tv Fast Money CNBC October 18, 2012 5:00pm-6:00pm EDT
was sorry for the scramble, he quickly shifted gears, saying he is happy with the results of the quarter, noting there was a 45% increase in revenue. and saying that the company has cleared $14 billion for the quarter for the first time ever. it's now 14 years old. not surprisingly, page and the other execs on the call, they are focusing on mobile. this comes as they're challenging google. page really stressed the potential in mobile saying it's like back in 2001 with the surge, saying they could drive higher montization as they did on the desktop. the run rate is now $8 billion, up from $2.5 billion a year ago. now, we are just recently now in the q & a period. there was some conversation about the currency exchange
rates. >> thanks. let us know if that q & a yields anything interesting. we'd love to hear about it. let's kick this around on the desk. >> one of the other things larry page said, he deemed it a strong quarter. i talked to a top analyst on the street who told me what happened in the stock today was an over reaction. timmy? who's right. >> their core business is not bad. it was up 18%. on the google sites, if you think of where they've come in mobile and how far it's come, it's not a bad place. people are looking at the core business and saying, the profitability of the core business is where it's at. there are a lot of problems people have with google that are more related to the vision of the company to things that were sloppy like today. this season the the first time, whether it's having the right people on the call at the right time, i think people have been concerned about some of the tonal things around google in addition to the vision. >> core revenues were about $100 million light.
cost per trick trends pointed out to me by this analyst who will remain nameless. a lot of folks on the street are trying to find the bright side in all this. barclays puts out a note calls it a buying opportunity. better than first blush. piper maintains its price target. rose colored glasses or what? >> it is owned by 88% institution ali. i think given the significant appreciation it's had on this pull back, you're going to have the investment community defend the story. however, let's go to confession for a second. you asked me a while back. you have new money to put to work here. you go apple, google. i say google, i'm wrong. i also told you i thought google monday tieses mobile better than anyone else. if this is monetizing mobile better than anyone else, this is a big problem for the monday etization of google. this is all about ovals shifting
quicker. >> i think we need to address an incredibly serious issue not only for the googles of the world, but the facebooks of the world. larry page said something else interesting on the call. it's growing and causing disruption in his words. disruption for him, for his company and for everybody else. the question is, are people adapting to mobile devices at a faster pace than even google anticipated they would. and the fact of the matter is, they're not prepared to deal with it in the same way -- >> it's moving so fast. i have to watch the younger guys in my office to tell me what's going on. they're past what's going on in google. i had a meeting last night with somebody who was so far beyond what i have seen going on on this machine right here. >> the world's passing them by, it's very quick. >> it's hard to adjust that fast with a business model to meet
that growing demand. the difference from a business standpoint is significant. again pointed out to me today that they receive about 45 cents per desktop click. 25 cents per mobile click. that's a sizable difference in the kind of revenue they're bringing in per medium. >> it's one of the reasons that i'm a little negative on google still. i mean, yes, the stock did bounce in the time after the halt. traded about 6 million shares going into that halt, it traded another 6 million in the final 40 minutes of our trading day, which is an awful lot of stock. it's about 6 times normal activity, but, of course, that leaked earnings was the reason behind it. mobile is going to be a problem for them. people are going to have to adjust their earnings outlook going-forward based on this quicker migration to mobile. they missed by 500 million on the revenue side, and even though they do a lot of things really right this thing was a debacle today. it wasn't their fault at the
release, that's r donnelley. the problem was the lack of communication from google to the street, to all of us, that was a big problem. they waited way too long. >> they've been trying to figure out what happened as well, and two months from now, the story's going to be written that google had an earnings bomb, not that it was released at 12:34 in the afternoon. >> it's not their fault about the earnings bomb that was released early. they needed to get out in front of it. you heard the lack of enthusiasm in larry page's voice. that was because the guy is forced, i'm not putting him down for a health issue. >> lack of enthusiasm is an understatement. >> it's downright weird. >> it was boring. >> that's not fair to the guy who's obviously suffering from some sort of an ailment, okay? >> there was no enthusiasm. >> there was no enthusiasm in that delivery whatsoever. >> that's a subjective thing to say. we just don't know what the case is. talk to me about the business and the stock? >> well, the revenue miss it was
largely fx. motorola missed by a billion dollars. i'm not saying again -- the motorola deal is something you can continue to question and say they are scrambling into mobile, but at the end of the day, the revenue miss is pretty explainable and is one off -- or related to lack of execution in terms of their edging. >> i disagree with you on the revenue. i look at it as motorola, somewhere around 300 million. you have pay clicks around 400 million. 100 million on the currency side of it. just to go back a second to the investment banking community. let's look at the analysts who have been right in the wake of this. a $600 price target. exactly what we're talking about tonight, the growth in mobile in phones, in tab lets is clearly outstripping the demand for pc's and this is more of a secular problem. we'll talk later in the show about this. there are winners in technology on that tablet side. you see that tonight with
sandisk report. >> what do you make of what happened in google shares today with the huge miss, but after hours as well with the conference call? >> obviously we're having a problem with scotty's microphone. let's bring in larry, he's a shareholder in google. larry, welcome to the show. it's good to have you here. >> hi, scott. give us the shareholder's perspective? >> i think the key thing here that you miss in the dialogue is how google eats. google eats by collecting ad dollars. you take on income reported a couple weeks ago, they're unit growth was 4%. here's a company that eats by collecting ad dollars and was growing 23%. and roughly five times the growth of the market. if you look at what the ad market's going to grow over the next five years and you take the
projections of google and facebook, they take all of the growth. you take that growth 37% even margin, and i can buy it at a 10% multiple premium to disney. maybe a 15% multiple premium to time warner. i think it's a no-brainer. you have all this tech discussion. and the tech discussion is missing the way the company eats. and if that's not good enough, you have an 80% conversion of ebitda to cashflow. >> i'm glad you went there. yes, that's the way the company eats, but they've taken it on themselves to branch out in other areas that are clouding the overall perspective of the business. the motorola side of it, which you just mentioned, that remains a problem, and they can't figure it out, right? >> well, you know, i think -- and i don't know, i'm not really at my circle of competence. i think the motorola thing is defensive to protect the patents.
you saw how apple won the patent thing against samsung. it's insurance and if you look at google, it's $40 billion of cash. they're earning nothing on the cash. if they paid $5 billion for motorola, it's essentially free money. i described it as a science project. i right now, if i were the science teacher's grade, i would give them a c or c minus, the basic business is so good, and it's taking so much market share, and the margins are so good, and it's generating so much profit, you really shouldn't be bothered by it. >> you have as much confidence in google as you did at 7:00 -- >> yes, but i have much better price. >> i'm an fx guy. explain to me. >> where do they lose this money? what did they do, where were they hedging? >> i can't tell you where they -- you know, where they did that. >> some of it comes back in the next quarter. i look at the end of the day,
dennis, the world's too complicated. we hold 1500 stocks, i look at cash. but cash is okay. they generated $3 billion of the cash selling at 15 times cashflow. if they have a couple people off the reservation in foreign exchange training, it's not showing up in the cash line. >> want to get back to julia, who's been monitoring the conference call, the q & a part of it, which can be interesting. what are the analysts saying? >> always interesting. the analysts are asking questions about mobile, search and television. before you get to what they're talking about. i think it's worth noting that larry page has been answering a lot of these questions. i'm surprised how many of them he's opting to jump in and talk about. as to the mobile question, he really stressed the opportunity. he said, we're living in a new reality. people move from intent to action really quickly. that's relevant not only from a search perspective, but also from the commerce option which he discussed a little earlier.
the chance to get people to really make purchases on their mobile devices. google would get a cut of that. he talked about the changes they're making to the ad system to make the ads more effective with the idea that the better targeted an ad is, the better that will be both for users and advertisers. there's some conversation, some questions about search and vertically integrated search and how google is trying to use as much content -- context as possible to help people access things like airline tickets, products, and to get as much information as possible about those consumers. now, it's interesting, it's not just about mobile, but tv also came up, they're trying to get more distribution for youtube. back over to you. >> i want one more quick comment from you. this becomes a spin game now, between the company and the street. larry page says he sees enormous opportunity in mobile. there are some who would say i
see an enormous problem. this is something you would hear from zuckerberg. this is a tremendous opportunity we're going to get there. you have to be a believer at this point in larry page's vision. >> i think you have to be a believer in what google's been able to do and execute with the android in a short amount of time. larry page even though he didn't sounds excited was talking about his excitement. the reality is, they are very comfortable that they can get where they need to go. i don't see anyone taking their market share here. their business is becoming less profitable, but they are probably going to grow that top line. >> it seems like google was the only company reporting earnings today, in fact, that's not true. you had microsoft and chipotle obviously. they're down 2% on its 3 cent miss. we thought it was all about google. as i said, think again. google's big miss could spell trouble for another big tech name.
welcome back to fast money. i want to show you shares of chipotle, down nearly 11% on the earnings miss there. the comps were up almost 5%. not good enough for a stock like this, where comps have been up double-digits in the past. >> this is a stock that's lost its momentum. i think clearly money managers have gone into young brands. young brands offering a nice dividend. getting a little bit of recovery, you saw that in the earnings. >> after hours, judge, traded down to 245.50. that's nearly $200 off the 250
week high. >> on the options desk, we have your microphone fixed, what do you have. >> whichchipotle is almost twic expensive as mcdonald's. i think that if you want to split the difference, than i think joe is right. great growth prospects over in china if you're chipotle and you're going to sport a pe of 35, have you to do everything right, and we saw in chipotle puts outweighing calls earlier in the day. people were worried about some sort of disappointment. i don't think they expected it to be down 10%, though. >> we got mcdonald's tomorrow, don't we? >> yeah, and before we get to mcdonald's, it's really about valuation. mcdonalds with the dividend
yield. it's a far superior story here. they're eating their lunch, bringing a higher price and a higher quality burrito bowl and the same kind of food that chipotle is, more efficiently. they're going to have 1,000 stores in india by 2013. taco bell is what nailed it. this happens every time going into earnings, i don't know why the high, a momentum stock which lost some momentum, you train at this kind of multiple, you miss a doughnut. >> he thinks that new canteen in a menu at taco bell is going to eat into the chipotle -- >> it's doing it right now, i eat there every day. >> the oij thing you can say, at least their commiditity prices are going to decline. corn prices are down, soybean prices are down. feeder cattle prices are going up, which tells you the cattle producers are beginning to put
cattle back on feed. the problems most of these food companies have had are about to go up. >> we flow jane wells is monitoring the call, let me give you color as to what the real color at chipotle are. the impact of a summer drought which drove corn prices through the drought that we talked about so often already hitting food costs there, the company will consider raising menu prices next year. that's the kind of stuff you're hearing on the call, right in. >> yeah. actually, it's sort of the opposite of what dennis was just saying. they expect, a lot of meat has been going to the market early. they are expecting that they're going to have higher dairy and meat costs next year. that will be partially offset by a great avocado crop. they're still saying food inflation is 2.5%. it could reach mid single digits by next year, and if that happens, they will consider raising prices. they want to be patient.
we don't want to be the first ones out of the box. the interesting questions were about competition. no one said taco bell, that was the big burrito hanging over the conference call. the chipotle model is not an easy thing to copy. we're pleased with our transaction trends. there's been a lot of noise about taking market share. we're not seeing any kind of loss in our transactions going to someone else. they're not seeing a lot of growth there, but they're not seeing loss between q 2 and q 3. we still don't think the economy is in great shape. they talked about drink sales being down and they don't know if that's due to higher to go orders. the big thing i think may be sending shares down after hours is this restaurant sales expected flat. no growth at all next year. >> thanks so much. the line i was focusing on crossing the wires. yeah, flat to low single digit
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i'm sorry for the scramble earlier today. our printers said they released just a bit early. we had a strong quarter. i'm really happy with our business. >> that was an obviously horse google ceo larry page on the conference call, began about 4:30. as you heard it, he said he was sorry for what happened today. he called the release of the earnings a bit early in his words some four hours before they were expected to be
released. did say it was a strong quarter as you just heard. let's find out if it really was. we'll talk about micro soft and steve balmer from the microsoft call. we had you on a few minutes after this debacle happened this afternoon. you sounded cautious then. larry page said it was a strong quarter, was it? >> there are multiple issues google is facing. it's google. they're a fantastic company. it owns display advertising. they're doing some great work for technologies, you have to be worried about the impact of mobile on to their core business. having four consecutive quarters. three quarters. after eight quarters, that's a negative. >> just the answer to the question, he said it was a strong quarter, was it? >> no. it was not. >> so this bigger problem, as larry page himself calls mobile
an enormous opportunity. but admits this mobile surge in commerce is causing a disruption in his words, are they able to manage that? to keep up with the much more rapid adoption of mobile devices that people seem to be making? >> so we activate over 1.3 million smart phones a day. that was only 500,000 just a year ago, as the influx of mobile devices come online, google is winning the scale issue. a lot of these, we got half a billion devices running android. they have not figured out how to monday ties. they talked about how mobile clicks are worth about half a traditional click is worth. it converts more poorly. it converts at about a 25% efficiency. this is a problem that they have to pick. at least they're in the game. android is running on all these devices, if they can figure this out. they can improve that click pricing overtime.
it's not going to happen any time soon. the other main point is that motorola was a big miss. also a big drapg to the bottom line. that expense is not going to go away any time soon either. >> is google playing too much defense, the motorola mobility acquisition to protect patents. android, they can't monday ties that effectively, these using that to play defense on search. they give android away to protect their search franchise. is it time for them to play more offense? >> it does make sense from a lot of business strategy angles. this is what the market is doing. have you to get your hardware out there, and have you to get your hardware out there inexpensively. let's see what they do on october 29th, there's an android eve event. some discussion we can see a $99 tablet that comes out. that would be an unbelievable step forward for google to get
scale. monetizing that is going to be the trick. the assumption that you're always going to monday ties scale may be wrong. >> how about microsoft? can you break down the results there, what appears to be a three cent miss on the bottom line? >> microsoft. if you're a defense investor. you're worried about the numbers that are coming out so far, we've seen this earnings season, you think the market may be near the top. microsoft is a good name for you. the results, pretty much in line with what we expected. this is a weak quarter for them in terms of the consumer pc marketplace, we all know that was weak. they still book north of $3 billion in the windows division. we still shipped close to 1 million pc's a day, while the market is weak, it's not that the technology is dead. microsoft has plenty of legs. i think there's going to be up side to windows 8 and surface tablet. >> good stuff as always. you have a hold rating on google, right? >> yes.
>> your target price remains 690? >> correct. >> just to give people an idea of what we're talking about. appreciate it as always. let's focus our attention on microsoft. what do you do here? >> there's no big surprise both in terms of pc's we have that from gardiner. things like xbox. the product refresh cycle was not all that great. i like it -- valuationwise, you're in a great place here. in terms of the charlotte, it's a great place to be buying. that to me is something you can own, especially when this is not a company. this is not a company that we already had that type of google company years ago when we talked about pc to mobile. >> we've been thinking about buying it for our own pension fund. i think of it not as a tech company any longer, i look at it as a bank, as a yield. it has so much cash on the balance sheet. i'm going to buy it for that reason alone. i'm goinging to like it, i don't
know anything about the technology involved in it. it looks like a bank to me. >> is that reason enough to buy the stock? >> institutional investors now look at microsoft as an income play. you will always have underneath the market that marginal buyer of microsoft on any pull back. i think it probably does pop above 30 at some point. but maybe not here. >> 28.80 to 31.5 is the range. you're buying it in afterhours at 28.80, which is where it bounced a couple times. i would be a buyer down there at that level. >> you do have a bunch of movers after hours, let's get back to headquarters. sema is watching what's happening there. >> reporter: marvel technology, the company lowering its revenue outlook to 765 to $785 million which is lower than street estimates. management says the continued slowdown in the global economy
during the third quarter is resulting in a weaker pc market than previously anticipated. surprise, surprise, the stock down 10% after hours. >> what do you see here? >> i think the big thing, certainly that's not good news, but the really bad news is, their cfo resigns effective immediately. whenever you see that, hear that, that's a warming sign, that's why the institutional investors are heading for the exits, that's a scary thing, and it's pushing the stock lower. >> sell it now and ask questions later? >> right. >> the cfo also resigning over at marvel. coming up on fast. is china edging toward recovery? tim seymour put concerns to rest a while ago. later, our traders debate, what to do with shares of a company run by one of america's most controversial ceo's, more fast money is up next.
positive news on economic performance. if you listened to tim seymour, you would have known that was coming, take a listen. >> a look at what's happened the last couple days in china, big volume has been missing, this means we continue this way, the rally is sustain abable, i thin this is a great time to own china. they can do more. i think the worst drawdown is over. >> you have been over this. fxi? >> the data tell you again, gdp is not going to nine and a half any time soon. the retail sales is what is encouraging. the consumer consumption, this is not going to happen overnight, it's happening. the green shoots in the new part of the economy, there is stuff going on, the service sectors are back up what's happening,
the treat is coming around. the strength of the yuan is a monetary flow issue. the way people are playing this, these are all ways to play, they've all been great plays, they're trading very well. >> a company we heard a lot about on half time. you talked again today, in that head to head battle with steve weiss. what do you think about china right now? >> i think you have to look at the numbers and realize at 7.4%. that's far better than a lot of people have talked about. a lot of people were talking about numbers well below that. china's turning around, as we've been waiting for our election to get out of the way, they've been waiting for them to come to power at the end of this month early in november. once that's done. it will be much stronger, six months from now. >> we're going to move on, joey,
quickly, do you have freedom to buy a coach? do you feel okay to buy a caterpillar? >> i want to hear from caterpillar. i want to hear the story, what they're saying. regarding the economy there, but to timmy's point, i think the most important thing is, you have a currency in china that's at a 19 year high. that's going to certainly bring 234r0es of capital into the country. >> buck up, camper, it's okay, the yankees are losing, it's not the end of the world. >> i know. >> the euro is falling today despite a relatively successful bond option in spain. european fears easing? should you remain cautious. >> a great training day. we have something going on right now. it's the same old stuff we got. spain work, doing what they're trying to do. grease negotiating. it's not about euro trading today, it was a great trader's
market. we had a 1391 strike. google came out and it pierced through the lows of the day. we have the s&p and euro back to the 2009, 2010 correlation. it's a short term trader's market. i like the euro for a down side continuation for the s&p. >> that's been a tough trade to figure out of late. the euros had much more resilience than a lot of people thought it would. >> we're getting a little bit of risk aversion. google mentioned it too. this dollar strength, i don't know if it's google dollar or earnings that are hurting it, dollar strength will hurt some earnings. we're seeing a risk of urgency. stocks up about 100 points.
take profit, right around 128.50. >> good to see you. todd gordth, we continue to track the plunge in chipotle after hours. let's get an analyst view from piperafterry. s piper jaffrey. can you give us your take? the street seems to be disappointed. >> we'll try to figure that one out. >> you know, there's two things. i think there's disappointment around the sentiment versus fundamentals. earnings are light, and then the guidance, it's still low single digit positive, they won't conclusively commit to taking menu price increases to offset inflation. >> why not? >> they think they may know
that. >> i think where chipotle is right now, has to be balanced in a shift one way or the other, could have dramatic impact to traffic. and they just don't want to run that risk. >> what do you urge someone to do with the shares on this sizable pull back? >> if you're going to be in restaurants and gross -- it's scarce. the company can step in and repurchase shares. what we would say is, we're buyers of chipotle. it's the best story and human capital story. >> i'm reading this move a few minutes ago, what you may have already seen. the company is saying it has no plans to raise menu prices next ye year. it will be interesting to see
what transpires there. >> i do. i know that you're rather bullish on the entire restaurant space. i know the price target you have is 471. do you think that's a little too optimistic and you need to lower? >> well, taking a look at where we're at, i mean -- the answer is not really. it's a favorable cycle. there's not a lot of companies because of the previous m & a transactions. you put it all together, the premium is justified. there's nothing to be concerned about. when we net out the numbers and you go to low single digit comps, there could be an earnings haircut. i wouldn't expect anything dramatic. >> what do you expect from mcdonald's tomorrow? closely watched stock, followed and owned by a lot of people?
>> well, yeah, it's a great leading indicator of what's going on with the consumer overall. and we expect expect something low single digit. not a big hurdle there, so a bit positive, but nothing heroic. >> europe is going to be a sizable issue? >> it is. the issue is that every market is so different and unique and some are up and some are down. there's so many reasons why. you met it out, it's the p & l, the top and bottom line. there are other stocks where that is not the case. this may not be not a favored name in terms of trading tomorrow. >> it will be an interesting one. thanks. >> we have the trade on the
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welcome back to "fast money." larry page ceo wrapped up google's earnings call saying when it comes to closing the gap he's very impatient and that google's positioned uniquely well. he made a key point at the end of the call. dismissing concerns is going to make search less relevant saying people will be able toll search within those apps, he ended the call on a positive note despite the fact that google did disappoint wall street expectations. >> thanks so much. obviously, interesting to note, that stock moving higher, it's going to be the story of the day as to how it trades. are investors finally ready to
rotate out of bonds and into stocks? >> in the last couple days i put a block out over this. what's supporting the market, you're beginning to see institutional flows out of fixed income. the 10-year treasury yield has risen up to 1.84 today. it's something worth watching, above the 200 day moving average. it looks like it wants to go to 2%. just the thought of ben bernanke not being at the federal reserve, this is your indicator of the market for where it goes now. >> there was a 30-year tips auction. at a time when you see the ten-year blown out. consumer prices are going higher. that's telling you there's more strength in the economy ultimately. unless this is an inflationary
spiral. i don't, but many do. >> i grew up as a bond trader. i remember trading the 30 year at a 15 and a quarter yield. you say you get to 2%. i'm going to yawn and say, really? easily? when that happens, you're going to see one thing going on, stocks will probably go up, even as yields will be going higher. demand for money is strong, and that's what's pushing the entire economy higher. all you hear is, rates have to go down to take stocks up. >> no, not true. lock in those mortgages now. the numbers you might have missed, dollar general. it's now line technology. algn is down 20%. you're switching it up on me by the second. >> the invisiline just not selling nearly as much, the stock frayeded down amount way
to 25.33. i bought it at 26.50. still down about 28%. i finally had to dip my toe in, because it was down so hard. >> how about wheat? getting a pop? >> there was hope there would be good rains over the weekend. we didn't get, wheat went up on that. there's been a little more export trade picking up. >> morgan stanley is picking up 3% today on earnings. >> at the end of the day, this stock had a great day. people really question whether their balance sheet allows them to survive long term, in the short term it's been a much better call. >> how about ebay, all about pay pal, right? >> well, it's simple to something along the lines of pay pal. positive comments. what do you do with the stock? i think you hold it, use the 46 and a half stock. dean foods popping 5%? >> i thought this was supposed to be price line, dean foods is going to be selling a subsidiary. this is not the first time we talked about something like that. they think finally this is going to happen.
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>> so do we. and to find out the answer to that question tune in to mad money tonight at 6:00 p.m. eastern, you get the exclusive with aubrey mcclendon and jim cramer. you saw a big bet on chesapeake today. what were traders doing? >> we saw someone buy a bunch of the october 21 calls. these expire late tomorrow. they paid 36 cents for them, versus the stock at 21.26. this is actually a really interesting way to buy a stock. you get to buy it on the close tomorrow. no harm, no foul. >> well, the cme group agreeing to buy the kansas city board of trade for $126 million. it opened up over 150 years ago, it trades red winter wheat grown in state. dennis gartman was a director for over six years. not in any of those pictures.
>> was it 150 years ago? >> i was close to some of those pictures. >> was it duke & duke? >> absolutely. >> first of all, people have to remember the kansas city board of trade is where they started trading index futures. very important to remember, it was a straight -- a forward looking exchange. i'm saddened to see the exchange go. i've served on the board of directors, i was honored to have done that. my job was to explain to the other floor members, guys, we're going by the -- we're going by the way of the computer, this floor is going to cease to exist in the not too distant future. the only thing i'm saddened about, i didn't buy a seat on the kansas city board of trade. it's probably going to go up 50% from where it was valued at yesterday. it's good, what we're going to be seeing is wheat trades in chicago. it will probably increase the value of the amount of volatility and liquidity in the wheat markets.
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>> selling against canada. >> lionsgate, lgf, buying that one out in march. >> i'm going to go with heather bellini's price target. do it at 675. >> i thought you were going to have a bellini after work. >> options action for options action followed by money in motion. right now cramer and aubrey. >> that's the sound of a market industry. that's the heat that forged america's backbone. that's the fire of american steel. reignited by the flurry of energy and development in pennsylvania and ohio. tonight "mad money" is in the heart of steel country to show you how the biggest oil and gas discoveries in a decade are putting a fire back under an industry left for dead. it's all heating up and we're reinvesting in america now! ♪
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