooner than later. i think it is profit taking. i think that's smart.
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that's what we're doing. >> michael, you're saying here that you think this softness illustrates that growth won't be as strong as expected? by all indications, whether it's the retail sales report this morning, recent reads from other sectors of the economy pointing to momentum in 2014, most people are saying the opposite. >> here's something very, very interesting. if you look at retail sales, why is -- why are retail sales good but retail earnings bad? because consumers are buying lots of product. but it's very low margins. for consumers, look at costco earnings. what that essentially means is if you're buying the stock market as really a gauge of what future earnings are going to look like, and retailer stocks are already showing that margins are compressed because shoppers are more cautious. that's why i think you can have both of those things coexist and have slower gdp growth going forward. >> heather, you know, as the economic data come in a little better than expected last last week's jobs report, the argument
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goes maybe the fed will be inclined to taper sooner rather than later. and you say that's a lot of bunk here. >> yeah. i guess so. >> my word, not yours. >> well, thank you. the consensus tends to be, look, i had a meeting with economist rubini. he's met with many fed heads. i do take his opinion. not lightly. he says the consensus is for a january taper, not next week. although, yes, we've had positive macroeconomic data as you alluded to. inflation is still not yet there. and i hope they taper sooner rather than later, but i just don't see that happening when we haven't reached our inflation target of 2%. we're still 1%. >> i agree. >> jonathan brodski, we've got people focus on the composition of the fed next year as well. the fact we'll have fisher, lacquer, i believe, the two, more hawkish rotating in and being voting members. perhaps the bigger headline which is that stanley fisher might turn out to be the vice
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chair here. are you reading a lot into that? do you worry about what that means if they sort of push the fed away from forward guidance or toward some slightly more hawkish positioning here? >> our perspective is that given the situation with tapering, we're recommending that, you know, there's a shift from some of the higher momentum type of securities that have done so well, stocks that have really performed extraordinarily this year, to higher quality names. names that, perhaps, haven't performed quite as well. as a defensive move in case there is a more hawkish type of a situation going forward. >> sam stovall, get this. i'm going to ask you a fundamental question. through all of this, i mean, we're going to be dealing in a little bit here with some of the high profile fourth quarter earnings. warnings we've been receiving lately. what do you make of that? is this going to be a tough quarter for reports when the time comes. >> historically the fourth quarter is the most volatile quarter. because basically that's your kitchen sink quarter. when companies don't have a good year, then it basically pile on in the fourth quarter, sort of set themselves up for an even
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better year over year change in the coming year. our expectation, s&p capital iq consensus numbers are pointing to a 6.6% increase in operating results in the fourth quarter. and most of the cyclical sectors, consumer discretionary, financials, industrials and tech are likely to show the strength in this coming fourth quarter. >> speaking of the kimpen sink, in just a little bit we'll get into this very phenomenon and whether you're seeing a lot more of it right now than usual. what that could mean. back to foint about earnings growth, 6.5% for the fourth quarter sounds reasonable. what's the expectation in terms of consensus estimates for the full year 2014 right now? where do we stand? >> for the full year 2014, the number is about $120 for the s&p 500. that's about a ten plus percent increase on a year over year basis. we were sort of at that range this time last year. and now it looks as if we're going to be seeing growth closer to about 6%. i think most of the strategists
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on the street are sort of paring down that 10% to 11% expectation and saying something a little more close to 6% to 8% is realistic for next year. >> again, if you're just joining us, this time yesterday the market was falling out of bed here. we're not by any means here. art cashin just walked by and signaled we've got no bias either way to the buy or sell side as we go into this final hour here. we'll keep an eye on this and see how we go here. rick santelli, all three major treasury auctions are in the book. rather soft demand this week. what happened? >> i don't know if it was that. definitely looking at mediocre 10 and 30 year options. i think why should a bond investor jump into these auctions when they could observe in front of the fed meeting and play in the secondary market with all the issues up in the air, all the big numbers on bond mutual fund redemptions. i think this will continue. but even a bigger story. i like the fact we're talking about mr. fischer. at one of the areas i really
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enjoy with mr. fischer is that when asked about things like transparency and forward guidance, he gave the same answer that i've had four santelli exchanges on. that is, how can the fed be transparent? they don't know how it's going to turn out or how they're going to orchestrate it. i really think he's an interesting person. he's also the mit modeler. i'm not so sure how happy i am about that. if you look at interest rauts on the long term charts we're show wk hovering at the highest yields since mid-september. we're not far from comping all the way back into the summer of 2011. at the end of the day all of the people on the panel, come on. stocks are going down coordinated with budget, fed meeting and taper. to me the handwriting is on the wall. there's one out of two markets that just hasn't accepted reality of normalcy of interest rates. that's the equity markets. >> stanley fischer, one of the great things about him, he
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taught economics to half the people on the fed including ben bernanke. it's just amazing. he was their professor. >> mario draghi of the central european bank. here's a picture. you can see just for a couple of examples, michael woodford. christina romer. david romer, her husband in that picture as well. there's ben bernanke. they're all with, you know, they're with stanley fischer. >> i love that. i wonder if he was a tough grader. >> where's rick santelli? you're not in the picture. i was looking for you. >> exactly. >> hey, rick, i'm surprised when you said only one out of two markets doesn't believe what's going on here. i thought you were going to say the bond market. i thought you were going to say the bond market doesn't seem to be fully onboard with the idea -- >> no. you're always saying the bond market is the only adult in the room. >> i think they push the fed. absolutely. >> the bond vigilantes are back. heather hughes, what are we
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doing with this market? you want to buy anything? finding anything to buy here? >> i think right now advisers, as you said it, it seems we're just sitting on our hands right now waiting for some sort of direction. i think a lot of the rebalancing will occur hearing from advisers the first week in january. for the time being, we're just digesting. look, we're up 24% this year. a pullback in the markets gives us a chance to reallocate. but two themes going into 2014. one, you want to tighten up on duration, of course. even though rick had mentioned that the bond markets may have already priced in a taper. we do know ultimately on the long end of the curve they're headed higher. number two, stick with your long-term horizon. whatever you've discussed, this is my outlook, you know, every day i need gps in my car. i can't get around anywhere without it. i'm a female. i can't drive. >> hey. i'm all right behind the wheel. >> you drive in? you don't take the trains in new york? >> that's your problem, ladies. you're using that gps. we don't ask directions.
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we don't need them. >> it's the beltway around here. there's construction. there's roadblocks. but the one thing that never changes, keep the end in mind. whatever your end game is, talk to your adviser and keep that plan in 2014 regardless of what the fed does. >> all right. >> good idea. >> thanks, guys. great to see all of you. really appreciate it. >> thank you. heading toward the close. kind of holding steady here with about 50 minutes left. dow down 78 points. again, we were down about 120 at the low of the session today. coming up next, we're going to talk about one major red flag for this market that no one has really discussed enough yet. what it could mean, whether it's signaling a new year that may not be a happy one for investors. >> also, hilton ipo. big ipo today. one of the few bright spots on wall street. shares spiking on its first day of trading here at big board. should you check in or check out of this stock? you knew we were going to say that, didn't you? stock brawl on hilton worldwide coming up. the pope is back on the business front pages today.
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first criticizing capitalism. now pope francis chiming in on executive pay. that story and healthy debate is coming up. you're watching cnbc, first in business worldwide. [ female announcer ] there's one thing dave's always wanted to do when he retires -- keep working, but for himself. so as his financial advisor, i took a look at everything he has. the 401(k). insurance policies. even money he's invested elsewhere. we're building a retirement plan to help him launch a second career. dave's flight school. go dave. when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us.
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welcome back. courtney reagan for a market flash. >> shares of marsha stewart living omni media. the stock is on the move here up more than 9%. the company laying off a number of employees today. while it's less than the 100 reported by other media outlets, an exact number can't be confirmed, most of the positions i'm told are in media, ad sales and marketing. i'm told mslo is realigning talent. all a result of management's re-evaluation of the company structure. trying to get rid of some of these duplicate positions. kelly? >> thanks very much. we'll watch that one. market shows signs of weakness, one thing gaining momentum, companies with, get this. negative preannouncements on earnings. in other words, negative relative to what the market thinks. one important fact suggesting the ratio of negative to positive preannouncements right now is sitting at an all time high. >> let's talk about it.
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is this a big worry for investors? nick rage. our own jeff cox joining us as well. nick, you think this is overblown. why? >> it's been a very bad gauge just to look at one ratio of negative to positive and then draw conclusion that it's going to be a bad earnings season. this indicator has been signaling negative things about upcoming earnings seasons for the last two years. the one thing it does, tells you the number of companies wanting to -- doesn't tell you the magnitude by which they're cutting estimates. >> i don't mean to interrupt you. i'm excited about this topic. >> excited about a lot of things in the market. >> what caught my attention, we're not talking about ratio of two or three to one as we've seen in the past. we're talking about 11:1. my jaw dropped. i had to read that 12 times. >> let's look at the magnitude, kelly. estimates during third quarter earnings season for the fourth quarter dropped from 12% to 6.6%. there was people during the government shutdown that thought that was going to go to zero. since late november the fourth quarter earnings growth estimate
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has actually went up ten basis points to 6.71. the 11:1 sounds flat. the magny nuitude is not there. >> i suspect you're taking the other side of the trade? >> nick makes a couple of points here i think, okay, earnings are still going to be positive. when you talk about, you know, the magnitude of this, i'll give you a magnitude. the beginning of the year fourth quarter earnings were supposed to gain by almost 18%. that number is down to below 7% now. we've cut basically by two-thirds the expectations. >> yeah. but who was really expecting earnings to grow by 18%? come on. >> somebody on wall street was, bill. >> oh, please. >> jeff, that's been going on for the last two years. each quarter the estimates get cut by a lesser and lesser amount. >> that's the game we play. >> we lower the bar and we say, okay, here's, you know, we'll beat this lowered bar. i think that the dynamics are a little bit different here. because we have, you know, welcome to taper town, here.
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i think companies now are starting to brace for the reality. i think rick santelli made some really great points in the last segment about facing the reality of a world where qe is not where it was before. where you don't have $85 billion a month in liquidity coming in. companies are going to have to adjust their expectations. there's going to be currency pressures. there's going to be interest rate pressures. we have $4 trillion in corporate debt that's going to mature over the next four years. about a trillion dollars each year. things are changing. the playing field is changing. >> jeff, that's absolutely true. the problem is -- nick, this is where i sympathize with what you're saying here. because this indicator, i mean, there's no one on wall street who doesn't know right now that that ratio is sitting at 11:1. we've barely moved on the market. all of these -- in other words, h is all effectively priced in. either no one really cares, and this is just a giant game corporations are using to lower expectations, or we're all about to get hit in the face with a massive readjustment of this
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market relative to what the actual earnings -- >> let me add one more point. >> kelly, you just nailed it. >> the fact they mentioned last segment, sam stovall mentioned the fourth quarter usually gets this kind of action because it is the kitchen sink quarter where they throw in all the bad stuff at the end of the year. isn't it sort of different this quarter, nick? >> well, kelly just nailed it. the street doesn't care about these fourth quarter guidance because they know the way the earnings game is played and manipulated the companies lowball estimates. jeff alluded to that as well. what we shouldn't care about are fourth quart revisions. in our model we don't factor in fourth quarter estimates. what we should care about the is rise in interest raurts and how that's going to impact first quarter and second quarter estimates. those are going to be much more determinate of stock prices. >> should we care this is getting egregious? it's not just some companies coming out and lowering the bar. pretty much everyone is. surely we've got to catch up with that somewhere.
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>> it's a magnitude, kelly. they're not lowering by much. they were lowing it by a significant greater amount last year than this year. >> do we think this is all some kind of big coincidence, though? i think you raise a great point, kelly. it's frustrating to me, too, you have companies -- where's the honesty? where's the integrity in this process? but, you know, you're just kind of left to look at the market action when you talk about things that are being priced in. i mean, you know, there's some speculation about a possible taper, you know, fear in the market thousand. how long have we known that the fed was going to start walking away from this? >> right. >> it really does raise a lot of questions. it becomes -- it's got to be frustrating from an investors' standpoint. >> one more thing, though. cfos have been trained by wall street to play this game. i mean, you set the bar high. and then you come in with it. then you keep lowering that expectation so that you can jump over that bar when the time comes. >> at what point do these
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numbers become meaningmeaningle? is that your argument, nick? >> they're not meaningless. >> the only thing that matters the final number when they finally report. >> there's a couple things that are really important. they're getting cut by a lesser and lesser rate. as sam stoval said the number for 2014 is $120. they're going to be $109 earnings for the s&p this year. stock prices are near all time record highs because earnings are also at record highs. it's as simple as that. >> watch and see for that actual number. that number to see if that stays there or comes down. >> the fed balance sheet -- >> the s&p 500 up 25%. which number is closer to the market expense? fed balance sheet or earnings growth? >> all right. one to ponder. >> something to think about. >> thanks, guys. we've got about 40 minutes left to go till "closing bell." dow down about 70 points. off the lows of the session. worst performer.
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s&p and nasdaq holding up. famed fund manager bob olstein says investors need to prepare for the reality of the rising rates we were just talking about. he's going to tell us which stocks could soar in that environment. speaking of soaring, investors hot for hilton stock after its ipo. up next we'll hear from someone who says this stock won't be ha hospitable for that long. farmers presents: fifteen seconds of smart. so you want to drive more safely? stop eating. take deep breaths. avoid bad weather. [ whispers ] get eight hours. ♪ [ shouts over music ] turn it down! and, of course, talk to farmers. hi. hi. ♪ we are farmers bum - pa - dum, bum - bum - bum - bum ♪
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streak. it's off about 60 points. s&p 500 may join in that as well being down about one point right here. dominic chu breaking down the day's big movers. >> kelly, yes, it's one of those days. we're going to begin with one of the biggest losers today. it's lulu lemon. current quarter guidance below street estimates. blaming mac coe and execution issues for the short fall. tough day for ciena. reporting weaker than expected fourth quarter earnings on weaker profit margins. company plans to move its listing to the nyse from the nasdaq. cisco falling after issues a disappointing growth outlook at a meeting with analysts in new york city. plus side, facebook getting a boost on the news it will join the s&p 500 after the close on december 20th. a successful market debut for milton worldwi -- hilton
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worldwide. >> dom, thank you very much. if you missed out on that $20 ipo price should you be betting on hilton stock at these current levels, 9% higher? let's brawl it out. david sourby says it's a great time to get in. mike santole would not. david, why would you buy at these levels? >> bill, for a couple of reasons. i think the lodging space deserves merit in a crowded consumer discretionary sector. the last lodging names that have gien estimates for 2014 have been quite positive. we're in the stage of the business cycle that favors this group. it's opportunities in hilton and beyond that in marriott vacations as well as windham worldwide. the group and stock deserves merit. >> michael? >> i actually don't disagree that the backdrop for the lodging industry is pretty strong right now.
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i also would say it's very well acknowledged. it's kind of manifest in the valuelatiations of most of the . it's a blue chip core holing. it's just not a particularly compelling value right here. obviously could ride up a along with the earnings and the cash flows of the group. still more heavily indebted. still three quarter billion dollar overhang of blackstone shares going to hit the market. also thele vauation on cash flow is basically the same valuation blackstone paid to take it private in 2007. unlike most ipos where it seems like there's a lot of dry powder, i just don't see it here. >> david, what about point? it's interesting the way in which the fact that blackstone is staying with this company while it is a positive. it's not like they're dumping shares right now. is that not going to be an overhang for a couple years while people are worried about them selling once they can. >> mike makes a great point. i'd give valuation a c plus or b minus. hilton trades at between 13.5 and 14 times next year's cash
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flow or ebitda. i think that's a mild plus. i think the bigger catalyst will be within the industry and within the group and hilton included, you'll see 6% to 8% rev par growth. that's the bellwether for the industry. i think that's still above expectations. just the tone of what managements are telling you about activity expected in 2014, i think makes the industry a winner. in 95 stocks and consumer discretionary in the s&p 500, that's a very crowded space. i think lodging deserves a place in people's portfolios. >> that's where you differ, mike. you're looking at the stock or company itself whereas david seems to be looking at the industry. >> and the stock. >> saying hilton's going to follow suit. >> i kind of agree with that. look, it is fwoigoing to be fin. hilton's well positioned relative to others. i don't have anything to say about the company as a whole.
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i think it's coming to market at a time when most of the good news is kind of known about lodging. if you look at the consumer discretionary etf, people seem to think that's a shopping etf. it really isn't. it's media. it's lodging. >> yes. >> and it's autos for the most part. i think lodging is pretty well represented in terms of the leadership. so i don't necessarily think there's any rush like a typical ipo where it's let me get my hands on it. i do think the deal was priced very well. very soberly relative to demand. it's traded well. i wouldn't say anything bad about it. >> david, just a point on that, too. if we're getting into a part of the cycle now where it's easier to build and expand after years of not adding any hotel rooms in this country, does that potentially weigh on rev par or revenue per available room? >> i think growth in the u.s. but even more so growth outside the u.s. is the positive catalyst in this group. yes, hilton's the biggest. 3,800 or so hotels. but that's where the growth is going to be. is outside the u.s.
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and michael just named the three industries that i'm most favorable on in consumer. it's not retail. it's media, autos, lodging and perhaps let's add home improvement on the retail side. that's where i'd want to be putting new money to work. and that can include, as i said, hilton, marriott vacations, as well as windham worldwide. >> all right. good to see you guys. thank you for your thoughts today on hilton. david, mike, always good to see you. we'll take a break. we've got 30 minutes left in the trading session. here again, it's a pretty even steven trade here. no clear bias either to the buy or sell side at the exchange here. we're down 61 points on the dow. >> one thing's for sure. we've come back from being down 120 points. other indexes have been flirting with or generally positive. he's been one of amazon's biggest bears. up next, bob olstein will explain why the amazon stock bubble is finally about to pop.
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we'll also get his take on this market and predictions for 2014. speaking of amazon, the online retailer has new competition in the same day delivery business. that would be your local shopping mall. unlike amazon this new service allows you to watch the delivery in realtime. kr you can watch it from pickup to dropoff. like the car wash. >> or domino's pizza. being super rich has its perks. now having a lot of money is being used as an excuse for bad behavior. it may have just worked in court. the quote affluenza outrage. impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing.
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as the markets head for what could be a third straight close negatively, noted value investor bob olstein thinks rising interest rates could soon be a big boost for the stock market. he's probably somebody worth listening to given his performance of his fund this year. >> the olstein all cap value fund has gained more than 30%, outpacing the s&p 500. joining us now exclusively is bob olstein, chairman and chief investment officer of olstein capital management. >> welcome back, bob. >> thanks, bill. thanks, kelly. >> first of all, there's a lot of people sitting here today worried about what it could mean interest rates are moving higher. why do you say people not only
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shouldn't be too worried but this could boost the stock market next year? >> earnings or free cash flow control valuations. if the economy is not turning and if the economy turning, you have to get higher interest rates. i think there's going to be a slowrderly march up the next three yours toward 4% on a ten year. if it doesn't happen, i'm concerned. that means the economy is not growing and maybe there's more overvaluation here than i think. that's what i'm looking for. slightly higher interest rate. slow march upward. nothing catastrophic. >> it's really what the rise in rates signifies to you that would be a boost for stock market. it just means the economy is finding, you know, picking up some steam here. >> right. if the economy doesn't pick up, how are you going to justify the $120 earnings estimates out there next year? >> i know how you justify it. $85 billion a month coming from the federal reserve. right? >> well, the federal reserve is going to start tapering soon. they have to. we don't want a lot of inflation. we know what happened during an
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inflationary period between '66 and '82. we're more focused on individual stocks. free cash flow valuations. look, the undervaluation is nowhere near where it was the last three years. our fund is up 280% in the last five years. if we can do high single digit returns we're going to be very happy. there's still a lot of undervaluation. there are as always pockets of overvaluation. media stocks, sales force dot coms. if they start earning money, that's when it's going to start coming down. >> because that's the end of the nascent, their adolescent period. >> it's better to fantasize than earnings. fantasy is better than reality. >> we wanted to talk, for example, about an amazon. is there something understoodmentally different about valuing names in the internet space or not? is it just a different way of looking at companies? or is it, you know, discounting today for the growth that is still supposed to be coming over the next, say, even ten years?
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>> let's take amazon. 1999. here we are in 2014. the same fantasy is still there. i think he's running a charitable trust for consumers. if he does not come through with this $10, $20, $30 a share in earnings that stock is going to start heading south. salesforce.com. linkedin. twitter. all these pockets of overvaluation. i remember sitting on "squawk box" back 15 years ago and people would come on the show with a million in sales. they have a billion capitalization. say, i didn't understand. >> amazon has been hitting all time highs. i mean, it has performed very well even as people continue to complain that jeff bezos continues to refuse to turn a profit for this company that he's just plowing revenue back in for growth purposes. >> you better watch out that the drone doesn't hit you on your way home tonight. basically, the stock has done very well. i've been wrong in terms of the fact the stock going up.
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it is my opinion that if they don't start producing real free cash flow soon, and they will, but it'll be minimal, in my opinion. because he likes to spend money. and that drone announcement just signifies where this man is going. he's all for consumers. there's nothing wrong with that. but his own people say, we don't manage this money for investors. but i don't think he knows who he works for. he works for investors. when that stock starts going south, the investors are going to get on his case. >> controversial. look, i wonder, speaking of which, twitter today, bob, isatt $55, $65 a share. what do you think about this? as the world is generating more and more of these kinds of names, do you think value investors should steer clear or start to try and understand who's going to be a winner? >> i can remember when the okman fund, 99, they wanted to fire him. i was up 37% in '99. it was in the bottom half of all funds. look, this happens all of the time. i've been in this industry a
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long time, kelly. this, too, will come to an ugly end. the only problem is, will it be a year from now? will it be six months? >> why is twitter going to come to an ugly end if it's ultimately an advertising -- >> advertising companies sell for 14 and 15 times earnings. you've got to get a free cash flow versus treasury yields. you tell me with their sales how they're going to get to 15, 16 multiple? nobody's predicting any earnings for two to three years. if this was not a public company, you're not going to tell me that you wouldn't take a 10% free cash flow yield and -- for yourself versus nothing in twitter. it's not going to happen to justify the current valuation. never say not. very small chance. >> we've established what you're not buying right now. what are you buying in the minute we have remaining. >> now i'm going to have a conflict. we've owned cisco. they're only going to grow 3% to 5%. nobody could get enough of cisco at 120 times and 180 times
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earnings in '99. they're still a market leader. 3% growth is fine. it sells at an 11% free cash flow yield. growing at 3%, i think i'd rather get that 13% return rather than get the zero return for the twitters, et cetera. we're buying some of banks, the mid-size banks, bb&ts, u.s. bank corps that don't own derivatives that are going to be beneficiaries of higher interest rates. johnson & johnson. earnings are finally going north. they've got to get confidence back. it's starting to happen. there are a lot of companies with 10% free cash flow yields which have very low risk. that's where we're spending our money. i'll stand on my performance. >> bob, are you -- because, again, this point about whether it's worth paying up for a guy like you who thinks he can beat the market. you're saying right here, despite this incredible run you've had for the last couple you think you can beat the market again next year? >> we've beat it for 20 on average. we've lost probably eight out of
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that 20. our average is up 2.5% over the s&p index over 20 years. i really believe this twitter and all of this new media, it's making it easier for us to find value. because they're -- i remember the new economy old economy shareholder letter. >> good to see you, bob, as always. >> thanks, bill. thanks, kelly. >> bob olstein joining us once again with his outlook for 2014. art cashin just came by and signaled, small bias to the downside right now. little selling coming into the market here. in fact, we are seeing that all of the sudden here. dow now down 81 points with about 20 minutes left. >> the s&p 500, by the way, below the 1780 mark. we've been watching that one back and forth for several weeks now. similar to the lows we saw back in november. in any case down about three, almost four points. making it a little bit tougher here as we enter the final 20 minutes to finish the day
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positive. high finance being targeted by federal government. for some even a higher authority, today, as a matter of fact. >> first jpmorgan chase paying the feds $2 billion for allegedly turning a blind eye to a ponzi schemer bernard madoff was up to. question, why isn't the government facing consequences as well? that story ahead. after the bell, pope francis himself rocking the financial world once again. today, attacking executive pay and financial inequality. but what about all of those charities that those executives -- the charity work they do? some are thinking his intervention in these matters is not so divine. that debate still ahead. i have low testosterone. there, i said it. see, i knew testosterone could affect sex drive, but not energy or even my mood. that's when i talked with my doctor. he gave me some blood tests... showed it was low t.
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here's dominic chu. keeping up with the joneses. >> shares of apparel and footwear company jones group surging high on late trading. private equity firm sycamore partners could be looking to buy for $16 a share. they're citie ining sources. a deal could be announced next week. you may recall last month there were reports sycamore was already interested in jones group. remember, jones, guys, home to brands like nine west shoes and, of course, stuart weissman.
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social networks are taking a turn toward more privacy while still being social. for example, instagram. right? >> the popular photo sharing app known as instagram just introduced a new messaging service that's touting some of the features. jon fortt was at the company's event today. he joins us down here at the new york stock exchange. welcome, jon. >> instagram direct. >> i saw this actually earlier pop up on my phone. it tricked me. it said you have a direct message. you have to upgrade the thing. i roll my eyes. i upgrade it. there's no direct message. >> they got you. >> what is this really about? >> this is about, i think, a shift in the way people are communicating with photos. first instagram is the biggest social network that's out there that's for mobile based on images. it was all about scale. now with the rise of snapchat, people using -- especially kids using these networks differently, it's more about targeting who you want to talk to at a given moment.
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instagram direct lets you choose 15 or fewer people. krou can send photos to just that group of people. only if they follow you. you shouldn't be getting a bunch of spam unless it's directly from instagram. and hopefully what this does, i think, for facebook is address that younger demographic that the main product isn't quite engaging as much as they were in the past. maybe they can monetize it. >> i'm going to be the guy sitting in the back of the room, teacher, teacher. you forgot the homework. how do they make money on that? >> the good news for them is that images are really engaging online right now. facebook is finding it. others are finding it. the engagement is so high on instagram and pinterest and the like that when they decide to put the right kind of ads into the feed there, they should be able to make good money off of it. especially if they can keep the audience engaged with things like this. more intimate communication. >> i think they're going to have a tough time supplanting people who are texting or using things already. >> they got 150 million people
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to tap into it. >> and the muscle of facebook behind it. >> let this be a lesson to you. don't be answering those spams that you get. downloading an app that you don't know what you're getting yourself into. >> the market is taking another leg lower. almost down triple digits on the dow. 91 points at the moment. we're keeping an eye on the s&p 500. off about five. nasdaq still barely positive here. take a look at these pictures we're going to show you here, kelly. if diamonds have a season, this would be it, of course. coming up on the "closing bell," the ceo of online diamond exchange blue nile will be joining us. his company has a new deal with nordstrom. why he's offering the largest discounts online. ♪ i want to spread a little love this year ♪ [ male announcer ] this december, experience the gift of unsurpassed craftsmanship
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all right. ten minutes left. as art cashin was signaling, the bias has been changed to the downside. got a little more aggressive here. it's been this last hour of trade lately that's really been the story for the markets. we're heading toward our third consecutive down day today. we're down 98 points right now
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on the dow jones industrial average. joining us, mark haflly from ubs and bob pisani. what is it about this last hour lately that's been the story teller? >> we haven't had a really good close since friday. last two weeks, the only good day was friday on the jobs report. there's a little bit more aggressive selling in the last hour. a little bit of imbalances. but i don't see this as a major -- 1.8% off historic high in the s&p. a 5% correction would bring us to 1720. that's 50 points away. there are a lot of people, the majority of traders, i don't know how you feel, but the majority of traders i talk to would like to see it drop a little more so they can buy lower. i see people wanting to buy at a lower price rather than get out and sell and flee the market. >> is this just profit taking, mark? what do you think is going on? >> i think what it looks like, you're looking at gold going down. that to me says this has to do with the fears of a taper. which has to work through the markets. that said we've got interest rates higher than they were this
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summer. we don't anticipate a taper tantrum anything like this summer. >> is this the kind of dip you think people are going to buy as bob's suggesting? people waiting for a level to get back in? >> we're putting out our year ahead. as we look at next year we're calling it the year of the taper. but the central bank stimulus remains there broadly around the world. we think that's going to be positive for risk assets. >> how about -- a radical idea. how about the fed tries to taper. i'm talking about predictions 2014. we're all writing them now. fed starts to taper. goes to $65 billion from $80 billi billion. economy sputters. the fed does an about face and increases the taper. what chance do you think that is? >> there is a chance. they said they are data dependent. they said that if there's trouble in the emerging markets or there's trouble in washington, they'd take that into consideration. so i don't think you're necessarily that far off. >> all right. that would be something. >> just trying to have a little
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fun. >> how about that? thank you for joining us today. bob, see you later. we're going to come back with the closing countdown for this day. then we'll have much more on what is now turning into a third consecutive day of a selloff. whether it's a buying opportunity at this point or time to hibernate ahead of the official start of winter. also after the bell, it's called affluenza. we're not making this up, folks. this is something lawyers came up with. when the children of very, very rich people excuse their behavior because they are wealthy and their upbringing clouds their ability to know right from wrong. you think that's ridiculous? well, that defense may be why a teen who killed four people driving drunk only got probation. that story coming up after the "closing bell." stay tuned. ♪
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12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. welcome back. about three minutes left. lately we've seen an influence from the european markets affect the morning trade on wall street. that's what happened again today. the low of the day came about an hour after the close of the european markets today. we were down 120 points on the dow. then climbing back. wondered if we were going to get positive at the close there. didn't happen. here it is last hour. down 102 points. it's been this last hour that's been a telling factor for the market. third day in a row. let me show you a five day chart
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of the dow industrial average. last week, friday, that 200 point rally after the big jobs number. quiet day monday. then it's been downhill since then. three consecutive down days and we're down another 103 points right now. bruce kahn from sustainable insight capital management. >> investors have had a great run this year. we think there were a lot of unintended risks sitting out in portfolios including sustainability risks. such as environmental risks where companies are not really managing their scarce natural resources well, not managing human capital well. having a tough time with governance globally. companies who perform really well on those issues tend to outperform in a down market. we're starting to see those risk factors differentiate. >> investors are becoming more selective obviously at this point. we've had good gains. maybe it's time to take some profits? >> i think investors are starting to see more and more risk. just as stock selection is very important on the upside, it's even more paramount on the
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downside. high performing sustainability companies tend to outperform on the downside. that's where we're starting to see this market differentiate. >> i'm seeing where you're going. you seem to be suggesting that's where you'd be buying for 2014. is that the idea? >> 2014, we do expect an increased volatility in markets. when you have increased volatility you need to be much more of a stock picker. >> do you look mainly in the u.s.? do you look overseas? >> overseas, we're looking at global markets in various thematics as well. including agriculture. we've had a huge drop in agricultural commodities this year. >> quite a bit. >> we're expecting increased climate volatility over the next three to five years. we need to be watching where commodity prices are going to go. how to allocate accordingly for where you are in the supply chain. >> you think commodity prices are going to come bouncing back next year? >> i think there'll bin crease ed volatility.
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>> good to see you. thank you for joining us today. that's how we're going to go out. with another triple digit decline on the dow. just as we saw yesterday. the s&p flirting with its support levels, around the 1776 level. we'll keep an eye on that as we are in the close here. and the second hour of the "closing bell" with kelly evans and company. see you tomorrow. welcome to the "closing bell." i'm kelly evens. if you take a look at your screens you'll see we're now down for three days in a row for the dow. looks like that'll be the same for the s&p 500. here's a look at how we're finishing. we were back and forth. now all three indexes finishing in the red. dow 103 toints to 15740. s&p 500 shedding a little more than six points for 1775. we'll talk about whether that 1780 mark was significant. nasdaq, the outperformer all day, still turning negative as we headed into the close shedding five points and, in
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fact, closing below 4,000. 3998 the level for that index. cnbc contributor and street.com columnist mr. herb greenberg. our very own seema mody. simon hobbs. great to have you with us. herb, what's the signal here? how much should we read from another late day selloff and now a three day losing stretch in these markets? >> i think you can read into this being a market that people don't -- there's no news. as people are talking about, they're locking in profits. i don't think people know what to do. they're all sitting here waiting for this santa claus rally that they're so convinced is going to come. and that it's so set up to happen. >> instead of us coming into the month and having all these positive december forces under the market, instead it feels like, well, maybe the money has been made. now we're a little bit wor rid about, yes, the fed. feels like a four letter word at this point. next year? >> we have earnings coming out in a few weeks. those are going to start seeping into the market. we've had so many earnings warnings going into the market. >> and for all of that, for
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everything that's happened today, simon hobbs, hilton hotels comes out the second biggest ipo of the year. biggest hotel ipo of all time. frankly does pretty well. >> yes. it's part of a wave of ipos that are hitting the market towards the end of the year. yes, hilton at the helm of that. what does that tell us? two things. one, that the market is open, wide open for private investors who want to exit in lodging. the second thing it says to us, hilton, the largest hotel group in the world, as a result of a cnbc interview today, it's clearly challenging the incumbents in the lodging industry. led by marriott. no longer will they necessarily be asset like companies, selling off their hotels and then running them for other people. >> if you want to talk about where people are spending money, how they're spending money, hilton hotels doing pretty well in that space. by the way, the retail sales report this morning, seema, people are buying electronics, furniture, autos. 15% annualized rate over the
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past six months. despite the government shutdown. despite what we're hearing from individual retailers. there's something clearly happening here. >> ahead of next week's fed meeting we are seriously getting some up beat economic data from retail sales this morning to last friday's jobs report to the gdp numbers coming in at 3.6%. better than expected. this is telling traders the fed will taper sooner than expected. that's why there's a lot of reports that say the fed will taper in december. >> i like to pretend the nasdaq isn't a fed index. there's something else going on there, as if that were the case. when we talk about that index, which was outperforming almost finished positive today, is it a twitter story? which is at 56. is it a facebook story and what's happening with instagram and other things, added to the s&p 500. what's your read on why this index is holding up relatively well? sf >> we've seen a lot of volatility in the momentum names. over the last two days we have seen the social media stocks outperforming the nasdaq. facebook, one of the best
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performing stocks on the index. netflix, too, staging a late day comeback. those are some of the names powering that index. as you pointed out, it did close below that 4,000 level. a key milestone that some of the market tech nixes watch. >> you know, made for some headlines, anyway. nasdaq closed below 4,000. the world is going to end. talking about what happens with the world in 2014, there were some people earlier saying to me this market is behaving like it did when it thought larry summers was going to be the fed chair on the news that stanley fischer might be the vice chair. is that overstating it? >> yeah, i think so. people think stanley fischer is going to be hawkish. you have to distinguish between hawkish on goals and hawkish on methods. he's going to look at unemployment that's too high. inflation too low. you'll see no daylight between him and janet yellen or ben bernanke for that matter on what to do. easy policy as far as the eye can see. the question is how do you accomplish that? will he want to pull back on quantitative easing sooner? i doubt it. will he be a little less enthusiastic about using forward
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guidance? maybe. on that point i'm positive he will defer to janet yellen who will, after all, be the chairman. >> if it's even the case that he's not the biggest fan in the world of it, so what? >> well, first of all, i'm not sure that what he said a few months ago about forward guidance is necessarily applicable to where the fed is right now. even the fed right now would admit it's not ideal to be telling the world where they think interest rates will be two years from now. how else do you get long term rates down when your primary instrument, the short-term rate, is stuck at zero? i think he will modulate those views a little bit. perhaps he will be less of a fan of changing the guidance. saying we'll stay at zero to, say, 6% unemployment instead of 6.5%. he might have influence on the debate on that front. >> tim seymour joining us as well. i think we've talked about gold in the past. there's a natural segue right
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here. it got hammered again today. im gold suspending its dividend. this looking like more than just a short term move. >> a lot of these guys have to suspend their dividend, kelly. look at 2014. i think the gold miners as a group are going to be optimizing their assets. essentially they're going to be high grading their assets which means they're going to be -- >> have you talked to -- >> i'm sorry? >> are you trying to politely say they're screwed? >> i think there's a lot of balance sheets in trouble. i would absolutely argue for pair trades in the space. yomada gold over newmont. if you look at the space, i think gold is going to 1,100 an ounce. they have to downgrade price assumptions. that's not going to be good for the sector. >> simon, i feel like you want to get in. >> no. >> by the way, i bought the gdx at 2450. i'm down 20% right now. feeling like a chump. i look at newmont -- >> herb, what happened? >> what happened -- >> why did you buy it?
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>> why did i buy it? when i looked at the chart, tim, it was so bad. i look for contrarian play. it was so bad. i felt it was a no loser. now i have to think to myself, it is a great loser. but does it become an opportunity to buy at a lower level? what do you think about that, tim? >> i think the valuation, again, the sometimes very distorted here. because if you look at where these guys are on an asset basis, that's where they have to be valued, i don't think you can make a call on yesterday's pe. i think if you have to look at the underlying price of gold, and i don't see -- i look at fed fund futures out in june already starting to price in four or five bips of tightening, that's right. i think that's what the market had concerns about today. that's not good for gold. i think gold can bounce down at 1,100 -- >> what i want to know, where's the point when we get into -- if we get into an inflationary environment, is there ever a point again that gold matters? are we in a period where we're going to sit there for years and years -- >> look back on this time. >> when are we going to sit there, tim, and say my goodness. what an opportunity that was. again, you look at these charts.
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newmont has been in the bottom 50 of the s&p 500 for the past one and the past three years. at some point something has to happen here. or these companies, tim, are they going out of business? >> i was long gfi early this year. it was a painful trade. ultimately i said i don't know where this thing can go. when i look at inflation expectations i don't see any. the only place you're getting inflation is emerging markets on the consumer side. europe's got a big problem. i think that's something people are concerned about. >> you have the dichotomy of interest rates potentially rising, whether it's with tapering, or you have the 10-year yield showing you interest rates are going up with no inflation. there's no economic revival. >> this could be goldilocks. >> greg, what did you want to say? >> yeah. if you are waiting for inflation in the united states to bail you out of a long gold position, you are going to be waiting a very long time. look, the fed is trying to keep inflation from falling too far. inflation expectations are moving down.
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by the way, this is an environment where those who are terrified of inflation are finally getting what they wanted. which is quantitative easing about to be tapered back. to the extent qe was helping your gold position, that's going away as well. like the other guest was saying you've got to rely on inflation somewhere else like india to justify being bullish on gold. >> i was going to say, if you want to talk about any consumer out there that might be worried about the move, massive drop in the price of gold, talk to some of the indians or chinese out there, two biggest consumers of gold. a lot of those individuals are wondering, including my grandmother back in india, wondering if the price will come back. >> seema, here's what i wonder. if someone like your grandmother is buying gold, was she buying it as a stored value? i often here this is a consumer play. it's a jewelry play. it's a marriage -- >> it's a central bank plan. >> if you're an indian consumer, were you buying it here actually on the hope that this was an asset that was going to bail you out of other ones that weren't -- >> my report showed there were a
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lot of individuals in india buying the pullback we saw in the price of gold hoping it would come back. because india has this love affair with gold. it's in the culture. it's in the religion. because of that you have a lot of people who think that this is the safe haven. when everything else falls, you go to gold. >> one thing greg says, he said it's not a u.s. sitwaugs. of course, it is a world -- it is a world commodity. so we can talk about what happens here. you know, so it's just -- >> i find it fascinating to listen to this conversation of rationalizing the falling gold after the fact. it would come as no surprise to us, to those of us that thought it was a bubble if not a ponzi scheme three years ago in the first place that was driven higher by an awful lot of hot air. >> i'll say this much about gold. i do think the global central banks everywhere will continue to buy gold. >> why is it going up? >> global central banks aren't the ones controlling the market. look at the etf, overall volumes of gold held by etfs. june 2009 lows which tells me the retail investor is out of gold. that's a big deal.
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i don't think people are going to run away from the gold market. i do think it can go lower. i do think central banks will always buy it. >> got to jump. want to say as well, you can basically look at gold as trading off real interest rates. those are starting to look a little bit better. inflation's still low. greg, final point to you here. here's a line from hsbc. the u.s., japan, europe, they remain extremely dovish. they're going to continue to reinforce the status quo of near zero rates. is there any reason to think that's not going to be the case next year? >> i think what you're going to see is central banks including the fed continuing to maintain very low rates in the near term from the zero to three year part of the curve. the longer part of the curve, three to ten and out, higher and higher as people get more bullish about the economy and want to move out of the risk free stuff and buy into the riskier stuff. >> can i add one more point. the other inflation trade, of course, was property. which an awful lot of private equity ended up going into. i wonder if similarly that will prove to be not as good of
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performer as they had hoped longer term. >> speaking of hilton. tim seymour, let you go. coming up on "fast money" at 5:00 p.m. blue chips are sliding again today even though we finished off the lows. should we worry about a bigger pullback ahead. liz ann sonders weighing in along with dennis gartman. their outlook may surprise you. j prgs morgan on the hook for a reported $2 billion in fines for turning a blind eye to bernie madoff's ponzi scheme. what should the securities and exchange commission pay considering they also missed it? we're in for a spirited discussion. stay with us. [ male announcer ] here's a question for you:
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welcome back. we've got some breaking news on obama care including when americans need to pay for the program. bertha coombs bringing us the details. >> secretary of the health department kathleen sebelius in a conference call with reporters saying americans will have until december 31st to pay for their coverage beginning on january 1st. they're requiring insurers to accept payment until new year's eve. they're also encouraging insurers to also take other
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measures and be more flexible. like perhaps just take partial payment or also perhaps accept payments that come in after the 31st and have that coverage go back retroactively to january 1st. clearly now with the website problems working and the website itself working, they want to make sure that people who sign up by december 23rd at midnight will have coverage starting on january 1st. although in a fact sheet released, they also said if it appears that people still have trouble signing up by december 23rd, they may very well extend that deadline. they're clearly, kelly, trying to make sure that they have the smoothest transition possible. now that the problems for signing up are a little bit better, they want to make sure that people actually get coverage. that's going to be the critical issue come january. >> i don't know if you can clarify just based on this release, but this is not another extension of the deadline, or is it? is this a way of kind of softly
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letting people continue to sign up until the very last second or even beyond? >> they say that you have until the 23rd, which they had already done in terms of the deadline. they had extended that from december 15th as the last day you could sign up. now they're extending the deadline as to when you have to get in those payments. they want insurers to continue to accept payments until december 31st. some insurers had wanted the payments sooner. they want to make sure that anyone who pays by new year's eve will have coverage starting on january 1st. even if it's retroactive. >> all right. important move, bertha. thank you very much. bertha coombs back at headquarters. red arrows on wall street for the third day running. dominic chu, what's moving markets here today? >> a plethora of stories. adobe systems moving lower. the company reported fourth quarter earnings and revenues that were in line with estimates but its guidance for the first quarter and 2014 was much lower than wall street was expecting remember, the economy behind adobe acrobat.
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publishing software. restoration hardware getting whacked in the after hours. fourth quarter guidance was a bit light here. its co-ceo is leaving to become chairman and ceo of lucky brands. the jeans company. dollar general hit its lows in the last half hour of trading. this on a dow jones report that kkr and goldman sachs were exiting the company with a $252 million stock sale. on the plus side, airline stocks were higher. the international air transportation association says it expecting earnings nearly $13 billion this year. up from its september forecast of $11.7 billion. also sees overall improvement in the industry in 2014, kelly. back over to you. >> 4.5% move for southwest. dom, thanks. our next guest is a noted long term bull on markets. why is he advising a more conservative strategy now? dennis gartman. liz ann sonders from charles
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schaub. we're getting all the numbers from 2013. the high point is -- where do you fall? >> i think it's still a long-term bull market. as i like to say, the trend is still from the lower left to the upper right. i don't see anything economically that is disturbing. clearly we're going to see a lessened amount of accommodation. but that's still instead of -- instead of traveling down the road at 85 miles an hour we're going to be traveling down the road at 75 mimles an hour. i find it amusing that everyone thinks a lessened amount of accommodation is tightening. it's far from that. we're due for a correction. we're getting a correction. the other day i said after being quite bullish i want to go to race k off circumstance. go to the sidelines. it's a bull market. you can only be really long, reasonably long or neutral. i think right now probably the best position to be is somewhat neutral. >> dennis, in a word, when do you buy back in. >> when it stops going down. that's the best that i can tell you, kelly. >> okay. >> you'll get -- you'll get all ten of the markets that i follow in my index every day.
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one day they'll all be down. they'll be down 1.5%. everything will look bleak. that's probably be the time to be a buyer. >> liz ann, what about you? it sounds like the long-term case for you has a lot to do with the economy picking up steam. what about those who say 2014 might be the year we finally see outperformance by the economy but not necessarily the stock market? >> i would be worried a little bit more about that if we didn't still have fairly reasonable valuations. if you get no, ma'amal growth up you're likely to get revenue growth up which support earn ppgs we've had valuation expansion this year. on forward earnings the market is still trading at a discount. we have a little bit of the valuation cushion that i don't think there's a risk in 2014 -- >> wait a minute. >> what? >> okay. this valuation issue is one that there's so much disagreement about. >> oh, yeah. >> you're saying the market is conservative here when there are others who would say the s&p is priced, you know, pricing in earnings growth in the range of 15% to 20% next year that's never going to be achievable. >> valuation is in the eye of the beholder. you could have somebody on your show that's a raving bear.
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they would probably point to the schiller cape as the rationale. you could look at trailing earnings in line with the market. forward earnings where the market is still trading at a discount. obviously then you have to plug in an e in the growth rate for that. i think it's probably mid to high single digits next year. with a discount to that. i don't think the market's cheap here. i just don't think it's expensive. i don't tend to use schiller cape. certainly i would not suggest using it as a timing tool. >> i guess this all boils down to you trying to comfort, i guess, the investor who may not be involved in this market by saying if you get in here you're not about to be down 10%, 20% for the year? >> i think the likelihood of having a correction here that could be in the mid-single digits not only i think would be appropriate, i would like to see it. i think that's a better kind of market environment that's grinding higher, you take two steps forward, half a step back. i think there has been and maybe will continue to be a risk of a melt up. that's something you don't want. they don't tend to end very well. >> that's for sure. >> kind of a normal correction, i think, would be appropriate and healthy in this environment.
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>> dennis, briefly, i noticed here you're cautious on some of the sectors including shipping which is where we've started to see a lot more positive vibes lately. is that both a fundamental and valuation story? >> i've loved shipping for a long period of time. all of the sudden it's now beginning to be on everybody else's radar range. so it's probably time to be less enthusiastic about it. where i live down in southern virginia we see ships moving in and out. we see containers being moved in and out. a year from now, shipping prices, shipping stocks are going to be higher than where they are right now. we're up a good chart you yao put up there with the baltic exchange rate. it's been pretty sporty. it wasn't on anybody's radar six months ago. now it's on everybody's radar. probably a good time to be less enthusiastic. does one get bearish of ships up here? not at all. >> just in a word, dennis, we have to go. we just had quite a debate about gold here. you still like it? >> i've liked gold in yen terms only.
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i have not liked gold in dollar terms at all. >> i like everything in yen terms. >> i mean, if you're short of yen against the world right now i think -- >> that's a pretty good trade. >> that's the trade. owning gold in yen terms clearly has been a far better trade. that's down 7% on the year. i only get to north carolina state so i get a little confused at times. losing 7% is a lot better than being down 35%. >> got to leave it there. dennis, liz ann, great to see both of you. madoff blame game taking a $2 billion turn. up next, jpmorgan nearing a deal to pay $2 billion in fines for i its -- why does jpm have to pay and not government agencies who missed the fraud? we'll talk about that. stay with us. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here
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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. today we got word jpmorgan is forking over $2 billion to the feds for looking the other way while bernie madoff ran his $50 million ponzi scheme. they allege jpmorgan should have known what madoff was up to. we may recall whistle blower harry markopolous said he handed madoff to the s.e.c. on a silver platter but they shrugged him off. while the s.e.c. has made reforms they haven't had any penalties close to what jp morgan is facing. mark, is this a double standard?
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>> good evening, kelly. to a certain extent i think a lot of people watching the story may feel that it is. part of the reason the s.e.c. got a pass is that the s.e.c. obviously has the ability to take advantage of government immunity. there were such significant and blatant shortcomings as it relates to the routine examinations that were done at madoff's operations that it's really hard to believe that this was allowed to continue for as long as it has. and on this, the fifth anniversary of this story coming to light, it's really a terrible remembrance of what went on. >> herb, i'm curious about your thoughts on this one. we're talking about should we be so surprised that one part of the government isn't pointing the finger and trying to sue the other part? no. at the same time, where's the accountability? >> i don't know that you can say the s.e.c. has accountability on this. how would you hold them accountable? the people are gone. what you really have here, you go back to the issue, regardless
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of whether the chs.e.c. should have been doing a better job, which they should have been, jpm still -- they saw it in their system. according to what i read in the stories, they saw it in their system. why didn't they blow the whistle at the time? >> right. >> they made money off these trades. >> marc, what do you think? >> unfortunately, some of the reports that came out in connection with the review of the s.e.c.'s conduct is that some of the examiners also saw indications of fraud. and what's so unbelievably troubling about this from my perspective, and i try to bring this down to very simple terms, is as follows. there are days in which madoff claimed to have traded more securities than actually were traded in total in the marketplace on that given day. >> right. >> even his dtc code, which he gave to the investigators, and later in prison interviews said that was the day he thought the jig was up, he was to be caught, because the code was phony. the code wasn't even checked. it wasn't even verified. these were unbelievable and
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unforgivable violations on the part of the s.e.c. >> again, herb, i understand, but you go back to it and you say, you really couldn't have asked for an easier case to be made for someone to come forward, not only to draw their attention to this is happening, but the way in which some of these trades were being done was flagrant. where today five years later has there been real reform, or people really held accountable for completely missing the ball on this one? >> you won't know until you see it the next time around. until they really nail somebody. we haven't seen anyone, a situation like that. you suspect there's more of that in the system. the real question is how many whistle blowers are stepping forward, whether it's on something that has to deal with a securities firm or corporations where the s.e.c. is -- no one's doing anything. there are whistle blowers out there. we know there are a lot of whistle blower lawsuits. so, you know, where does that go? how much of that tries to get papered over? that's still, i think, one of the questions we have to ask. >> we do know to a certain
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extent how the whistle blower program is going. we have had, if i'm not mistaken, two recent large whistle blower cases come to their natural conclusion. i can tell you that my colleagues that defend s.e.c. investigations are very cognizant and very concerned about what the impact is of the whistle blower program. i will also say in the s.e.c.'s defense, they have radically changed how they monitor the markets these days. both from the perspective of technology as well as bringing market insiders in that have an ability to understand these trades. >> though in some of the stories i've been watching, i sometimes wonder where there are whistle blowers and where there are issues, still where the lobbyists get involved, the politicians get involved to try to push people off the path. i know that still goes on. i know it's going on. and it's maddening at times. >> i got to say, i want to know what wall street's reaction will be. because at the end of the day, if jpmorgan turned a blind eye
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to this massive ponzi scheme that was taking place, is that not a concern for shareholders? i mean, take a look at the stock. jpmorgan, it's -- >> up half a percent. >> it's up this year. that's for sure. >> the bernie madoff line in all of this is that there's no way everyone involved didn't know exactly what was going on here. i guess it's just a little bit troubling that there was nothing more at the time that was done with something this obvious. >> can i make one observation. >> simon? >> in general it occurs to me that those intent to criticize the regulator and the federal government tend to be those that also argue for light touch regulatory regime and for underfunding of regulation. that is the broader point, actually. >> we'll leave it there. thanks very much. marc, appreciate your time. coming up, pope francis might be "time's" person of the year. we'll get a read on what you're reading when we come back. ♪ [ male announcer ] if we could see energy...
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welcome back. so what's drawing the most eyeballs to our website right thousand. cnbc.com managing editor allen wasz ler to tell us. >> exciting the last few minutes here. the story that broke on your show about the white house
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considering extending the deadline for obama care signups, put that on the site, it punched it right up. all day our obama care coverage has been pulling a lot of people in with news that they might extend -- that they're going to extend for one month the high risk pool. this is icing on the cake in terms of our readers. they're eating up this story right now. obama care has always been a big puller for us. next, reigning champion for today has been the pope. his coming out and being critical of megasalaries and big bonus. how they're a sign of greed and immortali immortality. coming e inine ining up and cha little feature up about gold. how the decline in prices we're seeing lately is actually a sign of people sort of setting up for the little taper tantrum in case the fed pulls out. what's going to get hit? looks like gold is the canary in
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the coal mine. >> i was going to ask you about the pope. number two on the site right now, i'm not surprised, actually. we'll see if he can edge out obama care on that one. thank you. >> take care, kelly. i want to ask you guys about this as well. we've seen now the pope is named the man of the year. obviously this is going to be -- this is going to help draw attention to this issue. here on the show for the last week or so we have been constantly covering the minimum wage debate and how proactive or not active to be about trying to address some of the inequality that we see in the economy. but, herb, when you hear the pope -- when you hear him and read what he's saying do you feel as though it is a direct attack on capitalism? >> i think it sounds like it is. i don't think he's sbenintentioy doing that. i don't think he's sitting there saying, gee, i want to sound like a socialist. i think he's thinking in terms of the masses which is where he's from. i think that's his m.o. i don't think he's thinking about the benefactors. the people who come out with all of that money and fund the
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catholic church and fund so many issues, so many -- so many things. i think -- i don't think he's thinking of it that way. i suspect when he's called onca. he's thinking broader. we talked about it in the green room earlier. where he comes from. it's a different mind set. >> he has a different view on the income gap between the wealthy and the poor. >> i really think actually globally, inequality is declining in big terms because of what's happening in china and india. you know, there's a problem with it in individual countries. i have huge respect for the pope. i think this pope in particular is an amazing man.
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wouldn't it be great if he actually came forward and said, look, i've got a thousand pieces of priceless works of art in the basement of the vatican. i'm going to auction them off over the next five years. i challenge you all in the national museums around the world to join me. we'll set up education programs for the poor. >> not to mention the tapestries. they're definitely worth something. >> greg, what do you think? >> the pope is as a pope ought to be raising what he considers to be moral important issues. the question is what do you do about them? he's not the first person to say inequality is a problem. poverty is a problem. here in the united states what would be interesting to know -- i saw a poll that said catholics are responding very well to the pope's message. catholics are the classic swing voter in american elections. the interesting question will be to see whether the pope's message starts to get some of those swing voters vote differently or put different pressure on their congressmen or on the president to move the debate. for example, on the minimum wage in one direction or another.
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that to me is the interesting question. >> you're so pragmatic, greg. >> always forward looking. >> always forward looking. exactly. try to figure out how this will all play. i will just say, if nothing else, if we all suspected that inequality was going to be a major theme, this tells you that this message is resonating. simon, it's an interesting point that you make, though. if you look on a global basis the story is different than how it may appear -- >> on the country basis it's a real issue. in this country, how long will a 2% drag the underclass along financially. conversely the poor look at trich and say that's undeserved wealth. >> whether you agree or disagree with what pope francis is saying, it's pretty commendable just to see the reception that he's getting. i was looking on twitter. so many of the tweets right now are on pope francis. same day delivery right to your doorstep. there's a big push in the retail world. one big box retailer is ready to join the fray. we'll tell you who coming up. if you're still clueless about what to get your wife or girlfriend for the holidays or maybe putting together a
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christmas list, the ceo of blue nile will have answers and ideas for you. that's coming up. stay with us. we're aig. and we're here. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays. so i can reach ally bank 24/7, but there ar24/7.branches? i'm sorry, i'm just really reluctant to try new things. really? what's wrong with trying new things? look! mommy's new vacuum! (cat screech) you feel that in your muscles? i do... drink water. it's a long story. well, not having branches
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welcome back. good news now. home depot is the latest retailer to get in on same day delivery service. some shopping malls are joining in the fray. courtney reagan. >> it could be good for retailers and consumers.
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the vast majority, more than 85% of all retail sales are still made in store. online shopping certainly taking share. that growth continues to be explosive. retailers like home depot have thousands of store locations around the country with long term leases. why not use them as distribution centers, too? the home improvement retailer telling analysts its investing in its supply chain to be able to offer same day shipping and delivery on 100,000 items. four mall operators are covering more than 660 malls a across the cub tri. offering same day delivery bought in store or online. brought to your doorstep through a crowd sourcing model. they'll also be able to track where your purchases are in realtime. walmart also offers same day delivery in five markets. amazon has just announced the expansion of its online grocery delivery and ordering service it to -- to its third market. that's done even without the drones. back to you. >> soon it will be same hour
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delivery. tha our next guest doesn't yet guarantee same day delivery. customers can shop up until 6:00 p.m. on december 23rd in order to get his wares in time for christmas. and he's promising the biggest discounts in his company's history. we got to take a quick break. stay with us. we'll be right back. impact woos from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. you stand behind what you say. there's a saying around here, around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability
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welcome back. here to talk about the spread of same day shipping and how luxury shoppers are behaving this holiday season, harvey cantor, ceo of blue nile. harvey, great to have you with us. >> great to be here and talk about all the great gift ideas we have for what's left of the holiday season. >> what's left? i haven't even started. there better be a couple. before we get to that i have a question. following on an interview we had back on cyber monday, you guys were offering diamonds at 40% off. that was unprecedented. how did that -- what were the numbers for that day like? how did the consumer respond? >> you know, we had great results. we've expected great results. we had phenomenal results. the fact of the matter is, since thanksgiving we've had a really good run. but the next ten days really are really critical to delivering the quarter. >> what about numbers and not adjectives? >> we've had a significant increase. you know, we can't provide specific information. but we feel really good about the guidance we provided which is 7% to 17%.
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again, the next ten days are really important to achieving that. >> which is actually the biggest day for you? is it super saturday? i guess that's more for the traditional big box guys. ebay used to talk about green monday which was this past monday. when do you expect traffic to peak? >> it's really interesting this year. there's been a lot of conversation about the compressed calendar. we think really the tail end of this season is yet in front of us. and what's really exciting is blue nile can deliver within literally 24 hours. on monday we will ship and deliver by 10:00 a.m. tuesday morning. and we expect next weekend, not this one coming, but the one after that to be just a phenomenal result. >> it's funny you mention that. that's exactly what we're looking at is this spread of same day delivery. for people in larger cities has been around, especially maybe for the grocery stores, some retailers, but now more and more people expect that the things they're ordering online, you know, they can have it that day. how much longer, i guess, until you're able to say to them, look, same day delivery. we can do it, too. >> you know, that's -- for us,
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we have to build the rings that we sell. that's a really big part of what we do. we actually have jewelers and g gemologists. we build the rings. that's part of the build your own process and the kcustmizatin we offer. traditional brick and mortar stores are selling out of the case. >> absolutely. just like when you monogram something. i've run into before. you've got a great gift idea. you're all set. you realize you have to order two weeks ago if you wanted the monogram actually on it. >> in our case you can literally order 6:00 on eastern standard time. by christmas eve morning 10:00 a.m. it'll be on your doorstep. pretty overnight, if you will. >> for last minute shoppers, what are the -- first of all, the top sellers this season. what are some of your recommendations? >> you know, the top sellers continue to be diamonds. diamonds, diamonds, diamonds. we are selling studs, pendants, diamond tennis bracelets.
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while those are very traditional, they're still great, incredible gifts. typically we're 20% to 40% below traditional brick and nor tar stores. this year we brought mo neek lillier. it's doing well. fashion and tradition and both of them make great gift ideas. >> do you accept pam yment in bitcoin? >> that's cute. no. >> you can buy an tesla so thought maybe an engagement ring, too. >> it's an infliction you probably have not heard of. it's called afluenca. robert, tell us. >> this was a texas teenager who pled guilty to driving drunk and causing an accident that killed four people. prosecutors were originally
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seeking 20 years in prison. instead he gets 0 time in prison. he will have ten years probation and he will do time in a rehab center in malibu, california, a really nice rehab center. some of the victims said he was let off because he was wealthy and part of his defense, one attorney brought in a psychologist that said because he grew up so wealthy he didn't know right from wrong. it's the first time i have seen affluence used as a defense and it appeared to work. >> the judge effectively sided with that argument? or was there something else here that was cited as the reason why he got off? >> the judge basically said that this kid needed some kind of intensive program, that this place in california offered it and that would be more constructive for the kid than
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prison. but the judge agreed that separating this kid from his parents who seemed to be a source of friction at home and spoiling him that separating him from his parents was a key part of this. now prison would have done this also. the judge never said affluenza, but it was the first time it was used formally as a defense. >> he didn't have a drug or drinking, medical or psychological condition? >> no. the defense said basically by growing up in such a wealthy household he couldn't determine right from wrong because he assumed that money could solve every problem. the judge did point out quite clearly we do hold him responsible for this. so she rejected the part of the affluenza part of the argument. >> especially on a day we were
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just talking about the pope. keep it right here.
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>> welcome back you have been tweeting all day and we try to keep an eye on them.
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bill was tweeting it seems that bitcoin is taking away from gold. we had a big discussion. afterall they are about the same price. they were at parity a week ago. it's true. and then paul tweeted facebook and twitter both above 50. i like this tweet. who would have thought we would be at twitter at 56 today. i mean, everyone was saying it would be down in the 30s by now. >> it's pretty amazing to see the run up we have been seeing. there have been more positive reports up there on upcoming earnings. >> facebook, twitter, both? >> facebook. >> really? do you use facebook? do you use twitter? >> no, no facebook. i do tweet.
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flurms were pretty good but you had co-ceo leaving to go to lucky brand. he is not the brains. >> this -- his departture -- gary runs this thing. he is the asthetic behind the company. the numbers were actually very good. we have seen the post close preopening declines suddenly reverse themselves. >> and you like the numbers? >> i think it's about the ceo. the gross profit margin was down. it was down year-over-year a little bit. this is a company in transition. we are making big plans and doing pretty well in the process. >> exactly. this is going to be a big deal. >> look up rain moma.
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i want to briefly go back to the point about stan fisher. we need to talk about it. >> it matters a lot less than you might think. we have a meeting next week where bern bernanke is going to make the decision. not yet a majority. if the strong economic numbers this week tip the balance i think some of the choppiness is going to continue. i think it stretches belief. >> it's going to be bernanke's
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last press conference. >> last conference but second last meeting. >> oh, all right. well, still the q&a, i was going to ask how do you think that's going to go? >> there might be a little bit. they're mostly going to want to get a headline. they're going to ask what are you going to do next? blah blah blah. >> right. and by the way there was talk that the fed might do less press conferences or something as part of its effort to change tactics a little bit here? you think that's the case? >> it's going to be really hard. you know, the transparency stuff is hard to dial back. >> transparency is great when you're a central bank. but coming out of the cycle it
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was always going to be tougher. >> can we leave it there and pick it up in the morning? >> of course. 10:00 a.m. >> it's time for "fast money" in just a couple seconds. >> the first investor in snap chat. the first guy who thought anything of snap chat? we've got him on and he will tell us what he thinks will be the next snap chat and why he's an investor in bitcoin. >> and i want to know what he thinks about instagram direct. i'm melissa lee, here's tonight's line-up. gold crush after three days in the red. gold is the real loser today. the metal down more than 2%. we'll tell you the stocks that could take a hit. the twitter stock exploding. but we've got the analyst who says to sell. and continue versy surrounding one of the

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