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tv   Street Signs  CNBC  January 7, 2014 2:00pm-3:01pm EST

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we have plenty for you. >> oh, thanks. you're a sweetheart. all right. right now we're up 104 points on the dow jones industrial average. the s&p is up nine and the nasdaq composite is up 32 points on the trading session. that does it for ty and myself on "power lunch." he's busy eating pie. "street signs" begins right now. have a great afternoon. all right. seems like an appropriate song. they say cold hands, warm heart. how about freezing cold day but hot stocks. the dow putting in a nice pop when most of the country feels more like a popsicle. hi, everybody. why analysts think some of the hottest stocks may be going cold. think netflix. a disability fraud story that may leave you too ill to work. you will be shocked at how big the program has gotten. maybe bad news for apple. one man's heartwarming return back to print from digital.
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>> after three days of losses, the s&p 500 has found its mojo again. it enjoyed the biggest one day gain in nearly three weeks today and by rising today, the s&p will also avoid its first four day losing streak to begin a year since 1991. >> well, it is warmer in antarctica than it is in much of america. that is not tv hyperbole. in wisconsin, they awoke to minus 51 degrees. the cold blast is crippling air travel with flight aware reporting 1200 flight cancellations over just the past four days. phil lebeau braving the cold in chicago. are you able to leave chicago? could you, if you wanted to get out of chicago right now and come to, say, our headquarters here in new jersey, could you do it? >> reporter: could i book a flight, yeah, there are some flights getting out. would it be likely that i'm probably not going to make it or would be delayed, more likely.
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listen, we are in the middle of a heat wave. we're up to negative two. we started the day at negative 12. things are warming up here. let's talk about what the airlines are experiencing in terms of the flight delays and cancellations that we have seen over the last four days which started with the winter storm last week and continued because of this cold snap. according to flight aware.com, more than 12,000 flights have been canceled over the last four days, and when you look at the number of flights delayed, fortunately these people ultimately made it out, more than 35,000 flights delayed. but this is the interesting thing. people are always saying well, there's more flights canceled now because the airlines don't want to have people sitting on tarmacs. well, we checked the stats and the stats show that we are not close to the high of 2001 in terms of cancellation rates. in fact, right now, it's fewer than 2% of all flights are canceled by the airlines. in terms of what we're seeing the impact of potential changes for the airlines, when it comes to the new pilot rest rules and whether or not staffing is a problem, i talked to some industry sources and almost all
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of them say sure, the new pilot work and rest rules are adding to the cancellations because logistically the airlines are trying to adjust to what their staffing needs are. remember, they keep about 5% to 10% more pilots on the payroll than they actually need but the issue in a storm like this is how do you move the pilots around and make sure they have the proper rest required. the top airports today when it comes to airport cans -- or airline and flight cancellations, o'hare, toronto, and then you see it, the upper midwest all the way to newark. that's where we're seeing most of the cancellations. quickly want to show you shares of jetblue which are up fractionally. the company is going to be holding a conference call. it's down fractionally. they will be holding a conference call within the next half hour to give an update in terms of their flight operations for the three new york airports as well as its hub in boston. they are gradually bringing back flights in the new york area but it will be interesting to see what they say in this conference call about whether or not they will be up to full flight schedules as planned by later this afternoon. >> it's pretty hard to take off,
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isn't it, if your fuel nozzle or fuel is frozen. phil lebeau, thank you very much. let's get an update on what's happening in terms of the weather. sarah daloff is also in chicago but unlike phil, is outside on navy pier right on lake michigan, where they are breaking records and not in a good way, right? >> reporter: yeah, these are the records that nobody really wants to hold. it's not really a pride thing. it's a quality of life thing. some people returning to the streets here but the majority still trying to stay warm inside. we are seeing public schools closed for the second day in a row. last night we saw record numbers in the homeless shelters. they actually had to open up some classrooms and some offices to handle all of the overflow. now, travel within chicago, it is not great either. aaa reporting an average of 650 calls for assistance per hour. so people really are encouraged to stay off the icy roads right now.
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meanwhile, amtrak not doing so well, either. they had 500 passengers stranded outside of the city overnight, the trains could not go through the ice and snow on the tracks. they had those people wait inside the warmth of the train. some people started to complain about running out of food and water, so eventually, they bussed them in this morning. so not a good idea, if you are in chicago, just stay put and stay inside. back to you. >> you got to take your own advice. get inside. it's television, i know, but don't get hurt. thank you very much. this cold front is expected to move out by the end of the week but that does not mean the impact is over, especially on crops and commodities. sheila dharmarajan is here to explain. >> it's a little cold outside, huh? >> that's what we hear. >> i actually stepped outside. it is freezing and the big chill is impacting a lot of market sectors, especially those commodities. nat gas of course, this is the obvious one, spot prices hitting a record. winter wheat, higher on concerns about crops freezing.
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then you've got orange juice. this is interesting. we initially saw a big spike earlier in the week but now take a look. we are down again. we got news from florida that the orange crops seem to have escaped the freeze. finally, got to talk about cattle getting a bump here. the cattle futures. look, the idea here is it takes more feed to keep the cattle warm. the temperature also makes it much harder to actually transport the cattles for slaughter so we are seeing cattle futures up as well. retail sector outside of commodities is also being closely watched. look, on the one hand, the cold weather means you want to stay inside, which of course means less mall traffic. citigroup estimated hercules could have affected sales negatively by as much as 1% in the fourth quarter. if you're stuck indoors, it kind of seems like it would be the perfect time to get out your ipad, do a little online shopping. so watch those e-commerce sales. that's where people say we could see a bump. remember, folks still need to dress warmly.
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that's where companies like northface come in. it's about a third of their sales, even more of the company's profit. don't forget underarmour, the thin compression shirts are really popular as an underlayer for consumers. and of course, got to keep the feet warm. that stock is getting a pop this week because one retail analyst said december sales were up about 20% just on boot sales. here's the thing. we're on to earnings season so whether the cold actually does impact companies or not, just brace yourself for everyone to be talking about the weather and how it will be impacting earnings. two companies recently, wendy's and jamba juice got a downgrade from analysts. >> remember in the past we always used to say oh, that ceo is just blaming the weather. now it's probably a real excuse. thank you very much. >> except it's three days out of 90 in the quarter. if i need milk, i'm going back out after it stops being cold. >> that is what we called
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pent-up demand. >> it balances out for the quarter. i still think weather is just a goldilocks excuse. >> maybe. we will see. >> we hear so much more of this quarter than next quarter. >> if i was a ceo with bad earnings, weather related or not, doggone right i would dump them this quarter and then say well, it was the weather. why were you convicted of fraud? the weather. sheila, thank you very much. let's turn back to the markets and away from weather and fraud. stocks as we have been mentioning are higher today on the back of some very interesting calls. momentum names like netflix and kors seeing downgrades why some of the big boring names like j & j, united health were given upgrades. why the shift? is the momentum run done? dominic chu has been digging in on that. >> let's talk about four of the best performing stocks, momentum wise, in 2013 in the s&p 500 and how they're doing now, because we are seeing some slow-mentum. netflix, first of all, the best gainer in 2013 for the s&p 500.
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morgan stanley downgrades the stock citing competitive pressures because of other sites like hulu and amazon's prime service. remember, this stock was up 298% in 2013 and now check out the chart because over the past month or so, we have seen this stock start to roll over just a little bit, down about 4% over the course of just the last month. also, another story interesting here as well. best buy, the electronics retailer, everybody bought into the ceo's turn-around story in 2013. this stock was up 237% but now this holiday shopping season, if it's just a bit weaker or margins get hurt, that could slow down this stock. this stock over the past month or so, down about 7.5%. also another big one to watch here as well, micron, one of the big memory chip makers out there. this stock was up 243% over the course of last year and now is showing signs of slowing momentum as well over the course of the past month, down about 3%. finally, we talked about delta.
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phil lebeau mentioned all the flight cancellations. delta stock has been flying high. it was up massively, about 131% last year. but guys, it continues to get better for these guys, better cost control, better labor costs, fuel costs working in their favor. that stock is actually up about 1% over the course of the past month. so guys, mandy, brian, some of the momentum names are slowing but some maybe have room to run. >> thank you very much, sir. a wise man, remember, once said quote, momentum stocks are momentum stocks until they're not. then watch out. that's deep. let's bring in the man who said it, the street.com's herb greenberg, as well as paul hickey. you're trying to contain a grin, if our listeners on the radio could see your face they will know you will say something like i told you so on netflix. >> no, no, no, because netflix isn't over yet. you tell me what's going to happen in the market and i can tell you what's going to happen to netflix. the fact of the matter is stock is down today because an analyst downgraded it after having
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downgraded, looking at fundamentals but as i write in the street today, you cannot tie a momentum stock to fundamentals. so the stock's off today, bad day for netflix. i can't tell you if it's interruption or the end or the beginning of the end or it's going to go up another 100 points. who knows. >> if you can't tie momentum stocks to fundamentals, what can you tie them to give you an idea what kind of future behavior they'll have? >> honestly, i think what you can tie them to is one thing and one thing only. that's when the company comes out and gives information that says it isn't what people expected. i have been saying that all along. that's what i think we've learned throughout this time. i want to point out something. all the stocks dominic talked about were very interesting but if you look at the, just the valuation on a p.e. basis of netflix or some of the really high flyers like tesla versus a best buy or delta, it's night and day situation. >> but you i believe say that hold your horses here, because
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momentum stocks are not done yet. explain. >> well, i think just looking at this year's performance, it's only been three and a half days but while the market has been down year to date, the stocks that actually did the best in 2013 are holding up a lot better than the overall market. in the s&p 1500, for example, the 150 best performing stocks in 2013 are down ten basis points as of this morning, mid-morning, whereas the average stock in the index is down about 75 basis points. so yes, there are weakness in names like netflix which has done poorly in the last few weeks, but again, momentum as a whole, these stocks, investors continue to buy them and the skepticism on the part of analysts i think is healthy. this year so far in the first four days of the year, we have seen more analyst downgrades than the first four days of any year going back to the beginning of '09. there's still a healthy degree of skepticism i think, and that in the long run is better for
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these stocks. >> one of the -- >> first off, i think the stock market should exist without a calendar. who cares when it rolls over to 2014. stock market's sort of a perpetual game. we talked about last year at the end of the year how sort of crumby stocks, i almost said something else, were leading the market, low quality names. if those roll over, do we care? >> well, i think what's more interesting right now is what paul just said. he said look at the number of downgrades at the beginning of this year, and what i find fascinating about that is were these analysts holding out before the end of the year so they didn't have to disappoint their clients by coming out with that downgrade? why did they wait until right after the 1st of the year to do those downgrades? to me that's perhaps more fascinating, especially when you look at how the street is paid. >> maybe more insight into earnings. maybe they have more insight into what the companies -- >> what's the difference? what is the difference of insight into earnings from december 20th to january 3rd? there is no insight into
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earnings, no more or less. >> in terms of the momentum stocks that you guys think do still have room to run in 2014, paul, you said pandora and web m.d. because all of us go on google when we're feeling a little sick, and herb, you say solar city because it got wind behind its back. you could have chosen a better analogy. maybe sun on its shoulders or something, i don't know. >> the only reason, the only reason i said solar city is when i was asked which one, i look and say why not. it's up because so many people seem to like this company that installs solar panels. who knows. don't take it to the bank. >> got two words for you. elon musk. that's his company. >> always great to see you. thank you. still ahead on a serious note, the outrage of the day. dozens of ex-cops and firemen arrested in a sweeping disability scam. some are even accused of bilking the 9/11 fund. does it show the system is
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simply broken? later, we are live at the consumer electronics show talking the big business of digital music with the ceo of clear channel. plus the worst thing to happen to stoners since twinkie gate. ♪ ♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. over the pizza place on chestnut street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i-95. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more.
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dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪
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more than 100 people in the new york city area and as far as florida rounded up and arrested today as part of a sweeping investigation into disability
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fraud. sources tell cnbc many of those suspects were also receiving 9/11 pensions. andrea day joins us with this story. the details are shocking. >> reporter: it's very disturbing. investigators telling us this scheme was going on for decades before it was taken down. so far today, 102 retired cops and firefighters have been charged. here's what the district attorney had to say moments ago. >> a grand jury has just indicted 106 individuals who abused this safety net through a massive fraud against federal taxpayers. >> reporter: as he says, we could be talking about $400 million by the time this is all over. investigators say the retired cops and firefighters faked stress-related illnesses, many of them from 9/11, and then just raked in the cash. they claimed they were too sick to work but today, we saw pictures of them working as a helicopter pilot, a martial arts
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instructor. take a look at the accused ringleaders. one of them is a former prosecutor from the nassau county d.a.'s office from years ago. the ringleaders allegedly coached the defendants, telling them exactly what to say, what to do and how to downplay huge chunks of cash rolling into the bank. here again is cy vance. >> these men are charged with coaching hundreds and hundreds of individuals on how to convince the social security administration that those individuals are unable to work at any job because they suffer a psychiatric condition and therefore, are entitled to monthly disability payments. >> reporter: and again, 102 firefighters and cops charged today. investigators are telling us there are many more to come in this case. i'll send it right back to you. >> thank you very much. appreciate it. the growth in the number of people collecting disability benefits is staggering. there are now more than 11 million people in the program, more than double the number of people just 13 years ago.
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even as the overall population has grown just 12% since then. let's put this another way. if all the people that are on disability lived in one state, it would be the eighth largest by population, bigger than georgia. the question is, what can we do? let's bring in cnbc contributors jimmy petakukas as well as jared bernstein. this is a difficult conversation because there's a lot of people out there that need the help. the growth of women in the labor force added new applicants to the pool, so that will grow it artificially. back in 2006 the national bureau of economic research, nonpartisan, called this a fiscal crisis and basically said a lot of people, because the changes in the after tax disability insurance income replacement rate, it's strengthened so workers will seek benefits. in 2006, the nbr basically said people are taking advantage of the system. >> some people are. you just did a segment on about 100 of them and that kind of fraud is obviously unacceptable, and it's clearly fraudulent
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because you really are supposed to be severely impaired. people on disability are allowed to do a little bit of work, but nothing like what you just saw if you earn over $1,000 a month, you should be ineligible. but listen, one of the things you said that's very important, we have to separate the fraud from the legitimate increase in the rolls. there are three demographic factors pushing up on the rolls. one is the aging of the baby boomers, people like me. we are more likely to be disabled as you go into your later years. increase in women in the labor force, the disability rates among men and women are now about equal. that didn't used to be the case. the increase in the social security retirement age. if you factor all of those in, the actuaries do this, you will find that more than half of the increase in the rolls is attributable to those factors. >> good point. obviously we do need to separate the legitimate cases from the illegitimate cases. how do we reduce fraud in the system? >> first, i will say some of the best academic research points to some of the demographic reasons jared just mentioned but also points to a changing in the
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eligibility criteria, about 25 years ago, which then allowed more mental, more back injuries, muscular skeletal injuries, things that are hard to determine whether or not the person has it. tightening up on that criteria will help. you want to change the incentives for business. you want to have business try to perhaps create some sort of private disability insurance where it would be their responsibility to try to keep these people at work. if someone has a terrible disability, you don't want them to go into the disability system because they will never leave. if you can keep people working, they won't go in the system, we won't have to pay all that money and first put the burden on business, get those people back at work, give them three months, six months, nine months. if then they cannot work, then they go into the system. >> the idea, jared, this is nearly now 16% of social security. the idea is that the more fraudulent people that come in, it's going to not reduce the pool but certainly put the burden back on, a, the people that are actually disabled and need the help, and maybe then cause congress to react in a negative way as the numbers go up.
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the people that are committing fraud are not just harming their neighbors. they are harming every single taxpayer. >> right. i think one of the issues here is as jimmy suggested, ferreting out the fraudulent behavior is incredibly important, not just because of prosecuting law, but because of the messages it sends, as you just suggested. i will say, however, that the condition of the disability trust fund which is actually not good, it's supposed to run out of money in a couple of years, was predicted back in the mid '90s so this has been a known problem for a long time. again, driven largely by demographics. and the kinds of solutions to the social security insolvency problem would work here as well. >> listen, disability overall between what we pay in payments and then having millions of people not in the work force, it's a $300 billion a year
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issue. >> what did npr call it? the disability industrial complex, i believe. thank you, guys. >> thank you. still ahead, the perfect price point for pot. the good people of colorado found it. we will tell you what it is ahead. plus the buzz kill headlines for stoners everywhere. later on, we will explain why some people here are going back to basics when it comes to reading and music. back to print. out with digital. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com.
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♪ all right. light this up. in a few days since marijuana became legal in colorado, recreational pot prices are up to about $400 an ounce. that is double the price of the medicinal version, according to the national cannabis industry association, who knew there was one, and private equity is betting big on finding profits in pot. let's get to josh lipton with more on this story. >> reporter: yes. at marijuana stores like the one i'm in now, harborside health center in oakland, california, they could soon have a new source of capital and credit.
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remember, federal law has not changed. marijuana is illegal so banks are often reluctant to do business with marijuana shops. they don't want to loan these businesses money. but executives of "high times" magazine are riding to the rescue. they have announced a new private equity fund to invest in marijuana related businesses. the ht growth fund is planning on raising $100 million over the next two years and making investments in the $2 million to $5 million range. there's a lot of money at stake here. the legal marijuana market is now valued at $1.4 billion. dan riffle of the marijuana policy project says we could see a government announcement within the next four weeks clarifying rules about how banks can serve the marijuana industry. >> everyone is at this point working together. it's just a matter of having a lot of different government agencies and bureaucracies and getting them all on the same page so we can find a solution that will make banking services available to this industry.
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>> reporter: so get ready, a bank near you could soon be supporting your local marijuana business. guys, back to you. >> josh, thank you very much. still ahead, one stock up nearly 90% over the past two days. who and why, ahead. later on, a story that makes the great twinkie crisis of 2012 look like child's play. we will tell you about america's coming cheese cliff when "street signs" returns.
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welcome back, everybody. let's take a look at our stocks. number one is getting an upgrade from outperform to top pick. >> yeah. the stock is responding, up 1.4% to 76.55. increased conviction and china sales recovery, also see sales
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trend in china reach double digits by the second half of this year. rbc saying we think things are going to be a lot better in china by the second half of the year. this stock actually has come about $16 off its low, less than 2% away from its 52 week high. it's actually quietly done well the last couple months. >> it really has. it underperformed last year. know where it's increasingly big? africa. fast food is really catching on in africa. lululemon -- >> that's what we export in america. >> it is indeed, fast food. lululemon upgraded to a buy and d.a. davidson with a price tag -- >> it's up nine cents. however, analysts believe that despite hiccups last year, remember butt-gate, lululemon brand remains the leader in an attractive consumer category. they also checked some stores and say the stores are some of the most crowded that their channel checks actually showed. bullish on lululemon. not helping the stock a whole lot today. >> and also wd-40 initiated by
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b. riley. >> i always said avoid companies ceo'ed by australians but in this case, make an exception. san diego based, go chargers. target price, $91. that is about 19% more than where wdfc stands right now. stock has already done really well, up more than 60% over the past 12 months. you could say they greased the skids of the stock market. >> you could say that. >> but you would never say that. >> you would never use a weak pun like that. world acceptance being added to top picks. >> stock up 4.5% to $89.33. a small loan company based in south carolina. they like the valuation, like the growth and their target is 35% more than world acceptance shares are trading for right now. >> and bioscience, a really interesting one, take a look at this. the stock absolutely soaring to a seven year high. it did announce some positive clinical trial results. >> yeah. let's take a look at the stock, up more than 80% today, folks. the stock is up $8 to $17.81.
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that is not a misprint. that is not a fat finger trade. they had trial results coming out, very positive after the close yesterday. if you recall, this is a company that we spoke with in our trip to san diego back in april. ceo kevin gorman rejoining us now. good to chat with you. go, chargers. congratulations on the trial results. the last trial results you had, your stock rose after we interviewed you, then fell dramatically, the last trial results you had were unsuccessful. what did you change to make these work? >> thank you very much for having me on, brian. we changed a number of things. phase two clinical trials is a learning process for any biopharmaceutical company. you just happened to do it on the big stage here in front of the entire world. we had many learnings from that first trial, we changed slightly the clinical end point that we were using and we changed slightly from how the end point is applied, meaning the
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physicians at the clinical trial site is the way it was first done. we learned it's better to use central reading by movement disorder specialists in this trial. those two changes led to the dramatic effect that we see of the drug in this particular trial. >> just to reiterate here, this is for involuntary movement disorder. when do you think you might be able to finally get approval and commercialize this product? >> well, broad timelines right now, i would say probably late 2016 is what we're looking at. based on these positive results and the other studies that we have, this is approximately our fourth phase two study, we are going to be requesting an end of phase two meeting with the fda, we'll have that in the first half of this year and immediately launch in the phase three program. so figure it will take approximately two years to get through the phase threes, then several months to get the nda filed with the fda. >> am i right in thinking that
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you do not believe you have any competitors out there in this space, or even in a related space, tourette's? >> right now, there are no approved drugs in this space and there are no drugs that are in active development in either t.d. or in tourette's syndrome right now. >> kevin gorman, pleasure to have you on "street signs." nearly a year after we first met, congratulations to you and your employees. hope it continues to work out. thanks for joining us. appreciate it. >> thank you very much. take care. a big rebrand for office supply retailer staples this week. out is the "that was easy" and that easy button thing. in is the new "make more happen" tag line. and subsequent advertising campaign. nice, but do we care on the stock? richard ross, steve cortez, fundamentally, steve, they are changing their advertising slogan. do you care? >> no. fundamentally i really don't care. i have to tell you, they are getting rid of the "l" in the
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word staples which is a big new innovation. i would say what the "l" are they thinking? retail reinventions don't typically work. look at jc penney, look at sears. in the case of staples, i think a lot of folks would be surprised to learn this is the second biggest online retailer after amazon but i think that's the problem. is amazon. they are trying to compete against a company that dwarfs them in terms of scale, that has pricing power that staples will never have, and a company in amazon who is frankly willing to get market share at almost any cost. regardless of profitability. so i think they are going up against a giant with deep pockets, a giant that doesn't care about near term profitability. this is a bad investment. >> so retail reinvention, will it reignite the charts? >> fundamental turnarounds are often difficult to detect until it's too late. that's why i focus on the technicals, that's why i'm actually a buyer of staples. let's bring up that long term weekly chart. i will show you what a technical turnaround looks like. yes, the stock has been a
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disappointment. we have been below that 200 week moving average for over three years now. but we've settled into a symmetrical coil here which is foreign from the collision of the multi-year down trend and the shorter term uptrend. this is not a directional pattern in and of itself but it tells you that a big break is coming and i think that break is to the upside. look at this multi year head and shoulders bottom that we have been carving out now for over three years. that tells me that a break above the neckline of that pattern and the 200 week moving average around $17 is imminent. i think the stock trades $24. that is potentially 50% upside here. i love staples in here for 2014. >> wow. technically there, below that 200 week moving average three years. rich and steve, thank you very much. by the way, folks, check out our online edition of talking numbers. go to yahoo! finance, click on cnbc and we have a learning center which has terms like
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symmetrical coil. >> i love staples. talking about the stock. coming up next, digital music sales hitting a sour note. why that is good news for the likes of clear channel. we will talk to the ceo next. forget about the cold. there's another potentially more serious crisis on our hands. there's a shortage of cheese. be afraid. kelly and bill, you guys have any cheese? >> we have plenty. just the other day, i bought a symmetrical coil at staples. just so you know. they're available. they're out there. it took a few days but the bulls are back on wall street. is the rally now officially back on? we will get top money managers to weigh in. also, after fizzling out in 2013, analysts are jumping back on coke's band wagon. can 2014 be the year of coke's comeback? we have a bull and found a bear on coca cola.
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welcome back to "street signs." check out game stop hitting session lows. s users will be able to stream older versions of games by new game consoles which could impact the used games business at game stop. this stock downgraded to a hold rating from a buy. this stock is up nearly 80% over the past year. back to you. >> yeah, but you know what, i was just talking to miss drury about how the worst performing stock year-to-date is game stop. much of that is coming this week but the stock was already sort of in a weak down trend. digital music sales did not hit a high note last year. for the first time since itunes came out, overall digital music sales dropped about 6% last year. the drop could be due in part to
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the success of streaming music services like pandora, spotify and others. julia borston is live with the ceo of clear channel. >> reporter: i'm joined by bond pitman of clear channel. before we talk about your announcements, i want to talk about i heart radio and what brian just referenced. the fact that digital music sales declined last year, track sales down about 6%, does this mean i heart radio is eating itunes' lunch? >> no. i heart radio is not on demand. neither is pandora. i think it's the on demand services which basically like spotify where you basically can instead of buying track by track, pay a monthly rental fee and you have the entire library. the interface looks exactly the same. that one's up tremendously, that whole category. i think if you look at downloads and subscription services in terms of units, how they price
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is another matter, you will see where the substitution is going on. >> are you worried about spotify and the likes of itunes radio which is relatively new, eating i heart radio's lunch? is that a threat? >> we are primarily radio. we have custom radio like pandora does and itunes radio is sort of an add-on. if you look at the business, radio and music collections have existed together forever and ever. over 90% of consumers say i like fm radio, i have favorite radio stations, i have a music collection, i like them both but i use them for different purposes at different times. so things don't change. in my day it was a 45 rpm record collection and a little record player. >> the majority of clear channel's business is still the old-fashioned terrestrial radio stations. do you see these new services cannibalizing that traditional business? >> no, to the contrary, i think they get people more interested in music, more interested in music radio stations and indeed, we have seen that. we have had great success with i
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heart radio, fastest internet service, including twitter and facebook, 20 million registered users, second fastest, the 30 and 40 million, and still growing. over 300 million downloads. when you look at that, that's another way for people to get the great radio stations they love and also, by the way, to add the social component. we have over 25 million facebook fans for the clear channel radio products. it's sort of by every stretch of the imagination, this stuff is just great because it's suddenly making this stuff come alive in ways it never has. oh, by the way, radio, of all the mass media, is the one not going through a decline. it is america's companion. you love ryan seacrest, you love steve harvey. it's part of your life. >> you announced a big deal with auto makers. you are putting i heart radio into volvos, land rovers, kias. this is such a crowded space. you have pandora and sirius have similar deals with auto makers. >> we are actually in all the
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major ones. these are sort of the additional ones we have done because it's more shelf space. by the way, we, because all of our radio stations also exist on broadcast radio, we are already in every car, about 278 million cars, so when you get to the 11 million for internet, by the way, we're on sirius xm with kiss fm and z-100. we want to be everywhere, just as if you're selling coca cola, you like to be at the checkout counter and on the soft drink counter, you would like to be on the end aisle cap. same with us. >> you raise a lot of eyebrows when clear channel made a deal with warner music to pay warner music for the rights to play their songs on the radio. for years, radio channels have resisted paying artists. why would you do this? doesn't this risk hurting your margins? >> look, i think that's one component of it. what we're really doing is that's probably one of our most important strategic relationships, the music business. we're the free advertising forum. we're their most strategic relationship. but it was ad hoc.
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>> you're not worried about having to pay everyone -- >> look, there is always a way. the give and takes make it work. i think it makes it work for us both. it's a better way to run the business. >> bob pittman, thanks so much for joining us, here from ces. back over to you. >> thank you so much, julia. up next, i might be the one guy going against the grain. the reason that i'm going old school when it comes to some media. plus our tech gurus tell us the coolest things they have laid their eyes on so far out at ces. plus the big super bowl dip dilemma. the one football food staple that might be in short supply. ask me what it's like
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bestselling tempur-breeze beds. visit tempurpedic.com to learn more, and find a retailer near you. all right. so i put on a piece on cnbc.com which explained why i went back to a little bit of print. when the ipad first came out, i was all in, mandy. i killed all my print subscriptions. i said i'm going to saved trees, i'm going to read everything. then i realizeed the ipad was
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sitting on the counter and i had stopped reading. i have recently reinvigorated my print subscriptions and started buying cds again. i still buy stuff on itunes. i just like to own the rights to the music myself. i can play it on anything. so i have gone a little old school and i put it out there to see if anybody else thought the same. >> you're preaching to the conversant because i never went new school. i have always been old school. >> these are people who went new school -- >> who are then going back old school. >> i think all these privacy issues which are appearing almost daily. the fact whenever you put out a di digital footprint, whatever you do, you have a gps function in your car, it is reading data. it is reading what you buy, where you are, who you're talking with. >> you think that -- >> i think privacy issues will start making people turn away from digital. >> i was paying for seven
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magazine subscriptions i never read. oh, my gosh, i'm six issues behind. >> it was too easy to click buy. >> i guess i'm probably the only guy in america if we might have seen the bottom of print. let's bring in a couple people who know more about it. liz gains and our very own john fr fort. you guys are looking at stuff through google glasses now. have you heard any anecdotal evidence that anybody else is going back to print because they've just had it with all the digital stuff? >> so i think that the distinction you're making in some ways makes sense to me and in some ways doesn't. one -- >> welcome to my world. >> i don't want to look at screens all day. but music, like what's the big difference between cds and spotify. cds are brittle, they break, you have to carry them around. >> because i own it. because it's a library of my life. i have a lot of cds.
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my -- i can look at the library. if i die tomorrow on the way home or whatever, my kid will have the library. when i die, the digital stuff goes back to the owner. >> what if you leave it in the sun tomorrow? >> probably not -- i might leave a disk outside. that's fair enough but you get my point. it's a library of our life plus i can play it on anything i want. you know how apple encodes that stuff. i can't put it on a competing company's player list. >> you can actually. >> what about you, jon? what do you think? >> you can, brian. >> do what? >> no, i don't think we've seen the bottom quite yet. i think you're going a little steam punk here. you're not entirely going away from digital. sure, part of what digital is supposed to do is give you options, and i think what you're saying is you just want to use a little bit more of an analog option in a couple areas. sometimes you like reading things in print. you're probably going online to order them. you're probably not calling on the phone or sending in that little tear out sheet from a magazine that you bought at the airport.
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so you're still on the digital platform to work out the distribution. you're just having your choice of how you want to consume it. i'm a different kind of consu r consumer. i read books on my phone, not to mention my iphone. i think this digital era is about us having the choice of how we want to consume. >> nonetheless, let's completely switch gears because i know both of you are out there and you're strolling around the floors of the ces. what have you seen that is absolutely hot and grabbing your attention, liz? >> don't say ereader. >> i had a fun adventure yesterday which was we went off the floor. we went to a home, a smart home, a connected home, one that was a demo of all these radically fun and different devices. there were connected locks, connected coffee machines, connected plant sensors that are in tune with what plant precisely needs to be watered and when the soil is too dry for it. it was off the strip. it was done in a house that's for sale and the owner now gets
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to say as seen on tv. and it's fun to see these things coming together and how they might actually impact our real lives and imagine them in your home. >> yeah. okay. i can certainly use that coffee machine that turns itself and when you wake up. liz, jon, thank you so much. nbc news group with a minority stakeholder and we a content sharing partnership. sound the alarm! we have a looming shortage of velveeta. jane wells, say it ain't so. >> imagine a super bowl without this. on twitter they're calling it a potential cheesepocalypse. ♪ i love cheese ♪ i love cheese ♪ i lovel velveeta ♪ >> this is the high season for dips but there are shortages of velveeta on the east coast. kraft says it's possible some consumers may not be able to
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find velveeta on store shelves. this is a short term issue. we have not heard many complaints from consumers so far. go long guacamole. always been a sucker for lipton onion soup mix and chips. >> thank you so much, jane. thanks for watching, everybody. "the closing bell" is next. she keeps you on your toes. you wouldn't have it any other way. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right.
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