tv Fast Money CNBC May 17, 2012 5:00pm-6:00pm EDT
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right now, 1.70% on that ten-year note. >> a lot of that triggered about worries about greece and spain with a downgrade of 16 spanish banks. stay with cnbc tonight and tomorrow for continuing market coverage of facebook and much more. >> good to have you with us. >> nice to be here. >> that's it for "closing bell." "fast money" starts right now. we'll see you tomorrow. is facebook overhyped. >> some breaking news on facebook. >> facebook euphoria. >> facebook ipo baseball caps. >> everybody i know is big with facebook. >> nook. >> facebook. >> facebook. >> zuckerberg. >> mark zuckerberg. >> facebook fever is going on. >> should i buy facebook? >> facebook. >> facebook. >> facebook. >> facebook. >> facebook. >> facebook. >> it is finally here, the facebook ipo pricing at $38 a
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share, valuing the company at more than $100 billion making this the biggest internet ipo ever! all right. we're volking obviously, but there is a serious question here, and the question is do you buy this ipo tomorrow? >> i'm taking this off right away. >> does that -- does that mean you wouldn't buy it? >> wouldn't buy it. no options. no earnings. it's overhyped, number one. we don't know. they have not had any earnings. i want to hear these gentlemen on a conference call. i'd like to hear what management has to say. i want to hear what the cfo has to say. i want to hear the answers to what the story is going to be when they are challenged by analysts. there's no options to protect me on this. listen, we'll get to the market in a second. i think the market is in as vulnerable place tonight as it has been since the fall. facebook's coming out at 11:00 tomorrow morning. i don't know what the damage in the tape is going to be by that point, but it's not going to be
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facebook that i'm going to look to buy tomorrow morning on what potentially is a selloff. >> joe, you can't imagine that it could be a pop in the market. >> it could be a pop. >> could have these things. only talking about short term here. talking about tomorrow's effect. we're talking about what people are tripping over themselves to get. that's your issue, not buying it. >> there's two separate questions here. first, if you get an allocation at 38, do you buy that allocation? i'm sure many people whoever has the allocation has it right now, if they have already bought it, but if you have to buy it in the after market after it's popped, do you buy it then? do you buy it up 10%, up 20%? >> you want to see the market absorb and play out just a little bit, so if you didn't get it pre, no. >> exactly. >> you wait for the market to absorb. >> you don't buy facebook if you think it's going to contribute positively to the overall market themselves there's plenty of things you can buy without buying facebook. >> we all sat around this table and didn't buy linkedin so
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there's a difference when you look at these names. they can accrue decent amount of value for the investor in the long run, even if we disagree with it. it's an untold story. we don't know what it's actually going to be. >> that's the point. >> i'm going to keep this on. >> you are? >> i like it. >> it's nice and toast. >> i like the stock. >> better than -- >> you will not like facebook in the after market. >> you would? >> i think what's going on here everyone is getting their rear end handed to them in the marketplace and now they are a valuation expert on facebook this. thing has 100% revenue growth, 70% grossing margins, 47% ebit margins. nothing you -- >> 100% revenue growth year on year. but quarter on quarter there was decline. there are cracks in this story can you not ignore when this thing is priced to perfection. >> i'm the only one wearing the hoodie. only one who will buy it. >> first print, if it's a 45 print, 50 print, are you going to buy a 50 print? >> we'll wait. >> all right.
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you going to buy a 50 print facebook. >> you wait and watch that opening print. you watch where all the buyers chase, trip over themselves and then you watch that little normal pullback after about an hour or so where people just settle and they get bored with the tape. it's a friday, and then you see where it sits >> i want to go to michael on the options desk. we did not buy into linkedin which is trading above where it ipo eid at but also on this desk we're not buyers of pan doro, of zynga and groupon and a lot of other stocks that didn't do so well. >> that's exactly right. >> google is a name that traded up from the ipo price. obviously linkedin did as well. if you take a look at all of the internet and internet media-related companies that ipo eid since january of 1999 you'll see a very distinctive pattern and that is you had a lot of better opportunities to buy them and in a lot of cases those opportunities ended up looking pretty bad when the stocks traded much, much lower, and i think that really everybody does have -- have an options trading opportunity right here.
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you have an option not to buy it. an option to wait and see what is going to happen, and if you need to trade the options, you don't have to wait that long because they are going to start trading a week from next tuesday. >> right to. that point, if you take, for instance, linkedin even, linkedin which has done so nicely in, ten days after the lockout period the stock traded at an all-time low of $59 a share. going out today somewhere above $100. plenty of opportunities to pick and choose your spots. >> and a massive amount of stock is coming on the market. >> right. >> in the three months and then in six months so i think that could be an opportunity to get in. you don't have to jump in tomorrow. >> you're the contrarian for us tonight. the hoodie is in the mail. what's your take on facebook here? >> why are we valuing it at $100 billion, sounds completely ash trar toe me. a great company and the only logical comparison is linkedin because that's the only one that we're selling here, build a network and the more of the network we build within facebook the less portable is becomes, yelp, groupon, pandora, doesn't have anything that smacks of that. not only does it not have
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options, no technical analysis. you can't chart. it just like throwing a dart. it's just like scrambling. >> i'm a paid subscriber. >> that's fine. the way the stock has come back to me, it's fine. i do myspace personally. >> does anyone pay facebook any money? that's another question. >> i don't know yet. we'll see. >> let's -- let's get the lowdown from the reporter who broke the pricing story before any other news sore. kate kelly joins us from headquarters. take us behind how this deal came together. i would imagine that in terms of coming to agreement on a price of 38 that the market action today actually had an influence on that. >> yeah, absolutely, melissa, and i think this thing was, look, obviously in active discussions all week. refiled the range up to $38. i think there was talk with investors this morning about a price as high as $39. we were even hearing whispers, hey, at this rate maybe they go to $40. it's a nice round number. there's a lot of enthusiasm. one thing people were pointing to as well is the fact that
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google shares have really rallied in the last few days while apple shares have taken a hit. that tells people two things, or at least those that i talked to. one is that google reflects the enthusiasm in the investor community for facebook, and then on the downside, that apple is getting removed from portfolios to make room for facebook, all of which are bullish sounds. things in the tea leaves that the underwriters in the company were looking at. at the end of the day i'm told $38 was sort of the operative number for most of today. yes, they took people's temperature at a higher level. of course you would, but you need any deal like this to be oversubscribed in order to make it happen, and, of course, they want to see a pop tomorrow, but just the right size. they want a 10% or 15% pop. having said that, you know, i was at the robinhood dinner earlier this week talking to a lot of people with facebook, and i met one guy, a current investors, not actually selling shares in this process, and he said, one man's prediction, he said i expect them to price at 38 and open at 48. so it does feel like he's speaking for a lot of people i've talked to that they are expecting at least a $10 pop and
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maybe beyond. let's face it. people seem to love this name, even though you guys hate it. so, anyway, those are some of the factors that went into play today. >> i don't -- listen, you opened this with are you buying the stock tomorrow? i don't hate facebook. >> you don't hate it. you wouldn't buy it tomorrow? >> i agree with what keith is saying in terms of growth potential. i just think it's foolish tomorrow to step out in a marketplace that's giving you tremendous amount of opportunities and a lot of names that are really oversold right now, to go pay $45 for facebook when you have no protection, as i said before, and please don't go put a market order in. at least put a limit order in. there are plenty other things you can buy off of facebook. i actually put a trade on. we'll talk about it in a minute off of facebook on something that's beaten down. >> right. okay. kay kelly, thanks so much for that story, and let's talk about the action overall in the markets. pretty weak here, closing close to the lows of the session. pronounced weakness in technology and financials. the nasdaq closing down by 2%.
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what's your take as we drifted closer to the close? >> so much negativity coming from over in europe. one call that came out late in the day kind of seemed like it was an absolute bottom call, a big firm calling to short the consumer discretionaries. i think you look at market here. definitely oversold. i think we look for a bounce tomorrow. >> it was the goldman call, to be clear on this, and we bought it. they said -- goldman sachs said buy the stock market in march. i don't know who made that call there, but we know who made the short the u.s. consumer discretionary call today. that could be the bottom, at least in the very immediate term. growth is slowing. we're deflating the inflation in commodities. we've had this call going on since late march. this is not new. the vix is up 67% from that level, and the s&p is down 8. you can't freak out when everybody else does. >> does it feel like a bottom is being put in place when jpmorgan is trading down 4%, bank of america down below the $7 mark here and technology weak? >> no, it doesn't, but if you look at the cluster of supports
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we're getting into now, look at the levels. 1305, right where we closed at, a retracement level, 1295 libya bottom, 1285 fib retracement and 1275 egypt bottom. an awful lot of supports, awful lot of supports right here so bigger bang for your market. unless the whole market totally dissipates and falls into the abyss, maybe you take out a flyer, you don't go all in, but maybe you take a little bit of a gamble here on something small. >> i am looking to buy names on the consumer discretionary call, added to my starbucks long, love that name. sjm smuckers, added to that as of the end of the day also. i think on some of the select discretionary names, some are oversold and you begin to take poxes. >> i want to get back to facebook. our next guest says though he expects a lot of volatility from facebook off its openio, it's still a long-term investment. joining us is the managing partner at millennium partner, value partners. the firm has a $200 million stake in facebook through secondary share purchases. sam, great to have you with us.
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>> thanks. >> have you gotten an allocation for shares at the allocation -- at the offering price, 38? >> definitely put in an order, a material order. feel really confident about the long-term opportunity here but haven't our allocation yet. >> you're willing to buy at this point? >> absolute. >> i why do you think it's such a long-term investment, and why don't you believe there might be a better entry point down the road when the lockout period expires? >> sure. so for some reference, we've been an investor in the company for five years. we think of this as a ten-year horizon so certainly five years from today so i heard what you are said. i wouldn't try to trade this either and wouldn't enter into it in the public market, but what i would do is recognize the risk return dynamic associated with facebook. on the one hand a comparatively low risk advertising business that generated $2 billion of ebitda that will generate $5 billion over the coming three years, swoe that you have a base level of value to the platform, but what you have here is a myriad of options that drive significant upside associated with this, areas like modernization of international, like mobility, which isn't an
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issue of if. it's an issue of when facebook decides to monetize that. there's f-commerce, and other areas where this company can drive significant growth, like credits. >> right. >> i mean, if you look -- does it annoy you when people compare this to other stuff just because the other stuff is there? yankering of the valuation, people comparing it to google i? look at the metrix not in the area code of google's current structure. does that annoy you or not? >> so i think increasingly this whole ipo process is one that's educating global investors as well as global users as to the value of this. when we look at things like google there hasn't been a second stream of revenue that's generated double-digit contribution to t.on the other hand, if you look at facebook, as young as it is, the payment element, think about visa, an $80 billion market cap business, significant opportunity in all the other streams. so, yeah, it annoys me if people think about this short term on the one hand, but on the other and there's significant long-term opportunity, and i
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think over time this process will be one of educating investors. >> completely agree with you. i don't want to buy the stock tomorrow. i want to wait a while. i will buy it eventually, but what i would like to know about, and obviously you know better than i is management. will they be serial spenders? will they be serial acquirers? what can we expect from this management? >> yeah. so, a few things. first of all, there have been many precedent situations where we had core management with some degree of control that have led this long-term driver of where the value comes from, so amazon is a perfect example where you have this difficulty of near-term financial performance on a quarterly basis relatively to long-term visionary opportunity. so i look forward to that element, and mark's influence on that. on the other hand, i also look forward to how this management team uses its data to make acquisitions, like instagram, because there's nobody in the industry with better data than this company does on the trajectory of the next generation of things. and last, there's plenty of liquidity associated with this stock, so if mark does something or this management team does something to let the
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shareholders down, they are going to use that liquidity as an opportunity to exit. >> why are you confident that they are going to do that if shareholders are let down in the whole structure of this company is that it doesn't matter what shareholders think and the structure of the board is in fact that it doesn't matter what shareholders think because they don't have to be an independent board because mark has the controlling votes in the company. at the end of the day, the shareholder is really taking a back seat here, no? >> maybe. but if we think about, in fact, what mark has done, that board it actually comprised of significant number of real business leaders who can add to mark and what he's doing. he also added -- >> if he chooses to listen. >> if he chooses to listen on the one hand. look at his actions. he's brought in people proactively and brought in people on the board with more experience than he does. i think, and i'm an entrepreneur myself. i think surrounding yourself with people you can learn from is actually a really strong sign that you want to grow and that you want to learn and want to matu mature. >> sam, thanks for coming by. appreciate your analysis.
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>> thanks. coming up next, trading the bank buzz kill as jamie dimon gets invited to testify before the senate banking committee. stay tuned to hear from an "fast money" friend who was one of the earliest to slap a $100 billion price tag on facebook. much more "fast" straight ahead. a route map shows you where we go. but not how we get there. because in this business,
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immediate will said the floor on the stock already 34 a share. we're below that at this point. granted, there were certain developments and investigations, now the testimony from the senate banking committee. things seem to be getting worse and worse but is this your bp moment? >> i think it is. i was on the desk as the contrarian when the news broke last week, and looking at it now it's one into a terrible market or maybe the market ran into the jpmorgan news. i don't know which one came first really, but at some point there's value in jpmorgan. could it go a little lower? yes, but a 10% pullback? when dimon gets in front of the senate, he'll do a good job with it, explain what he's doing. best management out there, still in my opinion. i think he can buy it here. >> the senate has a way of making people look stupid, including most importantly themselves. >> what's the problem here? >> that's usually what happens and what happens is you're guilty by association, so i want to see what he acts like in front of the senate. i want to see the first congressional meeting of the committee and see what he comes off of. that could be the bottom >> i think jamie dimon is honest to a fault.
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in front of the camera, in that setting, you should not know what's going to happen. you just don't know. if you think you know, you don't know. at the end of the day, a lot of people bought this stock last thursday. we were sitting right here. we did not. we said 36 spot 83. long-term tail line, if that snaps no supports to 28, 29. intermediate term that's where that stock is going. you have volcker rule implementation that comes in july, and that's going to be like a big wet blanket over jamie dimon's head right now. >> you stay out of the financials, trading, what's the revenue and revenue growth going to be? we won't know that answer until july. you look at the regionals and a pnc as an opportunity. i mentioned the other night tcbi, texas capital bank. look there also. >> friend of "fast money" has had a lot to say over the years, but here's why you should be listening to him. >> our next guest says mark zuckerberg, hold on to what you've got in the long run going public will be the right thing to do. you're not serious, 100 billion.
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>> sit on theirhands and go public, i think you could start seeing google-like numbers in the revenues and ebitda and valuations so google $150 billion market cap. eventually facebook is going to hit that if it goes public and stay through it to the long haul. >> that call is almost five years ago to the day. james hasn't aged a day and joins us now on the fast line with his latest take. always great to speak with you. >> hey, melissa, thanks. >> in the next five years, what does it look like for facebook? what's your call at this point? >> my call is going to price at the high end of its range and pop to around 42 and then as viewers or other people on the show have said it's probably going to be choppy until the lockup in 91 days, but i think long term we're going to see over the next five years up to $10 million in earnings. they are going to increase on mobile advertising. they are going to roll out more advertising tools. they are going to roll out to
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china and all the bric countries. think of all the websites with a like button, they are going to create ad sense networks all over the place and facebook credits. you'll watch netflix movies over facebook or pay for music via facebook credits and facebook gets 30% of all those facebook credits revenues so there's so many untapped resources that facebook has not used yet, like mobile advertising is zero right now, so this is going to grow to $3 billion, $4 billion, $5 billion. >> mike murphy. five years ago in the interview you were doing with joe kernin, joe didn't know mark zuckerberg's name. we're talking about valuing this company out five years. technology changes dramatically over five years. isn't about it possible that something else comes along, a bigger, better facebook? >> yes. here's the reason why in 2007 i made that call.
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facebook even then felt like a mini internet. the entire -- facebook encapsulated almost the entire internet in what it was offering, but it was a scrubbed clean internet for advertisers. think about the super bowl ad, on the super bowl advertisers weren't advertising their company urls, they were advertising their facebook pages. facebook has a billion users, half the internet users in the world so there's never been a company like this. >> right. >> never been a medium where you can target a billion people with one ad. so facebook is it. >> jim, you know, facebook smacebook. five years ago you made a great call on facebook when not a lot of people were thinking about that as an investment and right now there's so many extrapolations like what other internet startups could be like a pinterest. where do you place your bet? what's the next $100 billion company? >> i think twitter has a lot of opportunities. do i think -- i'm not as big a believer in pinterest.
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i've tried using it and doesn't excite me in the same way and rush that i felt with both facebook and twitter. i'm fans of both facebook and twitter right now, but other companies, $100 billion is a big number to get to. that's a lot of earnings that has to be generated. i don't see it. perhaps zynga, but, again, there could be a lot of competitors to zyn zynga. i don't see competitors to facebook. >> all right. james, great to speak with you. thanks for your time. let's hit the playbook. facebook options getting set to trade. may 29th is the date. let's take a look at how the options might be priced and how you might try to trade them. mike, give us a little trade school as to what to expect when the options start trading. >> well, you know, it's interesting, of course. there are's a lot of speculation here and a lot of people who will be interested in trading these options and demand to own options will be far greater than demand to sell them. the other thing is ipos typically trade in a very choppy fashion. they trade in a choppy fashion
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up until their lockup and usually after the lockup it gets a little bit more choppy. so this is a situation where the options premiums are probably going to be pretty high. let's use some other ipos as examples. probably the lowest volatility ipo that came out was google over the course of the last ten years. that one traded at 40% annualized volatility, but, you know, almost every other internet media ipo that is taken place was much, much higher. we're talking about 70%. facebook, as big a company as it is, probably isn't going to be trading in that 75, 80 kind of level, but here we're going to give you a little bit of perspective. a three month 10% out-of-the-money put on facebook, at 65%, 75% applied volatility will cost 8% of the stock price, so when you're taking a look at what it's going to cost to ensure it for the three-month period, you're looking at $3.50 for the 10% out-of-the-money put at 40 bucks or so, so that's the thing you want to keep an eye on, and obviously if you own shares, you might want to try to take advantage of that, so it will be
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very interesting. a lot of demand for the options, and we're going to start seeing that in just over a week. >> what's your plan in the figureses, if any, may 29th? >> i think you sell hype, there's a tremendous amount of hype, but i think there's more implied vol in facebook than mike thinks there is, so i would definitely be a seller. you know, i was thinking the first thing that popped into my mind i'd maybe sell a call -- sell a call to buy a put spread and take in some vol on this. i know selling a naked call scares some people on a game like this. i do think it's a solid company but i talked about a replacement to short the stocks. i don't have the guts to short the stock but selling an out-of-money call seems reasonable for me. >> got to take a break. with all the ups and downs in the market recently it may be time to play defense. the head of investment strategy in the americas is giving you plays for protection. stay tuned.
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welcome back to "fast money." we're live at the nasdaq market site in new york's times square. let's get the action on the gap after hours. better than expected first-quarter results. actually lifted the full-year guidance. they said it strengthened norm american same-store sales up by mid single percentage points. you see the pop there, 5.5% in the after-hours session. that is tempting you, mike murphy, to do what? >> it is tempting me. i think the gap here was overvalued, still overvalued, and i don't love this call. i haven't been able to go through the earnings in complete detail, but it looks to me like they manufactured a great quarter. it looks great on paper, but i think if you dig down into this quarter a little bit the gap might be a sell at these levels. >> half of their business is old navy. it's an extremely competitive
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sect of their business right there, so truth be told, full disclosure, i'm with a retail-specific hedge fund. his best bet as you heard me say before is american eagle. without the old navy risk, you wind up shorting gps. >> take the other side of both calls on monday halftime, we previewed the week ahead in retail. i said i thought gone would be the best retailer play. higher after the mark and still go with it. the transition is taking steam. i like what they are doing. >> the next trade goldman sachs saying you should short consumer discretionary stock coming after weaker than expected data indicating slower u.s. growth. you don't like this call at all. >> one of the worst calls we've seen all year. if you look at some of the calls that we've seen at the pressure points, buying tops, selling bottomings, this is old wall street 101. you can't do that. at the end of the day what's happened here with the strong dollar. dollar has been up 12 consecutive days. that's a new record for the dollar. strong dollar takes down the
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price of oil. oil down, takes consumption up. the last sector you should be shorting is the u.s. consumer on this kind of an oil move. >> you're on the opposite side of this trade? >> normally i agree with keith's sentiment when the analysts start jumping in it's time to diversify. the numbers that have come out over the last couple of weeks are slightly better and the best way to describe them is not bad. the consumer, there's a potential for some retrenching and de-leveraging. i think the consumer doesn't feel good right new and doesn't like the stories that he's seeing, so i'm short starbucks. i don't know where my exit is. i'm thinking somewhere around 45ish. >> let's move on to market volatility and continuing european contagion fears. could defense be your portfolio's best offense? joining us now is hans olson, barcl barclay's head of investment strategy in the americas. great to see you. >> thanks, melissa. >> you along with a lot of strategists come on and say if you want to go defensive, you go to health care and consumer staples and dividend payers.
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do you separate those out from multi-nationals with great exposure to europe and some of the emerging markets which may be falters at this point, or does it not matter? >> i think valuation maergts, right, and that's where the best valuations are right now, in the large-cap names. you'redividends. you're getting moats around and you're not paying a lot for earnings or the sales or even cash flow. if you start in the large-cap sector in the u.s. market, that's probably, you know, your first best salvo. >> would you include mlps and utilities as an optimal defensive player right now? >> mlps would be a great way to return income to the investor. hold it for a few years and get most of your costs back. utilities, another great defensive way. you know, an area that has been hit pretty hard that looks like it's beginning to pick up or has the potential to pick up would be materials energy and even industrials. what's interesting is that the -- i would agree with keith. the story on the consumer, u.s. consumer actually is getting
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better. if you look at consumer sentiment through the university of michigan numbers, the heart of the country, that's getting a lot better. if you lack at consumer credit picking up, bank loans picking up, and if you look at the small business sector in the u.s., that actually is beginning to look better, too. that's 50% of private sector gdp so as goes small business, as goes the consumer, so goes the overall economy. >> if you go back to march, i mean, people were saying 4.50 at the pump, 4 at the pump, doesn't matter to the consumer. the groth is slowing on the employment side and gdp has been palatable. if you see that reverse, is there any kind of thesis that you have that incorporates a strong dollar and down oil that gets you much more constructive on not the boring stuff, the exciting consumer stuff? >> we're at this really funky place right now so we're coming out of earnings season and now we're going into headline season and the headlines will be pretty awful for a while so you'll have to come back to really dig into what's going on deeper into the economy rather than sort of the headline flow, and the news out
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of europe for the foreseeable future is going to be absolutely awful, so, you know, we're going to get buffeted by that. the way that we're seeing this is that, you know, we're probably going to grow 2.5%, 2% gdp coming back to the big-cap name, the dividend payers, that's the first right place to start. >> you know, we haven't seen money come into the markets. >> right. >> just as you said, the only money you see is going to dividends since the flash crash. the average retail investor is just totally risk averse and doesn't want to be here. >> right. where do you think. put on your macro hat? where do you think the pullback is bringing us down to in the s&p cash? is it another 5%? i've been saying flat on year is an easy do. >> wouldn't be surprise me to go back to flat on a year, another 4%, 5% from where we are right now. i think ultimately though we end up in the low double digits for the year, maybe 10%, 12%, right, so that's 1400. that's supported by an 8% earnings growth with maybe 13 multiple on that, and, you know,
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it's throw in the dividend, and there you are, but, yeah, another 5% downside would not shock me at all. >> all right. hans, great to see you. thanks for coming by. hans olsen of barclay's. keith, curious. among the defensive buckets that hans outlined, what would be your top stock pick? >> i'd go with health care. >> within health care. >> because it has a consumer discretionary, hospice. again, they are boring. people don't like them. you can make the cheap argument, things that are cheap just got a lot cheaper. i've heard a lot of people saying things are cheap. let's buck up and start paying for things that are cheap and the growth sector to buy is the u.s. consumer on down oil. >> all right. coming up next, apple is nearing fair market territory. how should you be trading the stock? stay tuned to find out. ♪ ed to fi.
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first-quarter results. we do so a pop and cramer will be speaking with their ceo at the top of the hour. we want to talk about apple under pressure today losing $100 billion in market cap in the past month alone. groupon, linkedin, pand dora and yelp also selling off. are investors making room for facebook? there is word that they are sucking the oxygen out of the market. >> let's go with that thesis for a second which i don't agree. i think apple is way too deep in terms of liquidity, but if that is the thesis in play, well, the thesis ends at 4:00 this afternoon. afternoonle is a name that i was in up to 5:04, got cute, stopped out at 5:30, have not been in since. i'm back in apple today at 534. very happy to own it and will remain it for the rest of the year. >> and the stock has declined so it's up by 2%, so you are getting paid a sizable dividend to be in this stock. >> concept of cheapness, drives
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me crazy. at the end of the day this is a cheap stock that does a good job doing what they are supposed to do and competing where it matters, on their own. this stock is oversold. people have been trying to make room for it in in their portfolio. that's the way big-growth investors work. that's a reality and now watch out on the stock on its move back to 560. i bought it in the last week. >> in terms of the oxygen out of the work, just curious. there is a thought out there that if you count all the offerings out on the market, not just ipos but also secondary offerings, $20 billion is what it will top by the end of the week, including facebook plus the allotment. do you think that sucks oxygen out of the room when it comes to the overall stock market because that's what their thesis is? >> yeah. i think that's a great premise. i think we've also hit three different premises on the desk tonight that sucks the oxygen out of the room. just to jump back to the apple premise. >> right. >> apple from the doj headlines around april 10th or so, you saw priceline come in and goggle come in and saw apple come in. priceline didn't have anything to do with the doj headlines.
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>> yeah. >> so somebody was making room for something. >> right. >> so you watch the fund managers, we're selling it early. >> let's dig deeper into facebook's ad model sustainability and sero in on what the company needs to focus in to keep the revenue growth in check. mike borehouse is with a consumer research firm and has consulted a number of leading internet companies including google and yahoo!. great to have you with us. let's say you have a meeting tomorrow with the zuc and you've got your best hoodie on, what do you tell him in order to monetize mobile? >> the number one thing i'd point out to him is what he already knows which is in silicon valley we talk about the hockey stick. how fast are things growing, and he's already achieved the hockey stick with consumers. he's already got the 800 million akoumpts now he's got to work his way up the hockey stick on monetization and i put it together with a friend of mine from silicon valley today. in ten minutes a list of 12 different areas you can concentrate on in addition to advertising.
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and obviously he's got mobile advertising but what nobody is talking about is a third of the mobile traffic is tablet traffic and tablet advertising which is very attractive and desired by many advertisers so they have a lot of opportunities to close that gap between the consumers and the monetizization. >> mike murphy here. news out yesterday or the day before regarding facebook that gm was going to stop advertising on facebook. there was a rumor out today that that wasn't actually true. do you see big companies looking to cut back, and is that a canary in the coal mine for facebook or for any of these internet advertisements? >> well, obviously the gm announcement a couple of days ago was quite the talk up in the valley when i was there yesterday. i think there's something else going on there, something particular to the relationship between the account executives. that's certainly not what i hear from major american corporations. i was at two of the largest studios today, and they are all very interested in what 800 million consumers can mean to
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them. >> right. >> in terms of the hockey stick of monetization for mobile, have any other companies gone up that part of the stick that goes higher? i mean, the rap on a lot of companies is they are not monetizing. why do we beat facebook on the head of this issue when a lot of other companies are unable to do it themselves? >> you're exactly right. quite frankly there wasn't even a mobile advertising world a couple years ago because there were no smartphones. we were talking about little mediocre feature phones so we're in season's training in terms of mobile advertising. not even in the first inning, so i know, i've talked to car advertisers, tv advertisers, film advertisers, cpgs. they want to be where the consumers are. the consumers are moving towards mobile in all areas, not just in terms of facebook. by the way, we should also remember that facebook has great opportunities with consumer payments. it's not just about advertising. a third of facebook consumers want to use facebook credits
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outside of facebook the way we use paypal. there's a lot of opportunities for them beyond advertising, and they are going to do very well in mobile advertising. >> mike, great to speak with you. thanks for your time. coming up next, we're taking a closer look at which companies are set to feel the glow of the facebook halo. we've got those trades right after this.
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when we first launched, we were hoping for, you know, 400, 500 people. we're already at 90 million people. 200 million people are using the service to communicate and stay in touch now. >> 500 million users. >> we also want to make sure the next billion people can get on. >> wow. exceeded his own expectations, so which companies benefit most from the facebook halo? our own jon fortt is looking into networking names and how they may be impacted by tomorrow's much anticipate the ipo. jon? >> a whole bunch of names, want to start off with infrastructure. facebook doesn't allow its vendors to talk very openly
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about who they are using but i was able to tease out a few. intel has done custom chips and sysco's networking gear, data centering gear has been used by facebook and amd bought c-mike crow and thinking about mobile in particular. the study out from npd says facebook has 75% penetration on android phones. people use it 15 minutes a day, but timely i want to point to the cloud here. one of the things that facebook does for pinterest and fab and other startups is drive the sudden bursts of traffic. those types of companies are going to need cloud infrastructure. they could quickly ramp up and ramp down in order to deal with that so the people offering that could benefit, melissa. >> thanks for looking into the derivatives for us, jon fortt from silicon valley. a company that gets 36% of its revenue from facebook. mike, what's the company and trade? >> ticker symbol fio, fusion io. one of the providers jon was alluding to there at the end.
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this is a company that has seen the same kind of explosive growth that facebook has over the last couple of years, but a really good point was made earlier when he was talking about options premiums being really elevated. right now you can sell the june 20 calls, when i was looking at this, for about $2. that's roughly 10% of the stock price. that's how much you would collect against your long stock in just 30 days. 10% in one month. that makes up for a lot of mistakes when you're making directional plays, when you can collect that kind of yield, and i really think that in situations like this, where everybody is really jacked up about what's going on with facebook and a lot of the names associated with it, you want to take advantage of that and sell some of those elevated premiums like we're seeing in this one. >> mike, not only does facebook pop up there on the supply chain as well as apple, so i'm not sure i know, as you mentioned, it was over 30% revenues, but you're not just betting on a facebook play here. you've got some good company and
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two of the most exciting stocks that we talk about pretty much every day. >> that's exactly right. of course, 36% of the revenues coming from facebook at this point, but the valuation is pretty rich. this name is trading at more than five times sales, five times revenues. that's a pretty rich valuation and take a look at how much free cash flow and earnings they have been generating, not much is the answer. >> catch "options action" every friday at 5:00. coming up next, we're trading your tweets right after this. this. it's very important to understand
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how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally.
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coming up next on "mad money," now that facebook is priced, find out your next move from cramer and then the ceo of salesforce.com joins jim. that's all coming up at the top of the hour with the one and only jim cramer. take a check on gold, bounced out of the bear market territory with the gld finishing higher by 2.25%. what does that indicate about the markets, keith this. >> a sneak preview for what could happen for the rest of the market. this is highly correlated to what the u.s. dollar has done, the dollar up 12 consecutive days, a new record. gold down every single day until
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the dollar started going up which happened intraday. massive short squeeze happened in gold and can happen in oil and in the s&p 500. >> is the market's woes because of the dollar's long winning streak here? >> no, but let's just focus on one thing that i'm focusing on right in front of me. the miners that have underperformed. gdx. there's phases to that gold trade where everyone said it should have been that safety bet, the safety outlet. it's not. first, it's sold off with everything else and then it ratchets back up, and that's what we're seeing right now. the second phase, so look for gold to keep increasing heading back to $2,000. >> let's hit and trade some of your twitter tweets. >> i like the fact that brent sold off hard 2.5%. that's a beginning of a trough in oil. i have not liked oil since february. i think the next move that i will make in oil as they begin to acquire some of the names, and would i imagine that the bottom is very close.
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>> all right. here we have a question from paul. does facebook, does that ipo launch lift the entire nasdaq? mike murphy, what are your thoughts? >> i think the nasdaq is due for a bounce and could very well coincide with facebook. i don't know if you can give all the credit to facebook or the ipo so i'm sure a lot of people will so i'll say yes. it can and will lift the nasdaq. >> on the floor of the exchange do many traders think facebook is going to lift sentiment? >> i think it's the only thing that could lift sentiment. >> don't say that. >> we've had -- >> it's dire. >> we had apple. apple is crashing and burning at this point so i think facebook, everyone is looking forward to facebook riding in right now to save everything. >> like a white knight. coming up, a very special edition of "the final trade."
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time for the traders to call facebook's close tomorrow. >> i think it's still a little bit like throwing a dart to me, but i think the euro bounce tomorrow so we don't worry. it gets caught in a market sweet spot and we bounce a little bit and it closes at 42. that's a guess. >> 42. ten seconds to say that. mike? >> 43. >> grasso? >> $1 million. >> murphy? >> 44, five beautiful kids,
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