tv Fast Money CNBC October 15, 2012 5:00pm-6:00pm EDT
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the industrial average. volume picked up at the end of the day. nasdaq up 20 points. setting at 3,064. s&p up about 11%. i will see you tomorrow. have a great night. thanks for being with with us. here is "fast money" right now. investors shake off their case of the mondays. >> get a look at the s&p 500 today. not much worry at all about the looming fiscal cliff. stocks hit the highs for the day. and the wireless wars go global. >> all thanks to a decision to invest $20 billion to invest in sprint. >> will bank earnings keep the momentum going? >> with the turmoil going on in europe there is a chance for american banks to capture market share. >> this is "fast money."
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>> live from the nasdaq market site i'm melissa lee. stocks rally today after the worst weekly drop in four months. take a look at the price action very good in financials. we saw major reversals when it came to apple as well as google. >> those coming late in the day. google finished negative. apple got into the positive. this was a great broad based rally today. when you look at the financials led by citi. take a look at the xlv those big farmer names have continued to produce every week every month. today somebody was out buying 2014, $8 out of the money calls expecting to see more. it was led by the financials. they absolutely were the strong point today. the numbers today were absolutely crushing numbers. not even close and across the board following up with the jp
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morgan and wells fargo. the rest of the market wanted to follow along. >> there was pressure on the market early. you saw technical bounce. we bounced off the level of friday's lows. everyone was scratching their head saying what was the real catalyst. i don't think there were many. >> the retail sales number showed you the consumer which had been played off for being somewhat dead going into the earnings season has life. with fed q 3 china's numbers should be looked at. the inflation data that came out of china and their export numbers were better than expected. this tells you that at least the rest of the world is a little better than they were. china has no inflation to worry about and they can do more. i think the data set up today was pretty decent coming in off of a week where things were oversold. it is a trading range because
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the week before we were looking at the s&p. we are now getting earnings season. the financials can lead the way. i think citi's move tells you that a lot of guys probably see this. >> 5.5% move on citi. take a look at consumerer discretionary. we saw huge runs. wal-mart hitting a fresh i think this is a record high here. >> wal-mart. i'm not sure what to do with wal-mart at this point. i don't know how much up side is left. >> stop shopping there. >> i have. not really relevant. i'm not exactly their core customer. i don't know what to do with it here. we will probably sell upside calls against them. one thing interesting was the oil. that led the market followed oil. >> i think it was oversold on a technical basis. when you saw the market bounce
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it bounced probably its third traunch of bouncing. it was the risk on trade and you saw oil bounce with it. >> what did you say on today's action? >> i think it was really interesting in the financials because on friday of last week we saw call buying. we saw a bunch of put buyings in the sector etf. people were really trying to pick their name. they wanted to bet on individual names. we saw individual names like citi do really well. i think it is right on the money as far as the broad market is concerned. the s&p got the unchanged and a little bit lower today. last week the market was really mushy. when they didn't see follow through they had to turn around. they got long and had a nice ride. the s&p ends up 11 handles today. that is pretty good given how ugly it could have gotten.
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>> and to scott's point this is a stock picker market. if they want to go with the various etfs i think they are wrong. you have to be in the right stock at the right time. you look at something like bank of america citi. you didn't get that out of wells fargo. jp morgan gave some of it back. citi held on. this is a market filled with individuals. bank of america three to one calls trading to puts. my presumption is looking at where they are buying the 8.5 and 9 and 10 calls. >> we saw the financial earnings out. the next of the big banks report earnings. results are out tomorrow morning. so let's get more on what to expect. bob joins us to break down tomorrow's trade. it is always great to see you. >> thank you for having me. >> given what we have seen already what are you expecting for goldman specifically? >> we have goldman at 256 for
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the quarter. what you will see is good fixed income. largely rates and credit. that is not going to be a surprise. capital market will look good. and the key thing is will goldman start seeing changes in terms of the capital allocated to fixed income. if we start seeing that then the belief will be that goldman is on the way to beating the cost of capital and trading. that is the fundamental issue with many of the firms. the changes in regulation may make it impossible to beat the cost of capital. the market certainly believes it. that is the reason why you haven't seen these guys take off. once they are on that point now you have a stock that can begin to move. >> it's karen. i sort of feel like it is not the earnings tomorrow that is the story. what do you think they have to say. you addressed a little bit. what can they say to get people
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excited about the goldman story? >> it's very simple. we're auto mating our fixed income operation. the comp ratio is coming down modestly. we're liquidating some of the merchant banking positions that we have. the equity market has opened up and ipos are coming. now when you start saying that the message is the trading businesses aren't broken and the investment banking businesses are going to post better numbers going forward. that would get the market enthusiastic. they have a very large merchant banking portfolio and built into that are liquidity haircuts. they discount the mark for liquidity haircut. if you have equity capital
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markets that are open then that piece is going to be moved off and the liquidity hair cuts go away as they move piece after piece out. >> if i look at this and just to your point if goldman is number one in fixed income who is your second? how do i gauge this for someone at home looking at what we heard out of citi? >> morgan stanley is a little bit different. morgan stanley has two broken businesses. it has a fixed income business that tremendously under performed. goldman sachs generated about 300 bases points. morgan stanley closer to 185. morgan stanley has a longer way to go. can they beat their cost of capital. morgan stanley they are starting a half a mile behind goldman in terms of the initiative. the other issue is the retail business. they have been so delayed in terms of getting there is
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skepticism in the market place. so citi and morgan stanley both generating above expectation returns in fixed income. and then you have people getting enthusiast enthusiastic. this stock is trading at a real discount. so any improvement and you will start seeing that discount narrowing for morgan stanley. certainly the value guys love this. >> kind of what we have been dancing around is not only is it investor appetite and the ability of people to see bigger trading days. the bank itself. we haven't talked about some of the adjustments in pushing out. do you think their philosophy will change in terms of their return on capital? will they be more aggressive? that is not a good thing to talk about. what do you think? >> they are talking about it but not directly. they are talking about bringing risk weighted assets down by getting rid of the businesses
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with high capital charges. that's going to be some of the businesses that will shrink. corporate bonds will be constrained. and then they are talking about leverage. the only way you can have leverage going up and risk weighted assets going down is i'm going to be bigger in governments and smaller in the low return businesses. in essence they are giving us a metric of where they are going. they are being very politicly correct. they are not going to be the prop trading house that they were in the past but then on the other hand when goldman went public in 1989 this company stood up in front of the investment community and said we are going to constrain trading because we learned from the russian crisis. that is being delivered now just a little bit late from a 1999 promise. >> good to see you.
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let's put our trader caps. with today's big move what do you think the move will be? >> i think a lot of moves have been factors in. probably get another 2%. probably more leverage on the morgan stanley play. a lot of numbers already in the stock price as of today. >> i think it is going much higher. i looked at the options. 125 strike active. they traded more than the month going in. tells me that people's appetite is back. they are seeing what is going on with jp morgan and citi. and they are expecting this to be a big number, not just a number. probably in line with what brad has out there. coming up next we are on the hunt for bargain buys. the stocks closing in on all-time highs. our traders are giving you the best picks for finding value right now. so stick with us.
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unusual activity in the chemical sector. >> specialty chemicals have absolutely been exploding. you are in the petrochemical area where the sweet spot seems to be. we are talking about valuations still very good despite the fact that the stock is up. you get a great dividend yield and today they are buying the november upside calls because the earnings are not during this expiration cycle of october. they are going for the november 55 calls. >> with the s&p 500 only a few
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percentage points away from the high. we ask our traders what is on your shopping list. you have a lot here. a lot of bargains. >> of all the bargains this is a company who has not surpassed the price level at a time when u.s. auto sales were at 40 year lows. morgan stanley got a great note about this. adam jones who indicated that this is not only his top pick but thinks these guys are the way to play u.s. housing recovery. >> pickup truck. >> the f 150 accounts for all their global sales. if you are seeing that recovery this would be fantastic. their em business. in turkey we own them in russia. these guys are exposed but are not reliant on china. all of these guys pent up to the
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luxury brand that is not ford's game. they are in markets like brazil, turkey and russia. >> does gm's exposure make it less attractive than ford? >> i think people have overdone the fallout. we saw luxury auto numbers come back. i think gm is very balanced in where they are going to profit. it is about europe and not losing more money there. i don't think gm will be that far off. >> i'm with ford. tim made an amazing case. i have been in ford for a while. i have owned it at these levels. i believe in the comeback story and believe i will see much higher in ford. >> what a sincere compliment. i agree with him whole heartedly.
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>> i like comens engine which we were sitting here and they preannounced. the stock is maybe a buck lower than that. it tells me that the bar is low. they are going to be reporting earnings in i think two weeks. they have said things aren't great out there. we are seeing slow down world wide. however the stock is cheap. the balance sheet is in pristine condition. the multiple here well south of ten is good to own. it's going to be a little rocky. last time they preannounced. >> huge buying opportunity. >> i think the sharp dip on these refiner names i know they have taken off. i think this is giving you an opportunity whether looking at marathon or phillips 66, any of the other refiner names i like them all right now. i particularly seen papers telling me phillips 66 on this pullback along with marathon
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that somebody is starting to feel like enough is enough. it is pullback in a very short time frame and these have more upside. >> marathon had a deal that was supposed to 15% to 25%. it has come in. basically you have about $5 or $6 of a balance in a stock if the deal garners headlines. it was pulled down by chevron but marathon should be looked at. >> scott nations you are going to financials. >> citi is my best bet. it is still cheap on any basis. the fed is going to do their work for them. they are going to do citi's work and take some of the mortgages off the balance sheet. margins for both citi and bank of america are 40% lower than jp morgan. if they get margins in line there is lots more upside. let's talk about the big
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deal of the day. soft bank striking a deal with sprint to buy up to 70% of the company. steve has been eyeing sprint for some time. take a listen. >> right now went from universally hated to loved. i'm still long with it. >> they can have access to funds. i'm still long the name. when you talk about return to profitability. gain traction back with sprint i would be a buyer again. >> not quite the same outfit. good recommendation, though. what do you do with it now? >> i think you are hitting a bit of a wall here. these deals take time. they are a long process. so if you are buying sprint you are buying on a return to profitability. the mma is a huge kickerer. you should be buying based on the merts. scott nations you saw big ones
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on sprint. >> the option market agrees with grasso. we saw big call sellers in sprint because no matter what happens soft bank will end up with a stake in the company. the market thinks this deal is done, that soft bank will be the buyer because there is a break up fee if sprint goes with somebody else. we saw 25,000 of the february 6 calls sell for .19. the seller thinks the cap is 6.19 and is certainly not going higher than that according to them. it would be tough to see how somebody would come in and match it or beat it. >> would you stick with the stock and sell calls at the same time? >> no. to scott's point a lot of these guys are selling because they are bought. if you go back september 5 and look at the option volume on that day absolutely monstrous volume. they are buying the 4.5s, 5s all
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of which have paid off dramatically already. >> our emerging markets getting ready to stage a massive comeback. coming up morgan stanley's chief strategist reveals what should be on your radar. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account.
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speculation hitting the street that amazon is in conversations to acquire texas instruments. does the acquisition make sense? >> trying to get into the hardware. obviously with the kindle they are committed. the fire and this is something building into the ecosystem for amazon. maybe it is something that amazon has further ideas on what direction they want to go. >> when facebook came out and
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everybody said they wanted to monetize mobile i thought who better to monetize than a plan with amazon. they figured out how to make absolutely no margin and turn around the bottom line with making money off of it in people's pockets. people cover the costs of phones. who could sell a cheaper phone than amazon. i think they are moving hardware more. who is the biggest competition to the ipads? it's kindle. >> isn't that a distant second? >> you are still in the game. >> nobody is lining up around the block to get a kindle fire. >> they have great sales. if one company will be able to take market share and take it in a meaningful basis you have the cloud space. this is huge for amazon. they're making their own ecosystem the same way that apple did. >> i agree. that is what they will tell you. i think it is a bit of a stretch. it is almost as if they claim
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they will be google. i believe amazon is doing things, apple is encroaching nicely in terms of music and the cloud. it is a long way to go for a company that seems to be doing very well without needing to do that. >> right now all amazon needs to do is get people to buy two books on the e reader in terms to make up for the loss. the question is would buying a mobile chip unit reduce the amount of content that they have to sell to get back to the black on each sale otherwise it seems like a lot of money spent on i don't know what. >> i think they are getting into a space they know very little about. amazon is across the board the margins are terrible. the company barely makes money on each dollar of sales. i think they need to clean up the business they are in before
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they launch a new business. as far as texas instruments while the stock was up a little bit puts outdid calls today. there are more puts traded in texas instruments than calls. the six biggest trades five were put trades. there are lots of people, lots of longs taking advantage of the pop. once they figure the news percolates it will come back down. >> this is purely speculation. it is in the market place. that is why we are bringing the story to you. nothing happening right now. disclaimer. let's move on. u.s. stocks continuing their climb higher while the slow down in china remains a concern. the shanghai index has fallen over 2%. let's bring in chief cross assets strategist. it has been steady. >> thanks for having me back. it is a matter of time.
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was the call early? yes it was. we are seeing signs that china is starting to stabilize. you are seeing it from the exports and cement and steel and other areas. >> your call here is to go. this is more broadly speaking to go long em and short developed markers particularly the u.s. in order for us to believe there are signs of stabilization happening do we also have to believe that the u.s. market is breaking down? do these things have to happen? >> the u.s. doesn't have to break down necessarily but we are facing the election and a fiscal cliff and these items that we talked about repeatedly. the interesting aspect is that it has done well. it's quite stark to see asia equities do well without china participating. is the next leg of china participating we think so.
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>> do you expect to see additional policy measures to try to stimulate the economy? >> absolutely. we see the policy back in the spring has started to have an effect. we see more coming down the pike. has there been a distraction around the handoff, the changeover? yes there has. we are expecting that to continue now. >> in principle i'm an emerging market long manager. from an allocation and a performance story there are things that it is going to run into. as much as i believe in the things you are talking about the china numbers over the weekend i think were very, very encouraging. this is more about an allocation trade that i would make an argument. you said you were a bit early. if you graft the eem you will see that since probably mid may we have been grinding around at a range and building a base that
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i believe emerging markets are starting to recover. i believe it not only because of the macrofundamental story but because of allocations. you can't get expectations on china to be worst than they are right here. >> that is the story. we talk about technicals all the time particularly on the trading desk. the em technical story is phenomenal. we expect global allocations to increase the em over the next five years. to put that in perspective that is about $2 trillion in additional flow. to put it in further perspective on the fixed income side that equates to 83% of the entire outstanding bond market and 1/3 of the entire universe. the allocation story is a technical story that will turn into a fundamental story. >> $2 trillion over the next five years.
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>> simple allocation getting higher allocation. they are under allocated arguably. so we think that's the story. that is the secular story on the e.m. story. the cyclical piece runs into problems but that's the secular story. >> good to see you. thanks for coming by. in terms of the technical trade how are you trading them? >> i think crow can make an eem. not all markets have performed in tandem. in mexico, turkey, south africa, indonesia near all time highs where the bricks have suffered. i don't think you get it from yesterday's emerging market index. those are heavy. they remain heavy and you have to be careful of things like samsung. i like resources here.
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>> just how vulnerable are america's companies to a cyber pearl harbor. a security expert weighs in on the threat. a very big day for tech earnings tomorrow. we'll tell you what you need to know and what you are trade. stay with us. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... all ] i'm with scottrade.
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we are live at the nasdaq market site. blue chip companies like intel and ibm reporting after the bell. these stocks headed in different directions for 2012. will earnings be a game changer for them. the back drop is technology overall seems like a sector facing head winds, a bit of a break down as people start to rotate out of them. you're bullish? >> i am very bullish. i love intel but i don't know that intel is ready to start moving to the upside. i still think that is something in the future that will kick in for intel. they have done an absolute magnificent job of acquisitions.
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software services. they are looking at 2015 and a game plan of $20 in earnings. that is based on acquisitions that continue to hit the bottom line for them. this is another name where they will be able to explode and show people what they are doing in the emerging markets. >> i feel like everybody is just so down on chip stocks in general. >> really down if you look at the chart. at some point you have to think there is a floor. i don't feel like this is unraveling the way hp is. so to me the bar seems low on intel. >> to mention hp i think it is apples and oranges. i don't think you are comparing them in a way. they have to structurally readjust. i think they are reacting and will get there. on valuation after all the guidance that they have given analysts have come down.
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deutsche bank dropping. at the end of the day the street has priced in a lot of bad news. if you look at the chart it is very supportive. it has been grinding at lows. i would with own intel into these numbers. there is very little they can tell you. the only place they can disappoint is talking about inventories or windows 8 and people need to see clarity. >> you are confident about windows 8 after the ceo has been quoted in tokyo saying it is not ready for -- >> i am confident on the market levels and big cap tech and fourth quarter allocations. there you go. >> confidence. your level of confidence -- >> very confident man. the country is at risk of a cyber pearl harbor where foreign computer hackers could disable power grids. joining us is the president of
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the cyber security firm that works with the top financial institutions around the world. when we are talking about top financial institutions we are talking about bank of america and citi and financial institutions. the highest profile attack has been on the oil industry. recently there has been a massive attack of 30,000 saudi computers. the thinking is that iran is behind that. there was also an attack on the u.s. oil industry just a couple of years ago. are companies finally waking up to realize that cyber attackers want information and want intellectual property and not necessarily a weapon site that is the target? >> yes. i think people are waking up and i think the comments from the last week is very helpful. we are vulnerable. we are not at the pearl harbor moment yet.
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we have to act. >> how do you help companies prepare themselves against a potential attack? what exactly do you do in terms of services and products do you sell? >> the whole point is to have an approach to cyber defenses. and the layers is to create a dipping side when and if aattackers get through. we help financial institutions and other firms detect and prevent cyber crime and other suspicious activity. we look at a lot of transactions. and take that single needle in the cyber hay stack and drop it before it is too late. >> you are well in the services sector. that seems like an obvious target for hackers. if you look across the industries where do you see the biggest opportunity for you. in other words, which industries do you think are the most vulnerable and which should be
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thinking about potential attacks but aren't today. >> this is much broader than financial services. people are going after ip defense related and commercial related. you have a critical infrastructure which is definitely a target. meaningful state sponsored attacks. it is across the map from small firms to weapon manufacturers to anyone running a pipe with a valve that can turn on and off online. >> there is a long list of cyber attacks that have happened and there isn't a realsition. the cyber security bill here in the united states failed. in terms of governments willing to suspend i'm wondering what you are seeing especially in a time with austerity measures around the world including particularly here in the united states. >> government has to get involved and help.
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we have people looking for spiers. we need to help the private sector the same way. legislation can help here although i do not believe in the effectiveness of rigid legislation in such a dynamic space. definitely better collaboration and data between government agencies and the private sectorer can help a lot. >> we really appreciate it joining us from this evening. it lives within a division in a company. there are the obvious ones like semantics. >> the mcafee deal i think stands out. ibm has done a great job of finding their way into the security area. q 1 was a big buy for them. they continue to find ways into the various areas. it is difficult to find a pure play.
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>> if you don't want a pure play you go to general dynamics. that is a way to round out your risk strategies with people that have contracts both in the government side and the private side. >> should you be fearless like felix and take a chance on free falling. we are making the call on whether redemption is in the cards for some of this year's most battered stocks. stick around.
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that's a long drop. >> a day after plummeting to earth from the edge of space we are honoring felix baumgartner's historic drop with a look at stocks that have been free falling all year. should you buy these names or is it time to bail? these are steep declines. group on down 75%. hewlettt pack rd down pretty much half here. i bet you love group on. >> what can you not love about group on? it is still a business model that is severely challenged. i wouldn't short it but i certainly wouldn't step in. >> walter and cliffs in there given the warning. now they are expecting a loss. this is a major one. >> you would have thought if
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they mentioned that a couple of weeks ago stocks would have been hammered. i felt as if the action was extremely bullish in the space. >> it was down a lot prior to the small run that it had. >> 100%. let's talk about cliff. cliff is an iron ore play. these names have stop going down. if you look at the charts they have been beaten up so bad that at a certain point they are b buys. if china has bottom and i'm not sure it has you want to be a y buyer. what is the reason there? >> don't think the chinese aren't traders. there is no formal exchange market for coal. these prices have been pushed too far. i think coal prices are not going to get back to the 100s. i think at 130 these companies
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make a lot of money. this is a trading call, too. these stocks were shorted. there is significant short to be unwound. i think the worst of the draw down in china is over. >> that is the fundamental play. when you look at iron ore that is the play. you have seen such a tremendous whip lash move that it is not just into clips. >> i think that play along with the thermal i love these levels. i think it is a steal. if greg peters is correct about what he is seeing in the emerging markets -- >> you don't like thermal coal used for -- >> walter has far more but they have the blend like all of them do. certainly i think if there is something to be said for the emerging markets and some of the footing to be found. coming up next some traders are betting that the u.s. recovery story is only getting
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let's bring in kathy. good to see you. >> great to be on. >> stronger u.s. dollar and you have to pair it with something and you are looking at the yen because of elections. >> i think there is probably additional upside opportunity in dollar and yen. with good jobless claims and retail sales report the bears have to give way at least a little bit of a step here and there. the dollar has upside. i like the japanese yen. selling the yen against the dollar because of elections coming up in japan. it is getting messy. the former prime minister wants to take over as the upcoming prime minister. between noda i think there is a possibility that we could get some upside in dollar yen. so that is why i'm looking for dollar yen to dip a little bit and that is where i'm going to come in. and the trading opportunity here i think is to go long dollar yen at 78.25 with a stop at 77 and a
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target of 80.25. >> thanks for stopping by with the money in motion trade. we will see more of kathy on friday. time now for pops and drops and movers you might have missed. metro pcs down. >> it will be stagnant money for the next couple of months. the next leg is where you see the next pop. >> a pop for lilly. the move 4%. >> potential stomach cancer drug. this is a name that continues to push to the upside. second time testing that $53 level still cheap. >> drop for new mont mining. >> there is tension in ghana where they have significant assets. this is the best dip player, one of the best in the sector. i would stay with this sdmam the weakness is overdone. >> got a pop for the rubiks
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cube. the pieces all came together over the weekend at the championship where contestants raced to see who could solve the colorful cube quickest. first place went to a russian competitor. >> does not surprise me. >> it's crazy. blind folded. how does that work? >> how do you do that snnchlths pop here for travellers up 1%. >> when you are looking at the financials i realize it is an insurance play. this name is going to report earnings later on in the week. >> pop for pulte up 5%. >> drop for has bro. >> cut to a sale at goldman sachs. they killed the whole thing. >> and we got a drop here for celebrity jeans. this add shows what could be the
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hottest trend in fashion since the mullet. glen beck jeans. the latest in the string of celebrities to come up with a line of denim. if you want to get your hands on a pair of those pants start saving. the american made slacks will set you back around $130. >> you have locked into a long term denim deal. coming up next hour on "mad money" cramer is looking at the recent bipolar performance. all coming up top of the hour.
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into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it. time for the final trade. scott nations. >> citi and bank of america. >> waurlt position. >> some of the call names are in play. aci is one of them. >> we talked about this one earlier. cmi. >> bio tech is workin
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