tv On the Money CNBC October 12, 2014 7:30pm-8:01pm EDT
hi everyone, welcome to "on the money." i'm becky quick. would you rather dive off a cliff or watch the stock market? they may feel about the same right now, but is there really a reason to worry about stocks if you are in it for the long-term? they're not the cool kid on the block anymore, but htc wants to be the comeback kid. how the smart phone maker is trying to dial up success. there's no place like home, but whether to rent or buy is one of the biggest financial decisions there is. what you need to know. and it's a business that's growing like weeds, or at least like weed. meet some entrepreneur tries to get seed money. "on the money" starts right now. >> this is america's number one financial news program, "on the money." now, becky quick.
here's a look at what's making news as we head into a new week "on the money." october is turning into a spooky month for the markets. the dow had the worst week of the year on thursday, falling more than 330 points. that came one day after the best day of the year and the third straight move of 200 points or more. the sell-off mostly on concerns about weakness in the global economy. stocks continued to fall on friday. the market worries at least in part reinforced bay new outlook from the international monetary fund. it slightly lowered its growth predictions because of weakness in japan, latin america, and europe. earnings season is under way. and costco beat estimates. so did coke and pepsi. yum brands missed. amazon.com is ready to open the first brick and mortar store. they will have the store ready in time for the holiday shopping season. that store front would also function as a mini warehouse. amazon had no comment on the report. and walmart is eliminating
health benefits for about 2% of its workers. the company says it's too spiff to provide health care for part-time employees who work less than 30 hours a week. rising health care costs are to blame. the dow had three straight moves this week. that was enough to induce vertigo in even some of the calmest investors. but is this a lot of noise, a long-awaited correction or a new run? joining us now is adam parker. he is the chief strategist, and thanks so much for coming in. >> thanks for having me. >> this is enough to make you sit up and pay attention. what do you think about the moves we've been seeing? >> i think people get nervous periodically. we saw a pretty big correction in 2011. but my general view is the s&p 500 doesn't usually go down 10% or more unless people are afraid of an earnings recession. i'm still not afraid of an earnings recession. i think this will look more like a blip when we get out 18 months or so. >> if there were dips, you've been telling people to buy? >> i have been and telling people to. you have to depend what earnings
are declining. most of the questions are about the big move and the dollar or the fear of a big change in rates or a big change in oil, but so far when i look at that cocktail together, the earnings season is going to be okay. i keep constructive. >> that's good to hear. one thing that spooked a lot of investors this week is what they heard from the fed, from the fomc. the idea that you could be looking at these global downturns and that eventually pulling the u.s. down, that being a reason we need to keep rates low here. what do you think about that? could that be the right move? >> it could be. it's a double edged sword, if everything is synchronized. i think one of the good things is some economies look better like the u.s. some maybe a little worse, parts of europe. so maybe it ultimately makes the expansion last even longer in the u.s. just because things are a little less coordinated. >> you said you get a lot of questions from people asking about the strength of the dollar. that has been surprisingly strong, up something like 8% or
9% over the last month. and that has some people wonder about what that does for earnings to multinational corporations. will that put a dent in them? >> our work shows that the sectors impacts are machinery, personal products, chemicals, select pharma, select tech. but in aggregate, what's interesting is you can't really show that strongly that the stock market always does poorly. the earnings might be a little more impacted. the reason is sometimes a strong dollar means the u.s. economy is doing relatively better and some of the u.s. stocks can still participate. >> you also mentioned oil prices nap has people wondering if that's going to be a big boom for the consumer, maybe more consumer spending, retail, for dining. >> i think it does. in fact our biggest underweight in our portfolio, the first six months of the year, consumer discretionary. we're now overweight the last couple of weeks because i think it sets up much better into black friday. that's like an income gain or less of a tax with oil down in the bottom of the range. not necessarily great for oil earnings, but should be great for retail. >> you also see this expansion continuing for some time. >> i do. >> 2020?
is that really where we're putting it at? >> what we do is try to make a list of sign pulse that would make us want to call the top of the cycle. too much management arrogance, hiring, inventory, it could be debt or issues handling the interest expanse on that debt. it could be the economic factors getting too heated up. if you look at this stuff right now, the froth meter doesn't look too extended. i think we'll have to get starts and fits like we always do, but at the end of the day, this could be a long expansion. >> and if that's the case, if we are talking about economic expansion, stock market expansion for the next many years, even to 2020. where do you think the s&p ends up? >> so you take some basic assumption. you look at the corporate earnings right now. you grow maybe 6% per year until then, less than the long-term average because we have a high point for starting earnings. get close to 170 at earnings, and a little higher in multiple today. we wrote near 3,000 which i know grab people's attention. you think about it, i don't think the assumption of 50% are so up from here over six years is really that aggressive.
i think so the harder thing will be does it last six years. so we have to monitor those lists of signposts and look for corporate excesses to try to make that call. >> what would be another warning sign to show you the corporate excesses are on the way? >> i don't want to see a huge surge in capital spending, big advance in recovery. a lot of hiring, a lot of those things are good for the economic data, bigger increase, then a bigger fall. i want to see steady behavior where management says we'll spend in line with revenue growth and that could make the expansion last for some time. >> in the meantime, buy stocks on the dips? >> exactly. as long as you think earnings are going to go higher, i think you'll look back as the same way as issues in europe and fears of a china hard landing and worries about a fiscal cliff. we had countdown os than stuff, you know what, as long as earnings are going to grow next year versus this year, i should look at the u.s. market in a pretty constructive fashion. >> adam, thank you so much for your time. >> thanks for having me. up next we are on the money,
the smartphone wars get another warrior. the chairman of htc reengaging in the company she founded. she hopes that a new line of products is the solution for a struggling brand. you just have to make people love you. and it takes time. and later, this should hit home. is buy organize renting where you live the right move? before you pack your bags, you'll want to hear this. and as we head to a break, take a look at how the stock market ended the week.
the re is part of an effort to reinvigorate a struggling brand. as recently as 2011, htc made one out of every six smartphones sold in the united states. but poor sales and strong competition from apple and samsung drove the brand's co-founder cher wang to return to day-to-day operations last fall. wapg wang is one of technology's most successful women but can she rebuild the brand she helped make? >> we are producing one of the best smartphones in the world. >> even if you have the best smart phone or one of the ones being reviewed as one of the best, can you get the word out when you're competing against companies that have deep pockets, like a samsung, like an apple, how do you do that? >> the branding is you just have to be consistent, telling people that you are one of the best company, and you have the best phone. and the brains, you have to make people love you. it takes time to do that. >> it's not easy to do, why don't we talk about what you're introducing, the new products that you have with some of the new things.
people may look and think it's a periscope on a submarine, what is this? >> it's a re. we call it re. the little remarkable camera. it's something you can grab on your hand, it's so light, and very easy to carry with you. you don't to want miss any time of your life. just go anywhere you should, any time you want, so it is 146 wide angle, 146 wide angle. it's like your eyes. you know, whatever you see, you shoot. >> not everyone knows the story about how you founded this company, how you came up with the idea. from what i understand, you were on trains in europe where you were carrying around big mother boards with you all over the place, massive computers, and what happened? what were you thinking that the point? >> well, at a time it's very important to survive. you have to really show the people the performance. so the desktop machine is very,
very heavy. it's 186. so you have to show the customer about the performance. so i have to drag them down the train to show the customer they're performers. >> they're heavy. >> then sometimes you think whoa, that's a hand-held computer in the hand, you can show the performance with your customer much easier, and then you can listen to the music, it would be nice, but you just start sitting in the trends. daydreaming. >> what year was this when you were dragging the mother boards around? >> around 1985. >> so you were really sitting there thinking this is the future. the stuff you're imagining is the stuff we actually have right now. >> yes. the best product is really just made for people's needs. >> yeah. what's your biggest exciting thing that we might see that we can do with some of these phones or something else let's say in the next five years? what is the biggest pie-in-the-sky idea? >> this is only the first category. that's a lot of thing to imagine
about. you know, you can imagine a projector on the air. 3-d an that's flexibility or inflexible. the panel is coming out. there is a lot of things to imagine. but the most important thing is the smart devices along the way of the whole world connectivity that connect into your smart self, smart home, smart city, smart world, smart universe. there's so many different type of devices that you can imagine. >> so this is the water proof portable re camera, it's live streaming right now for the htc desire i smartphone. check out. what you're going to see is everything this camera sees you see. you see me looking at you looking at me looking at you. not bad, right? interesting. it's lightweight, it's not heavy. we'll see if it takes off. up next we are "on the money," it's one of the biggest financial decisions you will ever make. do you rent or buy? stick around for this advice and you won't be home alone. later, a green rush is coming to the marijuana
28% who said that they would rent. for many people renting or buying is the biggest financial decision they'll make. so what factors should you consider? joining us right now is personal finance correspondent sharon epperson. sharon, i guess affordability has to be the biggest issue that most people have to figure out. >> of course. and one of the things that people look at first is whether they can afford the down payment. and the traditional rule of thumb of putting 20% down, 20% of the purchase price so that you don't have to pay private mortgage insurance is what many people are striving for. but that is a big hurdle for a lot of folks there are some lend areas in will hay lou you to pay smaller down payment and not have to pay p martha's vineyard i, but it's still good to have as much equity in the home as you can. keep in mind the three things to think about in terms of the you can afford it, even if the down payment will you be in the home for four to five years. that's a key component because you want to recoup your closing costs that you're going to pay if you have to get that mortgage.
also make sure that your mortgage and your other houses expenses don't eat up more than 30% of your monthly -- >> take home? >> that's your gross. of your gross. and then you also want to take a look at what you're going to be able to afford in terms of other extra costs you may not expect that may happen. so you know when something breaks, we all know as homeowners, you expect that but those are costs you want to factor in to make sure it's affordable to you and the after-tax mortgage payment you'd have to make is comparable to the rent you can make now. >> interest rates. we're at historic low levels. that'll play a big factor in what people consider. >> of course, that's why lenders are saying now is a great time to buy. for many that may be the case, mortgage rates, even the 30-year fixed at 4%, that's still not the reason, the only reason, the only factor that you need to look at when you look at whether or not it's the right time to buy. folks say it's a great investment, you know, home prices are going to be on the rise. are you sure of that? that's something of course you want to consider.
and then you also want to make sure when you're looking at some of those tax breaks that you're hoping to get, the mortgage interest reduction, property tax deduction, if you fall into the alternative minimum tax zone, those aren't so great for you anymore. you may not really be able to get as much savings as you think. and if your out-of-pocket costs are too great, again, it may not be too great. >> when does it make sense? >> flexibility, you think you're going to move for a job, jump start your career, you want that flexibility, you're not going to be in the house for five years. then you may to want keep on renting. of course you also want to make sure that any extra costs as we talked about, you know that arise that you can afford them, and if they outweigh the rental costs, you really think i don't know if i can maintain the home, decorate the home, if anything happens, have emergency money for that home. may be just keep renting until you have that fund set up. >> sharon, thank you so much. it's always great the see you. >> my pleasure. up next "on the money" a look at the news for the week ahead. and the growing business of the growing business. entrepreneurs are trying to corner the pot market. is it the wild west or a sector on the rise?
banking behemoths, jpmorgan, wells fargo and citi. monday it a federal holiday, the stock markets are open, but the bond and currency markets will be closed. on wednesday, we'll be getting retail sales numbers. thursday, apple is holding a big event in which they're expected to introduce a new ipad, and we'll also be getting industrial production numbers and on friday we'll be getting housing starts for september. it is election day. three states in washington, d.c. will vote on recreation and medicinal marijuana legislationization measures. as more americans have access, entrepreneurs are lining up to offer pot products and services. jane wells visited a unique jane wells visits a unique competition that aims to weed the good from the bad. jane? >> becky, there was plenty of both this week in denver as cameras were rolling just because like everything else in america, pot needs its own show. the marijuana show being filmed in denver, it's a cross between shark tank and the apprentice, where budding beg ding ganja-pr
seek investor advice and support. >> we had 200 people show up. you guys, in two weeks, it's like, whew. >> the show which will be streamed online has whittled 200 contestant downs to nine finalists. one is toni wolf, a mom who broke her neck in an accident. she says medical marijuana made her life bearable, but she realized there were not any childproof attractive bags for carrying medications or anything else. wolf pack was born. >> i'm sinking 200,000 for 20%. i would like to go national. >> another finalist is biotrack thc, which already has hundreds of dispensaries and the state of washington using its bar code system to track cannabis from seed to store. it wants $5 million to add more software products including a way to track legal pot cash so banks might actually take it. >> whether you are a supporter of the cannabis movement or an opponent of the cannabis movement, everybody can get
behind technology that brings transparency. >> and like any reality show, this is the judge's table. this is where the finalists will find out if they're going to get any investment and the investors lined up for the show have agreed to put in anywhere from 25 grand to over a million dollars. toni wolf is still here and hoping to cash in on an industry striving for legitimacy. >> for me, to make a bag to protect my daughter and then realize my friends needed it for various things -- >> may become a millionaire. >> then i might. and help everybody else. >> it's all up to the judges. >> all right. producers wendy robins and karen paul say some of the contestants showed up with half baked ideas like the woman who wanted to paint the pot the same colors as all the rainbow colors in her hair, but becky, this is all happening at wall street analysts are giving more coverage to publicly traded marijuana companies, but colorado's going through growing pains as well. in fact this week, governor hickenlooper called voters there reckless for having
legalized recreational pot. >> jane, thank you very much. >> you bet. >> so ganja-preneurs are dreaming of hitting the big time, but the legal marijuana industry is still in the seedling stage. riccardo bocca is the marijuana editor, he's been watching the growth story here and ricardo, thanks for joining us today. >> you're welcome, thank you. >> now you say that the green rush is still to come. what do you think the outlook are for all the marijuana entrepreneurs who are there right now? who do you think is best positioned for long-term success? >> you know, so many people have come to colorado specifically to take part in this. whether it's to, you know, try and become a bud tender at a local shop or something larger. but i really do believe, and most believe that the most is yet to come. there is so much business, and i think still so much migration that's going to happen with people coming to colorado to take part in this industry. i mean, it's brand-new, it's never happened in the modern world and they want a piece of it. >> jane wells just brought up a
very good point, that there could potentially be a backlash if we don't see some of the desired affects, if there are some unexpected consequences. what do you think the odds are of that happening? >> there's certainly a possibility. you know, we're keeping an eye on that at the denver post, as well, people are keeping an eye on polls. since they're a great barometer of public sentiment. there has been a recent poll released saying that people in colorado are kind of waning their interest in marijuana, their public interest in support in legal marijuana is waning. at the same time, we're waiting to see different polls to see how they actually interact and react to their numbers from past years. >> i know that this is still largely an all cash business, just because of the difference between federal and state laws. how long do you think that's going to be standing in the way of the industry's growth? >> i don't think there's an end in sight. i did speak with an owner yesterday, he said there was some exciting interest from out of state from a bank. so i asked him than, and he
actually told me how there is a bank coming into town next week to meet with a couple select owners to actually offer them banking services if he deems them legit. and this is starting to happen, but it's really the infant stages and many banks are still way too afraid to touch this business and touch this money. >> yeah, the early seed stages so to speak. ricardo, thank you very much for joining us today. >> thank you. that is our show for today folks, i'm becky quick and thank you so much for joining me. next week, my guest will be actress suzanne somers. each week keep right here. we're "on the money." have a great weekend and i'll see you next weekend. monitor beeping ] woman: what do you mean, homeowners insurance doesn't cover floods? [ heart rate increases ] man: a few inches of water caused all this? [ heart rate increases ] woman #2: but i don't even live near the water.
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>> narrator: in this episode of "american greed"... make me rich, or die. >> "you have until august 1st to get the stock price to $6.66." >> narrator: investment pros receive threatening letters from a man known only as the bishop. >> "i know where you live, i know where your family members live, and i can reach out and kill you at any time." >> narrator: and when his extortion demands go unanswered, his next messages turn explosive. >> they were pipe bombs. they would have killed anyone within a 10- to 15-foot radius. >> narrator: and later... pennsylvania judges michael conahan and mark ciavarella vow to keep their streets safe. >> if you're a teen and convicted of murder, rape, or