today, plus banking or baseball. one career sounds more fun than the other, by which one actually pays better? the answer may surprise you and we're looking next week to big bank earnings. whitney tilson joins us to tell you his top stock pick after a monster 23% return in the first quarter. live from the nasdaq market site this is "fast money." let's start trading. this week the worst of 2012 so far and all eyes, of course, on tomorrow's big julia roberts report.

bks, i know you're active in the currency market, one market open tomorrow and what did you do in terms of your stock portfolio in preparation? >> stock portfolio, hedge any of the long. most of the long positions in the portfolio is really in the housing and construction area, and we're going to talk about that a bit and going into tomorrow you really have a dollar event here so we're long u.s. dollars. i think this is going to be -- you get people -- if you get less qe it's better for the u.s. dollar. long u.s. dollars verse short european currencies. that's the way to play it. the most liquid market tomorrow. let's keep in mind what actually happened this week. the federal reserve told you, hey, the economy is not so bad. maybe we're actually going to be all right here. we might not have to have more qe. that's not a terrible thing for this market. >> well, that's a glass half full interpretation of the minutes. i think a lot of people that day had a glass half empty interpretation. where do you stand on the importance of this jobs report in confirming the first-quarter rally that we've seen? >> you know, i think every jobs report has been important, and i think the key is that we've had some pretty good trends and even adp, if we can follow that with

an inline number, we should be okay. in fact, i would point out the jobs numbers have been better. manufacturing numbers better than anything we're seeing internationally so that's one of the most important features right now, and i think people will be watching it, even though the market is closed very intently. >> all right. if it's better, maybe do we listen to the other data points more so than the jobs report, i mean, especially given that it's more a logging indicator? >> a lot of the data has been a lot better. when you think about it, one of the things that had germany down, mixed signals out of germany and out of china and if you think what's going on here in the week alone. dax down from the highs made. s&p down only 1.7%. you're seeing a flight to quality for u.s. quality. it's reflecting some of the better data. in some ways you're seeing the bifurcation or decoupling and, you know, at the end of the day, tomorrow's number is just one number.

in two weeks or so we'll have the meat of s&p earnings and those are the numbers that are really going to drive the rally, if it's going to continue from here on out in my opinion. >> yeah, that said, karen, what are you anticipating in terms of earnings? do you think that will actually -- i think that's probably what will confirm or deny the first-quarter rally. >> i agree. to me it's much more important the earnings because it's one -- one time out of -- out of four times a year that we get that kind of data as opposed to a jobs number that we get far more frequently. so i think that the bank earnings will be a very good tell. i think they have a good lock into the economy. they have an excellent look into the consumer with their credit card portfolios. that's what i'm looking at to give us some direction, not the jobs number. >> right. brian, quickly on the options desk. any positions that you saw that stood out to you today. >> yeah, absolutely. one thing i noticed is the vix traded a little bit higher headed into a three-day weekend. we actually saw them buying the options in the s&p 500, so that's a little concerning that people are trying to add some protection ahead of this jobs number, ahead of earnings season. it probably makes sense, did

that for clients as well. buying april puts in the spdrs to protect against some of our long positions so i can stay long and add protection to the downside. >> all right. let's move on here. a bank of america recently performed a comprehensive study on renovation spending and took a look at how it impacts spending and as well as individual stocks so is the recovery in the renovation market better for the broader economy? michelle, this has been a tremendous theme in the markets, and this was a tremendous report. interesting because you sort of track the waves of spending, and it does matter who buys the homes and for what purpose they are renovating, investors versus actual homeowners who will occupy the homes. explain to us the difference. >> it very much does, so one of the things that's happening in the housing market now is the housing stock is just fundamentally not designed properly for the changing demand. there's too many big homes on the market for sale, and there's a lot of people moving into rentals, particularly multi-family renting.

that's why we've seen a big increase in apartment construction, but another area where we're seeing renters move in is to single family homes so investors are coming in and renovating them. the process by which they buy the distressed properties and rent them out, in between is renovation and that's creating nice support for the construction market. >> versus when a homeowner actually goes in to buy a home to live in, then that is a multi-year story potentially. >> exactly. they are both supportive for the rental markets so housing turnover broadly speaking is going to be supportive for renovation work, but it's a timing difference. when investor purchases, it's a jolt to the renovation market because they have to make it ready. where a homeowner, they can spend over time as their cash flow allows. >> how is it that you can differentiate about who just bought it? bank america does a loan for that purchase, an all-cash purchase? how do you know who is the buyer? >> i'm looking at macro data, nothing bank of america would have independently. all that have data is available to us.

we know if an investor purchases the property and there's survey datas to tell what they do with it. the survey that i look at the most comes from campbell's survey and it's a survey of realtors, so the data is all publicly available. you just have to sort through it which is time consuming but worth it. >> some of these names that you mentioned like the home depot and lowe's had quite a run. did you differentiate when somebody comes into a home, they redo the cabinets and redo the wallpaper, let's say, and then do they go out and buy appliances, so is there a two-step process where maybe i shouldn't be buying lowe's but i should be going into a whirlpool? >> luckily for me i'm the economist on the paper so that's the job of the equity strategist, and our equity strategist has done a lot of good work on that and looking at the micro data and feels home depot is a good buy, even more so than lowe's. >> so i'm curious. a lot of the economists say things like foreclosure abatement has actually been a negative for the economy. even though you're keeping people in homes, what you're really doing is keeping a new buyer from coming in and then

doing all this local spending on things like landscaping, appliances, et cetera, so is this a positive trend for the overall economy and not just this kind of housing renovation story? even though we don't get more home price appreciation, aren't we getting more local spending? >> you are getting more local spending, and i think it's a function of the overall healing that you're going to see in the economy and in the housing market. unfortunately, a lot of foreclosures are inevitable so they will happen. they have been slow which means that as people are in -- in their property and they are not paying their bills, they are not going to keep up that property as much. so that's one of the reasons renovations hadn't done as well during the recession as well as income constraints, so the renovation cycle is one of the ways that the market is slowly healing. it's going to be a long process. not saying that there's going to be a boom in construction tomorrow. in fact, i don't think that will be the case. in fact, i think it's several years before you return to more normal markets but these are the first steps. >> any sort of bottom line

numbers on spending and how can we interpret that as a boost to the economy and perhaps the gdp? >> yeah. that's a -- that's a great question. you always want to think about how it links back into the outlet and the gdp. the building materials and home improvement shows up directly into residential investment. in fact, renovations is a bigger share of residential investment now than new construction which is really quite startling. the other way is through sales, so building material sales, furniture sales, as you mentioned appliances, stuff like that that, you know, housing has a lot of spillover effects. >> all right, michelle. thanks for coming by. appreciate it. josh, i know you've been in this trade for quite some time in terms of the home builders and also the suppliers of the -- of the appliances. >> sure. >> and flooring and stuff. >> i think there's actually -- in looking at the sector and home depot and lowe's is very obvious trades and they have worked really well, two names to think about, one to avoid would be masco.

people are going to go down on this quality ladder and start looking for which ones haven't moved. masco is actually a very poorly run company, huge debt and no top line revenue growth but a good one might be sherwin williams, shw, 80% of the revenues come from the u.s. remodeling and housing market. in the a lot of exposure overseas and what's cool about this company is they could earn like $7 next year and that's with a weak housing market. heaven forbid there's pickup in prices and activity it could be much higher. >> and most people paint no matter what, whether they rent or occupy. >> people tend to shy away from high price, but i think this one is worth a look. >> the most interesting thing is when b.k. goes into a new home he doesn't change the toilet seat which is odd to me, he goes straight to the cabinets. home depot, 20%. >> how would you know that? >> all right, move on. >> i'm just saying. >> i'm very sanitary. >> when you think about home depot this, stock is trading

almost 18 times 2012 earnings and is up 80% from the august lows. i mean, the thing has gone parabolic. the trades in here, talking about a sustained trend in. a lot of ways when you look at stocks like this, only supposed to grow sales in the single digits for the next couple of years this. thing will have to grow into a trend like that. >> a 15 multiple though. it's not a screamer at 15 times, right, h.d.? >> well, i mean, it's probably trading at the high end of the historical range. >> right. it's not cheap. >> so when a stock makes a move like that, what i'm saying is, yeah, there's a lot of things here. may be discounting a point of this recovery and you want to wait for it to come to you. >> part two of our renovation nation trade is coming up straight ahead. we'll be speaking to the ceo of armstrong world, maker of floorings. meantime next right here, spring is for spending. unseasonably warm weather and an early easter combined to give the retail space a big boost. comp sales run 7%. our next guest has been looking at some of the retail winners and losers. morgan stanley's kimberly

greenberger joins us right now. always great to see you. >> great to see you. >> in terms of early weather and an early easter how much will that pull through and next month we might see weaker sales? >> well, we saw 8% to 10% increases across the specialty retailers today, and several of them called out two to three percentage points of benefit, both from the early easter and from the warm weather, but that would still leave april sales likely up in the 3% to 5% range and that's quite good in our view. >> so, what are your favorite names that you like, and where do you think we'll see more momentum after this strong start? >> we are our favorite pick is urban outfitters, and we just saw them release their 10k on monday. they saw about an eight-point acceleration in their same-store sales trend from february to march. that was somewhat of a preview of the numbers we were going to see today, and their assortments in anthropology are not

completely fixed yet. you think we'll see a fairly large acceleration in the second half of the year but we really like the stock here, and we think it's the best opportunity for a double here in our sector over the next couple of years. >> it's brian kelly. what about tiffany's, exposure to asia, high-end here still seems to be doing well. do you have a view on tiffany's? >> currently equal weight on tiffany. had a buy rating on the stock and downgraded it in early, early november before we got the disappointing holiday news, but we were very encouraged to see tiffany sales stabilize, and, in fact, accelerate in january, and the company gave a rather upbeat outlook here for 2012 at the end of march. we are looking for only very, very modest low single digit earnings growth in the first, second and third quarter here in 2012. we would expect tiffany's earnings to reaccelerate as we get into the fourth quarter, and that's when you think you'll see the catalyst to really get overweight the stock again. >> kimberly, j.c. penney doesn't report same store sales but based on what you've seen from

some of the other retailers, who is winning from j.c. penney's turnaround process and who might be losing in fact? >> you're absolutely right. j.c. penney looks to us like they are donating some share. my partner here michelle clark at morgan stanley covers j.c. penney, and her estimate is their first-quarter comps are down in the mid to high teens range. that's a lot of share coming out of j.c. penney. we published a really extensive report on this analysis and who might be the beneficiaries be a few weeks ago. the department stores dillard's and macy's screen very high and kohl's has a significant overlap. down further on the list and still benefiting significantly, old navy, gap stores, ross and tjx, all beneficiaries of that j.c. penney share coming out. >> i have a quick one here. apple, not a stock covered by you guys, but these guys are gaining 30 billion a year in sales, predominantly on consumer discretionary things, not necessarily on the pc side. where is this coming from?

has to be coming from somewhere in retail. when you look at the sectors you cover, are you seeing this in some of these more discretionary names? >> apparel sales have actually been growing. the growth in apparel has been quite slow. it's clear consumers have a lot of interest elsewhere outside of apparel. within the categories that we cover, shoes, watches, accessories, handbags, jewelry, all have been the strongest growth categories. like i said, apparel has lagged. in terms of looking at where the share from apple is coming from, i would take a look at some of the other consumer electronics categories that have posted rather lackluster growth here over the last 12 to 18 months. kimberly, great to see you. thanks for your time. take a look at a name like macy's karen, a favorite of yours in the past. >> yes. >> the stock has been a screamer. i mean, it's just been soaring to new highs, and when you hear kimberly's explanation of how much share is being lost by j.c. penney, you think maybe this is actually sustainable for macy's.

>> well, macy's has sustained this for actually a few years already, so i regret having sold it but they have done a tremendous job. if that is so, the mid-teens decline, that's really enormous in the operating, the negative operating leverage of that kind of decline is difficult to turn around. >> does that make you even more bullish with the names that might be benefitting from the share loss, to hear such a staggering loss at jc penny. >> it's amazing because people have really thought a lot about ron johnson and his ability to turn this company around. you really have to have some faith in there. i do think that macy's is probably the better one in this industry because it is focused just on the u.s. you don't have to worry about all the other international problems that we talk about every day. >> coming up next, jpmorgan's jamie dimon made a whopping $23 million in 2011, but there are other new yorkers who raked in even bigger bucks last year. find out who is worth more than the wealthiest on wall street right after this. >> 15 minutes of fame. we can't promise that, but what

are 15 seconds on f-fun? go to tout.com/cnbcfastmoney and submit a video question for the traders. we'll play the best questions on air. download the tout app to your smartphone or submit from your computer. #askfast.

♪ put me in coach, i'm ready to play today ♪ show the put me in, coach ♪ ♪ i'm ready to play it's ♪ look at me >> our next trade starts with a pop quiz. here it is. who makes more money, the top four u.s. bank ceos or the infield of the new york yankees? hmm. yankees, bank ceo. for the answer let's bring in dick bove. great to have you with us. an interesting note. give us the answer because i'm sure a lot of people out there will think yankees. >> well, yeah. the infield of the yankees makes $80 million in salaries whereas the four ceos of the four biggest banks in the united states makes 65 million. jamie dimon doesn't even come within a hair of a-rod, and, you know, teixeria is way ahead of john stumpf. the only guy comparable is vikram pandit could maybe slip in against shortstop against derek jeter because they both make about the same amount.

>> i can't imagine vik playing shortstop personally but maybe you know him better than i do. and when it comes to the bank stocks, dick, you've been out pounding the table. morgan stanley is now your top pick within the space and yet there's this looming potential threat of a downgrade of this name. what is the impact. how much notches would be too many notches? what is not factored into the stock at this point. >> on february 15th moody's came out with a comprehensive report of the industry in which it indicated where it wanted to downgrade each one of the banks to, and in the case of morgan stanley, they wanted to downgrade by three notches, and i assume that since that's what they said they were going to do, that that's probably what they will do. if they were to go more than three notches, it would certainly create a problem, and if they were to go less than three notches, i think it would be received as a benefit. however, if you take a look at the price of moody's fixed income securities, what you can

see is that -- i'm sorry, morgan stanley's fixed income securities, what you can see is that they have been going up consistently. in other words, one of the ones that i follow, which is the 5.5% of 2021 was selling at 86 in november of last year, and i think it's around 96, 97 right now. as a result, moody is going to be downgrading these companies at a time when the market has clearly made the decision to upgrade them, so i think that moody's is a lagging indicator here. >> hey, dick, it's josh brown. my colleagues in the financial advisory industry would be curious to hear what your thoughts are as far as the timeline between now and when they finalize the smith barney acquisition. do they do it all at once? do they continue to do it incrementally, and what will it mean for morgan stanley's bottom line going forward? >> well, as you know in may they have a requirement either make the decision to buy 14% of smith barney that they don't already own or they may go after the 49% which they don't own.

my guess is they will -- they will try and take the 49% down because if they take the 49% down, i think that it will enhance the earnings, you know, through the years, i don't think that the cost of doing that is going to be terribly high because, remember, morgan stanley has $72 billion in cash on its balance sheet, and i can't see them paying much more than $10 billion for the remaining portion of morgan -- of smith barney, so i -- i think it will be a good acquisition for them. i think it will be done. i don't think it will create any stress on their balance sheet. >> hi, dick, it's karen. let me ask you this. bank of america had a big run. i know were you a proponent of it in the mid to higher single digits. what are your thoughts now? >> well, i'm a big believer in may you're going to go away, so i think that there's a probability that -- that the stock will come down a bit but i

really believe this company has 2.75 to $3 earnings in it. i assume, whether it's two years from now, three careers from now, the stock sells ten times that number, i really think the stock gets to the high 20s, low 30s and, therefore, you know, the stock may get hit a little bit here with some profit-taking, but i would be a buyer aggressively all through the summer. >> all right. dick, great to see you. thanks for your time. dick bove. coming up next, it seems like the nasdaq will get the ultimate like from facebook but how big could its debut be? we get an update on what could potentially be the hottest ipo of the year. much more ahead. this at&t 4g network is fast.

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dominate. i know you've been a fan. >> we've like visa for a while and this is a new idea we got involved with at the end of march. to quantify what goldman is talking about the expansion of this infrastructure buildout throughout the u.s. could be like $3.4 billion of the estimates and veriphone, their share could be a billion if they play their cards right, no pun intended. this is like right in the eye of the storm of the huge buildout and a pure play and getting more involved in services which is a higher and higher businesses for them. a young company with a lot of growth ahead of it. just broke out technically so there's a lot to like. >> karen is the one who brought this play to us, strips to chips. following it for a while. >> i do like the name. it's a good story, but we've had

jimalto for a long time, which i often think as guipetto's father, but they are at the forefront of this, and this emv is happening. it's not an if, it's a when and actually the guidelines have been laid out for the when in 2014, so i still think there's room to run on this trade. still like gemalto. >> i have a question for you. how does that translate into visa? do they actually get more business because -- >> there's secular -- well, the overarcing theme is the secular trend that has nothing to do with the economy which is less cash, more credit card. this is about online, it's about waving your cell phone in front of things to pay for them, and that's really an unstoppable trend. it's not going to go back the other way. visa and mastercard are the gatekeepers. it's irrelevant who has what credit risk, et cetera, just taking a notch every time you do that, and that's why those stocks have been doing well really regardless of the economic backdrop. >> one other derivative play,

ebay, the embedded paypal, also growing hugely. >> an analyst downgraded ebay a little later on in the show. the new york stock exchange is touting its success in social market ipos but it wasn't enough for the social media giant which based on a $100 billion valuation could debut as one of the nasdaq 100's top ten companies. that is amazing. does it matter in your view, dan, who got it? >> not really. >> an investor or somebody who is trading the shares. i mean in a lot of way technology is seamless, really doesn't matter. >> saw it up today and new york down for the afternoon. i don't know how they went out. it matters a lot to them. i think to investors. >> right. >> three-letter ticker, four-letter ticker, it's all the same. >> you push a button. it doesn't matter.

>> yeah. >> you push a button and it goes some place, doesn't matter if it's nasdaq or nyc. >> surprised you didn't list on bats. >> you saw the banking fees that facebook really squeezed out of all the underwriters. make no mistake about it, had them on the ropes about pricing and facebook is probably the winner regardless. >> let's get some options action. shares of google surpassing apple. this thursday already, brian. >> earnings is really sneaking up. guys are getting active in the trading pits around that time. certainly for client, i like to put on certain option speculative plays and google, april 12th next week, something can you take a look at. come monday i'll look at it april 6.10, stock trading around the 6.30 level. purchase the 610 call and offset the costs by selling the april 16th call. basically your break even is 635. anywhere above there up to 660 you get to profit on this trade

and i'm stopped out below 610. a little worried around the 600 level where we've seen a hard selloff in the stock. sort of want to define my risk here and certainly you saw everything on cnbc about project glass. that's pretty cool. my 5-year-old son already starts to take pictures for pretend using his glasses when he sees a cool car on the street. google did everything. it's a stock i like to play and certainly ahead of earnings i'm going to play that. >> what do you think about what google will do on the back of it? >> i think google glass is not cool, brian. no, just kidding. i think your trade makes sense if you want to play from the long side. the stock is down 2% year to date. one of the things we were talking about earlier talking about sandisk, a stock underperforming, up 2% when they missed. down 13% so for the last two quarters google has moved 10%, a huge mover on earnings with a company this size. make a bullish bet, define your

risk and your call spread can make a lot of sense. >> feel like the glasses are in the category of a self-driving car. as an investor i would not be as thrilled about google spending their money. >> there's a business there. >> you buy the glasses. >> no, no, no. >> i think there's a business there. it's a difference. i can't see myself walking around new york with those glasses on, but i could see myself perhaps sitting at home with your feet up and have your google glasses. >> like all that people did with 3-d televisions sitting in their home. >> this is different. right in front of your face. >> certainly the glasses worked in "back to the future 2," marty's little son there, how they put their glasses there, a futuristic concept but something that can take hold. >> better than a self-driving car. >> let's agree to disagree. catch "options action" every friday at 5:00 p.m. coming up next, the housing market is on stronger footing. we've have the ceo of a company benefiting from the bounce back.

math espe, the ceo of armstrong world is on deck.

our house is a very, very fine house. >> welcome back to the nasdaq market site in times square.

a proxy for the real estate industry. armstrong world industries makes specialty floors for residential and commercial properties and the company is seeing an uptick in demand. with us is armstrong world industries ceo matt espe. matt, very excited to have you because this is a stock and a trade that we've been talking about for a long time. now, we just had an economist from bank of america/merrill lynch who sort of delineated the various legs of renovation spending. >> right. >> first of all, there's the investor. >> right. >> so the person who buys to rent, and then there's the person who buys to actually occupy. does it matter in your business when it comes to types of products sold in margins who that buyer is? >> not really. what drives our business is the -- the kind of construction, so obviously what we're seeing here is somewhat of a broad base modest recovery, you know. we're seeing single family housing grown at about 10%. that's what we're calling this year. multi-family close to 20 overall.

16%, 17%. you know, it's a mixed difference for us, so if you go to a multi-family housing you'll have a little lower end so there's some margin compression from that in flooring and cabinets. single family a little bit higher end and better margins. >> give us a sense of where your revenues are coming from right now in terms of single family versus multii. >> the things driving our business is really remodel whic >> the things driving our business is really remodel which is another thing she mentioned in both commercial and residential, so today about 60% of our revenue in residential is remodel. when we hit the peak, so in 2006 when, you know, the housing starts were about 2 million, that number was closer to 50/50. commercial, another look is 80% remodel today. >> so in the remodel space then, this cycle is completely different than anything we've seen before. it sounds like that's what you're saying so how sustainable is that?

are we looking at another bubble in remodel, or is this something that could go on for years? >> we've had pretty strong remodel volume throughout. kind of offsetting what we've seen or not seen in new construction, both in commercial and residential. seems to be somewhat sustainable. we're looking for more robustness in commercial construction. >> is there any data that you look at that gives you a little bit of a sort of head's up for what your business will be, whether it's employment or gdp or appliance sales or new or existing home sales. anything that you see first happening before you see it in your own business? >> best leading indicator is forecast round new housing starts. that's a good proxy. now, when you think about it, we're the last thing that goes in on a house so you build the house. the last thing that goes in are the floors and ceilings so that's a good proxy for us. you know, general macro, economic trends like unemployment, consumer confidence, absolutely drives that. when it comes to commercial structure, we look at architectural billing structure and when that's above 50 that's good news for us, and good month above 50 and that's commercial construction should strengthen the next six to 12 months and, again, we're the last to go with

the commercial building as well. >> so i'm just curious, the index, the build facts looks like it hit 3 million units in january which is a big jump over december. >> right. >> really for the winter a very strong report. is that the kind of thing we can take and extrapolate or because it was a warm winter is that kind of hey, it was a good season but don't take that to mean anything? >> well, you know, weather is always a factor. >> yeah. >> i think in this case it's not as big a factor. we have a much different winter than we all had last year so, you know, it's a factor, but a minor factor. we think we're seeing fundamental strength. >> oh, okay, great. >> when you hear about programs, foreclosure to rent programs, whether it's by large u.s. banks or government-helped policies, does that make you much more optimistic about your sales. how much do you anticipate capturing of that market? >> i mean, anything that takes

inventory down that drives housing starts, multi-family or single family is good for us. >> 20% of your sales come from europe. >> yes. >> so what are you seeing right there now? >> that's a good question. you know, our exposure to europe is 20%. when we think about europe we include russia, the uk and the middle east. our ceilings business is actually doing reasonably well in europe. we have a strong position outside the eurozone. we're seeing some challenges in the flooring business which is inside almost entirely inside the euro zone but focused more on the germanic countries, seeing relative normal strength there but it's a balance. >> input costs, what are you seeing? are you seeing a benefit from lower chemical costs, for example, because the inputs to them are lower like nat gas, or are you affected by higher oil prices? >> mostly oil prices. we have pvc going into resilient flooring. saw about $65 million of inflation last year. we're looking at about half that. we will see some inflation this

year, but about half. we're able to cover that in price so we're getting price over inflation in both the ceiling and the flooring business. >> great to have you with us. >> matt espe, the ceo of armstrong world industries. josh, i know you've taken a look at this space. have you taken a look at this name? >> i haven't, and i'm not sure why it didn't pop up on my radar. do you guys get lumped in with like the lumber stocks when people look at because you're a flooring product, or is there a certain sector where you think your stock should trade with? >> that's a good question. we've been for some reason flying under the radar screens. have a fairly new leadership team so we're sort of a little bit more aggressive in marketing ourselves. again, had a pretty good track record the last year and a half or so so we're getting more attention. >> got to hit the conference circuit. >> $8.55 special dividends. great to see you. thanks so much. >> coming next, a hedge fund manager who has made a 23% return in the first quarter alone. find out what whitney tilson's top pick is right now after this break.

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after a rough year in 2011, some hedge fund managers finally have a reason to celebrate. a number of the world's leading funds including tilson's winning

q 1. the fortunate thing for a lot of stock-picking orienting funds is that correlations came off for the first quarter. was that mainly it? >> partly correlations coming off. look, all our financials correlated last year to the downside. we were a little early on them. hung in there, had conviction and bought more of them, citigroup, goldman sachs as they fell and they all correlated to the upside this year. at least in some cases the correlations were there, but as the european sovereign debt crisis faded, our bet on u.s. financials really took off, but, you know, it seemed like everything our portfolio was correlating, you wouldn't think something like netflix would correlate with something like citigroup but they were correlating. both were rocking in the first quarter, so i think the real lesson for us is if -- if you're certain something is cheap and it gets cheaper, don't lose your conviction. hang in there, and you'll be rewarded if you're right on the fundamentals. >> we've been teasing the

audience with you bringing your top pick at this point. it's an interesting one. >> right. >> well, i should say -- it's our newest addition to our portfolio. it's our sixth or seventh largest position, aig, and it's certainly playing the theme of the rebound of the u.s. financials. we stayed away from the european financials and still are staying away from there. we don't think they have gone through their valley of death that u.s. financials went through a few years ago but we think u.s. financials are -- the big ones are on pretty firm footing, and we've been following aig for a while, similar investments to citigroup. aig has lagged, and we still think it's really cheap. >> what is aig's business? actually don't know what they do. >> it's a very complex business sort of, again, like citigroup. you've got to study it a long time to really get comfortable with it, but it's a global insurance company. a lot of different lines of business, but we think it's one of the premiere global financial companies, but they made a lot of mistakes in the downturn, and they are still trying to run off -- either run off or selloff

some bad businesses. we think there are unlikely to be any big negative surprises to the downside and when they finish with the bad business they are left with a fabulous global franchise and today the franchise is changing at 40% to tangible book value and we think that is likely good. >> not hurt by the low rates and the flow of the yield rate. >> i think all insurance companies are sort of in the short term, that's a head wind, but we think when you're buying a global franchise business at a 40% discount to book you're getting compensated to wait until that improves. >> does aig have a lot of exposure to some of the things that are going to take place with dodd/frank or some of the european or more global regulations? is that a big concern with an insurer or not really? >> that's not -- i wouldn't put that at the top of the risk factors. i think the single biggest risk factor is there's some -- another horrible negative surprise buried in their balance sheet somewhere which is what basically took them to

bankruptcy few years ago, but we think the passage of time has mitigated that risk. secondly, if the whole -- if europe tips over again, if there's a huge financial crisis, that would take them down along with everybody else, and then you're asking about the government. i -- the big negative on aig relative to the other financials is the government still owns a huge stake, and people view that as an overhang on the stock. our view on it is twofold. aig is generating a lot of cash and buying back a lot of stock and think they could regain a third of their outstanding shares in the next month if the government gives them permission. they have the financial wherewithal to do that. so we win either way. either the stock goes up, and it's hard to complain about that, or the stock stays depressed, in which case they can buy back a ton of stock and we win two years from now. >> where do you think this can get to in either scenario? >> book value is in the high 50s. if they buy back a ton of stock, that takes the book value by itself. book value per share into the $70 range. we think it's worth at least book value. we think it's a double in one to

two years. >> wow. in terms of going to the second quarter, whitney, has your philosophies changed at all in how you approach stocks or what your view on the world is? >> well, our view on the world is probably the most cautiously optimistic. since the financial crisis we actually think there's a reasonable chance that we start to get into a virtuous cycle here so the hiring is picking up. that means consumers spend a little more and you get this virtuous cycle. i'm not super bullish but for a bearish value guy i'm more cautiously optimistic than i've been in a while so we're still hanging in there on a lot of these stocks. they have run quite a bit but started at such a cheap price. citigroup with $50 a share of tangible book, we started buying at 30 and had the opportunity to buy a lot more at 23 but high 30s is trading 25% discount to tangible book. not selling that either, but we're adding more to aig because we think they have similar risk factors. >> what about exit prices? very easy -- maybe not easy to find a value stock, but

certainly probably harder to say how do i get out of this? >> well, yeah. the problem -- we have the high class problem this year which is when do we harvest gains because virtually everything our portfolio on the long side anyway, short side is -- we don't want to talk about the short side this year, but -- but -- you know, when do you harvest gains with netflix, for example, up 80% this year and it's hard to put an exact target price on that, so that one we managed the position side as it runs up. we trim a little bit, but, you know, our largest position berkshire hasn't run that much and still super cheap so we've actually been adding to that this week as well. >> great to see you. thanks so much. >> my pleasure. >> all looking forward to the value of investing congress coming up may 6th and 7th. >> the two days after the berkshire hathaway annual meeting. >> thanks, whitney. send your tweets in. we might answer them next. be right back.

how is it going to help the ten-year range to break out and what's the highest beta play you can think of to really exploit this move? thanks, b.k.

>> that was dan kirby asking us a question on tout, so bks, how do you answer him? >> that interweb thing is pretty popular. that's pretty incredible. what i'm looking at. right now the treasury market to mesa little unclear because it's not 100% clear whether or not the fed is going to come in here. i think the way that i'm playing it right now, instead of being short treasuries, i'm actually short high yields via the hyg, and the idea on that is, one, they will have to pay higher yields if yields go higher. if the economy gets worse and the fed is going to come in, the high yielders are high yield for a reason. i think that's probably the safest way to play it right now. if you want to go into a market and you want to buy some kind of bonds, i'd probably look at german two-year bonds, something like that, but that's a little deep end of the pool. i'd just stick with the short hyg. >> hope you got your answer. we should note we're looking at

the touts every single day. use the tout app. 15 seconds, ask your question and maybe you'll get your 15 seconds of fame on "fast." now let's go to some of the more traditional ways. claire asks how does k-fine see polycom's warning? is she still long being took profits already or buying more? >> i wasn't surprised north america was a little weak. i was surprised asia was. i need more details on it which we will have on their call the week after next. the valuation is cheap, but i've got to hear if there's something to this story that i didn't get right, so i -- i would do nothing yet. >> okay. >> breakdown sheet, got to add. >> first news tomorrow when we come right back. stay tuned.

you love those devices and time for the final trade. brian? >> big blue finally got a pullback on the stock. like to play that into earnings, maybe use options to play it to the upside. >> dan? >> i like that renovation nation theme. i think in a stock like home depot, if you want to get in and play, it wait until it comes to you a little bit and consolidates and then get long. >> josh? >> on the same page at whitney tilson, buying berkshire since the low 70s, like the pullback at 80s and hard to go wrong with their collection of names and portfolio so we would be buying it right now. >> karen? >> i like pacific drilling, pacd. >> bks? >> and book end renovation