tv Closing Bell CNBC December 9, 2013 3:00pm-5:01pm EST
top insurer of collectible cars say they expect sale of $100 million car in the next three to five years. >> maybe next year we could bid for them in bitcoins. >> have a great monday. thank you so much for watching "street signs," we mean that. >> we really do. "closing bell" is up next. see you next time tomorrow. hello on this monday. welcome to the "closing bell." i'm kelly evans down at the new york stock exchange. >> aren't you cold in that outfit? >> freezing. >> put a sweater on. >> maybe i will. >> long story. i'm bill griffeth. stocks largely holding their gains after friday's huge rally. we're also following these stories today. a dog fight on the "closing bell" today. what stocks are soaring this year but might be left in the dust in 2014? it's the dogs of the dow that we're wondering.
this year -- last year hewlett-packard was the worst performer. this year -- >> a best buy? >> -- until it left the dow it was the best performer. >> we see the springboard and some names is what people might be able to do with those in 2014. we're get a real-time check on the consumer during this holiday season. william lauder will join us chairman of estee lauder. >> that stock has done very well this year. did you see this amazing moment in ukraine? historic toppling of the statue of vladimir lenin. it's more than just a youtube moment. it could mean a lot more for anyone who owns emerging market funds, for example. michele caruso cabrera will join us to describe the implications. >> let's get a quick check of markets. starting off pretty quiet. the dow is adding 16 points. a couple points higher on the nasdaq. on s&p 500 perhaps more significantly, bill are simply
the levels we're looking at. 16,000 plus on the dow. 4,067 on s&p. >> let's talk about today's market action in our "closing bell" exchange with jem ma godfrey, we have anthony chan from chase,on n onon john naplatano and gem you tweeted, the headline allocation. >> we're starting to see rally fatigue. we think that will support the rally. good news is good news and bad news is good news. the fed is likely to remain supportive. this rally fatigue means people are reallocating away from growth into value. the biggest beneficiaries of this could be let's say, european equities over u.s. equities where valuations are looking tight. and opportunities within the financial sector and also risks
there so you have to be selective. >> we'll get to that in a second. on this point about how expensive some value names are, how do you call it value if we're paying these multiples? do you expect that to continue? >> john? >> yes, sir. hi bill. >> how are you doing? >> i'm doing okay, thank you. good to see you. >> to kelly's question. >> yeah. we feel growth is a little cheap compared to value. we do think there's going to be -- there could be an issue with the valuations -- or value stocks, per se. >>. >> the terms of allocation, what are you saying to clients? they should still -- is there a compelling reason to be long those names? or are you saying you want to look at more cyclicals, cheaper growth names, if you want to use that terminology? >> yeah we do want to look at some cheaper growth names right now. we are concerned about a little euphoric feel and maybe a little overbought situation out there.
we're thinking correction time could be near. >> anthony chan our resident economist here. the rally after friday is the market preparing itself for tapering or -- i mean what's the message? what do you think the fed's thinking right now? >> what the fed is thinking is financial markets are getting better. the real reason why the financial markets were so scared of a tapering of several months ago and certainly midyear because they weren't sure if this fragile economy had any legs. now we're seeing those legs. one thing i was really encouraged by was the slight increase in labor force participation rate. you can see that across a lot of h-cohorts. the only one that went down was initial one 16 to 25. other than that the other cohorts they were rising.
that sort of increase lakreescrease legitimizes increase. >> and people retiring who might have stayed in the labor force during the recession. things look like better. they're retiring. the unemployment being where it is may stay down there despite the upward pressure may not be as high as some thought. haum more months before we hit 6.5% on the unemployment rate? >> i have believed for a long time we'll see 6.5% unemployment rate by the fourth quarter. keep in mind, even with today's federal reserve flow of funds data showing another record increase in household network worth. a lot of people that lost money in the financial crisis they got it back and are even ahead of the game and they're feeling more comfortable. this they want to retire they're retire. you'll have that cohort retiring because they can retire as opposed to working because they have no other choice. >> rick santelli, is 3% on the
ten-year yield inevitable this month? especially as we get closer to the fed meeting. >> my answer is yes. there's a possibility i could be wrong. it's all about timing. i think we'll not only cross it but slice through it a bit. today there wasn't much going on. i found it interesting that 10s and 30s are unchanged. some wiggle with the yield curve. big story is the weakness you see on the dollar index. that's year to date chart. as far as the taper and stocks and all our guests saying you know the economy is improving, hence, stocks deserve to be where they're at, of course the economy's improving. but the issue isn't that stocks should go up when there's an improving economy. we know that. the issue is have they overimimproved based on what the fed is doing? i'll-i i will continue to say the market is looking for more growth in buybacks. all this easy money created a
dynamic where the supplies of stocks is more important than the fundamentals. the real yik issue will be once the taper is there for all to see, what are stocks going to do? i can tell you what interest rates are going to do. stocks are the question. >> it's a great point on buybacks. i want to push back on something. it comes out of japan today. it's this notion that a lot of the japanese are looking at u.s. debt here and saying i can get a great yield but i can't get it home where real yields are negative. i'm going to pile into the long end because there isn't inflationary pressure in the u.s. for now. why is it some of these forecasts from a minutes beneficiaricy, the u.s. ten-year will be at 2.4% next year, what have they got wrong? >> >> japanese got everything late. the line from greenspan, irrational exuberance. that was in '9 6. he said it's been ten years since anything's gone right for them. that was in '96. look at the dollar/yen the euro/yen, the pound/yen and the
ten-year and what it's starting to do move up a bit. i think there's a lot of danger with the outcome of abenomics. >> he says he thinks the economic recovery is sustainable in your region. we're here with a strong jobs report. are we looking at stronger economy and is that the time to start selling stocks here? are we going to sell on the news, do you think? >> actually, the biggest divergence we're seeing is this talk about winding down support in the u.s. whereas they are starting to come out rumors that in europe they're considering additional support, additional lending schemes for banks. that shows a sharp contrast. it's not necessarily growth is substantially picking up because it's so weak in the european area but it's more a case if you have additional support will that boost sentiment. from rick's point about sentiment overshadowing fundamentals sometimes this
could provide another boost going forward to stocks in different equity names, especially as i said in the financial sector when actually the economy itself has significant potholes they need to overcome. >>. >> an important reminder whatever the fed might not be doing, perhaps the european central bank picks up stimulus from here. we'll see. thank you. >> thank you for staying late gemma, as always. 50 minutes left in the trading session here. really the bias is a wash at this point, according to art cashin. the dow is up 15 points, adding onto that monster rally whoa saw on friday. >> last week the theme was selloff into the close. today we seem to be sitting around the levels where we've been all day. coming up next we'll take the pulse of the consumer this holiday shopping season. we'll speak to estee lauder chairman, william lauder. >> we'll introduce to you a conservative republican businessman who wants to raise california's minimum wage to $12
an hour and he says it would save taxpayers money in the process. he'll explain his reasoning coming up. and will this year's dogs of the dow be the darlings of your portfolio in 2014? it has been a winning trend over the last couple of years. so stick around to see if it will work out this time. what are the names to avoid for next year as well? coming your way. ♪ i want to spread a little love this year ♪ [ male announcer ] this december, experience the gift of unsurpassed craftsmanship at the lexus december to remember sales event. some of the best offers of the year. this is the pursuit of perfection.
as markets try to build on friday's big gain dominic chu has stocks making big moves today. >> the deal news of the day. cisco, the food company, announcing it's merging with u.s. foods in a deal worth $3.5 billion, sent shares of cisco soaring and still up 7% on this news. given imaging is spiking more than 26% after kavidian said it's buying it. they make pills that take photo inside your body. another stock popping, twitter, up more than 9% session highs. some investors are expressing optimism about the new tools for advertising and advertisers. one other stock showing healthy
momentum going into the holiday season is estee lauder. this is the sometime of year when consumers flock to cosmetic counters for holiday gifts. will all of that holiday traffic translate into profits for the perfume producer? back to you. >> we are just two weeks and two days away from christmas. kelly and i have not begun shopping yet. after a somewhat disappointing black friday for retailers, we're wondering what companies have done to try and drive sales in what is a very competitive shopping season. >> let's check in on the consumer with william lauder. >> thank you. >> people want to know how is it cosmetics are doing so well, whether it's you, rivals. do you look at it as a cycle or a sign that the consumer is in a
better position than 2008? >> i would like to say the consumer is in a better position than 2008 but that's a relatively low standard. it's a very approachable indulgent luxury for yourself. the consumer shopping, one for mom, one for me. one for dad, one for me. the price point is easy and we can afford that and we try to make it easy for her because of the price points we offer, the service we offer, the convenience we offer. all those make it very easy for her. >> and the benefit of a brand as well, obviously. your grandmother's name just jumps out at people when they see that on a counter. do you try to leverage that? i hear so often a company like yours will want to be a, quote, lifestyle brand beyond just cosmetics, to use that brand to further the consumer. >> estee lauder a family of 30 brands. one of the most well known is
estee but donna karan, mac, bobby brown, clinique. the consumer likes to buy multiple brands. i'm sure kelly has a whole drawer, and your wife, too, a whole drawer of products she's partially used and try again. we try to use the credibility of our brands to bring consumers to the counter. we show you what she thinks she wants but those things she didn't knew she wanted. we try to make sure we're prepared for her desire to buy gifts, for others and perhaps for herself. as we get closer and closer to the christmas period the consumer gets a little more desperate, a little more anxious. what have you got? we make sure we have prepared gifts as well as wrapping things for them right then and there. >> the first point about price points because this reveals what's happening in this country more broadly. pp when i think of cosmetics,
it's mac cosmetics. to me, if you're spending $30 on a lipstick or blush or single items, that adds up quickly to the hundreds of dollars. sad but true. it's affordable to say, a pair of $500 shoes but it does still mean your customer base and this may explain why your sales are so strong is, frankly a higher income customer. >> you're right. we've seen a trend over the last few years, since 2008 of a movement from the consumer en masse to class. she's moving from blister pack pegboard master brand shopping in other venues and moving into retail environments like macy's like nordstrom, because one of the values we offer her is service. the service aspect is very important because the absolute value price differential between the top end of mass pricing and the opening end of prestige is not very much.
research we've be done shows, for example, we reduced consumer's concern about a choice -- >> when i think about service, i think about people jumping in your face and waving perfume at the counter. >> you used mac, for example. makeup artist show you the right techniques. >> in the store. >> at the store. macy's at estee will help you find the right shades for your skin and help match it for you. when you realize, that service aspect helps confirm for the consumer she's made the right choice the expert has helped her make the right choice for herself or someone else and that value proposition is worth something to her because she's confident and she doesn't have to do it again. >> and you have a great relationship with a lot of makeup artists at a time when the proliferation of content means demand for makeup is going to be pretty strong.
>> absolutely. >> we see great demand for our makeup, skin care makeup, and fragrance. this year is heavier for fragrance, traditionally but during the rest of the year makeup and skin care make up a bigger percentage of it. people want to look good, feel good and smell good. >> i may wear makeup but i know nothing about it so i leave that to her. but i'm focused on brand. how does it translate overseas? is it american aspirational for a company like yours that people are drawn to or can you tailor a name like yours to focus on the asian mind set or european mind set at the same time? >> i'm glad you asked that question. a lot of what we do is we think local, act global. so by giving the consumer especially in asia, a global brand, aspirational products relevant for her needs, relevant to her, especially in asia where the consumer is very particular about what she wants and we
found that our -- one of the big engines for our growth over the last few years has been our focus on that asian consumer predominantly in skin care giving her what she wants. surprising her for what she didn't know she wants 37 making sure it's tailored to her needs. then she's shopping for that same brand around the world. and the halo effect is she sees the brand at home but while she's traveling and there's ever more traveling asian consumers, as she travels, she buys. and then one other important factor. the average western consumer american and western european uses an average of five or six products in the morning and the evening for her beauty routine. the average asian consumer uses 12. >> really? >> wow. so i guess you're hoping that does converge. >> very quickly, how is the consumer doing? let's focus on the u.s. because that's where we are. >> the evidence of what we see, she seems to be doing pretty well. the numbers seem to be holding up. you know, there's a lot of
confusion because six fewer days shopping days between thanksgiving and christmas. all the numbers we hear from retail partners seem to be pretty good. and the transactions are pretty much falling in line with what we expect. a little bumpy ngs because of weather, whatnot. no one is saying this is the best or no one is saying gee, are we concerned. two-plus weeks to go. >> it's early. we haven't started shopping yet ourselves. >> i wait until christmas eve. >> shop early and shop often. thank you very much. appreciate it. one more check of markets before we take a short break. dow is adding 15 points. s&p 500, the nasdaq are also up by a couple. twitter is one to keep an eye on as that flirts with the $50 mark. >> up 10%. big move. stocks generally building on friday's momentum from that huge rally. when we come back our buddy vanguard founder jack bogle will tell us how much more room he feels this market can rally.
did you know jack's own son prefers active investing compared to index investing, which his father pretty much invented? >> great story. they also may be making investors howl this year but next year we have names of underperforming s&p 500 and dow stocks that could be heading out of the dog house and into the winner's circle next year. ♪♪ ♪ [ engine revs ] ♪ ♪ ♪ ♪ [ male announcer ] the mercedes-benz winter event is back with the perfect vehicle that's just right for you, no matter which list you're on. [ santa ] ho, ho, ho, ho! [ male announcer ] get the all-new 2014 cla250 starting at just $29,900. in today's markets a lot can happen in a second. with fidelity's guaranteed one-second trade execution
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it is a trend worth paying close attention to. big oners one year often turn out to be the big winners next year. seema mody has this year's list of dogs that could be next year's darlings. >> what a difference a year can make. take, for example, bank of america, down 58 % in 2011 before rebounding to become one of the best performing s&p 500 stocks in 2012 gaining 108%. the rebound driven by signs of a recovery in the housing market as well as better than expected earnings. on the other hand, best buy, hewlett-packard, pitny bowes were among the worst but hp and pb were darlings. now among the dogs this year cliff's natural, peabody energy and mining. there is some doubt on the street where this dog to darling
trend will continue. >> seema, thanks very much. stay right there. we want to talk about the dogs of the dow and bring in john from 24/7 wall streeting, here with his top contenders to be on that list in 20 14. welcome. >> thank you. thank you for having me. >> let's start just straight off the bat. what are your picks for 240 -- 20 14 that are the dogs of the dow today? >> it's just a dividend methodology. that's at&t verizon, intel and mcdonald's are in the top four. you've also got merck in there, actually, ahead of mcdonald's, but these are -- they're just traditional high dividend stocks. i took a lot right before i came up, and believe it or not, the dogs of the dow did actually keep up with the s&p this year in performance -- at least very close to it, which i'm very surprised about, considering how strong the bull market's been. >> and you think ge could be in
there. i mean, they're expected to raise their dividend as they've been doing lately. that could make the list at some point, too, right? >> they -- i mean they're going to raise their dividend. it will be any day. for all i know they did it in between the time they were miking me up for the show. they won't talk about that at ge. that's probably going to make it -- if they raise their dividends to what i think they will, which is just about 8% then they'll probably be in there. >> you know what's interesting about that is that a lot of these winners that jon is pointing out are actually up double digits this year. that goes from what i'm hearing from market strategists that i spoke to. many see winning sectors will continue to outperform in 2014. health care is an example i was told. the best performing sector over the past three years. you would think at some point money managers would lock in their gains. i think what's happening is the fundamental story is still so attractive for that story. that's why you still see money being put into that -- into those names. >> jon i want to make sure i didn't confuse things here.
the premise that we're talking about for 2014 is to take the underperformers from 2013 and they might do better. i think what you're saying is the opposite of what i had asked. which is that what -- you're predicting the dogs for next year, right? these dividend names are you ones you think will do poorly? >> the dogs of the dow are the highest dividend yields. i tried to do something last year called the pigs of the dow, which were the worst performers. that's -- those are entirely different. that year if you looked at worst performers for 2013, ibm is in there. i have a hard time getting excited about ibm. >> hewlett-packard was the worst performer in the dow last year of components. if it remained in the dow this year it's been taken out in the meantime, but up to that point it was the best performer. i remember two years ago mcdonald's was the worst
performer inside the dow. and last year it was the best performer. i think that's what we've been getting at at this point. >> correct. you're absolutely right, bill sometimes the worst performers end up being the best gainers. i'd probably be more inclined to throw a hail mary on caterpillar than ibm. it's an internal operating metric. ibm's biggest story they have is their buyback. outside of, that they've got nothing. >> how true is that for so many companies here. jon, seema, response here? >> yeah. this will be the big question going into 2014. i think as well as the fact we are seeing so many sectors -- all ten s&p sectors are up? where can you put money to work? you would think they go into high growth sectors like technologies. >> jon, good to see you. thank you for joining us. >> thank you. bye-bye.
>> heading toward the close. 30 minutes to the close. slight bias to the downside but not much. if we sit here long enough maybe we'll turn neckgative on the dow. >> what is wall street's most famous investors think about this market? we'll ask him. john bogle is here next. >> george clooney lending his support to ukraine's pro-union protesters. >> let me say that this to all of you in the square in kiev all around ukraine. when you look to the west know we are looking back at you with great admiration. >> those same protesters he's talking about just tore down a statue of the first leader of the soviet union. of course vladimir lenin. for some reason was still standing more than 20 years after that communist nation dissolved. more of that astounding video, historic in proportion, coming up later on the "closing bell."
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oil and gasoline prices have been on the rise. sharron epperson at the nymex. >> one spread has been between brent crude. a lot has to do with the fact the brent market is well supplied and hasn't been as much demand from european marketers. it also has to do with what we've seen in the u.s. market. we've seen a big jump from $4 last week. that has a lot to do with pipeline developments on gulf coast pipeline owned by transcanada. today they said they started filling that pipeline 700,000
barrels will be filled from cushing, oklahoma to the coasts. that's something supporting the u.s. oil price. as we've seen gains there over the last week or so we've seen gains in gasoline prices. wholesale gasoline or the futures at nymex are up 5% in the past month. that is translated to higher prices at the pump. we're up about six cents or so for the national average in the last month, $3.26 a gallon. back to you. >> thank you, sharon. it's been a big year for index fund managers. probably the most famous index people can invest in or want to. the s&p 500 is up 26% this year. we still have a couple weeks to go. on top of that even bond king bill gross has been paying homage to index investing singing praises to jack bogle just here on "closing bell." >> the market not being able to outperform itself.
we know common sensicly, we know that's true. >> so should you stick with those index funds for 20 14? vanguard's jack bogle joins us now to weigh in. jack, i imagine you're taking a victory lap here for the passive investing view. >> i've been around too long to take victory laps. times change. >> bill knows that. >> you taught me well. >> victory laps a little arrogant for me. i'm content with what we're doing here in 20 13. obviously content with the way the index funds have performed. but they're not doing -- we're not creating any miracles here. all we're doing is giving you your fair share of the market return. and that's what all investors as a group are doing. active money managers except
they take such a huge hunk out of it. as a group, they cannot win. >> mr. b. what do you say to those -- i'm lobbing you a softball but an important point to make. when they say the world is too complicated with all the different trading mechanisms that are out there, the high speed trading, the computerized trading and so forth, the buy and hold strategy doesn't work anymore and certainly you don't want to go with index investing. you need to be paying more attention to your portfolio with an active manager of some kind. what do you say to those folks? >> no no and no is what i say to them. think about this for a minute. all the active managers are a giant index fund. they all only index as a group. 100% of the market participants own 100% of the market.
they've got this little piece of that pie, about 30% of it in fact. indexes by owning all of those stocks and the other 70% as a group own all those stocks but they trade them back and forth with one another. so, they have to lose. they take too much money out. yes, there are some good managers periodically. certainly, there are. they come and go. it's very hard to pick them in advance. the conventional way we do it in the hedge fund business is in the past. that's a terrible guide for the future. >> absolutely. jack, i mean to add insult to injury, a lot of the funds invested in some of these active managers are pension funds. you know in other words, it's a double whammy. i wonder what you would say and how you get that message out. it's almost less retail investor you're trying to reach out to here and more big institutional funds that keep channelling money the way of the active managers.
the retail investors are actually pretty close. mutual fund market is 30%. but there are a lot of pension funds. i think particularly the state and local pension funds who are swayed by these promises of great returns from hedge sxrurnz they're not getting them. montgomery county where i live in pennsylvania just switched. they've had enough experience with trying to pick active managers. they switched almost half a billion dollars, entire pension port foal dwroe, into largely vanguard index funds. that's the correct mathematical thing to do. it wasn't a tough sale. >> we talked about this before but it bears repeating because the story advances. what's important right now, how much does quantitative easing play into an investment strategy right now? we hear from so many investment
advisers who come through here who are still enamored of the stock market to a great degree because the fed is still pumping $85 billion into the economy every single month. it's not as much about the fundamentals, per se it's more about the easy money policy and for how much longer it's going to last. is that a strategy you would espouse? i realize you're a classic value investor here to keep indexing but this is a stellar year as the fed pumps money into the system. >> no question about all that. one thing i would tell those who are saying we're scared because of what's going to happen next when it happens, it's basically in the market today. the market expects, market participants stock market participants and bond market participants, both expect this market to begin. a consensus, it would certainly
and maybe into the end first quarter. if things work out all right. inflation rate is too low to suit the fed. as they return to their -- a little more long-term reality, the tapering will begin. the fed has gone from $1 trillion to $5 trillion in this buying program. that can't go on forever. >> great economist to richard nexten, herb stein said it won't go on forever. it will stop. >> it's hard enough to win the retail guy over but you struggle sometimes, even your son moved to the passive world. >> i don't know if win over. he said in the wall street journal article, he invests in index for his children. he started with a fairly
conservative hedge fund -- or actually small cap mutual fund is what i'm talking about, bogle small cap growth fund i put a little starter money in there. i don't think it's time to be doctoring air. someone said i wasn't be consistent by doing that. i said life is not consistent. do what you think is right and enjoy it. >> and family first. oh, by the way. >> yeah it doesn't hurt. >> thanks, jack. good to see you. merry christmas. >> good to be with you, bill and kelly. >> really appreciate it. while we were talking we turned negative briefly. art cashin pointing out the bias is to the down side. we're virtually unchanged with 18 minutes left. >> a couple points high other the s&p 500. the nas dashgs too, perhaps held by the fact twitter is up double digits at some points of the day, flirting with $50 mark the same as the intraday high. despite a barrage of naysayers
it would soon fall into the 30s no it turned around today. >> barclay's head of research joining us with his outlook for 2014. >> after the bell, the rubber hitting the road for polaris entries. the stock is riding high. the ceo joins us to share how he's revved up the company and we have a financed look. i don't just make things for a living i take pride in them. so when my moderate to severe chronic plaque psoriasis was also on display, i'd had it. i finally had a serious talk with my dermatologist. this time, he prescribed humira-adalimumab. humira helps to clear the surface of my skin by actually working inside my body. in clinical trials, most adults with moderate to severe plaque psoriasis saw 75% skin clearance. and the majority of people were clear or almost clear in just 4 months. humira can lower your ability to fight infections,
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welcome back. it's that outlook time of year with market posting record highs in 2013 and truly historic rally. what are the likely returns now that we look into 2014 and primary threats for investors? >> larry cantor of barkley says investors should be wary of a greater than expected pick up in the u.s. economy. you don't want things to overheat. is that likely, though to happen next year? >> i think there's a good case for it. >> really? >> in fact i think if you don't see a pick up in the u.s. economy going into 2014, you're not going to see it in this cycle. the two big things are a lot less fiscal headwind is number one. we had nearly two percentage points of tightening. two percentage points of gdp
and, you know, tax hikes and spending cuts last year. previous two years was local. this year less than half a percent. >> we make it smaller spending cuts. last is household wealth. increased again in the third quarter by almost $2 trillion. at the depths of the recession, it was neutral. now they're both going up double digit. that's going to add well over a percentage point to consumer spending. this is the time when growth should pick up. as you said this is also an important time for a couple of reasons because the hope is that cycle starts the broader, more sustainable, more widespread move that helps people get off jobless benefits as they run
out. all of these extreme mers prosecute expiring so this has to be the year we see that pick up. food stamps and all of it. >> right. other things have been expiring before like the big fiscal stimulus package. a lot of that has come off already. it may not be great for investors. if you think about this past year, what happened? we didn't have a great recovery. we had lower than expected inflation inflation, and more monetary support than people expected. the fed did it the entire year of qe3, they didn't taper at all. that would be a good environment for bonds, right? low inflation. and bonds collapse and yields soared. >> you still see tapering -- >> the threat of tapering triggered it but there was a bubble in fixed income. >> come on! how is it a bubble? >> in fixed income. we had no business being at
10 1/2 yields at 1.5%. >> the economy didn't look like it was growing more than -- >> it should run nominal gdp. it was too low. one thing we look at this sounds complicated, but five-year rates five years out. real rates on that this is long term. we're about 2% for a decade. they fell below zero before the tapering took. now they're back up there. so the long end has adjusted to tapering, so it's the short end in the middle of the curve that's vulnerable. i think fixed income probably sells off more. >> i'm running out of time. what will be your best sector next year to invest in? >> we still like tech and industries in the u.s. we think the window's still open even though it's narrowing because the stock market has come a long way. we are favoring. we have a manufacturing renaissance. trades doing better. emerging markets should do better. europe it's still very weak
broet but they were in recession. now they're out. and earnings -- expectations really haven't adjusted. we think they'll do better. >> maybe cat biller will do well. >> like the theme cropping up. still makes me nervous. but you promise stock investors aren't rooting against real people here? >> i'm not saying -- look. all i'm saying is this environment has been a bonanza for investors. huge fed support. that's not going to last forever. >> thanks larry. >> appreciate it. >> heading toward the close, about ten minutes left in the trading session. dow coming back a little bit. let's not make too much of it. up 12 points. >> that's right. i think you just summed it up. the battle over the minimum wage increase taking a strange turn now as conservative silicon valley advocating minimum wage to $12. he's here to explain why this move will save taxpayers money. impact wool exports from new zealand,
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that. >> it's a 50-point range in the dow, very narrow. a very points every day. eventually you start closing at new highs every day and technicians will get more enthusiasm. i know it's not exciting but nasdaq at 13-year high again today. you say, it doesn't take long to get there. we're still advancing. if you look at the market leaders, cyclical groups are all strong technology stocks industrial stocks are all the ones moving. look 1808 gets us near a new high on the s&p 500. we've had trouble get over 1800. we kept saying there was a barrier. now we're over it and everyone says, who cares? i think a few points every day is a significant move. technicians will squawk about it. oil stocks can't -- we had a major snowstorm over the weekend. natural gas is up 2%. the e&p stocks keep dropping. they're down about 10% in the last month and a half because we're oversupplied with oil here in the u.s.
these companies now are very concerned about what's going to happen in 2014. are they going to continue to drill. >> that looks so often. look at mining stocks. so it's happening on the energy stocks now. nobody is talking about the fed meeting possibility of tapering. we had a lot of fed speak this week. >> look today. fisher is out again. we know what he thinks. >> the rest of them you know could have some say in this whole thing are saying we'll talk about it. but i don't -- >> no not in december. but i think january is now becoming increasingly likely. it's a real issue about, some people are arguing we could withstand a taper. the bulls are getting a little more aggressive on that front. i'm not sure. i'll take a few points a day. now we're flat on the day. the s&p up there. >> we still have 4:30. plenty of time. we'll come back with closing countdown for monday. if you wish you were riding a
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no follow-through for the bulls, 200-point rally of friday but no selloff for bears either. one standout, twitter approaching $50. there we are, up 9.25%. at $49 a share, trying to make way higher. those on satellite radio, this is peter costa i'm talking to even though he doesn't sound like it. we had the big rally friday. no follow-through today. >> we didn't get a follow through which tends you to believe it wasn't that realistic. we're going to be very very sideways motion for the next two months. >> because it's december or -- >> december you know small caps are doing well but big caps are going to be waffling. i don't see any major moves coming until you get earnings. >> fed meets december 18th. >> a pop and selloff. once that's done it's going right back into this same narrow
trading band. that's what it's going to do. we've had a great year. why ruin it? >> exactly. hot tea and lemon, try that. that will work. peter costa. thanks for joining us this first hour. going out virtually unchanged here. the s&p going up about three points. nasdaq with 13-year high. stay tuned for the second hour of "closing bell" with an all-star panel. i'll see you tomorrow. welcome to the "closing bell." stocks managed just to hang on into the close. let's start with a recap. numbers continue to trickle in. looks like the dow will add eight points so 16,028 is the level there. nasdaq up about six. and the s&p 500 both adding 0.2%.
4,068 and 1808 are the numbers respectively respectively. let's get straight to it with today's "closing bell" panel. joining me now, our own robert frank, cnbc contributor, and howard dean down here on the floor of the stock exchange. we love you for it. let's start off, i guess, robert with talking about one of the biggest heaes tn the -- i don't know if people have focused enough on this. every quarter the federal reserve comes out with basically a calculation of how much households in the u.s. are worth. we found out, what $77 trillion, that's what a rebounding stock market will help do for you this year. >> as a whole, household wealth in america has hit an all-time high. increased $1.9 trillion. what's amazing about this number is that $1.5 trillion of the $1.9 trillion was in financial assets. then when you consider that the top 10% of americans owned 80% of the financial assets in this
stocks -- >> top 10% of households in the country own 80% of the stocks. >> correct. >> and top 10% own more half financial assets. not that this was the intention of the fed or washington, but this has had a redistributive effect where the top has gained from the higher increase in financial assets versus houses. houses also gained. >> but let's stay with the market for one second. michael, how many of these are your clients? >> i think probably all of my clients would qualify. >> what's been the average equity aloelocationallocation, 50%? >> over 50%, certainly. that's the norm for most of my clients. going back to bob's point, that was the intention. they had to swell and get some growth somewhere in the economy. that's what the federal reserve had to do.
they got it where they could get it which is creating this kind of a problem of a plutonomy where you have wealth in very few hands. more distribution is better for the economy. >> this is why this remark about 2014, larry cantor just said this a few minutes ago, he said if any year is going to be the year the u.s. economy could outperform it might be 2014. i think we should say, governor that it almost has to be 2014. we need to see that priming of the purpose, whatever you want to call it really broaden out to disposable income gains. >> i think that's true. i think bernanke has done an incredible job when you see what's happening in europe to have the chairman of the fed, very fortuitous. i don't begrudge the fact we picked up on the wrong people that didn't need it and got the money -- >> people will say, the wrong
people. >> well the people who didn't need it got the money. >> right. >> because i think what he was trying to do is avoid what happened in japan, which is an inflationary crisis. the problem now is challenge, how do you figure how do you get the rest of the 90%? it's much tougher problem than people think because the real problem is housing. if you look at the housing market, the same people that owned the housing market have not come back and a whole lot less people in houses -- >> if the president came to you today and said governor i think i can do one policy thing to try and make this economy better for everyone in 2014. >> if i could only do one? >> if i could only do one, it would be? >> i think at this point i would raise the minimum wage significantly. i know a lot of people on wall street get nervous because they think they're going to price labor. labor has already been priced in a very different way. essentially the collapse -- not the collapse. that's a little dramatic. the substantial downgrading of unions have lowered wages. bottom 20% has not --
>> the recession didn't help that. >> no, it hurt. labor is not the force it was. so, if you want to give people a decent working wage, you're going to have to -- and minimum wage is nothing like what labor was getting but have you to have some kind of minimum wage. >> i want to get lindsey's voice in here because we're hurting on a couple things i'm sure you have a view on. is minimum wage moving at the right place? >> on the surface, obviously, the easiest argument to standard of living for low skilled worker is to increase the minimum wage. that type of policy does the exact opposite. when you start to increase the minimum wage artificially what the market would otherwise price as appropriate minimum wage businesses are forced to squeeze out employees because employers are unable to support or afford that current level of employment. so, what we actually see -- >> i hear you. let me just say the argument --
if you broaden out that point, not from an employer's point of view but society point of view if we have people that can't put together a living on $7 an hour who, you recall then need government transfer payments, and this is where we'll talk to someone who has a proposal to raise the minimum wage in california for this reason there is going to be a sort of taxpayer burden anyway. so, what about from that point of view? >> if we look at what's happened over the past decade and a half the minimum wage was raised to over $4 in 1996 and we've had five subsequent increases since. low skilled unemployment has risen from 16% to over 25%. clearly, the minimum wage in these types of recurring policies are not fixing the situation. >> we're going to get more into the minimum wage. i want to bring in "fast money's" brian kelly. i hope i can ask you off the bat, what happened with twitter today? >> you know this is one of
those stocks that is just all momentum. $40 seemed to be support for this. everyone -- guy adami talked about it last week where he said, everyone thinks it's going lower so it must be going higher. that's exactly what happened here. i still think it goes higher. >> we closed for people who can't see the chart, it's up 9%. 49.24. high when it went public was just over $50 on that day. was it this just a twitter-specific story or are we seeing halo effect for social media? >> twitter itself -- everyone was expecting it to do a facebook, take a nose dive. i think that's why you're seeing this outpaced move here in twitter. in terms of social media in general, the winners are the ones that allow their users to monetize their experience. so something like a linkedin. people can monetize the use of that. >> facebook up 2%.
yelp up almost 1%. >> today specifically the natural resource sector f you look at what's going on in china, better news there. when you look at markets at all-time highs, where do you want to be? underperformers. materials in telecom, for the first time in a long time we're the leaders of the market. >> i want to turn this back around. lindsey, if we're talking about some of these sectors where high dif densd, people are nervous about the fed and rates moving higher, is that a move where all of a sudden they have to worry where we're going significantly higher, dragging on expectations as to what they can expect from dividend income? >> i think the fact we're seeing market little changed is the market is still trying to digest what friday's nonfarm payroll report meant. it was stronger, beating consensus expectations but not strong enough to force the fed's
hand at the upcoming fmoc meeting. it's likely we see accommodative policy well through the yellen takeover of the chairmanship in march. while there's growing concern seal see ratsz rise to the moon is really unrealistic at this point. if you take the improvement in the labor market juxtaposed to underlying fundamentals a consumer sector that continues to lose momentum and three-decade low in the participation rate. it's unlikely we see any upward movement in rates soon. >> i think we have to look basically we have a positive trend. numbers are getting a little better which i find encouraging. yes, i look at the disparity between you three and you six, which in -- i'm sorry, jargon. unemployment rate who has part-time workers not by choice and those who haven't looked for a job in the past year. that is a much larger number.
still they're all -- unemployment rate on all those are creeping lower. that trends positive. i take that as encouraging. >> whether or not that moves the ten-year before the fend fed sfwendz intends it to remains an open question. lindsey, stay with us. brian, we can kauch on "fast money" at 5 p.m. coming up, a battle royale in the works. banks in one corner and regulators trying to rein in risky bets on the volcker rule. plus, hot bikes hot stock, apparently. polaris industry ceo will speak with us exclusively about what heating up the bike maker's stock. you're looking at a live shot of the motorcycle. the company stock up 60% this year. what's in its plans to keep racing higher? we'll ask the ceo coming up on the "closing bell." [ male announcer ] if we could see energy... what would we see?
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news that beat expectations. full guidance came in a little light, helping to push the stock down. the ceo says the current holiday season will be very competitive and they'll spend a lot on promotions. twitter share seeing a big pop. they hit the highest level since the ipo days soaring more than 9%. investors liked some advertising tools. abercrombie & fitch fell after announcing contract extension of ceo. they put out a scathing report. let's talk about food. ruby tuesday shares jumped 10%. reportedly hiring goldman sachs to explore strategic options, maybe a possible buyout according to debt wire. kraft foods, bank raised price
target to 60 bucks a share. >> maybe a little more room to run there. thank you. >> now, five federal agencieses will vote tomorrow on a new rule intended to prevent risky trading by banks, namely trading with their own money, opposed to customer funds, known as volcker rule and required by dodd/frank legislation that grew out of the financial crisis. financial policy advocate at public citizen saying banks using their own money is gambling with funds ultimately guaranteed by taxpayers. mark founding partner at lopressi group saying things are overburdened by regulation. thank you for being here. >> thank you, kelly. >> mark i want to start with you. do you think it's likely -- we're starting to hear signs lawyers will challenge volcker rule basically the second the ink is dry on it this week. >> that's certainly what we're hearing from washington right now.
there are three basic legal challenges mounted to the rule. one of which, most interestingly in my opinion is that it contradicts a lot of what dodd/frank was intended to do and i actually agree with that. >> can you explain that? what do you mean contradicts? >> one thing dodd/frank was intended to do broadly speaking, was to increase market transparency, was to have the government get a better handle on macro factors and things that move markets like high frequency trading. while the volcker rule has yet to go into effect, the banks have by and large seen a max exodus of proprietary trading desk as way from the heavily regulated bank world into the more thinly regulateded or some might argue less effectively regulated, more opaque world of independents proprietary trading. i think that has had the absolute opposite effect of what was intended by dodd/frank. >> it's a fascinating point,
right? if you clamp down on one place, this is like whack-a-mole where it pops up somewhere else and does that undermine the original intent of the regulation? >> section 619 of dodd/frank is remove the subsidy with high-risk gambling. with fdic insured deposits. that's the intent. banks make $44 million a year by doing that and for-profit will take place outside government regulated money. >> the rule as it's currently expected to be implemented, goes far more is far more overreaching. what market -- where the line gets drawn. we understand customer money shouldn't be used for gambling and speculation. certainly the mf global and
other unfortunate incidents like that have taught us that lesson. >> mark your first point is the problem is that it contradicts dodd/frank but you acknowledged barth's point that no it doesn't because it moves it to someplace that doesn't imply that taxpayer guarantee is legitimate. what's the concern here? >> we have to make sure we understand kelly, is that as it relates to customer money, there's no question that the provisions of the volcker rule are appropriate. it should not go so far to restrict the bank's activity with the bank's own money. it's a critical distinction. >> first of all, mf global has nothing to do with this. >> let me be clear for viewers. this is an important point that eventually could trip up the whole thing. to what extent if you're trying to clamp down on banks making a risky bet with ultimately taxpayer money are you ever
going to really be able to know whether, say, something like a quote/unquote, hedge in jpmorgan's london office turns out to be much more than a hedge? >> there's a simple thing can you do with the jpmorgan case. you could ask what the cdxix was hedging. in fact, that simple question was asked by an investigator and jpmorgan said, well-being actually, we don't have a thing. it was not a hedge. jpmorgan let's look at context. biggest company on the planet. $1.3 trillion in deposits $108 billion in loans with balance they were gambling. chief investment officer using the london desk making bets. before the london whale fiasco they made money, on the bankruptcy of american airlines. how far we've come that that's somehow a profitable thing. >> to the point, if this legislation has to stamp out the kind of activity you know it's meant to without going too far, do you think we've struck the
right balance here? >> whoa will strike the right balance when we get banks back to doing boring things like making loans. we did better when fdic banks were -- >> final point to you, marc. >> you know i know bart has gone on record suggesting we should go back to glass/steagall. i would say that's really preposterous. we're in a different world today. banks need to be able to engage in proprietary trading with their own capacity. what we'll see as a result sthf rule f it's implemented, is significant impact to bank earnings and a direct exact on main street sgi don't main. >> i don't think american policy is maximized to -- i think we have policy to serve main street. i appreciate maybe banks -- goldman sachs isn't going to make as much money or jpmorgan won't make as much money but what serves main street not wall
street. >> i don't disagree. i think you'll see an impact as it relates to main street's cost of borrowing as bank's earnings go down and banks are unable to properly hedge on proprietary basis the other side of the trend when they lend. >> they shouldn't be trading. they should be lending. jpmorgan should use that excess $300 billion in sdpofrts and make loans not bets. >> guys it's -- look at least it's been illuminated as far as i'm concerned. i don't know if that will keep the challenges from taking place as we continue to see that rule finalized this week but we'll watch and see what happens. thank you for your points of view on that this afternoon. appreciate it. >> thank you, kelly. >> coming up trouble in ukraine. up next protesters toppleing a statue of vladimir lenin. we'll have more details on the explosive situation there. what it could mean for emerging market investments.
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billion invested. they're announcing, kelly, the final sale of gm stock that was held by the treasury department as a result of the $49 billion bailout. and walking away with a $10 billion loss. of course the treasury secretary touting 370,000 auto jobs saved as a result of the bailout. >> stay there. just to run the numbers, sounds like a $10 billion loss on the gm investment specifically but more broadly, steve, you're telling me that this is about $11 billion gain on the t.a.r.p. party foal yoe? >> yes. actually $10.9 billion. i know you like to be precise. >> that's interest. gm shares are up 0.4% this hour. this wasn't necessarily a huge surprise. there was rumor of the treasury moving to get rid of the rest of its holding toward the end of the year. when you're up there much more gm or the market more broadly, now is the time to do it.
>> $10 billion within range. my question s why didn't they just hold on until next year until they could tell the taxpayer we made a profit on this? we're in the black rather than taking a loss. on the other hand, i wonder whether this is a little signal that treasury thinks we're at a market peak. >> there's an overhang too. canadians have a huge piece they haven't gotten rid of. they have to think -- >> you want to be first. >> yeah. that may be depending on what you think is going to happen to the car industry. don't think anybody thinks the government should be in speculation of the car industry business. >> we're splitting hairs -- >> hang on. >> the treasury has said it was not going to be in the market timing business. and laid out a pretty regular schedule for selling it. that's one thing that treasuries in all administrations, selling bonds or stocks or anything they're involved is not gaming the market. i think that's why they sold these right here. >> we ought to be singing the hallelujah core russhorus. this is fabulous for every american listening.
the government stepped in. bailed out huge industry. on top of the banks and everything else. they ended up with a product, who would have bet on that when they were going through it and they saved us. i mean really, they got us through one of the deepest recessions if not could have been one of the worst depressions we've ever had. this is government actually stepping in and being effective. this is terrific. >> some would say ford didn't have a bailout and doing just fine. >> much worse dent position. >> lindsey? >> this is still a $10 billion loss on the taxpayers' back. the government sloughs that off and says we saved 390,000 manufacturing jobs. the government is not in the business of save organize creating jobs. that's a private sector industry. that's the disconnect we continue to see with this administration. continuing to move and take over larger amounts of the free market which is very discerning as we go forward. >> something i'm going to agree with michael on. i think the left and right are wrong about the t.a.r.p. nobody likes to bail out banks
and free enterprise. the truth is we don't do the t.a.r.p., we're not sitting here today. because half of the people in this room are broke. we just can't do that. >> i want to come in between michael and lindsey on this. you know very much what governor dean said. nobody's proud of this. you don't want to say, hallelujah, the government came in because nobody wanted that to happen. they came in they were able to save jobs, do it at minimal cost. you should be reasonably proud of how the treasury managed the t.a.r.p. with a slight profit. it could have been a slight loss. what you want to make sure year in a situation, key to policy going forward, where you're not in these situations. where the government doesn't have to come in -- >> but then -- >> lindsey, go ahead. >> how about you -- >> say that again. >> keep the government from perpetuateing this going forward? how do we control the government from not backstopping every time there's -- >> the public was not happy about this. >> clearly, public opinion did
not have much influence in the government's intervention in t.a.r.p. >> there is a lot of influence, lindsey. can you find it in the people who do not have jobs any longer who were in congress that voted for t.a.r.p. the public has spoken in a big way in that regard, lindsey. i believe both current law in dodd/frank and what happened to these people who were elected officials who are no longer elected will play a big role in stopping the next bailout. >> michael? >> i agree with lindsey. we don't want government in this role, period. but when we do have a very real situation that looks like too big to fail across banks and other industries we go through what we went through, the result really wasn't that bad. i don't think goth should be in this role and i don't think we've done anything to fix it. the banks are bigger other things are bigger. we'll have to do it again if we get there again. >> they're trying to write legislation to keep the fed from being able to exercise -- >> that's right, kelly. >> does it make sense? >> there's also more capital, michael. >> yes. >> a lot more regulation for better or worse. i would think given the capitalratios
of some of these banks we're away from a t.a.r.p.-like situation -- >> although history after the fact is not that encouraging. we'll leave it there. steve liesman, they've for bringing that news to us. we'll keep eyes on gm shares as government has divested the rest of its stake, $10 billion loss. up next polaris ceo speakinging ex ing speakinging, what will take his stock higher. ♪ ♪ [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade.
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welcome back. the holiday season is revving up and this company is seeing big toys for big boys paying off. they made they say that. polaris is up big and betting on the revival of the indian motorcycle. joining me for a twist on the american classic, ceo, scott wine. >> thank you for being here. >> what are we looking at? >> indian chief, mid price. we launched three at sturgis. riders of indian founded stur gus a long time ago. >> indian is one of the oldest
motorcycle brands in the u.s. our international viewers may not be aware. >> it was founded in 1908 in springfield, massachusetts. for the first 50 years or so it was the indian/harley wars for a long long time. indian took a few decades off and we're giving its rightful place back in the heart of the motorcycle world. >> that's a charitable way of putting it. i love the fact you managed to bring back the manufacturing and the bikes in a much more -- much less expensive way, i should say here. how did you manage to do that to get a bike that used to retail for $30 grand under $20 grand? >> weaver been in motorcycle with victory brand. wonderful bikes, continuing to get rave reviews and the quality is excellent. we built a great engineering team, great supply team operational team and we took that learning and built an all new indian motorcycle. the style points continuing to give back to heritage of the
original bikes. >> we were just talking as well about general motors which had to be bailed out by the u.s. taxpayer five years ago. five years ago was around the time you were coming into the company. i mean how opportunistic were you then and how much convincing did it take for people to stick with you stick to the turn-around plan and get to where we are today? >> i remember being here in march and our stock was at 2k9 $9 and today we closed at all-time high. it was because we had so many great people to fight through that recession. we didn't get any government bailouts but we took a lot of cost out of our company and put a lot of savings back into innovation. we consider ourselves an innovation company. we put 4% of revenues back into r&d every year consistently. lately a lot has gone to indian motorcycle. >> you're in minneapolis? >> medina 20 minutes outside of
downtown. >> i'm curious, when people talk about and we've heard strategists talking about this all day, the u.s. manufacturing renaissance. i wonder if a company like yours is part of what they're talking about. where are these things made, assembled and walk us through the supply chain. >> sure. first of all, they're designed right in medina where we have headquarters, a wonderful design team. engineering work is sdondone in wyoming, minnesota. minnesota has a thing about naming towns after statements. we have 600 engineers there. engines are built in osceola, wisconsin, and bikes are assembled in sprirt lake, ohio. this is an example of great work they do. >> any trends you're gleaning from this holiday season? >> surprising strength around the brand itself. whether it's t-shirts and jackets or anybody that can get their hands on the bikes. we're trying to ramp up production right now. quite honestly we're not going as fast as our consumers would
like. >> you're running into supply constraints. why? >> we are. mostly because we're so dedicated to ensuring the highest possible quality for our bikes. and you talked about american manufacturing. one of the benefits of making things here in america is that we can ensure the quality every time before they go out to our dealers. >> i'm sure there's an easy way to test that around the parking lot as well. >> i've given it as much testing as i possibly can. minus 8 in minneapolis. chilly for motorcycle riding. >> i'll take this for a spin after my next engagement. i'm not going anywhere near this bike. too much kim and kanye lately. thank you for coming in. we'll be back after a quick break. plenty more "closing bell" stlat ahead.
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the rate of over 100 a minute. the next up and this one -- you know how everybody accuses, oh, you put up the doom sxm gloom headlines. that's how you get readers. we have a good news story that's a solid number two on the website right now. and it's household net worth is at an all-time high. since they started keeping numbers on it from 1945. people love to read good things happening to them. >> we were talking to robert about that. i'm glad it's that kind of story and not -- as soon as we start to see the website lighting up with stories about how the market will go down to 20,000, that's when everyone will get worried. >> maybe so. speaking of warnings our third story on the hot list right now, art cashin did an interview earlier on air talking about one warning sign that might cause outright selling. we put it up. he has a huge following on our website. people are diving into. he warns watch the ten-year rate
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welcome back. our next guest made millions in silicon valley and launching an initiative to raise minimum wage in california to $12 an hour. by the way he happens to be a conservative republican. here to make his case is chairman of the higher wages alliance. this goes beyond a single ballot initiative. ron, welcome. >> great to be here. >> why do you feel so strongly about raising the minimum wage? >> i think it's very important for the country for a lot of reasons. obviously would lift millions out of poverty and would put $150 billion a year more into the consumer economy. those workers would spend their extra dollars and that would help to revive our economy. >> ron, last week we had the
ceo -- or one of the executives from white castle on the program and he said it would result in less workers. what do you say to him? >> i don't think that's necessarily correct. if the wages go up everywhere in the industry all of the different companies can simply raise their prices to cover the cost. mcdonald's could raise their prices by a dime or nickel for cheese burger and that would be enough to cover the wages. >> some will say, from an economy wide point of view you're moving money around. so, consumers will have to pay higher prices then and they'll suffer as a result of that. maybe not in the same way, but to a degree. you know there's got to be an element of truth to that. >> there is but higher prices we're talking about are very small. wall walmart could raise wages of minimum to $12 an hour and all it would take is walmart to raise their prices by 1% one
time. it would cost the average consumer an extra $12 a year. again, put hundreds of millions of dollars more into the u.s. economy and many of those dollars would go to walmart. >> i want to bring in the panel. lindsey, first to you. i'm curious on the economics and politics of this what's wrong the proposal ron unz is laying out? >> again, it's very simple economics. if the cost of labor increases, businesses will move away from that expensive input. they'll move away from hiring new employees. again, going back to the point of they just have to raise their prices 1%. an increase in prices as we've learned in econ 101 leads to a lower demand for those goods. so it's a very simple negative impact on the economy when we talk about raising the minimum wage. we can be very clear this is not about economics. this is about politics. politicians love the idea of a policy where they can point out a very discernible, positive impact for a very small interest
group. so if the president signs an increase in this -- in this minimum wage creabe surrounded by a very few individuals that did see salary increase. we won't see the lineup of individuals that lost their job as a result of that increase. >> lindsey,ly say, and you're probably familiar with this, if you look at the research both sides of the economic aisle so to speak, it's sflit. even those who find harm the harm doesn't seem to be massive harm. you know, it's really hard to point to any one study or you know comparative example from one region that wants to raise minimum wage and the other and find it had terrible harmful, negative fallout. >> that's true. the studies out there, they are temp mental based on the assumptions they include in that model. you're right. there is research very much split supporting and not supporting that increase. what's very clear is when we go out to the small business sector and talk to these individuals about raising the minimum wage as we saw in the fed's most recent beige book california
industry insiders saying they were very concerned about the impending increase in california's minimum wage. they were going to sister to lay off employees as a result. i think that's as clear as any research report we could find. >> michael? >> well, i think that you -- talking about the elasticity of pricing model. we're talking about the pricing of labor. we haven't seen any real gains in wages that have been all that significant going back to about 1997 adjusted for inflation. we're at about those levels now. maybe there's some room in that wage model. $12 seems excessive to me. it would be one way, and i'm not an advocate. i agree with lindsey, by and large. getting more money to a greater portion of the population that in fact, are going to spend it. you look at people who make $35,000, $40,000 a year, that gets spent. >> california is already going to raise the minimum to $10 from
$8, is that right? >> yes, but that's not until 2019. the minimum wage of california at that time will be below minimum wage today adjusted for cost of living. >> ron, you come from the tech workers in silicon valley make the minimum wage or less. you mentioned this would be money coming out of the pockets of those who don't shop at walmart going into the pocks of those who do. >> the costs are very small. walmart raises their price by 1%. the average walmart shopper pays an extra $12 per year while $150 billion of consumer spending money goes to the families. many of those dollars end up at walmart. >> why don't we find a way to
increase productivity. >> let's get the governor in here. >> there's another piece of this. the simple economics, this is not simple economics. i'm horrified to be agreeing with ron, but glad to have you on board. >> minimum wage makes for strange bedfellows. here is the other piece. capitalism is a great system and it's worked really well for us. the problem is like every other system, unless you can be sure that everybody can participate you start to tear it apart. if that goes on people will believe that they can work as hard as they want and never get ahead. you have got to be sure that people at the bottom are treated
fairly enough. >> the question is what is the best way to getting to that outcome? >> there are lots of dicht ways. >> teen and low skilled employees. >> there are lots of ways to do it but everybody can agree the best way to do it is a job. as ronald reagan said the best support, the best welfare program is a job and he was right. we have got the earned income tax credit. we have got to make work pay. >> there are many of your colleagues who will say even though it doesn't sound as nice they like the earned income tax credit. it's less -- it's a different kind of potentially more precise tool. what about something like that as an answer here? >> here's the problem. what it does is force the government, force the taxpayer to pick up the cost of the businesses that don't want to pay their employees. we have small businesses that
pay low wages, they are privatizing the benefits. but they are sociallizing the cost of the rest of society. a $12 an hour minimum wage would save tens of billions of dollars. >> michael? >> but you still have that group of smaller employers who are going calculate the cost of the extra hourly earnings and say i'm only going hire one and a half people i'm going to reduce to part time. i'm not going to spend more money out of my poblgtcket. and i think it does put pressure on the low end of jobs. >> final word? >> i think $12 an hour is not high enough to see that effect. >> all right. i hate to leave it there. but thank you so much. >> one way to find out. >> great discussion. >> really appreciate you coming to join us. we will continue to follow this
very important theme as well. seems enhancements to advertisement has sparked ideas that they will grow into valuation. coming up neck we will be showing you what we have been talking about. tweets of the day coming up next. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade
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>> welcome back. always keep an eye on twitter. here are some of the discussion points of the day that we have been following. the economics make passive index investment the only way to stop making money managers rich. whether to be active or passive it's hard to argue with this. long short traders saying by the time i have fully morphed into a growth investor, the markets have crashed. that is a sad face. i think a lot of people feel this way. they are worried that they will be won over by the market. >> a lot of the wealthy who we have talked about have really benefitted from this market are really nervous right now. >> at least they benefitted. what about everyone who has not
participated? >> they are not putting more money in the markets. they are neutral to bearish and that is a tough sign going into neck year. >> what are you cracking up about? >> other tweets that we're not going to talk about. >> talking about abovety. >> i'm on the board of a pubically traded company. >> what's your company? >> i'm not going to tell you. the reason i don't do it is i think this is an investment philosophy we ought to figure out how to go back to. if you do your job over time your stock price is going to go up. and so a lot of the concerns of the tweeter are that this is all about short term. if you think you're going to be a growth investor in the short term you're playing the market and you're going to be lucky. >> there is an element of buffet
here you're betting on the future of america. is now the okay to do that? >> the market seems to have the best of both worlds. unlimited fed printed dollars and that's what you continue to expect to see with the fed erring on the side of caution. and still allow the market as you said to reflect the stronger growth in the american economy. so right now the market is really poised to grapple from the best of both sides. >> we were talking about your clients to start off the hour. are you increasing their equity allocation? >> no. it's time to go back. check your allocations. it's hard to reduce your equity allocation because that's what has been pulling the train. we have had a great year. you might want to keep that
fixed income short and in spite of all of the tweets i'm not an economist. >> thank you so much for joining us. governor dean lindsey and robert frank, appreciate the time that all of you have spent with us. fast money coming up. melissa, what's going on with bitcoin? >> one thing you need to know. in four days bitcoin dropped 44%. >> doesn't sound like a store of value to me. >> we'll ask him. great show. "fast money" starts right now. live from the nasdaq market site in new york city times square this is request fast money". we have got some breaking news at this hour. the u.s. treasury selling its remaining stake in general motors. phil has the very latest. >> this ends more than three years of the federal government having a stake in general