>> some people feel some of the strength in the dow is coming because the euro is starting to strengthen a little bit. hit a two-month low against the greenback earlier this morning. that's starting to change a little bit. that may be contributing to the strength in the dow. >> welcome back. good to have you home. >> nice to be here. >> that will do it for "power lunch." >> "street signs" begins right now. see you tomorrow. today we're changing the name to k street signs. the white house defending the buffett rule. critics say this is about votes, not the deficit. we'll discuss with gene sperling and show what most americans pay in income tax. you'll meet an analyst decided there are more than a dozen names in the energy sector you probably want to stay away from. plus, inside apple's $50 billion put side. why diamonds could become the investors new best friend. and a disaster du jour all the way from china.

kelly evans. >> brian, the dow is the day's best performer registering a triple digit advance third day in four sessions. also the least worst of the major averages for april down 1.7% for the month so far. the s&p 500 is trading marginally higher today bouncing off early losses as it tries to avoid its seventh decline in nine sessions. apple isn't helping. shaved almost two points off the s&p 500 itself. and apple and google throwing their weight around pushing to a one-month low earlier in the session. and this stat of the day 48% of the s&p 500 index now yield more than the u.s. 10-year note. that's not saying a lot. let's get down to the trading floor with bob and rick. bob, amazing stat i just referenced there. what do you make of it? >> i think the bond market yields are lousy. that's what i think about it. good heavens. for 20 years the yields have been dropping. i'm not kidding, i heard you talking about this. i hope we can pull this up. there it is. this is a 20-year chart of the 10-year yield. look, that's the direction it's

been going in, straight down. when is it going to bounce to the upside? it's about time. the s&p yields 1.9% right now. the 10-year yield's 1.9%. the 10-year yield should be higher than the s&p 500 yield in my opinion. by the way, kelly, one of the reasons i'm optimistic about apple is apple's going to start paying a dividend, about 1.8%, that should attract a lot more value players down the road. one of the reasons i feel pretty good about it. by the way, people have been asking me why the dow just rallied, as far as i can tell most traders think we had a dollar move to the downside. put up the dollar intraday. that drop there moved the s&p and dow industrials to the upside. >> started turning things around. bob, thanks so much. rick, what do you think of that the fact the 10-year is yielding about half of the s&p 500. >> i'd flip it around. gives you good reason wlie in an iffy global economy stocks are doing so well. for that exact dividend argument. now, if we want to look at

foreign exchange, this is a real fascinating day. to see the dollar doing -- or the yen doing so well against the dollar on a day where the pound's higher, the swiss franc's higher and the euro's higher against the dollar is a very unusual combination of countries and foreign exchange trades. so i think we need to monitor that. but in the end, you know, i'm very jealous. brian's going to be talking to gene sperling, maybe he can get an answer to maria's question and include that vote with the buffett vote on a budget. what do you think? >> rick, we'll have to find out. >> yeah. rick santelli, might throw that in there. thank you very much. later on today the senate holds a vote on the so-called buffett rules rick alluded to create a minimum tax rate of 30% for people making more than $1 million. the vote not expected to pass the senate and the gop expected to be blamed for being on the side of millionaires rather than the middle class. let's discuss this with gene sperling and assistant to the president for economic policy. thank you very much for coming

on the show. >> thanks for having me. >> if the bill passes or if it's successful, we'll still talk about couple percent of the deficit if it passes, right? why the focus on such a small amount rather than going after the other 95% to 97% of the deficit? >> well, i think, you know, this president has been and has tried to put forward a comprehensive deficit reduction plan, but i think that this is a particularly important measure in terms of i think building the trust for us going forward with tax reform that could be part of an overall comprehensive effort on debt reduction. why is it important? i think a lot of mistrust in our tax system today is mistrust that comes from the fact that typical families who work hard who are paying their taxes today feel with justification that there are people extremely well-off able to pay less than they do because they're able to shape their income, park their income, use expensive tax

planning and accountants. and i think the idea of the buffett rule -- the idea of the buffett rule is to have a very simple rule that says those that make over $1 million regardless of their deductions, regardless of what preferential rates they'll use will pay a basic amount so that we don't have people in the -- you know, so many of the 400 most well-off americans paying an 18.1% ef effective tax rate and have people teaching in schools or working construction jobs wondering why the most fortunate in our country are paying less in taxes than they are. >> okay. mr. sperling, i understand that, but according to irs data, 22,000 homes out of 110 million did pay less than a 15% tax rate at the very top end. so, yes, there are some people that are paying very little, right. 1,500 millionaires paid zero. i get that. don't you think we're propagating just by having this conversation the idea that there is this big problem out there that can be solved by a few

thousand households when in reality you could tax those thousands of households at 100% and won't even make a dent. >> listen, i've been on this show and others and we've been very clear compare today where tax rates are today, this would raise $160 billion to reducing the deficit. $160 billion still counts. and i think what you don't w to do is denigrate each item in a plan whether it's agriculture subsidies or medicare provider savings or something like the buffett rule, no piece alone is going to reduce the deficit. but this is an important component for trust. it's an important component for shared sacrifice. this president is putting forward a budget that asks a lot of americans to sacrifice in the cause of bringing our long-term deficit down. it's important for them to understand that if they're being asked to take a little less in a certain area, that those who are most fortunate are also chipping in. this is why this is about shared

sacrifice in the cause of bringing our deficit down and helping have shared prosperity going forward. >> first off, shared prosperity will higher taxes on a few represent increased income of anybody else? >> you know -- >> that's a direct transfer payment. is that the shared prosperity? we're going to take some and directly give the money to somebody else? >> that's obviously not how i just described things to you. what i described is that we as a country need a long-term fiscal discipline package that includes shared sacrifice. and you need various different components. and what people like simpson and others have shown is that you need to have a combination of revenues and entitlement savings. and you need to be asking those who are most well-off to contribute to an overall -- >> gene, we had whitney tillson she indicated if hers went up,

hers would go down? is that a misconception? >> you want to put a deficit package that will bring down our deficit. if you want to have the funds to bring the deficit down and do things like the president proposes like continue a $2,500 college tax credit for millions and millions of americans and you want to be able to afford that type of catch really for middle income families and still bring down the deficit, you have to make some tough choices. one of those tough choices is to do something like the buffett rule which compared to current tax rates would raise $160 billion. now, when you're putting a deficit reduction package together, you have to look how else would you get that $160 billion? would you rather do it by deeper cuts on the most vulnerable and their health care? would you like to do it by taking away tax cuts for the mid l class? >> i think there's obvious no good way to do it. if we have to make significant changes to medicare and other entitlements having those people own up is better than --

>> i keep describing exactly that our administration's view is this is one component of a larger deficit reduction package. >> it has to be, right? >> it has to include entitlement savings, has to include the tough discretionary cuts this president has already agreed to. again, we keep saying that and i think you should be willing to embrace that this is one component. but it's an important component because it goes to the fairness of how we're doing deficit reduction. are we doing it all as the house republican budget would suggest by putting the whole burden on middle class families and the most vulnerable? or is it under the values of shared sacrifice where we ask everybody to pitch in. and we don't leave out the most well-off -- >> that's fair. that's fair. because 1.2 million teenagers drop out of high school every year costing the u.s. economy approximately $300 billion over their lifetime. that's according to princeton university. that's three times as many dropouts as there are millionaire families in the united states. what do we do about that problem? now you're talking about five-fold per year the

difference in gdp growth. when do we address that rather than saying to people who are making money and doing what they were told to do work, go to school, become successful that they need to do more, what about the others? >> well, you're just making our case for us. which is to assure that you can afford to do things like the president's proposed which have dramatic increase for pell grants assistance for less advanced young kids to go to college. you have to be able to afford those investments in a way that can still bring down the deficit. >> you can't go to college if you don't finish high school. >> of course. and that is why the president has a very robust education agenda and why having a higher education assistance gives more young people in high school the incentive to believe that if they do graduate from high school they can go to college. but our point is to address those type of important issues that you've mentioned that are

important for our economy that do require more investments and more resources at a time that you still need to bring our long-term deficit down, you need to make tough choices. all we are suggesting is that one of those tough choices is having a buffett rule. not the only hard choice. we need the other hard choices the president has put in his budget proposal which calls for cuts in agriculture subsidies, calls for cuts in medicare providers, even for future medicare beneficiaries, but one piece of that pie -- >> we agree. i think we agree on that. >> -- the most fortunate to contribute. >> i think we all agree on that. >> i'm so glad we've reach this agreement. >> i think what i was trying to get to more was the other 97% because there's a feeling that this is sort of a look over here type scenario when we're ignoring the 97%. and i think that was the focus that i wanted to go down the road on. what are those other pieces? >> can i tell you why i think we're not just looking at just this piece?

remember that the president has already signed into law through the budget control act over the summer a trillion dollars in cuts for discretionary spending. cuts that put us on the path to have the lowest levels of discretionary spending as a percentage of our economy since the eisenhower administration. we've not only spoken of the other areas, we've acted on them. what we haven't done yet is put forward pieces that also show that we're going to ask the most fortunate to be part of that overall effort to bring down our deficit. >> well-said. gene sperling, thank you very much for joining us. >> thank you. >> up next on "street signs," oil downgrade palooza. one analyst downgrading 16 stocks. we'll list all by name and in alphabetical order. >> and apple crunch apple has lost as much as $60 billion in market cap. does this give google more room to run in the race to $1,000? we'll check that out next. tdd# 1-800-345-2550 the spx is on my radar.

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all right. my tax quiz was this, what is the average post deduction federal income tax rate for the middle income household? 12%, 15.1%, 5.6%, 9.8%, 19.7%.

the answer is c. almost everybody on twitter guessed kelly, guessed either 15, some people at e, 19. here's the reality. the federal income tax burden in the middle class -- i'm not saying it's right or wrong, right, but that has fallen by 50% over the last 30 years. that was the point i tried to make with gene sperling. >> that's an average. i wonder how much that represents people at zero or a much higher rate even though it's probably across the board. >> here's the problem, america, if we keep spending that number has to go that way because there's not enough wealthy people to make a difference. all right. surely you know the old saying sell a maiden go away. for an old saying it's been sharp the last two years. the dow has dropped and some recovering since labor day. simply saying is too simplistic. capital management chief investment strategist, i don't know how i got that out, but thanks for joining us. as a 1% -- are you going --

never mind. where should i invest that if the government raises my taxes i'll have money? >> well, i think, brian, it's a -- there's not a lot of guarantees in the future. but one of them is taxes are likely to go up. >> for everybody. >> yeah. i think that's an inevitability. i would pay more attention to some of the other things going on like fundamental improvement that's becoming more obvious in the economy than i would about tax policy. they'll get it resolved. in the end of the day the solution ultimately is less benefit, more cost. i don't know how we come up with anything different than that. >> jim, you're still bullish on stocks. earnings are slowing but get top line growth. not to worry. do you see 2012 as a gear year? what do you think is the biggest risk to the outlook? >> i do, kelly. i think that there's a few good catalysts yet to come this year for risk assets. i think for one i think people

still think we're growing around 2.25% gdp. i think we're growing closer to 3%. i think as we close that gap, if the consensus comes up to 3, i think that's going to lift stock prices even to new highs. even this morning's reports retail sales better than expected, last week trade net exports better, inventories stronger. all those might cause people to revise up first quarter estimates. >> even if they revise them up, what's going to happen with momentum going forward? there's already concern warm weather pulled that forward. are we going to be able to sustain this? >> i think so. i think people are worried about a selloff like last year or the year before, but one of the things that preceded that was higher mortgage rates. slowdown in the money supply. what we have is gas prices up, but we have mortgage rates that are below 4% today compared to over 5% a year ago. and we have a money supply which is growing at double digit pace. there's still a lot of late stimulus here. we also have a debt service burden in the household sector far lower than it's been at any

time in this recovery. >> and you like, jim, you like the industrials emerging markets. you say to be careful around technology and some consumer names. >> i do. that's mainly just valuation and what they've done, kelly. technology i like that sector. i think it's going to continue to do well. but like the consumer discretionary stocks, tech stocks both have had tremendous runs and i think they're overextended. i would prefer to put the money -- keep it close to the cycle of the economy. i think it's going to turn out better than expected, but i like the industrials, basics, financials, not to full valuation potential. >> still sticking by that gear. we'll check back with you in a little bit. thanks so much. >> thanks. >> have oil prices peaked? crude hovering around the $103 a barrel mark. raymond james says it could be headed much lower from here. and the firm has downgraded 16 oil service companies. director of energy research at raymond james joins us now. marshal, good afternoon -- how

low do you expect oil prices will go? >> well, we think they're going to fall probably $20 a barrel next year. maybe even more. there's a structural oversupply problem that's eventually going to bring them down once you get past this iranian situation. >> marshal, this is contrary to everything we've been hearing certainly in the political realm lately about the need for the u.s. to drill more, et cetera. you're saying there's too much supply right now in the u.s.? >> well, part of it's because we have been extremely good at getting oil out of the ground here in the u.s. it's one of the best things this country has going for it, which is our productivity and drilling. and we're finding so much in fact that appeared where demand is fairly stagnant, which ss right now globally, the amount of supply would bring online the u.s. is enough to drive those oil prices down next year. this isn't 2012 issue. it's really a 2013 problem. >> yeah. who hurts the most in that

scenario? >> well, you know, obviously if oil prices fall 20% or 30% from here, you know, the companies levered to oil get punished certainly from a psychological standpoint. that's what really worried us is our oil service names that we cover when we plug in lower drilling activity that we think will follow the lower prices, our estimates for 2013 fall some 20% to 40% below current consensus right now. >> we're showing a lot of those names right there who might be affected by this. transocean, halliburton, basic energy services tethered to what is happening in the u.s. of course those are more attuned to maybe brent prices could do better? >> yeah. for most of the names that we cover we still are very, very optimistic for the offshore side and those solely levered to the international side. that should be fine. we think brent prices will hold up meaningly better than wti

prices. >> let's talk about names you do like, marshall, right? you don't hate everybody. you like -- you like noble. what makes those two different from the other 16? >> the offshore side is on fire right now. day rates are going up. utilization's extremely tight. and, again, that's going to be driven by a present price which we think will be $20 higher than the wti price. so we think the economics are extremely attractive in the offshore drilling area. and certainly noble and ins co are two. nlrv, they make the equipment that ins coand noble use. we see a very robust environment for them over the next few years. >> yeah. marshall's area of expertise but would help consumers in the middle of the country. even those on the coast could suffer from the higher oil price. might be tough for those companies including all but the

two downgraded at raymond james. marshall, thanks so much. >> just ahead on "street signs," herb's dang good disaster du jour. and a super sweaty sunshine-induced disaster. could wall street be ready to friend the gem? is an diamond etf on the way? back after the break. nditions. one that continually monitors and corrects for wheel slip. we imagined a vehicle that can increase emergency braking power when you need it most. and we imagined it looking like nothing else on the road today. then...we built it. the 2012 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. for exceptional offers how did the nba become the hottest league on the planet?

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trouble in toy land. mattel tanking. worst performer in the s&p 500. sales came in below consensus for mattel and fisher price brands. american girl brand in line trading down as well, hasbro. dang. what happened with the dang-dang, herb? >> stock getting clobbered. an e-commerce company. amazon of china. they want to use that. i don't like it. cfo for just over two years left. no explanation. dang dang has been controversial since its debut in december 2010 with its ipo in the u.s. with its latest decline, the stock is below $16 ipo price and about 65% below its post-ipo first day pop. >> another cautionary tale for

investors both for china and getting in on those ipos early. thanks, herb. meanwhile a little sunshine on the bed today. tempur-pedic trading an all-time high. investors having sweet dreams about earnings out. >> that's a very controversial company. >> it's been controversial because you have raised the controversy about this company. >> and absolutely wrong. i will tell you the big thing people will be watching is a new bed they rolled out, a lower price bed competing with serta's i comfort. i hear from my sources in the field that the tempur-pedic is selling well. interesting to see if it's cannibalizing the higher price products. >> it will be. i like your inadvertent pun. boston marathon runners dealing with 86 degree heat. about 30 degrees above normal. 30 degrees above normal, folks. that is a record. organizers did contemplate

postponing the race but decided against it. they have more amateur runners to sit it out. you can come back next year with your same number. some good advice. still ahead on "street signs," an extreme diet giving new meaning to the term liquid lunch. >> oh, god. plus, "the wall street journal" named this fund one of the top mutual funds in the world. we have the man behind encompass fund next. "street signs" back in a moment. people with a machine. what ? customers didn't like it. so why do banks do it ? hello ? hello ?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello ?

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welcome back to "street signs." catch up on the day's big stories in street talk. all right. first up, mixed day in the markets after last week's big losses. dow's pulling back a bit after hitting a session high within the past hour. but still blue chips seeing triple digit gains. the s&p is dancing in positive and negative territory. and the nasdaq is in the red. heavyweights in the tech sector getting hit especially hard by the way, apple poised for its fifth down day in a row. google also struggling. in just a bit one money manager talks about which of those is a safer place to park your money. and the oil close. we look at brent crude sliding as nymex holding steady. let's get to bertha coombs at the nymex with the close. >> last week according to cftc we saw a lot of fund managers really slash their net long positions on oil overall their positions.

but, boy, today wti was looking good. and that brent premium collapsing. a week ago we were at $20 for brent above wti. the seaway pipeline reversal, which is reversing the flow of the pipeline from now to run from cushing down to the gulf will start two weeks early. as of may 17th it will start operations and be ready. and those tariffs will be a whole lot cheaper than they are for the brent premium. so we saw a bit uptaking off the table here as far as brent today. and gasoline sliding right along with. and at the end of the day nat gas closing above drs. 2 once again although folks still very bearish on nat gas. back to you guys. >> bertha, thank you. are you looking to land your money in a mutual fund? look at encompass. up 31% over the past three years. smart money named it one of the top 100 funds this year. joining us co-manager of the

encompass fund. good to see you again. thanks for coming on the program. let's talk about where to put your money in a market that has had as one investor we had on said a great year in the first quarter. how much more return overall is left? >> i think there's some return left. i think earnings continue to look pretty attractive. interest rates are low. we think we are cautiously optimistic. we think there's reason to be optimist optimistic. >> malcolm, you've done well over the last three years. in the last year you're down something like 25%. what explains that? why are you lagging the market there? >> we have believed in the resource sector for the last five years. and we believe that will continue to outperform resource companies did particularly poorly last year even when resources increased in price. so where we saw gold increase 10% last year, the gold

companies lost between 10% and 30% 40% and 50% in the case of smaller companies. >> can gold and gold resource stocks, miners, et cetera, go up if the u.s. dollar also goes up? >> it can happen. "the wall street journal" today had an article out there are a good number of people feel there's not going to be a lot more growth in gold. we don't agree with that long-term. short-term we think gold prices are likely not to go much higher but long-term we think they'll be higher for a number of reasons. >> do you believe in the resource story going forward? are you going to change your investment strategy at all? >> well, the fund has more than resources. we believe in health care, for example. we see other opportunities. we take advantage of a number of companies that are not closely followed or underrespected and we'll invest in those companies. as far as resources go, we pick the resource sector. so for example right now uranium looks attractive longer term. we think we're going to see much higher uranium prices certainly starting by the end of this year

and into 2013. >> are there any nonmaterial stocks that you really like? anything outside of that that you would dip into? >> we like the agriculture secture. agriam looks attractive in the health care sector has a solution for cancer approved in europe. they're marketing the product there. they're making a lot of headway. they're waiting for fda approval. and they will be able to attack a lot of cancers without getting the medicine throughout the bodies and therefore a lot of poisons are avoided. >> malcolm, a lot seems predicated on the growth in u.s. and china holding up maybe seeing a bottom after coming in disappointing. what happens if that doesn't materialize? you guys could suffer, no? >> we can although we're very confident about growth in china. everyone is talking about china declining, but the decline is still the envy of the world is china's growth is only 8.1%, there's tremendous growth.

the infrastructure continues to be constructed. we see lots of demand for more materials to build that infrastructure. that will continue. >> you guys seem to have something like the ron paul portfolio. congressman had a lot of his holdings in very similar plays. is that expressing a skepticism that you may similarly hold about what the federal reserve is doing? >> absolutely. i think if you believe we're going to have inflation ahead, if you don't have a lot of confidence in the american dollar long-term, i think you'll be wanting to own resources and hard assets. that's why we think one of the reasons why gold and silver should do very well long term. >> malcolm, thanks for coming on "street signs." see you again. >> great to be here with you. >> take care. >> thanks. >> all right. for months you've been wondering when apple shares might stumble. apparently now we know. >> shares down nearly 7% in weeks of trading taking a bite out of apple's meteoric rise. why is the stock down? we'll debate that coming up. [ male announcer ] this is corporate caterers, miami, florida.

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like july in april today. coming up at the top of the hour on "closing bell," home builder sentiment has declined for the first time in seven months. time to get out of that group. we'll look at that. and speaking of hot industries, citi group's earnings helping the banks outperform the broader market today. are the banks a good buy ahead of goldman's earnings due out tomorrow? we'll look at that. and we're breaking down the transportation sector to find out whether railroads or trucking stocks are the better investment right now. michelle caruso-cabrera is with me all this week. we look forward to seeing you at the top of the hour. back to you guys. >> bill, thanks very much. shares of nokia, ouch, they're down again. new news today, moody's cutting credit rating to the single lowest investment grade and

maintaining a negative outlook. adding nokia's financial position remains strong for now, but that cash conservation remains a priority. nokia stock about 20% in a week after the lumia 900 launch and first quarter warning nokia up a little right now but had a tough morning earlier today. >> ouch. meanwhile let's look at apple. shares down over 3% today. that's the fifth straight day of losses and apple has lost more than $50 billion in market cap during the slide. so if you've got some cash on hand to invest, which is the better bet right now, apple or google? our next guest says google hands down. onset with us ken heckle. ken, what's google's edge? >> google's edge with regard to capital its stability metrics. its perspective cash flows are much more certain than those of apple. when i wrote my report at the end of last month, i was merely pointing out that apple because of the risk associated with the size, stability, when i talk

about stability, i'm talking about any risk to its perspective cash flows whether it be loss of market share which is difficult to say in terms of apple right now because near-term results are very striking. but if you look at such metrics even the stability of their free cash flows, it's about 30% more volatile than those of apple with regard to apple's tax rate, people probably wouldn't believe this but between 2009 and 2010 apple's taxes actually paid -- not taxes reported to shareholders but taxes actually paid actually declined even though apple's pre-tax income over the past three fiscal years have risen by about 350%. believe it or not only grew by about 10%. if you look at the quality of entities free cash flows, you'll see quite clearly that there's a very strong relationship between that quality of the free cash

flows and the tax payments. >> so what does that tell us about google? or what does that tell us about apple? >> well, it tells us two things. it tells us that there are risks associated with apple as there are risks associated with any large company. people probably won't recall this, but i was around at that time in 1954 the department of justice ruled that kodak had a monopoly on photo pressing and busted them up. now, that's not about to happen with apple. but a firm like apple will never sell to the market multiple because of its size and because of disruption inherent in that sector. >> ken, if you had a situation here, you have apple, google and over here you have facebook that's coming out, which one would you buy? >> that's a no-brainer. >> facebook. i'm kidding. >> well, you go on facebook. my kids go on facebook. i'm not -- i don't go on it. by the way, facebook is a very high quality company.

again, i'm not here to bash apple. i'm just here to discuss the risks inherent with owning a company like apple. and there are risks that many investors don't appreciate because they're so focused on the top line. >> of those three you like google. >> oh, yeah. google within three to three and a half years, and let's keep aside what's happening in the equity of google today i believe split adjusted will sell somewhere around $1,000. and that's not really much of a stretch given, again, the consistency of google's cash flows as opposed to apple. >> even if you look at the shareholder governance issues when they had the change in share structure, that doesn't concern you at all in terms of whether you're going to be a shareholder in a company where you have -- you had no voting rights to begin with for the most part. you're going to have less voting rights going forward. and you still own the stock. >> well, you can use that same logic and apply it to any firm that has nonvoting shares which

there are over 500. so to single out google in that regard is really almost a false argument. the shareholder needs to be concerned of the prospective free cash flows in the cause through capital. let's not minimize the risk of these firms. again, there's less risk associated with the google metrics than the apple metrics. and to a certain extent the facebook metrics as well. >> is there any other company, quickly before we let you go, that you think does really well with their free cash flow and stability and how they manage their free cash flow? >> oh, yeah. we have 79 firms, entities in our ct capital portfolio. a sector we really like now are the copper stocks. we like tck. >> freeport. >> yeah. freeport-mcmoran. >> based on cash flow, those are the ones you like. are there any based on that that you would absolutely avoid?

>> i wouldn't discuss that right now. but i might another time. >> you thought apple's decision on the share buybacks was a big mistake. >> oh, yeah. an awful mistake. as a matter of fact, i didn't have a chance to discuss all the risks associated with apple's metrics, but the dividend is now a risk. for example, let's assume a year from now apple doesn't increase their dividend next year. that now represents a risk to the valuation multiple of the stock. >> what does it mean for apple's share price, do you think? >> again, apple is most likely sitting on a very strong quarter right now. so i'm not a short-term shareholder. i'm a long-term shareholder. so when i look at a firm's financial metrics and free cash flow, growth rate and cash flow and risk associated with that, i believe apple shares are somewhat undervalued. but then again, given the risks i've mentioned against size,

sector -- china, which i didn't have a chance to mention the tv which i think is going to be -- is not going to be -- not going to be the product that they expect it to be. tv -- people are not going to spend $2,000 for an apple tv. it's not going to get the subsidies -- >> can already buy one for $99. it's that big. it's for sale at best buy. >> if you listen to the corning conference call, you'll quickly learn that consumers don't spend $2,000 for a tv. >> i knew that already. >> ken, thank you very much. appreciate that. see you again. could diamonds be the new gold? >> that's up next. and the movement to kmodtize the gems and allowing investors to trade them, diamonds could be a portfolio's best friend coming up. omnipotent of opportunity. you know how to mix business... with business. and you...rent from national. because only national lets you choose any car in the aisle. and go.

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shares are a bit lower a day when the dow is up triple digits. year to date, stock is up 11% and new even a disney movie will be made in china. the company is making deals from the next installment of the iron man franchise there. julia has the store fry l.a. hey, julia. >> hey, kelly. disney wants in on the fast-growing chinese box office.

disney said it will contain full control over iron man 3 but is co-producing the movie with china's dmg entertainment, shooting is partly in china. the partnership will make it easier for the film to be cleared by chinese sensors and exempts it from the chinese import cap. dmg is private but has close ties with the country's biggest state owned studio and movie importer. disney is looking to tap into china's fast growing market. in the first quarter it overtook japan as the second biggest box office growing 31% last year to $2 billion. expect it to top $5 billion by 2015. now, this isn't disney's only big china play. it is building a shanghai theme park and announced an incubator with with company 10 cent and a china animation group. it seems like all of hollywood is chasing growth in china. dream works animation announced partnering with the chinese government to build a big studio there. brian and kelly, the big

question is whether the chinese government will be able to inflew enthe content. disney says they will be doing this on their own. but we'll see how it all plays out. back over to you. >> all right, julia. thank you very much. and if you talk about sparkling, shares of harry winston have done this year, basically flat today but up about 30% since january. harry winston is looking into creating diamond fund. yeah, possibly etf for diamonds. a similar one has been done for gold. so are diamond the next hot class of etf? what about asset class? editor of etf trends and oliver, accessory an left at citi. welcome. tom, i will start off with you. gold is gold, right? i can get gold here, get gold there, it is probably the same thing. diamonds can be very different, can the four cs. is there any way to commodityize them into a fund or is it way

too different? >> that's what it is. when you talk about pricing, gold's liquid. it trades on the future market. you can trade inner day. there's been almost no problems with the gold etfs. but with gold, it's a different story. diamonds aren't created equal. there are so many different sizes, shapes, qualities and no standard pricing. especially on the futures market. so the company index iq that's got the filing with the sec for the only and first gold diamond related etf, although i think there will be demand, the problem will be in the pricing. >> yes we look at pricing then. is there any way that you see to standardize it, tom? any way to do it? because they are trying to do this with pat ernts. could standardize enough. if you can create the etf, have to increase deplands for diamonds, right? it spikes, this what happened

with gold. gold took off as soon as etf was created. >> when you talk to the world gold council, best thing that ever happened to gold were the gold etfs. however, there was a different feeling on the diamond producer side and diamond wholesalers. they like the fact that pricing is not always clear. that's basically how they're making their money. but when you look at these etf providers trying to get into the space, to a degree, a tail wagging the dog. they are trying to force the industry to have standardized pricing. and the first way they are going about it is creating shares or blocks with just one karat diamonds. however, the variety of diamond within that group are going to be quite different. >> sorry, tom, don't mean to cut you off. finish that thought. >> the only other thing is, it'll only be priced at the end of the day. so if this price comes out and there is a diamond etf, it could trade at discount or premium at the end of the day. and that's one of the negatives

we've seen in the etf marketplace. >> what's your take? >> we are excited about the fundamentals of the diamond industry. we think supply is growing at low single digit versus demand at 6%. regarding etf, i would be cautious for a few reasons. one, i agree with tom if that one karat diamond can be priced anywhere from 200 to $20,000. i would also say that diamond for end use tend to be 98% consumer versus gold at 50%. so there could be a lot of volatility on the supply and demand characteristics. and thirdly, within the context of the diamond market, debeers and rosa still have chunky market shares. that's 60% combined. so it is a relatively no one fragmented market, which is a unique characteristic in contrast to gold. er with recommending harry winston. we do think it is a unique way it play diamonds. it is correlated to the diamond prices. and it is a diamond specialist company which has mine and very

attractive luxury retail side. we think this is a good way for people to buy. >> oliver, i didn't even know until i read your stuff that they mined. i thought they were selling high end jewelry. you think the mining jewelry is 60% of the value of harry winston. >> that's right, brian. it is a mining company and started out as a mining company. they do have this jewel of an asset, the luxury retailer, which we know, on 5th avenue. but the mine is a very attractive asset. and i think is worth at least $12 per share. my price target on harry winston is $17. so the correlation is quite strong to the commodity and to the mine. >> tom and oliver, gentlemen, both, thank you very much. we will have more diamond discussion, i'm sure, at some point. >> speak of diamond, this is one that everyone is talking about. angelina jolie's engagement rock. jewelry designer spent a year creating the emerald cut ring which brad pitt used to propose. the stunner is worth about a half million dollars.

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