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tv   Power Lunch  CNBC  August 13, 2009 12:00pm-2:00pm EDT

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the same flat rate. same flat rate. boston. boise? same flat rate. alabama. alaska? with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. dude's good. dude's real good. dudes. priority mail flat rate boxes only from the postal service. you know, one of of the
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things, guys, i found encouraging about cash for clunkers was that it had the ability, and it did get a lot of excess inventory off the car dealers' lots of. yet you look at today's retail sales numbers, and some are saying it was an absolute failure. what do you think? >> the point, trish, the industry numbers up 15.8% in july much those are the numbers that will be used for gdp. the commerce survey of 2.4 is wrong. they are selling them. it's just the disconnect. i tried to make that point earlier in the program. we've got to get out of here. >> that's it for "the call." i'm melissa francis. >> i'm trish regan. >> i'm larry kudlow, i don't like fiscal stimulus, but cash for clunkers. i'll be on "the kudlow report" at 7:00 p.m. but the key point is s now comes "power lunch. of". >> this is cnbc.com news now. >> new york stock exchanges and all of its systems are working properly after a server program delayed earlier akts. a southwest airlines pilot
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official says the group has reached an impasse. they have asked the bankruptcy judge for extra time. and port will louisiana it's escape models to meet growing demand. that's cnbc.com news now. i'm courtney reagan. > welcome to "power lunch," for a thursday. we're styling today, huh? >> absolutely stylin. >> we are stylin. >> let's make the point, we have different ties on. >> we do. they have the same shirt on. >> i never would have thought of a brown tie with this shirt. a fashion statement. i'm bill griffith, a volatile session early on this morning, stocks swinging between gains and losses in the major averages, the financials among the best performers again today. we also have the results of the $15 billion of 30-year bonds being auctioned off. the results next hour will be announced. that could add to some volatility here.
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>> oh, yeah, that long end of the curve is very important. i'm michelle cabrusso-cabrera. walmart beating and boosting estimates. the retail giant is thriving in this tough economy, but others barely hanging on. what are the three big things that retailers need to do right now to win back shoppers? we're going to go inside the mind of the consumer. >> and i'm steve liesman, a lot of mixed data on the u.s. economy will separate what's important from all of the noise, and do we need to spend the rest of the stimulus money and watch for next two hours as i get back at bill griffith for his comment on my tie. here is what else is on the menu. >> i'm diana olick in washington. foreclosures hit yet another number with 7% with big jumps, you might not expect. but some claim foreclosures don't matter in today's recovery. how is that possible? >> i'm jim goldman in the silicon valley bureau. in the midst of this recession, the bright spot for tech is smart phones. even as mobile phones is a whole separate, a 6% global decline last quarter, smart phones
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jumped 7%. nokia, followed by research in motion, and apple and palm back in tenth. i'm and i'm darren representative develop with a different blue shirt. imagine you have hdt but can't get the game, that's what is happening this weekend, because the game gaens the seahawks didn't sell out. how the state of the economy is expected to affect a couple teams this year. >> walmart, the economy, all adding to the volatile trading session. telecom and health care among the weakest sectors of. bob pisani kicks it off at the new york stock exchange. bob, how much nervousness is there about this event that is one hour away, whether the government will be able to borrow money at cheap rates for 30 years? >> well, i think -- look, that's a big, long period of time. i think there's a little bit of debate about it. but there is really more debate about the whole retail sales outlook. that was a real disappointment here. take a look at the numbers here for walmart here. good news here is walmart beat the earnings, very high gross margins. the bad news, there is no sales
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growth here, folks, nor is there for kohls. kohls very disappointing guidance in the second half of the year. j.c. penny on the weak side. financials up, john paul son bought big chunks of financial, including bank of america. these numbers were as of the end of june, so we don't know if they still have these positions. finally, say it ain't so. tootsie roll is down, a doubling of sugar prices, companies downgrading, and so they downgraded on concerns it will hurt them as sugar prices have gone up, crop shortages in this brazil and india, big talk. tradertalk.cnbc.com. >> bob, technology still holding up, nasdaq up 7.5 points. i take you to wall and show you big cap technology stocks. the story today dictated by apple. barclays capital raising the price target to 208 from 188, not only like the product line but free cash flow. stocks up 1.75%. microsoft strong, as well, 1%,
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talking about the zzunor next month. look at what is happening in the chips base. 1% for the semiconductor index, names internally within that intel, qualcomm, and r.w. baird. palm, jim goldman was telling you on the menu, smart phones, palm is up 4%, despite the fact it was cut to sell at morgan joseph, and an upgrade at morgan keegan. >> the question we often ask so many times, what's driving crude oil? we have two charts here that really put it in focus. first take a look at oil versus the dollar. the dollar has been down all day, but it's been so steady and you see the volatility in oil. so, okay, now flip it. take a look at oil versus the s&p 500. it's pretty clear, based just on those charts, and this is for today that it's the equity market driving oil more than the dollar. just look at the price in
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general, i want to share something from the libian opec oil minute -- opec needs the cup production even more. nat gas bullish on the inventorq number, popped a little bit, but back to the down side. let's go to rick in chicago. >> chuck, i love that! so higher stock prices are the culprit for higher oil. how fascinating. let's look at the yield curve today. we know we have the last leg of the auction's $15 billion in 30s of. if you look at a two-year note yield, it's virtually unchanged. but if you look at that aforementioned 30-year bond yield, you can see it's dropped close to a half dozen basis points. why? part of it might be a regrouping after yesterday's steepening, but it's very interesting that there is flattening going on, especially the day of a long-term auction. now let's look at the history real quick. three-year at 172, went off 178, six points, basis points lower in yield. if you bought t you're making money. let's look at the ten-year
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yesterday. 373.5 yield, it's at 367. the first two legs if you bought in, you're making some dough. steve, back to you. >> beyond the bond auction, i give you news that people may be talking about today. legend, absolute tie tan of the guitar world died at age 94. hard to describe to the world of music. i think he played and rock until very much the very end. of out there, active in a bunch of trios and other groups until he died. >> you say he helped drive the electric guitar industry. >> he made a series of models that became very popular, and if you didn't own a fender, you owned a lest paul, and he was really starting an industry, which was tguitar making industry. >> senior producer bob fessman who like you is an aficionado in that area telling us that he created a solid body guitar nicknamed the log. that was one of his many, many
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creations and innovations in the guitar world. >> you play guitar, correct? >> yes. but now i have to get back to my other job. >> lest paul. >> despite other positive data, the latest data on the consumer, walmart, the overall retail sales in the nation came in below expectations today. and the job market is not getting healthy as quickly as some had hoped. here is walmart sales which i think are instructive, because they're echoed nationally. revenue lines. the profrlt line above expectations, the revenue line coming in below expectations, below a year ago. economists have been expecting about 103.1 billion. that was their number. and then you can see overall retail sales also disappointing, 0.1% with an estimate of 0.8%. x autos, as larry kudlow said in the last half hour the auto number is not right. it's going to be bigger. so i look at x autos, that came in worse than expectations. for some economists, hard to see retail turn-around until jobs turn around. look at initial claims, 4,000
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going the rai wrong way, up 4,000 for the week of august 8th, kind of sticky in that 558, which is a step down from as high as it was. continued claims also down. but a truer picture which adds up continuing claims and finds a much worse scenario out there. 9.25 million americans are in one of these three programs. one of the worst weekly declines we have had. long way to go before we put the unemployment back to work and then get americans spending again in the way they were. so how was this u.s. economy compared to europe? well, we have good data this morning, and do we need more stimulus money to fuel the recovery? let's bring in john sylvia, wells fargo. rick santelli is there. and that was the answer to rick's question. so rick, you are right. what there is, is a transition from one program to the next program to the third program. 26 weeks, 33 weeks and then you get another 13 to 20 weeks. no data, rick, about the falling off of the claims list all
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together. so you're right. it is worse than it appears. >> well, i find that fascinating, but i think the winning story of the day on cnbc today has to be diane olick's story about the foreclosures. this is what i've been hearing from friends who have friends that are in real estate in california. that the banks in many ways are actually becoming the valve, because of the backlog of so many of these defaults that are coming do you think the pike, foreclosures. but also her guests talking about the correlation to unemployment by state, and watching how it correlates directly in the foreclosures. this is huge. >> it is huge. and john sylvia, something else that surprised me this morning is when we got this data out of france and germany, didn't they show growth? everybody was shocked. i thought they were doing worse than us. they did less stimulus than us, right? what conclusion should we derive from that, if any? >> the growth from france and germany, as opposed to the netherlands, for example, does reflect the cash for clunkers program, which, in fact, began in germany.
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it does reflect a lot of fiscal stimulus there that went directly into payments to individuals and a little bit of an inventory correction. so, yes, their economies are much smaller, so i would expect their stimulus to be smaller. but those same elements are still there, both in u.s. and in europe. >> and i know, john, you believe here in the u.s. the recession is over. my question is, we obviously went through an extraordinary period of time with this recession. is this an ordinary recovery, or are there some changes, differences from what we would typically see in a recovery out of a recession? >> oh, bill, i think it's very different both in terms of magnitude and in terms of grasp. i think one was looking at an economic recovery in the second half of this year, very moderate consumer spending gains. a little bit of investment gains into the fourth quarter. but primarily, it's going to be the inventory correction and government spending that are going to really drive this recovery. so i am not surprised that the retail sales numbers are
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dragging a little bit. >> and how far behind will the pickup in hiring be then? >> well, our evidence is that quite frankly, jobs have lagged every economic recovery. >> exactly. >> in terms of economic growth, since the 1970s. so we're not expecting job growth this year. we do think job growth will begin early next year. >> let me just point out that john sylvia is a lot more relaxed in a fishing shirt and fishing cap than he is right now. but let me bring in rick santelli. rick, bonds seem to be rallying here a bit on the weak economic data. is some of this shine from the recovery being taken off here or the expected recovery? >> well, i think that in many ways, the credit markets have been more of a function of equities. they're higher prices, one of the reasons for higher yields. but i think there is a retrospective, readjustment going on. i would like to ask our guest, you know, gdp has many faults as a metric for real growth and cash for clunkers is my example.
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if you destroy every car, gdp is going to show a big up as you replace them. but it isn't sound economics, maybe europe is ahead of us on that. what are your thoughts? >> well, no, i think, rick, most economists will tell you, it's simply a change in timing. what you've done is basically with the cash for clunkers is brought some purchases forward right now, but it's not sustainable, because basically you're not going to buy that car. >> it shows up in gdp, which it did in europe. >> right. >> exactly. >> and you get the short-run jump in gdp, but it's not sustainable all of the time. and, again, it's not a sustainable stimulus to the economy at all. >> thank you. >> thanks, rick. thanks, john. see you later. >> sure. >> appreciate your time. happy fishing, whenever you get back there again. so retail sales, a little bit blah. walmart was up beat. jobless claims higher, but a more positive view from the fed after its meeting yesterday. so what is the investor to take away from this right now? what does it mean for your
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money? ow task force will check in. >> also this hour, what do retailers need to do to get americans buying again? we go inside the mind of the consumer. plus, should obama just kill the end of life provision in the health care plan? >> and get ready for the "fast money" halftime report. a resilient rally? what are the best opportunities? there in about half an hour, we're back in just about two minutes. these days every penny counts with everything you buy.
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dow jones industrial average higher by nearly 16 points. 9377, as we await for the key ye vent of the week, the bond auction one hour away. lots of uncertainty about the government's abdominal to borrow over a 30-year period. >> les paul apparently recorded multitrack recording. >> that's a multibillion dollar business. >> that's huge. >> everything we do. >> les paul passed away at the age of 94. so mixed economic data out, but the market kind of holding steady here, maybe a wait and see mode before the 30-year bond auction. lincoln ellis the lind group and jason sledder wrote an op-ed piece in "wall street journal", and jason precisely when i was beginning career, '82 and the
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market took off. how do you equate what's going on right now? is dia metrically the opposite, isn't it? >> it really is. i think the point of the piece is really the basic building blocks of i think market gains. i would be your -- taxes, regulation, inflation and interest rates. those are building blocks of earnings multiples. all those things were so dizzyingly high at that point that they all had room to improve. and of course president reagan cut taxes and paul volcker broke the back of inflation. now it's the opposite. so you take the fed funds rate from 20 to 0, where we are today, that's a big tail wind. from now you're on the opposecy side of the fence. >> so lincoln, what do you think? jason sounds pretty pessimistic here? >> we're at this fulcrum or tipping point at the moment, and i think the ten-year auction yesterday pointed out a little
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bit of that weakness, although we had noise because of the fed meeting there, and the 30 year will show what the investors' appetite is for risk. we had quite a significant run, three or four down days in the last 20 trading in equities, and bonds, seemingly stuck in a two-point rake frrange from the two-year to the thirty-year. so volumes have been bright, and i think the wait and see or show me attitude as we go to the second half of the year is founding. >> jason, what might be wrong with your analysis is that market is not oblivious to all of the things you have listed what's wrong with the market and the market has essentially priced those in. and the question an investor asked himself right now is whether or not it has overpriced or underpriced all of these realities you suggested. what is your answer to that question? is the market appropriately priced for the future that you're laying out here, or is it underpriced for it? >> well, i think, steve, i'm no sure it's appropriately priced, because the fed is monetizing the debt, right?
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so i'm not so sure the current administration really knows what its cost of capital is. so i might take some issue on that. i would say that it is probably accurately pricing in effect that we, through monetary and fiscal stimulus, have averted probably the worst-case scenario. i guess the only point i'm making is that it's going to be very difficult to get the types of returns you saw in the '80s and '90s. it's just you're not dealing with the same type of spring board. doesn't mean there won't be big rallies in between. that doesn't mean that active management -- >> jason, any sectors, considering that's your outlook, any parts of the economy that can do well, or is a better place to put your money in light of all that? >> it's going to be tough, michelle, because you have to restructure the consumer part of the economy, which right now is 71% of the economy. so to take it back to the long-term average of 65, consumer spend, that's $850 billion. and of course we just passed a stimulus package. we would have to do that every
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year to fill the hole. so i think this is going to be a long-term workout. >> lincoln, how do you think the 30-year auction is going to go? >> i think you'll probably find a bid for the 30-year auction, just because jason points are reflective. we need to price in a new fundamental reality without the spring board that we had the last 30 years since the reagan era. >> all right. lincoln, jason, good to see you both. thanks for your time today. >> coming up, it's all about the american consumer today on cnbc. what are the three big things retailers need to do to get people to spend? we'll get into the mind of the consumer, with two experts. >> and a little later, it's paulson's picks. we'll tell you where hedge fund superstar john paul son is putting his billions to work right now. after this. you're the colon lady!
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welcome back. our day-long special on the american consumer continues right now with a look at the way retailers are trying to lure folks back into the stores and start spending more freely. we have two strategists, richard and jason. richard, is there a way to get
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them back, given they're so -- >> entrencheded. >> cocooning, retrenched. >> they look for multiple layers of value, the retailers in the brands, they don't care whether they're in the store or online, because if you go in the store, you don't buy anything, there is no data. if you go online and do a lot of clicking, it generates a lot of data they can use to figure out how to sell and market to you, so they would prefer that you go online, so there is different ways of getting them. >> james, we're looking at the good news. we saw blue ray players up 60%. wine up 6%. what is going on there in the mind of this consumer, the inskrutable consumer? >> it's interesting. for the better part of the year, with the nielson information, we see consumers recalibrating what is normal and moving towards the home being the center of dining and entertainment. so there is a prepond dance of information to show as you pointed out, blue ray sales up 60%, traffic to food to cooking websites up 11%. categories that are selling in the retailers, basic, essential
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items moving very well. so the story there is one of as consumers have accepted the severity of the recession, moving through fear and panic, they're really focused on that at-time dining and entertainment. >> i was surprised you sent inspection on canning and store supplies -- people canning their own tomatoes? >> it's a great example of what the consumer is doing. we tracked over 1,000 categories and the number one category in terms of change in growth is canning and storage supplies, and it gives you a sense of what the consumer is doing now. dining out less and spending more time at home. >> i thought you made a good point during the commercial break. this reminds you -- >> post 9/11, people nesting, staying home. michaels did very well, because people doing more crafts. >> we say flippantly, it's all about price -- but it's more than that? >> oh, yeah. and it always has been. price -- if you look at the layers of value that the consumer is looking for, price may be a big percentage of all
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of those different layers. but they want other things. if they're going to a dollar store, they're expecting simplicity of price points. you know, a dollar, two, five, ten-dollar increments, but looking for more inventory from them. they accept their brands. if they're going to the clubs, like costco, they're fully -- >> richard, don't you have an economics -- we e-mail back and forth economics all of the time. i have a theory that there is a lot more pricing deflation than is showing up in the data because a lot of that pricing deflation is in luxury goods. is that right to say that the luxury brands have come down more than the middle and the lower brands? and, in fact, if you're a smart consumer right now, you are trading up into better brands. >> a little bit. what is happening is that the average unit retail, the aurs, those have been coming down across the board, but much more aggressively so, steve, you're correct, in premium goods and luxury goods. they're changing their merchandising. for example, niemann marcus is bringing in across many stores
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leave vice childrens jeans, and they have done these average, retail prices. so you are correct, a big deal. >> all meeting in the middle. richa richard, james, very interesting. thank you for joining us. >> lots of sound, lots of theory, lots of misinformation about the end of life provisions in the health care plan. should the president just drop it, get it out of the fire? that's our "power grid" debate after this. >> and get ready for the "fast money" halftime report, melissa. >> hey, guys, you heard about bank of america, region one, and if you want to invest, what are the plays? we will tell you. also, we'll take our attention on jcpenney, the retail action happening today, as well as tomorrow before the bell. all that and much, much more on the halftime report, but first more "power lunch" right after this. small sidecar, but i've still got room for the internet. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't.
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welcome back. we are almost halfway through the trading day. in the headlines this hour, doctor pepper and snaple reporting much better than expected earnings. raise the its full-year outlook. walmart not the only retailer out with earnings. kohls and urban outfitters also came out, beating wall street estimates, seeing sales rise in the second quarter.
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and ford is saying it is boosting production of its popular focus and escape models this quarter. to meet growing demand as a result of the cash for clunkers program. we will talk to head of ford sales analysis for more on what the outlook is for prouk of ford. >> when you look at all of the people showing up at these town hall meetings, it's pretty clear, the battle over health care reform is a battle over caring for the elderly. the house bill contains a provision requiring medicare to pay for patients to get counseling every five years on end of life decisions. critics say this is just an insidious way to convince the elderly to choose euthanasia rather than treatment. others say that's nonsense, it's good to know what options are. tempers are flaring. so should the president drop the issue? we have democratic strategist and julia raginski and j.d. heyworth. julie, start with you. 20 seconds why this should stay in the bill?
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>> this is voluntary, not mandatory whatsoever. sill simply allows seniors to understand what their options before they get to point where they are no longer to make the option in a rational way. it will save billions of dollars through the medicare program because people now get treated for diseases they don't want to be treated for. >> j.d., 20 seconds on why it should be linl natured from the bill. >> let me the first to welcome president obama. he will be going to the grand canyon and now faces a credibility canyon of his own. >> it should be pulled from the bill why? >> he is about to commit political euthanasia on himself because this goes at the key market he's got to convince, and people don't want this government intrusion. >> you have to to tell me why it's an intrusion. you didn't make a case, j.d. come on. >> let me make the case. >> another 20 seconds? that's cheating. >> you asked a question, let me
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answer it, okay? here's the problem. it's inherent in what julie just noteded, $90 billion in savings, and you cannot convince the american people this will not deal with a neutral kind of counseling, it will say to grandma, you've had a good life, now it's your duty to die. >> congressman -- >> that is the perception. and you know and i know you can't fight that kind of perception. >> let her answer. that. >> is patently false. you and i both know when we go to a doctor to get options about, you know, a knee replacement surgery or colonoscopy or other medical procedures, simply what the doctor is doing is giving us the options before us from a medical perspective. nobody is going to put grandma to death, but grandma should be able to make decisions while she is still capable of doing it about what's good to happen to her. my grandfather passed away not too long ago. i wish he would have done this so the family would have known what his wishes were. quite honestly, what this does is allow seniors to have the option. >> do you think it's appropriate to have a rational discussion
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about what to do about an inevidentable situation? >> a rational discussion should take place as senator chuck grassley noted 20 years ahead of time. not every five years, smacking of a soviet plan. here's the fundamental problem you guys are going to have with this. in politics, if you're explaining, you're losing, and the american peoplin stirveg actively don't want this kind of inclusion into their life. >> j.d., you know what i don't understand? making clear and full disclosure, i'm usually on j.d.'s side. what i don't understand is why you guys aren't going after comparative effectiveness research, which asks the question, how many quality of life years are we going to add to people, and when you're 70, the answer is very different than when you're 30. that's how they're going to rash on care on this, but you have misinformed everybody. >> i love it, because not only do you moderate, you criticize during the course of the conversation. let me point this out to you. there is so much wrong with this bill, with 1,000-plus pages,
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believe me, the criticism will continue to come, and most basically is when -- >> j.d., how do we rags health care now, j.d.? >> how do you ration health care now? people sign with their doctor -- >> no, no, no. wait a second. isn't it by the amount of money you have? >> yes, it is. >> so that's better than whatever else anybody else is thinking of, j.d. >> that's exactly right. >> if i don't have money, i don't care. >> quite honestly, the insurance companies will know -- they pay what they want to pay for and don't pay for what they don't want to pay for. >> we all ration. >> we all ration, okay? we all have unlimited wants, and we have limited means. the question is, how are we going to ration, going to let the government ration or are we ourselves going to ration? you can make a choice early in life, that you're going to buy a health care plan that really covers you, through all the
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costs you want. you make the choice. >> you can have a discussion -- >> michelle -- >> sorry. got to go. >> can i jump in? >> ten seconds. >> this end of life counseling does not ration anything, allows seniors to make informed decisions, it's the right thing to do. >> no, bottom line, it is rationing. >> prove it, sir. >> that's up for discussion. >> exactly. >> i've got to read this now. >> a town hall broke out just now. >> i think we should do very long specials about what do you do about elderly care? >> can i read this? >> yeah. >> a record-setting number of home foreclosures. this is another important story. diana olick will tell you what it means for any rebound in the housing market. >> and minutes away from another mark market-moving bond auction. we are all over it. "power lunch" is back in two minutes.
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the government struggling with its plans to help troubled homeowners. new data show foreclosures hitting a new record. diana olick joins us from washington. diana, i am a huge fan of you and your reports, but how many foreclosure records can we break? it's every month in a row now. >> i know it seems that way,
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steve. clearly the government and industry modification programs simply can't keep up. in july, over 360,000 properties received some kind of foreclosure notice, and yes, that's up 7%, and yes, that is a new record. now, the usual suspects still lead. california, nevada, arizona and florida account for nearly 57% of all of the foreclosures in the nation, but the pain is spreading. we're seeing big jumps in states like kansas where foreclosures up 94% from a year ago. oregon up 84%. does this mean housing cannot recovery? the experts are noting a strange contradiction. >> we're seeing increased levels of foreclosure activity, and we're seeing price stabilization at the same time. so it could just be that there is so much buy interest, because the affordability levels have become basically record levels of affordability. and that there's this inventory sitting out there waiting for the buyers that the market might be recovering at what amounts to the new normal level of foreclosure activity. at least for the time being.
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>> of course, the other side of that argument is that as the face of foreclosure changes, that is, we see these big jumps in states like cans and even minnesota, as those properties go on to the market, if distressed properties -- is there the same amount of pent up demand from investors in those states, because we see so many investors in florida, california and nevada. those are the investor states. are they there in other states? we talk about that on the blog, realty check.cnbc.com. steve. >> i have a question. it seemed to me that many of these foreclosures are the result of the government not getting to those people yet. why not just extend the deadline if that's the case? >> extend the deadline in what? >> for the amount of time that people need to be behind in their payments before they can get some help from the federal government? >> the problem is, it's not necessarily the time. they are coming through the program now. and what they're finding is a lot of folks are not qualifying. it took time to ramp up the modification program, and so you
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saw a time lag there. but now they're saying that people don't have the loan to value ratio that is needed, too far under water and so they're coming out the other side as foreclosures now and that's the surge. >> now i understand. thanks diana. >> diana, a new foreclosure record oi olick. >> 30 year bonds up for auction. this may be the reason we have a flat market right now. we'll have the results, instant analysis and market reaction at the top of the hour. >> up next, the bulls are hanging tough today. where are the best opportunities to play this market? medical list and the gang will tell you in the "fast money" halftime report, which is starting in just two minutes. ess
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welcome to the "fast money" halftime report. we're getting to the heart of the action as it is happening. the bulls remaining resilient, refusing to give up control, despite weaker than expected economic data. where is the front money going? let's get to the word on the street. right now, our "fast money" crew today, jon najarian, and eugene prophet and patricia edwards. there are a lot of claims by consumers about foreclosures, and patriciais amazing we're in the green across the board. >> it makes no sense to me whatsoever, frankly. i'm kind of speechless over the whole thing. if you look at some of the retail stocks today, though, not doing so well, i don't think they should be doing very well. any of the earnings numbers we
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get over the next week or two, i think it's going to be all about cost-cutting. we do not have demand for the consumer goods at this point. >> eugene prophet, do you think we're seeing some short conversation still in the market? that is, keeping us higher? >> yes, i do. i think that there is a little bit of investors who were late into the rally, trying to jump into at the last minute, because economic data you're seeing doesn't support an expansion. >> are you seeing any clear activity, doctor j., in the options market when it comes to investors taking one stand or the other, whether bullish or bearish? >> a month ago, as i wrote in "barrons" the unusual activity setting newspaper walmart, and that stock has performed administratorly, up over $3.5 in a month. but i'm nervous about stocks like abercrombie and fitch, because they have earnings tomorrow, and that one is looking a little tired. it's put in a double top here, and i'm a little nervous about that. i see put activity that indicates other people are nervous, as well.
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>> so there is some concern in the markets. let's talk about the markets overall. our chart of the day. and greg, you're watching the key level on the s&p 500. >> hey, melissa. we're really in the trenches. over the last ten trading days, look at the september chart and that runs at about a 4-point discount to the cash. and september chart, right around 1,000 now for ten trading days and counting. my problem is, although we can call it resilient and the market is staying quite where it is, it's steep, so it wouldn't surprise me if we had a 20, 30 points correction to the down side. i can it would be healthy now. >> let's talk about the sector keeping us in the green today, and that is, of course, the financials. higher by bank of america, and stocks enjoying a nice run after it was announced that john paulson had taken a large stake in the company. and sally craw check, bank of america has bought tens of thousands of shares. eugene prove it, do you invest
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alongside the likes of paulson when you hear he is getting more bullish on these financials? >> i wouldn't here remember the i think if you are looking a 13f report, he could have bought those shares in april when bank of america was starting from single digits and already has been 100% increase. there really is no visibility, and i think you wait two years before you catch up to where the stock is currently trading. >> so if you were an investor, you hold the stocks and seeing it run up, would you recommend taking profits, given the nervousness in general of the panel about the markets? >> i would. i think that if you're looking certainly short-term, you have had quite a run in some pretty weak names. and although bank of america is going to be around, back in the first quarter, there was concern it would not be around and that's why it was such a cheap stock. but at the current price point, i think that is a position i would be taking someplace else. >> pat trish and melissa -- >> were i was going to say, don't forget we're going to have a lot of foreclosures coming down the pike, because there is such a lag from unemployment. when unemployment got bad, we're just now starting to see
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foreclosures. you add to that the commercial real estate going south, and i think that the banks in general have got some head winds going forward. >> and we cannot forget that the disclosure in the 13f filing does include a lot of other positions. doctor j. you're the options guy, is it possible that paulson also has hedging positions which is mitigating his risk in some of these names? >> that could well be, and i think that he certainly has called both the down side and now the recovery phase of the market, and i agree with eugene that those purchases he made were in the rear-view mirror by several months. however, i do think that it shows that there's stability in that space, and certainly if i owned these stocks, i wouldn't be exiting, i would probably be an aggressive seller of calls. but melissa, bill griffith gave us a great lead in here. the reason we're trading water, quite frankly is that we've got the huge auction heading our way. and we will move based on how that auction goes. >> absolutely. top of the hour, as a reminder
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to our viewers, next, government reporting sales falling sales fell unexpectedly in july and wal-mart raised outlook for the year, but the same store sales missed. that is concerning to a lot of investor. what happens to wal-mart here? >> you have to look under the numbers a little bit. i'm not trying to make excuses for them, but part of the numbers the sales are down is because of grocery deflation. the effective translating the currency on the international side of things. given that, the stocks run a bit and at 51 it's probably going to take a bit of a breather. they are probably the retailer for the next five years that is going to win because of the cost control and the changes they are making in the store. that's the investment and not a trade. maybe you step aside. >> what do you see with wal-mart? it has been fairly flat year to date. >> i love everything dr. jay has
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to say, but for me it's an opportunity cost. a three-pointy where we had a tremendous rally and at around 50 or 51, you can put your buck to better value. >> we will go back to the center of the day and the big market leader today and check in with steve grasso. the governor. they had the wrong nickname in the prompter. that's the tricky thing about reading the prompter. >> the pressure is on because dr. jay is on the phone. hello, melissa. >> governator, what do you see going on in the financial. the money sensored banks and not the capital market banks. >> paulson is the great story, but for the last couple of weeks, we have seen guys getting long. they are putting new money to
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work in all of these names and the whole space is more stable than a couple of weeks or months ago. >> new money. where are the institutions going? is it in fact the regional banks or is it the morgan stanleys and goldman sachs of the world? >> it starts with the morgan stanleys and the jpmorgans and it trickled down through the space. the guys doing their homework and the whole sector is being bought. when you see paulson going in, it's a headline number. >> at the same time these are out at the end of the sec and paulson at the end had 7% of the short financials and they are approaching the double for the year. it doesn't mean it's smart money. >> what we learned since august of' 07. nobody gets this market. everyone is perplexed. hedge funds are perplexed as the market goes higher. every day they get run over and
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the bet is on the bulls right now. >> always appreciate your insight from the floor of the stock exchange. it has been 40 years since woodstock and the baby boomers are talking about t. we have a trader who was live on the scene to tell you how you can stop it from the never-aging population. instant analysis from the $15 billion 30-year auction. the halftime report continues after this. blap welcome to the now network. population: 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road.
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eight are wearing bathrobes. two... less. ople are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.
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welcome back and time for the "power lunch" trade to go. time to take your position on jcpenney out before the bell tomorrow. >> the like the middle income space and they have been doing a fabulous job. they are guided down and i think colt as better inventory control and i think you can stay away from jcpenney at this point and watch and see what they come out with. no rush to get in. >> with the softness, patty, are there opportunities for somebody to be committing fresh capital? >> if you go in anywhere, my trade has been wal-mart and that's probably still the place to go. urban outfitters knocked out the number this is morning. i'm not thinking the consumer is strong and i think you can take time and wait. >> let's call right now and go around the horn and ask whether you buy or sell going into 4:00
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eastern. >> i'm selling. i hope i don't look like a crash dummy. >> i'm selling as well. we have been selling to the close and i think it will continue. >> patty? >> i'm staying short. >> john, what are you watching? >> i'm going to keep my eye on the earnings out of abercrombie and fitch and palm in particular. it made a nice v-shaped turn today. into the close, it's going to depend on the auction in another few minutes. >> of course. 1:00 is the 30-year auction that. does it for us on the halftime report. on fast money, we will go off the record with charles gasparino to debate whether john paulson is the next eddie --. the sluggish economy dampens the nfl season? "power lunch" breaks it down for you. michelle, what are you working on? >> weaker football season and breaking news moments away. you can't turn the channel. it's one of the most important
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of the week. $15 billion and 30 years. the government trying to raise moan. instant market reaction and analysis and should city be broken up? we have a fight with charlie gasparino and the 180 foot yacht up for rent. we will tell you how much you won after this. >> bank of america's new global management bought 63,000 company shares according to an sec filing. the shares are rising after the fda found no deficiencies in a west virginia plant. they have detailed alleged problems at the facility. gmc henderson told them they saw a 30% inkroes in the last week of july thanks in large part for the cash for clunkers program. that's the news now. we are first in business worldwide. i'm courtney reagan.
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there it is. >> four or five points. >> the 30-year bond auction will ob in a moment and we welcome you back to "power lunch". the rather choppy trading session. the volatility could come in as investors get the latest read on the economy on materials among the winners. utilities on the losing end so far and the result that was 30-year bond auction, keep in mind we have the yield right now at 4.53%. we see if it comes in above or below. >> the more than consumers shutting wallets and purses and cutting back on spending and trading down. one type of shopper still spending big money. the technology consumer. the tech toys are the new necessities. >> it's a question on the minds of many american parents. how to pay for their kids's educations. many look for 529 plans, but are they really a bad investment?
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don't miss this debate. >> the 30-year option, this is the first one post the fed where we know that they think the economy is getting better and they won't extend the treasury purchases beyond what they were going to do. >> yesterday we had the 10-year that came before the fed. that also by the way came in above in terms of yield where the prevailing market was at that time. that was an interesting development. >> what happened, the fed yesterday came along and said we are going to end this program, but do it over a longer period of time. we will see what kind of appetite there is and it's called the semi untethered world where the fed is going to let the bond market go off on its own. it is buying several hundred billion more of mortgages and agency debt, but with treasury debt, it will end the program at the $300 billion figure they said it was. >> who typically buys the longer yielding facilities? >> we can say it was surety and
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not the essential banks at the shorter end of the curve. this is the five-year base and we don't look for them to be in the 10s and 30s. >> it looked like the 30-year was going away and it was frustrating to them to not be able to plan liabilities and costs all the time. >> people are trying to match their maturities on the 30-year end. >> rick santelli stepped to the podium. what grade do you give them? >> i have to give this an a  minus. the yield is 454 and change is below where they were trading. a dynamic that is dissimilar and he had a much dicier history or at least one hour ahead of you  yesterday. the bid to cover is good.? better than the average and i believe it was 254. we had to double check that and above the average to remember. it's the 16th auction of 30 year
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since the hiatus around o halloween of 2001./ this was a tight auction in terms of pricing and terms of demand and to be fair. the 30 year may be one issue that has a real valid audience out there matching long-term liabilities. however, being the longest on the curve, it is potentially the riskiest. it's a good auction. >> should we conclude that people are looking out there and still not fearful of inflation? can we condition clud that from this result? >> there is so much inside these treasury yields. inflation expectations and credibility of the federal reserve. >> absolutely. >> there is the least in a turn around or not or inflation or not that you have higher yield. there is also supply issues. there is not as many 30s out there as there relatively tens or five. the 7s in the 30s are the newer issues out there.
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there is less supply. >> while they talk, can you show us the dow chart? >> yes. steve is absolutely right. as a matter of fact the darling of the curve these days in terms of investor interest is the-year. the duration of the treasury portfolio is roughly that of a four-year. you are right. there is a long, long maturity these days and lots of various fires. it's got a scarcity factor and a prevalent auction lately than it was a year ago. >> let's highlight for people listening on the radio. bill was right. if you look at the interday chart, you see it move higher. that's because of the a minus of rick santelli. >> a relief rally. it still doesn't feel like a powerful rally. we will keep an eye on this as the daywears on. >> the idea that we are still sitting here talking about it is a negative for the market. that the market has to watch all of these bond options in a way it never did is a significant point.
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>> did you think in your wildest dream that they would be breaking news like it is today. >> i looked at it and it would pass me by. doesn't ever go on to me. like a major deal at 1:00 and we see the market react to it. it's a sign of the times and something we have to get through to be healthy. the idea that we are not following these options on a day to day. >> i remember back in the day when we would sit around and wait for the money supply report to come out. first on thursday and then moved to friday afternoons and the markets would move on that. >> that was 1893. i told you i was getting him back for the remark. >> i was waiting on that one. >> i still win. >> see you later. >> famed hedge fund manager john paulson sell the 4th largest shareholder in bank of america. his end of holdings with the sec filed this week showed he scooped up 2.2 billion worth of
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b of a while taking large positions in several other blue chip stocks. more details now and we are expecting -- he made it. greg from the "wall street journal" who is hard at work on the greatest trade ever, the behind the scenes story of how john paulson defied wall street and made financial history. david, we don't know if he holds these positions, but at the end of the quarter, he had a big stake in b of a. >> no doubt. over the course of the quarter as many other hedge funds did. it became a crowded trade and paulson being as big as he is, it became a bigger position than it would have been for virtually any other fund out there. i will defer to greg since he is writing about whether paulson still holds the position. he is reporting and he indicates he probably does. it is important to point out that these 13 filings do come well after the positions have been purchase and very well may
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come after the positions have been sold. that is always the case and they do give you a snapshot into investors that people care to follow. they are becoming one of a small group of investors given this. >> what do we know about how much he paid? >> he paid a lot less. under 15. he has been buying phi nashls generally for the past few months. addressing what david said. he still owns it and likes it. the argument here is that is a great franchise and over the long-term, they will do well. the biggest base in the country, but i note he is buying other financials as well. >> can we put a warning label on this discussion. when a hedge fund acknowledges it holds a long position, we do not know the extent to which he is hedged in that position. we don't know if he is net long, net 100% long or net short given
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the disclosures out there. is that correct? >> gi good point generally, but for paulson, what you see is what you get. he likes financials and doesn't necessarily like the market here. it's not so cheap and he believes they raise equity and now looks better over the long haul. >> do you think this is a vote of confidence for the socks or does he believe they were beaten down badly? >> the bull case on b of a when it was $4 a share is it's not going out of business and generates as much as $45 billion and will be taking hits to that amount every year for a year or two. ultimately you talk about a stock that is cheap. that was the bull case during this period when paulson along with other hedge funds seem to build up a significant stake when you get rid of it, they had an incredible run since then. he owns any number of other big
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names. the begins were continuing to be an important part of his firm. schering-plough add up to a larger total. >> what are do we know about how long he is going to hold based on your reporting? >> my sense that these are long-term holdings. he is not flipping these any time soon. he made a big bet against subprime mortgages and financial companies. earlier this year he had about 19 billion of cash. they poured through the books and felt they raised enough equity on the financials and got comfortable over the long haul and will do well. >> greg, you know big gold position for mr. paulson. isn't there? >> that's a good point. on one point getting bullish about stocks in the economy. he is really worried about long-term about the u.s. dollar and inflation. he is buying a lot of gold. you don't want to go overboard
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on the gold because a lot of this he is buying with gold because he has the classes and certain shares of his own investors so they can be in gold. he believes that inflation is down the line. >> i don't want to harp on this thing, but quickly it's possible he could belong to b of a and short jpmorgan. that's the only disclosure we would see. >> that's possible, but i don't think that's the case. he owns jpmorgan and has been buying as well and likes jpmorgan. >> let's use that as an example. i'm nervous about this. i'm going in. >> in this case i think greg's reporting will stand by that. what i'm hearing as well. >> he was early with the first. we will start getting a lot more than that. >> we will let you get back to that. >> okay. good seeing you guys. >> the name of the book will be the greatest trade ever and the
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behind the. will be out in a few months and we should not forget the book called and then the roof caved in. the bestseller list deserves a mention once again. >> always great to be with you. >> congratulations. >> fantastic. >> straight ahead, a soft economy and lower ticket sales means you may be able to see a lot fewer football games. the latest on the expected big blackout. >> the top ford executive shows why the company is ramping up production. back in a flash. eseseseseseseses
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call or click today. joining us live for a first on cnbc interview and the chief sales analyst at ford, george, me about this production increase that actually kicks into the third quarter and this is the third increase in the third quarter, right? >> that's right, phil. since we originally announced the third quarter production plan, this means we have now increased it by 35,000 units from the original estimate. cash for clunker citizen program that is driving the business. >> you have cash for clunkers meaning you will build more focus and edge vehicles and you
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are adding shifts and overtime and at wayne, michigan, how does it translate into jobs? x number of jobs will be added because of the increased production. >> not at this point, phil. what this increase will do though is add income to households. usually that's what you find. we saw this spike in productivity that was announced in 2 q. businesses will employ overtime working more days in the week and adding shifts on saturday. the number of workers is still the same at this point. that will be the next phase hopefully. at this point it's growing incomes and households providing more in the wal. >> you fearful at all you will end up overproducing? let's face it. cash for clunkers goes away at the end of the month. you guys are still ramping up production at this point. >> what happened is that our
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inventories have been driven to such low levels, we now have to replenish inventories and get back on plan with inventory. our 2010 forecast of 12.5 million vehicles for that calendar year has not changed. we need them to do two things. one, supply as many vehicles in the short-term that we can to the dealers. the ones that are most popular. in the fourth quarter, replenish inventories and head out of the year at a very, very low rate. >> what is the push back from the dealers and screaming for the product and are you beating that back? >> we are doing as much as we can to meet the demand. not only are we increasing production, but expediting sold business that dealers have ordered from the factory.
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putting a high priority on vehicles that actually have a customer name in addition to the dealer name. those are the two efforts that we are undertaking right now to keep the flow going. there is no question that it is very, very difficult two weeks into the program to find a ford focus or a ford escape. as you well know, they have been at the top of the list of the vehicles performed under the program. >> it's phil again. at the end of july, you said the pace of sales for the last week of july was running at a rhett of about $15 million. that's the pace, not the sales. how has the pace been for the first two weeks of august. how much has it slow and what do you expect for the remainder of the program? >> it hasn't slowed down. each day when i look at the sales report, i kind of expect that the lean level of inventories will have an impact on the sales performance against the daily objectives we set. to this point, sales are still
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in excess of 50% of where we pegged them before cash for clunkers. >> they still at the $15 million pace? >> easily. >> wow. >> word ends up for the month will be difficult to say. we are expecting things to slow down a little bit because of the tight situation on inventories. i have not been disappointed every day when i wake up. >> george is the chief sales analyst at ford joining us 50 on cnbc in deer born, michigan. he is emphatic in saying they are running at a sales pace at 15 million vehicles. they have not seen things slow down at all. >> great stuff. you give me a guy that i can take it and plug it into the gdp, i'm in nirvana right now. >> very few guys whose numbers matter so much for the economy and we talked about these production numbers can seriously boost gdp. >> absolutely.
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>> it is another sign that the chargers take on the seahawks and preseason game and the first one, but the chargers fans won't see it on tv. darren joins us with the gory details. >> it's gorey and it doesn't come into play often. it's the age-old rule f. a team doesn't sell off within 72 hours of kickoff, within 75 miles doesn't get to see the game. that's what will happen. the chargers had about 6,000 seats to sell by the deadline. blackout games in local markets hasn't been that common. the past four years and more than 95% of games have been sold out. that's an incredible feat. even though the economy will not be eased. they have seen a huge drop this upcoming season. what make this is year
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different? in the past the teams have been bailed out by sponsors, especially winn-dixie who paid for thousands of empty seats to ensure they can watch things at home. it will be harder to shareholders and why do something like this in this economy is a good move. >> they blakd out in that local market. >> you can't go to the bar and watch it there? >> darn. listen to the radio. >> thank you, darren. see you later. back to the new york stock exchange. this week's cnbc 101. >> an etf asset and we hit new highs even as the markets moved up. they gathered more than their share. this is according to barkley's global investors and there is 1700 etfs worldwide with a battle.
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most that was is in the united states. 582 billion and a report earlier estimated that the trading volume may now be etf-related. that's the good news. the bad news is that a lot of etfs close to 700 are thinly traded. there is only 50 or 60. you have to take that into account. the bad news is inverse and leveraged etfs are getting a lot of attention to pay attention there. we can get 401(k)s to use etfs, we will hit the $1 trillion mark. >> thanks, bob. bob dasani. blackberries and i phones and net books, oh, my. they have the tech toys. they have always been a necessity. >> check out shares of the tech toy titans it says here. apple, research in motion, maker
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of the blackberry and lower is sewny and nokia. back after this.  what's on the minds of independent investors? let's ask. when i trade, i want a straightforward price. they lure you in with a $5.99 trade, then charge you 15 bucks. you get a low price, but only if you make a ton of trades. at td ameritrade, every online stock trade is just $9.99. period. no matter how often you trade. no matter how much money you have in the account. i hate those hidden fees buried in the fine print. surprise! it's a maintenance fee! i hate surprises. at td ameritrade, you never pay a maintenance fee. you get low, straightforward pricing, so you always know exactly what you're paying. hey, that works for me. are you ready to declare your independence? independence is the spirit that drives america's most successful investors.
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a couple of technology stocks. telelabs and ver sign are up and going along for the ride. a gain of more than 9%. >> we continue examination into the american consumer's mind and a look at why many technology gadgets, one thought of as luxury items have become fully virtually indispensable to everyday living. molly wood is with us and our
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silicon valley chief with us as well. we are talking about the cell phones and talking about the blackberries and the other kinds of pd a's out there. they were to some degree luxury items, but part of everyday living now. >> absolutely. technology and in particular phones and the smart phones and messaging phones are not optional to people anymore. you feel like you have to be in touch all the time. otherwise you are at a disadvantage. >> this is a testament to one of the worst economies since the great depression and you have people willing to spend monothese things that add to everyday that people don't see them as a luxury, but a necessity. >> it's so true. it's want versus need and need visit want. do you need a new mobile phone, probably not. do you want it? cell phone sales globally were down like 6%, but smart phone
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sales, blackberries and palm pres were up 27%. that's staggering. net books. we all want to be connected on the go. sales are expected to double as far as unis are concerned. clearly if it plugs in and as a cool factor, people are rate to crack it open. >> to achieve the gains, do they have to discount the items? >> not as much as you think. net books have taken off because they are low price and people feel they can justify. they get excited about a $300 to $400 laptop. the i phone sales have seen little drop off. that is say premium-priced product. as long as people are willing to blur the line between want and need. they are willing to spend more money. >> there other segments where you start to see the shift from the luxury to necessity. are we getting there from hdtv?
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>> we are. people see it as something they have to upgrade to. that market has taken a while to penetrate. >> let me pipe in. i lo a lot of research for this thing on cnet. i bought and they closed two video stores and bought a desk stop to replace it. are any others doing that? is that a trend that we will see? >> people are ditching cable and they are buying a desk top or mac mini. they are buying consoles like an xbox 360. you can almost replace cable completely. stream netflix and amazon on demand and get a lot of value out of the game console and hdtv. it's a smart buy these days. >> are the analysts reflecting this with their wednesday and see what we are talking about? >> absolutely. especially as we talk about the economy starting to turn around towards the back half of this
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year into the holiday shopping season, we talked about the key products. we're talking about mobile device. it goes beyond that for nintendo and sony, they have a competitor with the apple and i phone. when they are talking about replacing your dvd players, bd live sony, there so many cool products out there. it is confusing, but when you get them installed, it becomes your new normal as far as your living room is concerned. streaming all of this to this new hdtv that you buy as well, prices are plunging on so many key products. we will see nice sales. >> just yesterday best buy was selling. >> for $99. >> a keyboard on the coffee table is the new normal. tivo. >> thanks for joining us. >> coming up, i love the new molly too.
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if i have another daughter some day, i would name her molly. >> i like names that begin with m. >> coming up, we will head to the big board and get steve's take. >> a come back lately, but the gets want consultants to weigh in on what to do with the bank. is it time to break it up. has the super market model broken beyond retear? that's beyond this break.
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breaking news about warren buffett's berk shirt hathaway. in a letter to the sec, the company admitted it und underestimated the impact of the stock market on the portfolio. the cfo told the sec that last year the 30 to 45% decline in the indeces are in excess of our volatility input. the derivatives are valued given the nature. they agreed to demand that provided more explanations on a number of write downs that included some of the stock holdings and the auction rate securities as well as municipal debt. back to you. >> there have been a lot of stories and money he lost on
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credit default swap when is it comes to ensuring a lot of companies. we are talking about the long-term contracts that he wrote with a lot of pension funds and worried about whether or not the s&p would be higher or lower? they expire between 2018 and 2028. >> introduction, yes. >> what happened? >> obviously they had impact on his earnings. >> that had to do with the volatility of the markets and under estimated they could decline that much. >> my family owns berk shirt and he was talking about it and he was talking about it and thought it was a great deal with the billions and billions of dollars in premium that he thinks will pay ought overtime. it's impacting. >> in the near term and they are long-term investments and he
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could come out ahead. >> we will file that in the follow your own advice department. what's going on with sugar prices? >> why are we talking about sugar? the reason is in yesterday's trade, we hit about a 28-year high in the market. pull back a little bit today, but millers don't even want to touch the raw stuff at the levels. why is this happening? india had a light monsoon season and it's drier than expected. going to be low. brazil is the biggest grower had the opposite problem. too wet and the harvests are low. they are up 90% for the year. you wonder what this means to us. it could go higher. they may have to import and they are the largest consumer. if they import it constricts the global supply and you might have inflation. sugar goes into about everything except your coffee.
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maybe it's an outliar. who knows. >> we are here decrying all the government intervention. >> it's all government intervention. >> why are we subsidizing sugar? it makes me crazy. it's wrong, wrong, wrong. >> they are talking about the situation in the u.s. and there is argument. cash for sugar. >> from sugar to banks. banks have focused and john paulson buying a stake in bank of america. both these banks have taken bailout money. how are the t.a.r.p. banks paying off? in washington with a closer look. hampton. >> as you know better than anyone, it's all in how you break it down. the only really money in the bank for taxpayers, the dividens and interest repaid by at least 10 major banks to get out of the
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t.a.r.p. program all together. from the t.a.r.p. inspector general and the latest figures saying about $6.8 billion have been-ed through june, including $1.1 billion from bank of america and the real conundrum is in valuing the long-term investment in those warrants and preferred stock. since city is in the spotlight, let's break down the investment in city. three investments on october 28th, preferred stock and warrants worth $25 billion and december 31st, trust preferred securities and 20 billion under the target investment program. in mid-january, another $5 billion under the asset guarantee. the average strike price for them about 1466 per share and today the warrants are about $4.8 billion under water or 72% below the strike price. remember we are talking about a
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10-year option to buy. citigroup is less under water than it was earlier in the year. however experts looking at all of this and that's the t.a.r.p. investment in 281 institutions say the city investments from the government standpoint could be among the top five worst investments so far. however some of the same risk managers tell us if you are looking at return on investments, it may be a better deal in the long run than the t.a.r.p. investment in the auto city. michelle in. >> thank you. regulators are forcing city to hire outside consultants to see if the bank's current management is up to the job of steering city out of the crisis. is it the bank too big to manage? would it be better to break up citi? >> "new york times" reporter eric dash, charlie, you first. should citi be broken out? >> they hired outside consultants? did they need outside
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consultants? my point is i read the wonderful piece about risk taking at citigroup and he showed how there was a culture of risk mixed in with a bank that is supposed to safeguard deposits. i think you have to break it up. if you want to maximize shareholder value, that's how you maximize it. by breaking it up. >> eric, what do you think? >> the world's biggest fixer upper project and it will take a long time. there good businesses there. there good people still there. the question is, is this management team up to the task? i don't think from a leadership standpoint you can give them failing marks, but from a tactical standpoint, it's hard to argue with it. >> there good business there is. when you put them together, is it a better business? >> i think it is. it's a better stream line business. the question is how will they get it there.
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they haven't articulated that. >> based on what? what evidence do we have that this monstrosity that cost the taxpayers so much, that they have been screwing around with this thing and obvious it wasn't making enough money in 2005 and 2006. it couldn't be regulated right and they were involved in every scandal. citigroup is a monstrosity and cost a lot of money. it cost a lot of money where they were involved and got screwed on the unethical practices. where is the evidence that kepting that it worked? we have the word from bob ruben. they have a long time to try to get it. >> nobody is arguing for jpmorgan for example. >> that's a model on in a stream line. >> that's a different business model. they don't have a brokerage division e. this is a monstrosi
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monstrosity. >> give a few of the answers. >> say it again. >> let's hear the answer. >> i didn't hear the question. >> we want eric to answer the question. you bring up the fact who manage this is thing if they haven't been brought up and know the aspects of the business. you don't have anybody. >> there was one guy i believe could have had it and they fired him. he's now at jpmorgan. if you look at what jpmorgan does and citigroup does, it's a different operation. city is sprawling and huge and never has been managed. the reason why i came to this conclusion is because of eric. he wrote what i believe is one of the best articles ever about the crash of what happened at citigroup and how the risk takers were just left to do whatever they wanted because they couldn't get temperature who is the guy charging with his
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friend. you went through and showed how chuck prince had no idea what they were doing. it's a team. >> you have to give this team a chance to start executing. you may see profits. it's a roll of the dies. >> you are rolling the dies again.ce. >> you are rolling the dice again. >> eric, thank you. charlie, thank you. have fun. >> reeling him in there. come on in, eric. another time. he will be back. >> millions of students are heading off to college this month. millions of parents are younger kids are wondering how they pay for college when the time comes. are savings plans a good investment or not? i'm racing cross country in this small sidecar, but i've still got room for the internet.
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a lot of kids heading back to college. we are focusing on the college savings plans. the white house asked treasure to look into whether they benefit the wealthy the most. tomorrow is the deadline for comments on the plans themselves on that issue. the full report is due next month. a study out shows 50% of full time college students take out some form of federal loan. the 529 plans and other college
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savings plans working? are they the answer. joining us with the views on the policy director on education sector, a nonpartisan think tank and larry glarz at may flower advisors. thanks for joining us. you say no. they are not a good idea. >> no. they are too risky. we saw the government marketed to hundreds of thousands of families convincing them to gamble in the stock market and when it crashed, they lost. >> defend them then. >> the real problem is the rising cost of college. as a parent and a national advisor, i can appreciate that. they are inaccurate in that these plans are self-directed. they don't need to pick the options. they can pick bond and cd options. to blame the fact that you lost money on the plan is like blaming an ira. you haven't saved enough for retirement.
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>> so many people will put money in and fall asleep. they leave it there and i'm saving and putting the money in and it will be there when my kid goes to college. you have to pay attention to the plans and actively manage them. take charge there. >> absolutely. what happened in a lot of states was in north carolina for example people put their moninto what they were told was a plan that would reduce risk as they approached college age. a year out they were 50% in real estate and stocks at that point. >> have they been badly sold? >> there was a lack of education. the financial service industry was guilty in not providing adequate education. that's our responsibility. we need to explain to people, you can't set it and forget it and check a box and move on. you have to take spablt. responsibility. >> what's the better way to save for college? >> to your point, they are a good way to save for wealthy people that were going to save
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anyway. >> that's the question the white house is asking. >> that's a good question. >> the only way is to invest in high yield yunk bones. the average annual price iny crease is 6.33% going back to 1990. i have to do 6.3% just to keep pace with inflation to forget about glowing my principal here. there is no way to get it to use these programs. >> you are quoting advertised price and the actual price -- >> the cpi index that shows average annual price. if you want to address that, i don't think these 529s get close to the returns. >> that's the whole problem. what politicians have done instead of doing something about the cost of college, they told people college is going to go up by 7% a year and the stock market goes up so put your money in the stock market and it will be okay. that works until the stock
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market goes down. >> that's the thing. there may be people who believe that what they are putting in will be enough to pay for college. college costs have doubled. >> that is the core problem here. again as parents we want what we can't afford. we want a private bedroom and private bath and state-of-the-art athletics and technology. this costs a lot of money and we need to change the expectations and save more at a young age rather than blaming the vehicle that is not performing. the equities have been disappointing. investors don't need to gamble savings. they can be conservative and balanced in the approach they take. >> if you are conservative enough to minimize the risk, you won't make enough to pay for college. we recorded this savings mentality and they are two different things. different risk profiles. it's a mistake to equate. >> we have to go.
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>> i used to do a lot of personal finance. >> the advertising price is not what the average person is. >> they have a tremendous inflation. >> you won't believe college has don make money for school. back in a flash. >> remember that rally that happened after the 30-year bond auction. the dow is up 13 points. back after this. >> smoking two packs a day for 35 years, nicky finally quit. >> i tried before and failed before. i truly think it was the support of the program. >> a program paid for entirely by her employer, golden living that operates nursing homes and hospices nationwide. with a workforce 40,000 strong, half were smokers. >> those people who are motivated to take advantage of our program, 62% of them are no longer smoking.
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if you are motivated, we will give you help. >> had the in the form of prescription meds paired with coaches. >> let's talk about the goals you set. >> they're spoke with me every other day for the first couple of weeks and every week there after. they still make a point of checking up on me. >> rt company offers weight management and preventive care for free. >> we would like to be ahead of the curve. >> that's today's "healthy horizons" report. i'm rebecca jarvis.
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you may have heard there was a technology glitch on the stock exchange and trying to figure out what to do with the orders. they decided the orders have been canceled. approximately during the first 15 minutes of trade when the glitch was in operation at that point. they will cancel the orders. of the orders that did go through, how is the trading going? >> i will tell you, it depends on which side of the coin you are on.
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it moves towards the big finish here today. whether or not we can do weeks in a row. it will be close if we continue our weekly winning streak. if you take a look at the home builders, they have been hot, hot, hot. citigroup is downgrading dr horton to a sell. are granted they missed a big run up here, but they rated it and think a lot of these builders will be jamming in last minute write downs for the land. notice lennar in green. upgraded by raymond james to outperform from market perform today. >> thank you. a sign of the times. rupert murdoch is renting his yacht out and college students are selling anything and everything. we mean anything and everything to raise money right now. >> a full serving of empty calories coming up.ng [ engine powers down ] gentlemen, you booked your hotels on orbitz. well, the price went down, so you're all getting a check
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