tv Fast Money Halftime Report CNBC October 18, 2012 12:00pm-1:00pm EDT
sauter, from amazon to facebook, who will win that battle? we'll ask the man who controls where millions of dollars in the ad market goes. but first, our top story, apple may get all the hype, but it's google that's rewarded investors the most over the past three months. and as the company gets set to report its earnings tonight, the question is, is the stock running out of steam or poised for another pop? we trade it today with dr. jay, and how about it, doc? >> well, there's at least in the short-term right now, judge, there's folks thinking that google may have topped out. that's not a bet that it goes straight down, it's rather a cap to the upside on the strikes that the people are selling basically with a week -- this is expiration week. the folks are selling right out of the money calls and they've sold them rather aggressively today. you can see why, it's up 30% over the quarter, that's a nice outperformance versus apple or versus virtually anything else. and i think that might not be a
bad idea to take the money off the table. >> up 30% in three months, dominate search, there's a lot about internet advertising. running out of steam or ready for another pop? >> i think if you're going to the quarter buying a stock on that basis, which i don't mind, you're better off buying apple because of reduced expectations versus google where expectations are so high. >> reduced expectations on apple? >> slightly with the stock price down 10%. i'd say that's reduced expectations. >> all right, weiss. >> well, down 10% means something. didn't go there because expectations grew. so in terms of google, though, their price for perfection with this quarter, so i'd say the risk was in the quarter unless they blow the doors off and that's not been their m.o. >> simon baker, what's the deal with the stock? does it go higher? or should you beware and take money off the table? >> i think you go long before the earnings. you saw ebay report good earnings up the other day. it's all about mobile, more and more people using more and more devices and google's right in
the middle of search. i think it's positive all the way around. it's taken a breather, but go long google in earnings tonight. >> total difference of opinions between the two of you. >> simon's somebody i never agree with when i'm not talking to him. so in this case, i'll tell you that i don't disagree, i think the long-term future for google's very, very bright. all i'm saying is the risk/reward of going into the earnings tonight, if that's you're playing it favors the downside because it's done so well. >> stephanie link, speaking of doing so well, there's the one-month and three-month performance. apple has eaten its lunch. but from a more recent perspective, google's beating it. >> and for good reason. they had a good quarter last quarter and one of the key metrics is cost per click and cost per click looks like it's bottoming. and that's the key in my mind what people and investors want to see. and i think by a lot of different metrics that we've analyzed, looks like that metric
will get better this quarter, down 16% year-over-year last quarter. i think it'll be down 14%, maybe up 1% or 2% sequentially. if this stock is weak, i think you buy it, the core trends are running strong, mobile is their winning there. and probably taking share from the facebook crowd. and i think that's going to continue. we know the motorola side is going to continue to be in transition. it's going to be ugly, but once you sift through the numbers, i think those numbers will be good. >> do they, doc, need to unlock how to make more money on android? is that the key to the next big leap higher? >> android was supposed to make them money on the clicks and that's not working out at all for android. as far as google, this is a great stock, a stock that a lot of people had jumped off the bandwagon as i've said over the past few weeks, i have been on the bandwagon, i am not on right now based on unusual activity i saw this morning. i took my profits, go the to the sidelines. >> street's betting on a miss. >> not on a miss, but capping
their upside expectations. so right now with the stock at roughly 755, are the bets that this thing carries through 800? no, the bets are pretty strong it does not carry through 800 right here. but again, we've got better than three hours into the bell. so that could change into the bell, and stephanie, i agree with your assessment that if everybody in the internet is trying to make money on mobile, ebay showed us how last night with paypal, google doesn't have paypal, but one of the best m metrics for getting the ads out there and getting paid for it. >> we'll talk to him later on the program, he's got his finger on the pulse of what's happening in the ad market, how the facebooks, googles, and everyone else for that matter try to monetize mobile better. let's talk broader markets. as we said at the top of the show, we have a mixed market picture. philly fed better than expected, jobless claims ticked up higher than folks were looking for today. let's talk to gus sauter, behind
vanguard's $1.6 trillion mutual fund index. led the company's march into etfs and navigated the firm through the 2008 crash. welcome into "halftime." >> well, great, thanks for having me. >> i know you're set to retire soon. you look far too young to go into retirement. and i know that even though you're going to head out the door soon. you have some pretty strong views still about the markets and where we stand today. where are we? >> well, you know, we try to focus longer term and quite honestly longer term i think in the bond market, you can expect pretty modest returns because yields are so low right now. but for equities, i think over an intermediate to longer term time horizon, five years, reasonable rates of return in line with historic rates, 8%, 9%, maybe 10%. at the present time in any short time period you're always subject to a tremendous amount of volatility, there are a lot of macro economic events going on.
but, if you take a longer term view, i think equities will reward you. >> are stocks cheap? >> yeah, you know, we look at valuations. and that's really the best predictor of future returns. and if you look at 13 times p/e ratio on forward earnings, stocks are reasonably priced. i think they're discounting weakness in the economy, i think a mistake that many investors make is they think there's a correlation between economic strength and equity returns. in fact, there is no correlation between economic strength and equity returns. so it's really more about how much you're paying for earnings than anything else. and i think the market is discounting a very weak economy for an extended period of time, and you can still earn a reasonable rate of return even in that environment. as an example, this year -- >> i'm sorry. >> yeah, we're up 17% this year. >> yeah. the reason i ask the question, obviously, is that there are a lot of concerns about what earnings are going to be going
forward and stocks are only cheap on a relative basis. if you believe that earnings are going to come in to make your thesis hold true. if earnings do, in fact, slow more than expected, how would that change your view? >> well, we are projecting slowing down in earnings for next year, flat to slightly up. certainly not in the 10% range that i think some estimates are. even if you're looking at, you know, flat to slightly up earnings, i think you can still get a reasonable return. if you think about economic theory or financial theory, it really doesn't say anything we're being compensated for growth, we're being compensated for the risk we take. so the market tries to find a price level that will compensate us for that risk. and you can find a price level for any type of future environment. you can have a 5% coupon bond that yields 10% to maturity that drives the price down.
i think the stock market has tried to find that. if we go into a recession, if we fall off the fiscal cliff, there would certainly be downside. i think that the market is projecting a muddling through. >> you think we're in a secular bull market for equities, one of the traders on my panel today simon baker disagrees with you. simon, why? >> well, obviously got a tremendous amount of respect for you, but you know, when you're talking about -- you talked about valuations. normally when you talk about the beginning of a secular bull market, it's low valuations in low singles. still pretty high up in the 14s. if we were to take your buy and hold over the last ten years, most retail investors are still even up a little bit. and listening to your comment there saying from intermediate to longer term, that's another five years. it would seem you need to be tactical rather than take a very diverse wide approach in here. because i mean our position is we're still sort of muddling through a secular bear market. what would be your reaction to that a posed to the beginning of
a secular bull market? based on valuation? >> so if we're in a secular bear, i guess we've got to go back under 666 on the s&p, which would be a long way down. i think that established the bottom for us back in 2009. i do think that we're in a longer term bull market. simon, i think your comments about modest returns over the last decade are true, but, in fact, if we think what the environment was say at the end of 1999, p/e ratios were 30 or 35 times and there was going to be no happy ending to that. it took the market a long time to adjust to that. and basically you get zero returns for a decade or 12 years. now looking forward, i think we're in much better shape of valuations are certainly much more modest and a little bit less than historic averages longer term. >> go ahead, i'm sorry, finish your thought. >> i was just going to say, you know, we could certainly be subject to volatility in the
near term. i just don't know how to be tactical in a very short time period. think back a year ago, how many people were really excited about investing in the market at the beginning of october after all the volatility in the third quarter? it's just very difficult to step up when it's the right time to step up. people just don't do it. >> no, you're going to stick around, as well, we'll talk to you more about the market. want to talk to you about high-frequency trading, as well. you have interesting views there, which i think our viewers will find quite interesting. let's hit a market flash with kayla tausche, watching morgan stanley which had results. >> scott, morgan stanley trading below the flat line, down about .5% in midday trading. the earnings were a beat, but not so positive comments coming from james gorman on the conference call saying that the company's still looking to cost cuts to boost returns that m&a volumes are not back and they might run into some issues with impending regulation, of course. the company had a great quarter with bond trading, but it's unclear at this point, obviously investors are unsure whether
those other negatives will be outweighed by bond trading. >> and the stock is trying to get positive. >> yeah, very simple. if you want to play a pure brokerage firm, play goldman or play morgan. there's no second or third best. you can dip down to to merrill, however, prices are coming down in all of their product lines. banking fees, so the whole model's under attack. so i would say, look, i like them, it's a bet on the economy, but i'm not involved now. >> all right. well, we'll have much more of our exclusive interview with gus sauter, including his defense of high-frequency trading. and can investors put to rest concerns over a china slowdown? our traders debate what's really going on in the economy. more "halftime" on the way.
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. china can start to recover. i think you can be bullish. we've been buying on the dips and buying some of the stocks that gotten hurt. >> i'm now short again. which i don't think there's a chance in hell, can i say that? >> yes, you can say it. >> that the chinese come out with a stimulus plan now or any time soon. i'll disagree with stephanie. >> that was a spirited debate and we're going to continue it right now. weiss, are you wrong on china? the data that came out suggests you are. >> if you believe it. i believe john travolta has a full head of his own hair too. come on. we talk about the data. the data's fabricated. she talked about the wikileaks report where china said, hey, that's a manmade number. china has been stimulating for the last year. they never stop. fixed asset investors up almost 23% year-over-year. >> look, you can cite all of the data -- >> let me cite this -- >> but if the stocks believe the
data and the stock market goes up and individual stocks go up, as a result, isn't that all that matters? >> it is. but that's not what's happening. >> coach is up 1%, caterpillar's up 1%, nike's up, yum's up. >> down 6%, they're supposed to be up 3%. every single company that's reported without exception, i believe, has reported a slowing china. that disagrees with -- >> difference between slowing and crashing. >> that's right. it's slowing, it's not crashing. people are expecting hard landing, the stock prices are expecting hard landing. >> game's not over. >> i'm not saying it is. i'm saying you're in the bottoming process, i think you've had three rrr cuts, to me, the last 15 weeks we've had good liquidity injections into their system, last week was at 42 billion, two weeks before
that, it was the largest injection. and i think these are going to have -- these along with other things they have been doing in terms of targeted stimulus programs, i think eventually that's going to work. i'm not saying you're getting back to 9% 10%, i think you're going to 3% or 4%. and if you look at the very different china plays, they're starting to catch a bid, and that's because china, at least for now, looks like it's in that bottoming process. >> stocks can catch bids, nothing goes down or up in a straight line, but if you take a look at fundamentals, valley in particular, iron ore prices at 115, they bumped up from 87, but down from 189. >> we've talked about this. >> their cost -- >> their cost per ton are far lower and they're the -- >> that's not true. that's not true. >> the lowest cost producer -- >> much higher, much higher than competitors, which is why they've -- >> that's not true.
they're not shutting capacity, the chinese companies are cutting capacity, steve, come on. >> no, no, no, iron ore, cut their market shares down, bhp -- >> their market share is down because of a mine in brazil that went off because of environmental issues. >> right. exactly. >> that wasn't them cutting capacity. >> so you shut a mine in brazil, but that's not shutting capacity. >> it wasn't them shutting, it was because environmental issues. >> so it's the reason that they shut it. >> link, last word, stephanie, last word. >> we're buying fxi, we're taking a look at joy global, looking at cat in the low 80s, they're discounting a lot of bad news and there's money to be made here. >> let's bring gus sauter back in from vanguard. you want to get in the middle of that? >> i was listening on the sideline. >> so what is your view on china? and does your thesis then of a secular bull market need china? >> well, i'm a little more
closely aligned with stephanie, i think. i look at why the chinese economy slowed down, it was an engineered slow down. they were really trying to curb inflation that was starting to grow a little bit more than they liked. so they raised interest rates and tried to put the curbs on a little bit. now they're comfortable the inflation's more controlled and starting to pursue policies of ease. and so i do think they will be able to restart the engines. >> i have a question for you on that. number one, how big is your short book? because it seems that vanguard is really always positive. and it's very difficult to have a long-term positive economic outlook. and i know you say stocks aren't correlated to the economy. i'll disagree with that also because the economy plays into earnings. so they may not be a direct correlation, the stock market gdp growth are declining. but underneath, that's what drives earnings. i don't think you carry a short book, so pays for you to be positive all the time and i think vanguard's done a great
job. but most investors aren't looking five and ten years, at least the ones that watch "fast money." >> that's weiss' way of endearing himself to you, gus, before you answer. >> he's retiring soon. >> i just wanted to let you know that. >> glad to meet ya. you're right, we don't have a short book. we actually don't think investors make money that way. that investors have a tremendous propensity to buy high and sell low. the best recipe we've found for the bulk of investors to really make money longer term, you know, saving for retirement or longer term needs is to just create a strategic asset allocation and stick with it. when they try to deviate from that invariably they sell at the bottom and buy at the top. how many people do we know that sold in the spring of 2009 or bought in the fall of 1999. we're just trying to bust up that cycle.
we think that, you know, that investors are better served if they just stick with a strategic allocation rather than trying to move all over the marketplace. >> gus, you know, on halftime we've been paying attention to high-frequency trading and the impact it's had on the markets and investors and the folks who watch our program every day. and the kind of folks who invest in vanguard's products. you have a really interesting view on this that i think would be counterintuitive really to what most people would think and you say and i'm quoting here from some of the notes i have. you think it's a big benefit to individual investors. how so? >> yeah, if i could clarify, we are not high-frequency traders. >> sure. >> we think our investors do benefit from that. by way of background, we do measure our transaction costs. we're constantly in the marketplace. and 15 years ago, our transaction costs were more than 1% when we were buying. and that's industry averages. today it's a third of that.
so we've observed a tremendous change over the last 15 years and there are a lot of causes for that. there have been changes in the market structure, the electronic markets, and the advent of high-frequency trading. i think all of those have worked together to dramatically reduce transaction costs. you know, when we talk about high-frequency trading, i think we tend to paint too many strategies with a broad brush. there are literally hundreds of strategies that are high-frequency trading. ranging all the way from those that really perform much of a market-making and liquidity providing function to perhaps on the opposite end of the spectrum. obviously we need to get rid of those types of high-frequency traders. but i think the bulk of them are creating liquidity and reducing spreads for us, which has dramatically reduced costs. >> gus, isn't that electronic trading that has reduced those
costs and not high-frequency trading? i mean because you're citing from 15 years ago and with mark cuban here, we had the same discussion and i agree with mark it's the electronics that gives you -- it's speed, certainly, but it's not the millisecond, the nanosecond that gives you the edge and the costs coming down. that's one question for you. the second is, do you participate in dark pools at all? >> yeah, so with respect to the first question, well, you know, used to be there were three exchanges, new york, amex, and nasdaq, and the stock would trade on one of those three, today the stock can trade on 45 different venues. and so we have this fragmented marketplace. and in 2005, the sec moved to try to knit these marketplaces back together again. you'd hate to buy it on one exchange. the sec wanted to prevent that
and created reg nms, but it only works if there's somebody to arbitrage and bring the markets together. that's what the traders are doing. they are arbitraging different marketplaces, investments. so etfs have to be arbitraged against the underlying securities. you don't want an etf to reflect the wrong price, and when it does, high-frequency traders bring it back into line. with respect to do we use dark pools? the market structure we have today is certainly not one we would create. we don't necessarily like dark pools, if we were creating one, we wouldn't create them. but they're there and we'd be crazy not to use them. so we can help reduce transaction costs, but we wouldn't design it that way. >> thanks so much for coming on today. we appreciate your time. you've been a good sport, as well. and we definitely wish you well in your next endeavor as you'll retire at the end of the year. >> and a pleasure to meet you,
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well, earlier we gave you the set-up for google's earnings tonight. but there will be another name to watch for in tech today. with microsoft also set to report tonight. so should you be betting on tech heading into the close? cnbc has her eye on how traders in the pits are setting up for tech's big night. also the host of the new online show on cnbc.com called "futures now." >> good to see you. good afternoon, guys. "futures now" the newest sensation to hit the web. but first you said it, out with
earnings tonight and that poses a big test for technology. those two names make up nearly 15% of the nasdaq 100. so the question now, should you be buying or selling tech into these reports? the cme in chicago, anthony at the nymex in new york. rich, make the case for the nasdaq here. >> jackie d., if you've been fading the rally for the last three months, you're probably not making any money. the trend is your friend here. i want to bet on those three into the close. google, microsoft, as well as capital one, i think you buy the market. and a couple other things to think about. if we're in an uptrend and valuations are low, i think this gives us more room. i don't think nasdaq will be the leader for the big sector, but i think s&p goes higher, brings us back up to a yearly high in the nasdaq. >> anthony? >> yeah, rich, a lot of support in these areas and a couple of
analysts have downgraded the google and microsoft earnings estimates, cut them over the last few days. how do you think this is going to play out? >> well, listen, there's both sides of that card. analysts will take either side. i'm betting on the long side because i think the whole market's going to get an uplift. the nasdaq has been sold off about 5%. haven't broken any key levels, 100-day moving average is intact, the two-day is intact. i'm buying it before the close. >> what are the levels? >> well, listen, we put this out on the twitter this morning. nasdaq at 2,762 which i'm already in, i've got a stop at 32 and my target is going to be 2,826, about 100 points higher, i'm risking 600 to make 2,000 here. if i'm wrong, i'm out, that's it. >> scott, you had a question? >> obviously tech as you mentioned has been on the ropes lately. what do you put more stock in so to speak? ibm and intel which were
disappointments from their outlooks? or microsoft and google? hasn't the story been told in technology that you should be concerned? >> no, absolutely not. we haven't broken any key levels, and if i take a look at the nasdaq, which is 20% apple, i'm using apple 620 is my gauge. perhaps this whole thesis is wrong, but they haven't broken the support's still there with the 100-day, i like the long side here. >> bottom line, rich likes technology here, now you know how our guys are making money, but what about you? are you buying or selling tech this season? log on to futuresnow.cnbc.com. we'll geoff you the results on our live streaming show today at 1:00 p.m. eastern and log in today because we will have a very special report on what names could send the s&p 500 to 1,500 off of earnings season. our senior stocks writer jeff cox has crunch eed those number for us. scott? >> thanks so much. and next up on "halftime," the biotech bull market. we're talking to the ceo of
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reporting is one thing, this is ridiculous. >> i have no idea what happened with google, i'm sure we're going to be digging into this all day. they are out here, the numbers. as you noted, scott, a huge miss on the revenue side, eps, maybe even worse. they missed by $1.62, eps coming in at $9.03, revenue did rise 19%. a big miss on eps, you can see that stock is getting absolutely walloped, down $61, as to the inards, we'll bring you more. everybody's calm here, we're fine. >> well, what's interesting about this one, we've talked so much about the stealth rally in google, the stock's been up 30% in some three months, and look, you warned us earlier today not
to buy this stock ahead of the numbers tonight and, you know, maybe that's being told right now. you know, the earnings miss, the revenue miss, a top and bottom line disaster from google. it's going to be the cost per click, the key metric that's going to be looked at out of the release today. it declined last quarter, i believe. that's really what the street focuses on. and this comes as there's so much optimism right now out of internet advertising, they dominate search, but look, weiss, you gave the big warning. >> well, first of all, i'm used to being right, usually takes a little longer for it to play out. >> come on. enough nonsense. >> this is what happens, so much expectation. you have to look at google's a little like amazon. i'm actually pretty interested in the stock this level and things don't go away overnight. i want to know exactly what happened this quarter if it was deliberate, if there were some costs, and then i'll take a look and i may jump in. >> look at what it's doing to
the nasdaq right here with the nasdaq tumbling faster than anything else. and that's because google making a 7%, 8% move. if the numbers are as bad as they look, scott, and i haven't been able to break them down fast enough, this thing could easily be a $670 number quickly. >> this is an advertising model more so than a tech model. so forget about going into the other tech names and saying it's the same thing. >> stephanie link? >> looks like the cost per click down 15% year-over-year, 3% sequentially. so the 3% sequentially is disappointing, have to get more information on that, but down 15% is better than down 16% last quarter. nowhere where they need to be. might not be as bad. >> that's the number, in fact, that we mentioned was going to be most probably closely watched on the street. it's one of the most important metrics that there is at google, cost per click. sully, you still there? >> i am, and cost per click was a nice hit. and also traffic acquisition costs, basically the portion of
their sales that they share with partners. that was also up. in fact, it was about 26% of the third quarter versus 24% of the third quarter of last year. in other words, they're sharing a little more money with their partners. we talked about the cost per click. i've gone through about seven or eight pages so far, scott, of this 8-k trying to find if a smoking gun, if you will, about why there was such a big miss, haven't been able to find it. most of the numbers are up, not huge, but up cost per click we talked about, down a bit, going to continue to go through it. when i find something, i'll raise my hand and put me back on television. >> we've got collin on the phone from bgc. what do you make of what we're just learning from google and the big miss and the tremendous stock decline? $65 and counting? >> yeah, absolutely. you know we thought the run-up into this number was overdone, we're talking about, you know, north of 30% rise since july 11th. google still is facing a couple of issues. one is, they are not the only
company with a mobile problem in this space. this decline in cost per click is directly correlated to the rise in android activations. we activate over 1.3 million android vices a day and those clicks are worth about 50 cents on the dollar. so, you know, to see another quarter with double-digit declines is a major negative. and then on the expense side of the equation, this is the first full quarter with motorola. it was not a major surprise to us to see the expense line get hit, plus motorola is a business that's still in decline. it's going to take some time for google to work through and cost rationalize that and get that business back on track. >> why are costs per clicks declining at the rate they are? >> what i would point out is that as you activate more and more supply, these android smartphones, literally 1.3 a day, that's a stunning number up from about 500,000 a day in june of 2011. so over 1 million a day activated and those mobile
clicks are worth 50 cents on the dollar compared to a more traditional wired desk top based click. >> everybody talks about moving into mobile and monetizing mobile, it's what at least in google's standpoint seems to be worth a little bit less. so what you would think would be a positive turns out to be somewhat of a negative, collin. >> absolutely. and mobile's a big issue. they need to figure out mobile, particularly as these clicks move on to these devices. and we talked about how a mobile click is worth about 50 cents to the dollar for desk top click. but the other problem is the effectiveness is even worse. thatst the reason why advertisers are paying less for mobile is because they're less effective right now. >> biggest drop for the stock, collin, since 2008 for google, a stock right at $700 now, it's a decline of $55, more than 7%. what are the other issues out there? you've got big competition in the mobile space we're talking about.
amazon, whether it's facebook, apple, you've got the lack of revenue growth related to android, you've got regulatory scrutiny. you can go down the list of reasons as an investor that you would have real doubts as to whether now's the point to get in. >> correct. and particularly as this stock ran so sharply from july, you know, seemed that the market was ignoring some of these points. and you also have to add larry page's health. he spoke recently, but not speaking much, and when he did speak recently, it did not remove the concerns about his health. you've got regulatory issues, the core business slowing down, the mobile issue, the potential health issues with the ceo. there's a few things here that are factoring into this pullback. >> understood, thanks as always. let's go back to brian sullivan at the breaking news desk. and brian, stock's moving a little bit off the lows. >> little bit. two things very quickly, guys that stuck out. you just talked about motorola,
that's a big part of the story, operating loss of $151 million or 6% of one of the units revenue. so motorola weighed heavily on google's quarter. something else which is interesting although it's not going to be ebitda because this is taxes. google's tax bill went from $268 million last year to $1.33 billion this year so that $1.1 billion jump in taxes and their federal income tax rate was about 22%. i know taxes are a big part of the election year cycle story so i thought i'd throw in that google is doing their fair share, in fact paying $1.1 billion more, that's taking a chunk out of -- not ebitda, but overall numbers. >> thanks brian sullivan. again, recapping the news if you're joining us. google was set the report the earnings after the "closing bell" today, in fact, about 15 minutes ago, the earnings crossed the tape. it's something you don't see often and there's something you don't see often, as well, it's google's worst decline in the
mr. margin? don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know.
coming up in just a few moments on "power lunch," we have the latest on the fallout from google's early earnings release. some of wall street's biggest names call for action on the fiscal cliff. a live conversation with a congressman in the center of the storm. and a whole lot of shaking going on, live coverage of california's biggest earthquake drill ever today on "power lunch." now back to scott and more of
the guys and gals on "halftime." we'll see you at the top of the hour as we, as well, continue to monitor the moves in google's stock. 676 was the low point for google, but as you can see, the stock has bounced off its worst levels, 693, still down more than 8%. we're going to talk to martin sorrell, as well. in the mobile space right now with facebook, google, so many others, as well, we're back with zir martin sorrell on the other side of this break. ise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future.
welcome back to halftime. we continue to follow the developing story of google, releasing its earnings report several hours early. and it was a big miss. the stock taking a big hit. down $68, almost a decline of 9%. it was a top and bottom line miss. stock went down as low as $676. it has come off, but as you can see now, looks like it is taking another turn to the downside. it will help brit overall market into negative territory. we continue to follow that story. let's bring in the ceo of the wpp group, the parent company to some of the world's most well known advertising and marketing agencies. he joins us now exclusively.
we're lucky to have you, sir, on a day like this. welcome. >> i don't know whether you're lucky to have me or not. a quick flash of the results. but i guess it is a surprise. we certainly had a very strong year so far with google, not just in search but display, video, social, and last, but not least, mobile has been great. but obviously they have some challenges post the motorola acquisition. in fact, we were with them on the google plex when we had our strategy session in silicon valley about two weeks ago and they were in very bullish form and things sounded as though they were going very well and certainly we thought so from our numbers. we spent last year, about $1.6 billion with them. this year it will be well over $2 billion. so it is somewhat of a surprise but maybe it is to do with the reorganization and bringing together of motorola. >> the stock is now halted. we should let everybody know. we'll certainly let you know when it does reopen.
mr. sorrell, i'm just wondering if something changed recently. one of the key metrics that we watch, i know you and the industry at large watches, are those paid clicks. they're down. those are effectively advertising prices. i'm just wondering if you've seen any of your own clients pull back their advertising on google or if the business has weakened more recently. >> well, i think it is interesting as we get in to the third quarter earnings season. i'm on the board of alcoa and they are the first to report and their earnings were on the downside. you've seen things like intel and ibm, a number of other companies have reported difficulties or more difficult trading conditions in the third quarter. you saw one of our competitors report a day or so ago and referred to a down draft. i think i was in europe yesterday, traveled to chicago today. and certainly there is a feeling that september wasn't a great
month generally for our clients and for markets generally. i'm not just talking about the advertising market. that obviously has some knock on to our industry and the media industry. it may be a little bit of that. we're here with the business council. i was looking at the survey on business confidence with henry kravitz -- we'll talk about later on today to the business council -- and that certainly showed a downturn in confidence. not just in europe but in the united states and across the world. so growth has slowed. it slowed even in the brics and next 11 and that's taking its toll on company earnings. looking to 2013 and the survey that again the business council did, it doesn't say that things will improve in 2013 either. and many companies are saying that for the next three years in the united states, growth will be under pressure and they really want the government to deal with the fiscal cliff issues and the deficit issues. not dissimilar to some of the things we saw in the uk a year
or two years ago. >> sir martin sorrell, it is great to have you on the show. apologize for cutting you a little bit short. but again with the breaking news of google's quite early earnings release, we've been tied up with that obviously. we'll welcome you back soon though, sir. thanks so much. >> thanks very much, indeed. bye. >> again, google shares halted right now. the stock did take a big slide down on that early earnings release and this on the top and bottom lines. we'll have much more with our final trades on the other side of the break. final reflections. back in a moment. [ male announcer ] now you can swipe... scroll... tap... pinch... and zoom... in your car.
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♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it. welcome back. we'll go around the horn. simon baker, i hate to do this to you, my man, but the stock you told people to buy about 59 minutes ago is $6 cheaper right now. it's shed 19 billion mr. in market cap. >> okay. but any time a company preannounces and has a chance to
explain some big costs like the motorola executives acquisition, et cetera, it is a buying student. it is better than it was 15 minutes ago. >> totally agree. i think this company has very good double digit growth. i think that's in the process of bottoming. >> that's all for us right now. power lunch picks up the story, google shares still halted. indeed, scott. thank you very much. our breaking news does begin with the halt in google stock. the stock before that halt, as you see, fell sharply. we're down 9% on the stock right now with the halt in place at $687.30. as you can imagine, that's taking its toll on the nasdaq as well which is down 24 points on the trading session. an early release, unexpected release in google's earnings report took the market by surprise. that's putting it mildly. ty, it has really weighed on the stock. i bet it is the talk of the town down there as well. >> it absolutely is. some $19 billion in
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