tv Street Signs CNBC May 16, 2012 2:00pm-3:00pm EDT
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are facebook ads worth it? gm says no, ford says yes. who's right? we debate. and herb's favorite stock this year, jc penney, getting crushed. will herb make a comeback, mandy? >> we certainly hope so. first let's get to steve liesman with the minutes. >> mandy, thanks. recovery faulters. remember last time we had a change it was only a couple. now it's back up. however, only one member is supporting or assuming additional qe right now. here's the change, folks. we had a few supporting here if the economy falters in january. that's what caused the selloff when the minutes came out in march. now that number's back up to several. don't make like you understand this because those assuming more qe, those building it into their
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assumptions for the balance sheet went down from a few in january to one in april. there was of course no count in march because there was no forecast from the fed on that issue. so that's an important change the market's going to have to take account for. more support if the economy falters, but fewer building it into their assumptions on the balance sheet on the fomc. other headlines, the european financial crisis cited as a significant risk to the u.s. economy. there's also significant concern about the u.s. fiscal policy and repeat of the august debt ceiling debate. we brought you that story about fomc concern last week. i want to show you what the meetings say. if agreement is not reached on a plan for the federal budget, a sharp fiscal tightening could occur at the start of 2013. several participants indicated that uncertainty about the trajectory of future fiscal policy could lead businesses to defer hiring and investment. that's an illusion to what they think happened last august. the numbers still see economy expanding moderately, the labor market improving. the unemployment rate though
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they believe will be above what they judge to be the long-run level for some time. they did debate how much of the unemployment is structural versus cyclical. that is how much the fed could do about it and how much it could not do about it. there was a lot of uncertainty mentioned about the impact of mildwetter and cited as a reason for not doing anything, which they did or didn't do in march. inflation threat was seen as temporary. they did discuss this interesting issue of telling the public certain economic triggers that might cause the fed to change policy. and they debated the use of policy rules, which you've seen a lot from janet yellen and other members. one note lacker decented on the overall meeting and also decented on agreements between the fed and mexico because he does not believe the fed should be involved in foreign policy. also made a tinker on some of the meetings. they made them all two days for the rest of the year and changed when the forecasts come out. don't worry your heads about that. >> we won't, thank you very much, steve. let's find out how the markets
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are adjusting to the fed minutes and also try to make some sense of the very conflicting news that we got earlier on greece. first of all, bob pisani on the floor of the nyse. any reaction from traders at the minute? >> magic word, qe-3. several members mention qe-3 support if it falters. i don't know if you can put up an intraday of gold. gold was 1534, maybe. i saw a pop there to about 1543 or so. there's gold. that's what i'm talking about. right there. see. there is your little qe-3 trade. of course that's a play overall on inflation. other than that fairly modest moves here. bank stocks move just a little on that news, mandy. >> quickly get your reaction. earlier on today there was the conflicting rumors or reports, whatever you want to call them, about whether or not the ecb was going to halt funding to certain great banks and then later a report that the ecb continues to support them. we saw some gyrations in terms of risk appetite in the market.
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has that all settled down? >> yes. there's not a lot of news there. bottom line it's a few greek banks, very much need to recapitalize. the greek banking system is going through that process. they're still undercapitalized, but i don't think there's anything particularly new going on today on that. >> got it. keep an eye on it nonetheless. thank you, bob. >> okay. >> let's bring in our special panel to talk the mashlgts, the fed, greek banks and whatever else they want. rob morgan, tom por which he willy, rbc capital markets chief u.s. economist and gerald lipkin valley national bank ceo. jerry, because you're onset, i'll go first to you. as a banker, do we need in the u.s. right now qe-3? >> no. >> why not? >> well -- >> you paused. >> because interest rates are already at record lows. i don't know where they're going to push them down. i don't think business is
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holding back because the price of money. i think business just isn't encouraged to go out and invest. but lower interest rates aren't going to get businesses to invest. right now businesses buy at record low levels. >> obviously a lot of your business hinges on refinancing and mortgages, et cetera. so if there is no qe-3, do you expect a spike up in rates? and therefore be fewer mortgage applications? fewer refi applications? >> i think that even without a qe-3, rates are low enough now to stimulate refinancing, companies to go out and do whatever they want to do. they just don't want to take the risk. >> tom, do you agree with that? do you think companies are not investing because they're just not convinced about maybe the direction of the nation and has nothing to do with interest rates and therefore the fed would effectively be ineffective even with another round or two of quantitative easing? >> yes. i agree with gerry.
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there's a great relationship that typically exists between the level of mortgage rates and mortgage applications. forgive me if i'm repeating myself. i've made this point time and time again. if you look at the standard relationship, they should be strongly negatively correlated. simply means as mortgage rates fall, mortgage applications for purchase should rise, right? we get that. but few view the relationship as it exists today actually see the relationship is strongly positively correlated. mortgage applications are also falling. the potential home buyer is not responsive to already historically cloe low rates. as a result, no, i don't believe in another round of qe-3. having said that, like i like to say, we're sort of paid to tell clients what we think the fed will do. i think if that will continue to muddle along and bearing in mind of course that job growth now is below bernanke's range, i think the odds have to stay at least somewhat high. >> tom, i want to underscore that. the significant change in the language here from a couple to several, i think what that means is if you think this economy is going to underperform, if you
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think it's going down, it means you can feel more secure that the fed is going to come in and do quantitative easing. and the big shock last month, the reason why gold sold off, the reason why the dollar strengthened, the reason why stocks sold off is because if it was just a couple, then you can't bank on qe-3 if the economy falters. >> that's exactly right, steve. so i would say we have a checklist of things we're keeping track of. one of them is bernanke's job range, which again over the last two months we're now below that range. the other fact is headline inflation is probably going to be softening up. headline inflation over the next several months will dip to 1.5% and lower than that. will get people talking about deflation, wrongly talking about deflation, but they'll talk nevertheless. the other point and i think this is the most important point, how can the fed possibly justify qe-3 with equities at 1350? i don't think they can. you would need another pullback in equities. when you had twist last time, equities were actually at 1200.
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so think of it from this perspective, you basically need a 10% pullback from where we are today. that may seem like a lot for some people, but remember one thing, we actually fell 17% in 17 days last year. so not such a high hurdle. >> and talking where the market is right now, rob morgan, what do you feel the market is assuming right now with regards to qe? and taking into account the minutes from today, what is an investor to do? >> well, mandy, i think that most u.s. equity investors don't think there's going to be anymore qe. i would agree with the previous speakers. you know, the first quarter run in the s&p 500 up 12%, that was too far too fast. we think this consolidation we've seen has actually been pretty healthy and allowed earnings to catch up with the prices a bit. now, just in the last couple days we've broken below the 1350 to 1400 range on the s&p. but it's very oversold. and we'll probably continue to muddle along in this consolidation phase until the next earnings season, which is
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probably going to be another blowout earnings season i would guess. that would be the catalyst to continue to move upward. >> gerry, the fed has two mandat mandates, maximize employment. we cannot maximize employment until housing and construction get better. >> right. >> i'm looking at your website. a mortgage under 4%. >> correct. >> you know, yeah, you're more regional, but from your point of view, yes or no, housing is improving? >> it's improving, yes. not at the rate that we would like to see. most of the change that we're seeing in housing are people refinancing their homes, liquc kwid liquefied. the price of homes have gone down as far as in my opinion they're going to go. we're starting to see some upticks. we're actually starting to see.
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>> sully doesn't qualify for 4%. he's more of a guy with an 8% mortgage because the inherent risk of a guy like brian. >> no. >> i just want to be clear. >> i wouldn't get a loan. >> he's not going to get that. >> so you're right. >> we do see tremendous activity. it has not slowed as far as the refinancing boom so to speak is concerned. it has been going on now for the last two years. month-to-month it varies maybe by 100 applications, but that's less than 10%. >> how about the quality of those applicants? are they coming to you with better balance sheets from a year ago? >> a little bit. we're finally a little higher pull through on our applications. in fact, they just asked the head of our mortgage department that question this morning. and it's up about 3%, 4%. >> are they getting easier? >> no. i said they're showing better credit background. people over the last couple of years have been paying down on their debts so they have less other debts that they have to
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carry. makes it easier to pull through. >> mortgage applications were up over 9% mainly driven by refis. >> tom, i want to ask you this, i have this terrifying fear of housing in about ten years from now because of all the refinance activity now. we say it's a good thing, maybe it is. but let's say rates normalize and in six or seven years a 30-year mortgage is back to 7%. and i'm sitting on a mortgage at 4% that i've refied. maybe i'm thinking about moving, but i can't take the mortgage with me. and why am i going to pay another 300 basis points because that's all i'm going to be able to get. i won't move. right. is there a risk to all of this refi activity now? >> there is. let me first say that i definitely love you, you ask great questions. i hate this question. tell me why we got to 7% on mortgages. if all of a sudden because job growth is roaring ahead at 500,000 a month, then it's not necessarily a bad thing. but 7% in an environment where you're only growing 200,000
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jobs, yeah, it probably is a bad thing. that statistic analysis is tricky to pinpoint unless you can tell me exactly why we got to x%. >> thank you all very much. rob, tom, joe, thank you. >> another problem area. the fha. remember them? across all loan categories, 7.4% of all fha loans were in default. more on that coming up. on deck, was i right to be upset over capitol hill's bashing of jpmorgan? and how does my rant -- >> yeah, your rant yesterday. >> stack up with the likes of cramer, santelli. >> we're going to discuss that, play back for you. gm calling facebook a clunker. the pontiac aztec. >> and as we go to break, what data point is this? steve, do you have a guess? this is our mystery chart of the day.
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tweet us. we're going to reveal what chart you're looking at coming up later on in the show. stick around. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language.
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>> not me. i'm not going to take this. he's a dead man. >> he's right. and then there was cramer. you hear it every night in the intro to his show. >> these forms are going to go out of business and he's nuts. they're nuts. they know nothing. >> up next, our good friend, rick santelli's now world famous monologue. >> how many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills? raise their hand. president obama, are you listening? >> and then there's my moment from yesterday. why doesn't congress look into how much money fannie mae has lost? freddie mac has lost? the fha has lost? the post office continues to lose. when's the hearing on whether the post office should go to vegas and continue to lose money every year and is going to need a giant bailout? i understand they're mad about
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the jpmorgan loss, but it was jpmorgan's own money. they're not coming to the taxpayer saying give us money to bailout. they were stupid, they're going to pay the price, the stock got wiped out, dimon may or may not lose his job, who knows. why doesn't harry reed and everybody else dig into the government agencies that are black hole -- most of you agreed with me. some called me a wall street apoll gist. i was not defending jpmorgan or jamie didimon. it appears they engaged in reckless trading behavior and may have tried to cover it up. we don't know. but dimon and jpm suffering. the stock crushed down 10% since last friday. lost more than $17 billion in market cap. the point i tried to make was enough with all the political opportunism on both sides of the aisle. let us deal with a fiscal cliff that is coming. that is hanging over the american investor like an anchor around their necks, mandy.
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>> here to tell us, brian, if whether or not brian is off the reservation or right on the mark, we have our rick santelli, who we heard from a moment ago, and bernstein, center of budget and policy priorities, rick, weigh-in. do you think brian was off the mark, on the mark or off the reservation? >> sully was spot-on. he was absolutely spot-on. you know, once again. it is not whether we are trying to fix something. because we tried to do that 22 months ago when we passed dodd frank. the only thing we should be worrying about with regard to jpmorgan is the cord that may connect them to the taxpayer's pocket, which was supposed to have been done 22 months ago. but congress shirked the responsibility. they passed it but didn't pencil it in. not only is sully right, he didn't go far enough. sully, aren't you even a little upset that the s.e.c., the fbi and department of justice seem to be paying more attention to
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the fact that if you have a trade you can lose money, versus mf where investors basically had their money stolen? >> there you go. the post office is going to lose $14 billion this year and $18 billion for the next three years. what is that, $60 billion. nobody seems to be blinking an eye. jpm loses $2 billion and it's a national crisis. jared bernstein, what do you think of that? >> first of all, i think you have a point. and rick kind of underscored this point. the reason why you need to look into jpmorgan is not because they lost $2 billion of investors' money. that's exactly like you say, brian. the question is, could that loss have been magnified such that the taxpayer would again be on the hook? i'm telling you, now, we don't know all the facts yet, but i think a clearer look at the facts suggests that's entirely possible until we get this dodd
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frank, volcker rule, capital reserve stuff in place so we can be sure that doesn't happen. when you have the fortress balance sheet, greatest risk managers in the business have this kind of debacle, it could read down to the taxpayer and a very much relative issue for washington. >> jared, jared, jared, i have a question. >> okay. >> at the epicenter -- first of all, i think it was mandating mortgages to people who couldn't pay in the '90s that started the great ball rolling. but otc, credit default swaps, many of these unregulated products, why aren't you recommending your part of the democratic group, you work for joe biden, why haven't they done their homework? why didn't they finish what they started in dodd frank? >> that's a good question. >> come to me and say we needed reform, they did it, but they didn't finish it. >> i can explain that. i agree with the kind of core of your question in the following sense. in order to get dodd frank over the legislative bar, there were a lot of is and ts left undotted
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and uncrossed. many of them what we're taking up right now. we now have to specify whether a volcker rule would actually prohibit the kind of proprietary trade that hedge number two, the hedge on top of the hedge that exploded for jp. we should have done it a while ago, but the fact is we better do it now. >> so who's fault is it then? >> forget about fault. let's figure out -- >> no, no, no, no. >> no, no, no, no. that's wrong. >> guys -- gentlemen, rick, rick, rick. rick and jared -- >> he's got a cheering squad. no fair. >> a, it's a great debate if i could understand what either of you were saying. b, rick has an audience and puts jared at a disadvantage. jared, respond. he's got the crew behind him. >> rick, the question is not about the past. the question is did -- was brian's rant that the government shouldn't be looking at this the
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way it is correct? my argument is that where i understand where he was coming from, the taxpayer was not exposed, it's absolutely correct for the government to look at this because the taxpayer easily could have been and will be the next time if we don't get the regulations in place. >> i agree with that. it could have been larger. it was $100 billion -- rick, i got to take both sides. it was a $100 billion trading position. >> exactly. >> so i get that. we're lucky it was only $2 billion. my point was more to the fact we have all these other black holes and yet we don't seem to be talking about them very much lately. >> we should be talking about the fiscal cliff. you're absolutely right. when you take the stance that john boehner did today or yesterday when he came out and said we're going to cut spending dollar for dollar on the fiscal cliff and extend the bush tax cuts forever, that's not a negotiation. that's basically -- >> why should we negotiate with the same issues that are plaguing europe? why? why should we compromise on the failed spending strategy with no budget, no fiscal discipline,
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jared? why compromise? >> final word to jared. >> okay. the only way we're going to solve the fiscal cliff is if both sides give something. >> oh, i disagree. we need to stop spending, jared. that's the problem. >> rick, you're the guy i want to turn to if i want a rant from the floor of the bond market. >> or tell the truth wildly as we call it. >> when it comes to negotiating a budget deal, i like to keep you pretty far away from that room, probably. >> that's all right. i'm sending those people to washington that you don't like. >> we will agree to disagree. rick and jared, thank you for playing. >> thank you. >> all right. up next -- >> that whole segment is going on the wall. >> yeah. i think that's going to encompass the whole wall and burn all the other rants out. that is the rant to kill all other rants. up next, brian and i were dipping bottles of maker's mark on monday. should we have been opening another famous kentucky whiskey instead? a little 80-proof shot of
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very slightly negative for the dow and s&p. the nasdaq down by 0.5%. we were in the green earlier and got a pop right after the fed minutes, but clearly that's been lost. brian. earlier in the show we asked, we begged, we pleaded for you to answer the identity to our mystery chart of the day. so can you name it? well, it impacts just about everybody. here's the drum roll. it is housing starts going all the way back to 1960. big shout out to reuters and scotty for this data. housing starts rose more than 2.6% last month. signaling more signs of a recovering housing market. but you can see, mandy, huge big drop, climbing slowly and steadily back. >> you can see it clearly on the chart. i'm dubious as to whether housing starts is necessary. we have to clear the inventory we have. in the meantime time for today's sunshine stock. finding it in the bottom of a bottle. the maker of alcohol brands like
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jack daniels and southern comfort is hitting an all-time high today. that stock trading at levels not seen since it went public in 1968. do you think possibly people drink more in times of economic uncertainty? >> yeah. and drink more in times of economic uncertainty because they're flush with cash they can buy more bottles. that was terrible. coming up -- all right. you heard our sunshine stock. but next, a titanic disaster du jour. has jc penney hit an iceberg? that's herb right now, by the way. >> gm also not liking facebook for outspending. will they be the first of many major advertisers to ditch the social network. is facebook simply too big to ignore? we'll ask ford's marketing chief. stay with us. or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community.
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apple placed a d-ram, memory order with a bankrupt company in japan. they're a competitor to samsung. apple used to buy from samsung, they still do. but micron is in talks to buy elpita. micron gets apple as a customer. thus micron stock is up. did you follow that? >> i followed that. i'm sure you can as well. technology a big part there. >> a bethlehem, pennsylvania, company. fda recommended approval of a home testing kit. the vote was 17-0. it looks good for approval. it's not approval, but a recommendation. 17-0. >> staples is another one we're watching. >> sales came in a little light at staples here. we talk about europe, why do we care? staples is talking about europe. some european issues hitting the name. again, europe does matter even to individual stocks.
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>> i think they also suffer from the syndrome that best buy has where they use it as a showroom, i'll have that and that and then go and buy it online. tough for those kind of businesses. speaking of greece, we've been talking a lot about greece today. what's the latest on that? >> well, i want to bring up the chart of national bank of greece. the adr that trades here. $1.54. down 10.5%, mandy. this was a $41 stock. >> kind of tells the whole story. >> three years ago -- it's the biggest bank in greece. >> uh-huh. >> i think one stock sort of exemplifies what's going on in the country. >> it really does. >> all right. disaster du jour time. sorry, herb. i understand herb apparently watching the show from italy. >> but he's watching us in italian. >> all right. jc penney getting hammered after reporting huge earnings in sales miss last night. stock posting worst drop in 20
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years. no offense, herb, but listen to what you had to say about the company in december. >> herb thinks jc penney is ripe though for a turnaround. and even a new name. a new name, herb? >> well, the new name as we say is jc penney which we are going to call jcp. it's my number one prediction that we say jc penney essentially is going to be one of the hottest, hippest turnarounds once they rename this company. i'm putting all my chips on new ceo ron johnson. >> okay. i guess the question is whether or not jc penney can be saved. do we have the quote that herb actually gave us at the time? put it up on the screen for you. >> yeah. herb is watching the show and wrote us an e-mail. >> there we go. as for jcp, guys, it's only may. >> founder of the research retail firm, is herb going to be caught flat footed on this one, do you think? >> i'm with herb. we should change the name.
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we should change it to mud. if he was there last night, he would have seen the same thing i did. ron johnson, michael francis, mike cramer, they looked like the guys to change retailing in january. last night they looked like three badly dressed guys at retail amateur hour. it was awful. >> if ron johnson can't turn it around, he's got a pretty good track record, who can? >> i'm not sure anybody can turn it around. when you miss sales, down 20% on sales, miss gross margin, nobody thought gross margin would be down except for me i think. they were down a boat load. they did a great job on shipping out expenses but we don't know how that's going to effect it going forward. >> i'm going to play herb. >> feel free. >> listen, herb is a lot more right than he is wrong. >> not on this one. >> it's only may. it's one quarter. how can we extrapolate out from one bad quarter at jcp? >> we can't. i think it's a 50/50 deal if this works. if it does, it works in about six or seven yeeshs. who's got that investment time
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for a horizon? >> investors aren't going to wait six or seven years as you say. what would you do right now? if you were in charge instead of ron johnson, what would you do? >> the fact they've gone completely away from promotion is never going to work with the moderate customer and the customer over 45 years old. if they're willing to walk away from that customer, fine. i don't think they can and be successful. i think they have to do something to invigorate that customer. i don't think advertising will just do it. i don't think they can get them in there and get the sale that way. they need to put some sort of promotional cadence back in. if they don't, they'll be down 40% or 50% on black friday. they'll be down 40% or 50% on super saturday. >> i interrupt you because i want to dig into the point you made. because i think this is maybe key to the jcp story, at least to me. they spent 30 years training their shopper to use coupons. ron johnson wants to basically
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do away with coupons, go to the everyday lower price strategy. can you retrain or untrain a customer that you've been beating over the head with a message for 30 years? >> sure. you can wait until they grow up and die. and you can maybe in six or seven years retrain them. like i said. but in the short-term it just probably can't be done. and really do we need another tjx, ross stores? they're doing a good job in that space already on everyday low price. i'm not sure we need another one. we've got plenty of retailers in america. we're way overstored. we don't need somebody that's moving into a new space that's already fully occupied with companies that are growing pretty darn well in pretty good space. these guys have bad real estate in about 400 stores. they have a lot of cutting back to do, i think, before they can ever grow again. >> well, as herb says, it's only may. jan, thank you very much for joining us. >> thank you.
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>> we have a market flash now. so let's get to brian shactman with the realtime market flash. >> following the conversation, very interesting, jc penney hit a three and a half year high on february 9, 2012. and you take a look at 20912 highs of best buy, jc penney, sears holdings and see how far they've fallen since then. i don't know if we have the full screen for you to show you. take a look at that. again, these prices aren't totally updated based on current prices but you get the gist here. down 30% plus, and jc penney isn't the worst of the bunch off 2012 highs. sears down 39%. these were darlings back in january. no longer. >> darlings out in the cold. thanks very much, brian shactman. >> by the way, i was talking to him in the cafeteria to brief interlude, we had brian sullivan on the other day, there's too many brians on television. so i think i'm considering changing my name to beta global conflict. just thinking about it. >> okay. >> beta global conflict.
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[ male announcer ] every day we help students earn their bachelor's or master's degree for tomorrow's careers. this is your moment. let nothing stand in your way. devry university, proud to support the education of our u.s. olympic team. welcome back. i'm sharon epperson at the nymex. oil prices have closed here below $93 a barrel. the lowest close we've seen since november of last year. two weeks ago oil prices were at $106 a barrel. this has been a dramatic decline in the price of crude oil. keep in mind as well, all things could change in the matter of a week. november 23rd there will be
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talks about the nuclear program for iran in baghdad. a lot of folks are eyeing that and say that we could see more price volatility when geopolitics comes back into play. bill, over to you for more on what's coming up on the "closing bell." >> coming up at the top of the hour from post 9 here at the new york stock exchange, an exclusive interview with meredith whitney. we'll get her take on jpmorgan's trading loss and whether that has created a buying opportunity in the stock. plus, we've got the head of a women's right group demanding that facebook put a woman on its all-male board before it goes public. and billions in tax cuts are set to expire by the end of the year. does that mean investors may seek a spike in dividend payouts before their tax bills are raised? we'll get to that coming up at the top of the hour. maria and i look forward to seeing you then on "closing bell." back to you. >> bill, thank you very much. take a look at shares of mattel. they've been on a tear year-to-date up better than 15%. the toy maker seeing strong demand for its barbie brand.
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>> this comes as one of the world's biggest barbie exhibits gets underway in croaticroatia. they have all sorts of barbies. >> there's a nun barbie? >> shares of chipmaker nvidia has been struggling. but the company has sky high hopes for the cloud. jon fortt is in silicon valley with an exclusive with the company's ceo. >> if you want to design yourself a barbie doll, you'll need a graphics designers. we're going to talk about the cloud now with nvidia founder and ceo. you made an announcement yesterday about the vgx platform. this will allow a different scale. how big a business opportunity is this? and how long is it going to take you to scale it? >> this is a brand new technology that we introduced yesterday. we call it the nvidia vgx makes it possible for virtualized
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desktops to be accelerated by the gpu. you have your powerful workstation right there in your hand. >> so that means the pc is actually in the cloud, but because of the graphics technology, it's able to stream to your screen like it's actually there in front of you? >> exactly. so it's been added into our server and cloud. we're on stage with cisco, cisco, ibm, dell, hp, all signed up to do this. now you can have a really high performance pc experience right there from the cloud. the customers want to address are people like power users, knowledge workers, people who have a need for a high performance pc, but would like to be able to use their pc in the cloud so that they can enjoy their mobile device where there's a tablet or android device or whatever happens to be. >> one more question i want to ask you about mobile 28 nano meter problem across the industry not able to get supply. how are you doing say with the
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htc 1 not on 28 nano meter and how will you be able to grow that? >> outside of the united states all of the htc 1 xs are based on a 20-nano meter low processor. 28 overall demand is surely greater than supply. but we're past the bottom now. last quarter was our bottom. and month-to-month-to-month supply's going to improve. from this point forward i think we'll be in good shape. >> jen-sen, thanks. the cloud the big deal here. >> thank you very much, jon. the facebook fight is coming up next. gm is pulling its ads, but ford is all in. who's right? who's wrong? we'll debate that. >> and wait until you find out how much this diamond went for. it's a rock fit for a queen. our game of thrones jewelry edition continues.
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ipo this summer. jpmorgan and bank of america to lead an initial public offering for the fragrance and cosmetics company that could value it between $6 billion and $7 billion. specific terms of course have not yet been hammered terms, of not yet been hammered out. we did tell you some time ago that coty was considering an ipo. now sources say that they have attacked the underwriter for that offering, which could be the larger offerings. again, offering the company at 6 to $7 billion now that it is no longer in pursuit of avon. coty had revenues last year of about $4.1 billion. it's still smaller than avon. if it should reach that valuation target, it would be roughly the same size in terms of market value. back to you guys. >> thank you very much.
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for the latest installment of that story, thank you, david faber. gm is pulling their ads from facebook. they are not alone with the lackluster results. other companies say that the ad model does not make them enough money. but ford is sticking by the marketing and it is ramping up the ad buys there. jim farly is with us and todd hazelton. jim, let me start with you. why do you feel that facebook ads are working for you when gm femt that they didn't? >> well, ford we launched the explorer on facebook and no doubt about it it works for us. but you have to do it differently. facebook is new media. it's not like a super bowl spot and you have to execute the advertising differently. but when you do, it works great. >> do you feel, therefore, that gm was just doing it wrong? >> yeah, they are. and i think jim is right on point at thinking about it
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differently. facebook you have to build your brands slowly over time. getting a 13-year-old to like your brand, he's 17 and he's asking dad, i want a ford. especially with my generation, as we gravitate away from tv and those ad spots, i can control what ads i want to see, click away on the ones that i want to see and then you're targeting the right people. >> the click book rate is .05%. i think the math out of a million people, five will click. some accidently. that's a terrible number. >> that's what -- >> it can't show any contraction. >> exactly. but facebook has the potential to move forward and grow these numbers, especially as they move into the mogul space and we're using our smartphones more with gps. >> jim, another question for you, assuming that you're advertising in other places and
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online sites, does facebook work any better for you than those other places? >> we've seen some really dramatic results. just the last conversation, if you measure in click through, you're measuring the wrong thing on facebook. i'll give you an example. we did the mustang customizer. it's a niche. we don't sell a lot of it. but we decided to engage people with mustang and we developed this kuftize customizer where people could customize their mustang and they could vote on what is better. in one day we had a million likes and engagements. people are sharing it with their friends. we then went out and bought advertising on facebook to drive people to the customizer and the traffic was the same as a super bowl spot. if you're measuring it on click through, you're really not measuring the right thing on facebook. >> jim, i get you.
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congratulations on that. does that translate into sales, which is the entire point of marketing. >> well, absolutely. we have really been very excited about the launch of explorer. you know, normally we would go out there, buy a lot of network tv ads. but when we launched explorer on facebook, we had almost a 100% lift compared to normally paid search or even a tv ad. it was dramatically different results. >> here's something we're going to throw out at you. obviously people are questioning the sky high valuation in light of the questions that have been brought up about the ad model. so we were thinking, are there other ways for facebook to make money? for example, charging $5 a month user fee. will that work? >> no way do i ever see that happening. facebook has always said, we're not going to charge.
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that's why we have advertisements. location-based services, gps on your phone, walking down a block and -- >> even if you pay to opt out of ads. >> i wouldn't pay $5 to access facebook. the point is they are giving you ads that you want. and they are nonintrusive. it's not exactly like going to tv where you're getting an ad for something you don't buy any way. facebook changes that up and another thing they can do is take 30% or boost their presence in their new app store and draw in new developers the way apple has. >> jim, mandy and i mean this with all due affection. is tv still alive? we like our jobs and we'd like to you keep advertising on the nbc platform. is tv still a place for advertising? >> it is but you have to do it right. look at what we do with "american idol" and at ford. you have to integrate the product itself.
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you have to have the talent using product and advocating. you have to use the talent at ford. so it's just, frankly, the way you do it, it's got to get the most out of investment. there are a lot of interesting new things at facebook. they are teaching us how to develop a socially connected car so the car knows kind of where your friends are, it checks in. i think that's a new opportunity for them and for us as a company. >> jim, thank you so much for giving your point of view. todd, thank you for coming in as well. be sure to catch a special edition of "power lunch" tomorrow on facebook. just hours before the company's ipo is priced for friday's trade. the social offering is at 1:00 p.m. tomorrow on cnbc. we're going to go to a quick break. do not go away.
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