tv Fast Money Halftime Report CNBC December 16, 2013 12:00pm-1:01pm EST
analyst noted on little news. we'll see as a public company which will tell us where growth trends are for twitter. incredible move. scott wapner on this monday and "the halftime". >> guys, thanks so much. what we're following today. halftime hitters, some of the best and brightest investors with us all week to roll out their 2014 play books. today, kick things off with deepak naruula. after hitting new highs last week, wery are two analysts jumping ship on twitter? a strong starter to stocks in a week where the stakes could not be higher. will the fed taper? if so, what will it mean to the rally? will it end or extend over the final ten trading days of 2013? a new poll suggesting americans
aren't optimistic about next year. it's "halftime". joe, what is today saying how the market is digesting what's ahead this week? in two things. short term you have to look at continue with the theme the trend is your friend. the winners, they're going to be continuing to see flows pushing them high into year-end. more importantly, deal in technology, 2014's all about growth. where are you going it see growth? increase in m&a. the street's getting ahead of itself on a strong cap ex year for technology and looking at a mean reversion type of trade for the sector overall. like technology '14, a favorite sector. street gets an indication as to why today. >> why up 150 today? is this saying the tarp's okay if it happens? >> they're trading off of what they heard from europe and got more bullish. overnight, forget about taper, we know what's going to happen
wednesday. as far as what the news's expected to be. we look at what happened overnight and look overnight, down 4, 5, 6 s&ps and suddenly ripping to the upside. joe's right. technology spin. 2014, i said, look i think cap x is going to increase, folks spend on technology. look at xlk. go out to january 35 calls, you'll seal paper as well. what is the xlk made up of? apple, google, microsoft, telephone, names like that solved. we'll see more upside. financials have done nothing sense august. nothing. if you look at financials, xlf 2080 august 1st. here we are 21, they've gone up but we need financials if they go to the next level. >> pete's answering my question in a round about way by saying the same thing. good growth is going to override the taper.
that's going to matter more than the fed pulling back on stimulus. >> i agree. we all know the taper's coming. to pete's point, overnight the futures were down 14 handles at one point. a big flush overnight. people want to buy the market. people want to be positioned in areas you're going to see growth. we know whether the taper comes wednesday or next month or the following month, it's coming. we're positioning ourselves for that. technology is a great area to be in, my opinion to joe's point. the banks, i'm not sure about. i look at action in citi group, citi had an upgrade and it's not doing too much. i'd like to see the banks start to lead again. but right now i'm not seeing that. >> steph, deal with what's in front of it's here this week. what happens, really, if the fed decides to taper? we've got ten trading days left between now and the end of the year. so much at stake within the rally now. >> well, i'm looking at cut of the macro data. that's more important because if they do taper, they obviously feel comfortable they're getting
momentum in the economy. i'm looking at today's industrial production numbers and some 0 manufacturing series. i like at dry bulk index, it's a up 45% since september lows. it's telling me there's activity that's happening that we are expanding a little bit gradually, better than we had. they feel comfortable, they can pull back a bit. they're going to keep interest rates low and accommodative. we can get through it. then we'll focus on earnings and listen to what companies have to say i think they'll have positive things to say about the global markets because you are also starting to see data there as well. >> before we get to deepak, one more question, right? if we remove the taper from the tack of the conversation in -- for the bulk of 2014, if qe was the primary driver of the stock market in 2013, are you suggesting that 2014s a year of growth? it's a year of more m&a and
buybacks which fueled the rally from the beginning and a year of earnings? focused on core fundamentals of the stock market rather than foe as some same fed. >> it's confidence, business confidence. to pete's point 0 of business spending and cap x budgets we haven't seen that yet. as companies feel comfortable, they've got a boatload of cash, 3 trillion on the balance sheets, so they can start to put that to work in m&a and elsewhere. >> best-known bond trade, 2012's top hedge fund performer returning 41% net of fees. this year's more challenging in the prospect of the fed tapering. it's grit haeat to have you on halftime show. >> what's going to happen this week? do you think the fed's going to taper? >> the market's outputting probable and reasonable probable the last few employment reports there is mass on the taper,
either december, january, march, between the three, the probability the fed tapers high. if you think bigger picture we taper in the next few months and by the end of next year, qe looks different than today. this week probably is one in four chance, maybe one in three chance of the taper. >> highly probable. if you believe those odds. how do you invest in a kind of investment that you make in that kind of environment where we know rates are going to continue to go up? >> rates have backed up a fair bait already. it's likely that the as the fed pulls away from the large stimulus that it's provided over last five years we should see the long end of the yield curve yields to go up further from where they are. i think in addition to that, we should see a pickup in volatility. fed buying has kept interest rate volatility. volatility overall at very low levels. think of changes happening. we have a fed that's changing after five years, changing
course and pulling back on stimulus. providing stum lus. we have janet yellen, she'll do everything that it take. when that's your baseline forecast there's volatility to the extent there's variations. it's a year you should budget for pick up in increased volatility. we have other changes, too. one of the more powerful bodies, it's the fhsa. conservative of fannie and freddie. there's a change in leadership there. we've had acting director ed demarco calling the shots for years and we have a new person, mel watt, to be seen. the market has a point of view on mel watt. he's said very little. the way we look at it overall in the bond markets rates go hire long end. >> do you have an idea? your prediction, when people ask
you at a cocktail party or wherever elsewhere's the ten-year yield going to be mid-2014, i'm sure you've thought about that. what answer do you give? >> i mean, the treasury market is one of most efficient markets out there. so bond yields have gone up in anticipation and you have to respect that. certainly, a couple of observations. if you were to look at where were yields when there was no qe? 2008, the fed cut short rates to zero. economy's a mess. and where were ten-year yields? 4%. they launched qe-1, take ten year yields down close to 2%. massive buying in 2009. where does the ten-year go back to? 4%. we have today an economy that's a lot better, whether it's you look at house, obviously equities. whether you look at employment, on every metric we are in better shape than we were at that point in time. only reason yields are at these levels where inflation is and
inflation relationally has been backward looking. to the extent the fed is successful in getting banks to lend and able to take excess reserves and push them into the banking system and that money works its way into the markets, to be seen where inflation goes. yields can go up, go to 4 or higher. >> as a consequence of everything you're talking about the taxable fixed income space, you've got the federal reserve basically buying 90% of the new issuances in the mbs margement. the theme is cmbs over mbs. does that concern you at all? >> not really. i think it makes a lot of sense. you have an economy than recovering, stock market is clearly telling you that. real estate prices are clearly telling you that. what should happen is high grade bonds which is what the fed has supported especially the mortgage-backed securities arena. the fed buys net $40 million every year, that's $500 billion a year and they're going to stop doing that at some point.
it's reasonable to expect spreads will widen. the flip side, deeper credit, ricky securities, it's a sector we favor that's going to benefit from improving fundamentals. how much is priced? ? if you look at cmbs spreads that wider than the high yield mark, than the mortgage backed securities market. it's a sector that will do better but in more credit risky securities not aaa securities. >> we know that the qe is going to enat some point and this is an unprecedented tool that the fed has been using for last five years, anything you look at back in history to say, this is how i see this playing out? this is how i see them first starting to the taper and eventually ending qe? >> it's anybody's guess. i think qe-1 is instruct everybody to look at what happened as qe-1 ended it was a similar size. look at net buying in terms of
issuance. impact that qe-1 had was larger because of the times we were in and starting point in where the markets were. but than the closest thing that you can turn to. and what should have happened, what is reasonable to expect, again i hedge by saying they are pretty efficient and they look forward, and you've got to respect that. likely scenario, fed let goes of long end, they're comfortable with the growth occurring in the economy and the balance sheet is growing rapidly and you can't keep growing the pal lance sheet the way it's been going because you're in unchartered water, you don't know how to get out of the balance sheet. it's prudent to let go of the long end. the markets are pricing that, too. but even there, surprise we think is that probably they stay -- this fed has provided basically followed a policy of max stimulus. they've done everything they can to basically pull the economy out of what was one of deepest
depressions. >> by necessity, right. >> yes. on the short range side, probably keep rates lower for longer than what's priced in. if you look forward two years, there's probably three hikes priced in, look forward three years, probably eight hikes priced in. probably the fed keeps rates lower for longer. >> so, mortgage rates are going up, right? we know that. your top play in 2014, if we were to open up the play book, mortgage derivatives, that's your favorite place in the market. >> correct. >> and these are securities that benefit from two things. benefit from short rates that stay put and long rates if they were to go up, they impact mortgage rates which if they were to go higher it impacts homeowner refinancing. over last several years we've been in a refinancing boom. one large refinancing wave that the fed engineered by keeping rates low and in combination, fhsa, hud, homeowners refinanced
by changing some of the rules that impact homeowner refinancing. we're at the end of the refi wave. so what the way it should play out, look rates go up, homeowner refinancing slows down, and that benefits a set of securities and mortgage derivatives that benefit from slower prepayments and low short rates. we think that's probably the sector in or markets that fare well next year. the other is cmbs, lower in the capital structures of cmbs i think will have a good 2014. >> how does a guy described as one of the best mortgage bond traders on wall street answer do you think there's an equity bubble in the stock market? you think about that question? >> of course. that's off my turf. markets are forward looking. so certainly, you know, there is kind of good numbers and good things that are coming with the economy. but look at equity market. it's gone up a lot, too. question is, do the numbers
deliver relative to what's priced? certainly qe helped the equity markets a lot. probably you know increased volatility in line there. but at least the growth numbers can justify equity valuations. on the rate side, kri credit ma are vulnerable. >> we'll see what happens. great having you on. >> all right. next guest company has $38 billion in global real estate assets and in search of the next big moneymakers in the space. find out what the ceo tom barrack is putting in his 2014 play book. then our trader portfolios that we revealed here friday. mike back with a recap and to reveal his own 2014 play book. google making big bets on robots. will it pay off for the stock? in today's markets,
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good monday for stocks. dominic chu watching the action. >> scott, like deepak said, last hour stocks are showing optimism about our economy. today's marks up 130 point for the dow industrials, up a percent. we are drifting a little bit below our session highs. on the s&p 500, that move as well, 11 points to upside, .6. on the nasdaq composite, up 26
points, or about .7%. if you look at all of the sectors in the market, specifically for the large caps, every single one of the large cap sectors in the s&p 500 are flat or up over 1%. energy is leading wait higher thanks to exon mobile. that name is getting an upgreat at goldman. they like that stock along with refiners. exxon mobil on the move in the trade. >> a quick comment on xom? >> unstoppable. >> it has. you know, there was probably about six to nine months ago no one liked exon mobile. i like the fact that you do get the natural gas exposure with it. it continues to push higher. no reason not to own it. >> steph, what's the deal with this one? no respect for exxon mobil but all-time high. >> you have buffett in there, too, right? interesting in itself. this company's not able to grow production for several years and
all of the cap x putting into the company, that's starting to ease, so that should help margins. >> tom barrack chairman and ceo of colony capital. joins us live on set now with his 2014 play book. >> thanks. >> your view on how you think real estate's going to shake out in 2014. say u.s. real estate first. >> u.s. real estate will continue, sings and doubles, no big arbitrage, volatility in the residential housing business but household formation happening quickly. what deepak said about the change in fannie and freddie is true. one plan in our play book, subsidized mortgages, that will continue. i think it's going to be pretty flat in the real estate sector. what you're going to see in reits is an outflow of funds once we get volatility and the interest rate sensitive stocks out to growth and optimism.
that should be a good thing. buying good real estate, reasonably leveraged in a cyclical environment is a great play. i don't think too much exciting. singles and doubles with pros there, that's what it is. >> what's holding back? is it that to play on your baseball metaphor, the pitcher against us too good? prices of homes went up too fast, more than expected? it just too expensive? >> not really. it's confusion. there's more confluence in the system than the market really reflects. if you look at supply and demand, what real estate is about, right? real estate the drunk driver on every highway and decade one time or another. but at the moment, there's not too much supply of anything. so, office product, industrial product, retail product, digital product, residential product, the same. so apartment reits have had a run beyond belief, because there was a beneficial of a gigantic resurgence to rental versus
ownership. i think you'll see in the four-year cycle tremendous building going on. they'll probably flatten out. home billing and home builders trading at two times the book will go back to trading over book, which is where they should be, it's a manufacturing process. everything else is in balance. it's just a cost of capital play. so, for the average individual in household formation and looking for a house they look at it as a proxy to everything else. so if you can borrow 80%, $90% at low interest rates with no recourse, have option on the upside of growth, that's a pretty good play. if you don't see upside in growth you have options including single-family rental as alternative to buy. hou housing will stay solid. real estate will be stable but it's a cost of capital funding regime. >> take reits first. who has a thought on reits by virtue of what tom said, and the fact that interest rates are going to go up?
>> tom highlights apartment reits have been the place to be. where you could get a double or triple when you look at class a malls, take a name like simon property group. this is the type of nape where in '14 it's underperformed in 2013, tremendous opportunity. the street recognizes funds from operation are stronger than what current estimates are. so the mall reits have been forgotten. i look at a name like this, we just did that play book portfolio, i would say that's would be the sixth name of the five that i gave that i would get exposure to in '14. >> you like simon, don't you. >> i love samen. it's underperformed. >> look at benefit of what simon has, in addition to operating leverage, you want nobody real estate categories, hospitality and regional malls. simon has a huge investment in clay pierre. look at resurgence in europe where i think 2014 bet in real estate is, where about where we
were in 2009 in europe, that play with simon, those assets are represent applicable. >> you love the hotel space. hilton ipo on friday. what do you think of hilton, first and foremost, what do you think of the space? >> genius. hilton was a genius play. engineered an unbelievable restructuring. so, part of the benefit was that they had a strategic plan over a long period of time to go asset light. it's the flavor of the month. no one wants to own assets, they want the long-term no-cut management agreements. even though it done benefit from having a reit structure for the properties that it owns, cash flow is significant. great thing is blackstone lost 76% of stock so they make sure there's value there over time. the hospitality sector in
general isn't the place to play. you're starting to get operating levg raj. adr's coming back. rates are moving slowly, everybody's getting balance sheets in order and nobody's produced new product. that's a time for three, four, five years for production of new product and we'll overbuild like we do. >> focusing on china and the market there's, your thoughts on the real estate market? >> you know, it's not so easy in a place like china, you think you understand, europeans talk about the defense between heaven and hell, heaven having a french chef, english policeman, italian lover and everything else organized by the swiss. hell is having an english chef, a french mechanic, i german policeman, a swiss lover, and everything else organized by the italian. not simple, right?
china's sure a growth market. but the difference in the capital structure and the way the leasing of those hotels takes place is much different. and of course, orbitz, expedia, who would you rather own in that expansion, otas or hotel brands, i'm not sure which. i would say expedia starting to expand against priceline on international basis might be a more interesting place to play. aren't on equity investments astronomic astronomical. >> we'll talk more where to invest. weinsteins. >> exciting. >> weigh in on the latest move in a single-family rental space. shares of tiffany a boost thanks to upgrade. someone on the desk says the stock deserve to be shorted. major averages in the green today. take a look at nasdaq 100 leaders. on your screen. back in two minutes. s&p 500 leaders as well.
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today. talking about, is this your favorite name, so to speak, in the online travel? >> yeah, it is. because joe and i were talking about, it's undervalued compared to priceline and orbitz. if you look at roomkey, an endeavor by the brands to irn crease online booking power, it's jurassic park, they're so far behind it isn't going to happen. expedia a yield manager to owners of real estate in convert with the brand is incredible. ability to bran is exponential and they have no cap x. kill her hospitality is cap x.
>> just when you think the single family rental trade is starting to cool, a megaplayer makes another big bet on it. diana olick has details. >> a new lending platform. blackstone closing its first loans to other investor whose want to buy single family rental homes calling it b to r, buy to rent. structuring loans like commercial real estate loans. i the president told me the market for financing small to medium sized borrowers in the single family rental space is underserved. they don't have access to good capital because fannie and freddie limit the number of investor home loans. blackstone, which has itself invested over 5 billion in single-family rental homes is offering loans starting at 500,000 and going up to as much as $50 million. the investor must be purchasing minimum of five homes each worth 50,000.
underwriting is conservative. blackstone will look at properties and make sure the cash flow covers debt service. they will lend across the u.s. and value each individual property using local appraisers. i asked who clients are, they're local entrepreneurs, small business owners, real estate agents, cpas, doctors, but they're getting the finance now. >> stick with us. what do you think with this move? >> i think it's brilliant. john came out of deutsche bank, the best guy in the business, of course blackstone-like colony has built this podium of single-family rent tow own. quick math. say you've got about 14 million units that are in the single-family rental universe, 2% owned by institutions, blackstone, american homes for rent, ourselves. what happens happened is all of the mom and pops have gathered 10 to 200 units but gotten to
the end of the line, no financing, no commercial financing, it's capital intensive because you're repositioning and they're stuck. so they're renting and getting 6% yield but have no debt in place because fannie and freddie will not do that. the natural place to go if you have a great structure like blackstone has, we'll utilize all of the information, we're going to lend into that environment, we're going to give then the services and products that we have, and we'll extend this asset class into a business which is everybody's goal, right? what's happen now, you have three reits not trading well in the space because everybody's saying what is it when they grows up? trading book, a little over book, where apartment reits are trading 2 1/2 times book. it will happen. these single-family pods will go back to where apartments trade, and the lending into that community is a way to plant future buys that you're going to harvest because all of those pods of entrepreneurs who are
stuck want exits. and the exit will be the three, large platforms, i think it's great. >> lit switch gear and talk film making. miramax, which you guys on, bringing back the wine zbleenz right. >> tell me hwhy, how this will work. >> we own it with qatar holdings one of most biggest and brilg ye brilliant sovereign wealth funds in the world. rob lowe, one of my partners has always believed content is king. so when we bought it, disney was getting out of the business, going to their brand. we said, content is like oeng the seagrams building. when you own bricks you may have different tenants occupying it but you have a multiplicity more of buyers. you have digital, which wasn't in existence in 2010. harvey and bob weinstein built
an irrepresent applicable portfolio, 250 films and disney helped them get there and they went on their own ways. the films you sell avails, availability, miramax is a clean brand. everybody knows the genre and the difficulty of making those films is immense. harvey and i have been friends forever and i've been tracking and suiting him trying to figure out a way to put humpty dumpty back together in a smart way. the platform doubled the cash flow we projected it's a little bit like farming our own acres of diamonds. we have 750 films, 250 development projects, ones who know best how to sequelize those films, how to uncapture the rest of the value, harvey and bob. and there's nobody who's better at institutional qualify. we look at it as putting the
rubiks cube together again. >> doubling down on distribution. an early thing when you got in and now it is a real place for growth obviously that you see. >> it is. you know, the movie business is disintermediating everywhere. studios are own by conglomera conglomerates. they have a designated silo in which pay-per-view or international distribution has to go and you have a multiplicity more of buyer in the world as every platform changes to sul why s ts to to w pda, i want to watch on my laptop, in my hotel room and everybody needs 24/7 of product. so digital, whoever wins, it may be xbox, right, facebook, you don't know who the winner of this race is, but they all need somebody brilliant to tell a story who can take all of the threads and weave them into a
tapestry that takes genius of somebody like harvey and bob. >> thanks for spending a good portion of 2013 with us. >> great being with you all. i'm waiting to get my real picks from 2014 so i don't have to be in a single-family rental. >> we'll look forward to have you back next year. coming up, the stomach ref is back from friday's play book. here to hani cap friday's picks. market seeing strong gains today. the sectors hire at this hour. bulls 1787. two-thirds of 1%. back after this. (vo) you are a business pro. seeker of the sublime. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the
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welcome back. tiffany shares hitting all-time high after upgraded shares to hold. stock up 60% this year. one of our traders are thinks there's more room to run in 2014. let's debate it. stephanie the bull, mike the bear. 1:30 on the clock, steph. >> global brand, upside to revenues, margins and cash flow and that's not priced in at current levels in my opinion. revenue growth from international which react sell rated last quarter.
they're doing a restructuring in north america. new management team from cartier, chanel, et cetera, new products as well. that could drive the top line. but the most important thing is the margin side. with precious metal prices down 30% since 20 1 that's a big tailwind. diamond prices down 10% and price increases that's going to give you upside and operating leverage. >> great company, great year but you can't buy the stock up. stock at $90, trading at 21 times next year's earnings. a company over five years averaged 12% growth. all of the good news and then some is priced in. had 60% run year-to-date. a great name if you want to own luxury but want to own it 25% cheaper than currently traded. >> back to margins, it's not priced in. before that, they missed seven quarters in a row. >> the kicker and -- >> they didn't grow top line. new products are going to drive
better growth and earnings. >> comps for 2014. get very, very difficult. they are not going to have the low bar that they had in 2013. the comp is going to be the real story for next year. that's going -- >> they're not -- they didn't have the products last year or this year. >> you see the crowds on fifth avenue? >> i do. i was there yesterday. >> i hope you're in there. i hope you're both in there buying. you can't spend over 20 times earning. >> they're not growing 12%. >> to the desk. who made the more compelling argument? >> stephanie. the stock gets above 100, seeing investment banks raise estimates and the main reason stephanie's right, it's about a margin lift. why is the margin lift happening? it's cost, disinflation, that's what tiffany is indianapols exp. headwinds dissipating. >> tweet us, use either #bull or
#bear. we'll give you results at end of the show. >> our stock referee during friday's play book playoffs. >> very hard to pick a winner because i couldn't rank everybody eighth. but pete, pete did not get dislodged from the first spot. >> well, he liked pete's 2014 portfolio the best. mike santolli is back. putting pete number one or weiss number eight. >> after a weekend to think about it, i might have to reshuffle that. top eight pick as among the thousands who are going to have outlooks for 2014. >> how do they shape up with what you're thinking how the market's going to look next year. >> i think, largely in the sense that i don't think tremendous amount changes in the environment going from '13 to '14. a lot built into the expectations among those picks meaning you have a grothe outlook, in terms of what the stock market's going reward, technologies and financials
favorites i'm don't have to big an argument. my headline the easiest year of the bull mark is the one finishing up now. >> great year followed by good year. what you're saying still done include the market from having a good 2014. >> right. it doesn't, no. i think the margin of error is lesser now, because you can't go up 25%, almost all of it coming from valuation expansion and not having eaten some of future returns. longer term future returns still does not preclude a good year here. to me it's about similar theme but was more global growth outlook. have to have a second wind for earnings. >> anybody have a boning pick with how santoli graded your portfolio? >> absolutely not. >> pete. >> nice job, mike. >> slightly the momentum mike pointed out. some of the names had a great run but there's a lot left on the table. >> what i would say, actually in
your defense there, i do think a lot of the uncomfortable kind of feelings people have about this year the idea that you are piling on. in other words, it's a bull market acting like a bull market. people talk bubble, which is absurd. it really is we have a lot of force and pent-up demand for stocks. >> bull markets don't end with expansion, they end with recession. what do you make of the fact in the a.p. poll americans see stocks flat or lower by the end of 2014. it goes to your point. >> broad skepticism among the public. we see that in the yahoo! data all the time. it's not like a year ago. a year ago people were positioned that way, professionals were positioned that way, you had an absence of bad news and the world falling apart almost enough. this year, the bar's higher. >> where do you want to be? if your play book in front of us, how would it look? >> sector wise, within financials deal oriented financials, capital markets and asset managers make more sense to me, and globally exposed
industrials. i believe in the quality trap. high quality stuff, starbucks selling off, be careful of those guys. >> thanks so much. >> see how to shakes out. take a look at twitter. losing ground today. a wild day for twitter shares. two downgrades, two analysts unfollowing it in our call of the day. top tech investor dan niles here to reveal his 2014 play book, tell us why he may be singing a different tune about a popular social media stock. ♪ i wanna spread a little love this year ♪
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hello everybody, "power lunch" for a month, top of the hour. green arrows on the board today. we're going to take an in-depth look at nasdaq, tech stocks among the year's best performers, can they keep going in should investors be bracing for a pullback in we'll tell you when one's about to hit. kick off "power lunch"'s top five business and finance stories of the year. today, a turnaround tale. more "halftime report" right after this short break.
our next guest made headlines in october when he sold all of his facebook position. the news was big because dan niles is considered one of the street's top tech investors that runs alpha one capital partners and joys us on the phone. nice to talk to you. >> nice to be on, scott. >> it was big news when you sold completely out of facebook. understand now you're back in? >> yeah. i mean, we had sold out before they reported. our feeling was expectations had gotten too high going forward around advertising and that's,
in fact, what you saw when the stock sold off we started buying it back in early november. our feeling at that point was people had started to understand some of the near term issues going on with them. >> you're telling me that much changed between october and november? >> well, i mean, yeah -- >> what have we really learned we didn't know? >> what did they say on the call? they said on the call don't expect us to increase ad loads going forward at the same rate. they said teenagers aren't using the service at the same levels they were before and, you know, people had really stuck a straight ruler to the stock price and assumed it was going to keep going up at that rate forever. with stocks it comes down to risk versus reward. people hated facebook when it was, you know, at 30 bucks an then they loved it at 50. so at that point, you have to look at the fundamentals and go it's a lot different than what people think they are. >> if you're back into facebook, how would you judge twitter which we were talking about,
which, you know, has had this unble unbelievable rise of 40% in two weeks, gets a couple downgrades today. do you like it? do you own it? >> with regards to twitter no. we're actually short it right now and look at it and say if twitter is worth this much it makes us feel that much better on our fook potion, so we shorted it when it came out at ipo, we covered some of it when it got back down to 40 and this move t me looks a little pair bollic. the good news, we own a lot of other internet names we'll get to later such as yahoo! as well as google and so from my perspective i look at twitter and say if investors are willing to pay 56 times revenues for calendar '13, then a facebook at 17 times revenues or a yahoo! at, you know, nine times revenue or google at 7.5 times revenue makes me feel a l they
should have some more momentum and be able to go up. some of those names i just mentioned ares wne will d wel>> what's -- before w what's fair value in your estimation for twitter? if you shorted it off the ipo you much think it's much lower from here? >> i mean again, it comes down to risk/reward. it's the same discussion we had on facebook. if you look at the risk/reward of twitter at 56 times and facebook at 17, the way i look at it is simple. twitter should be able to grow at twice the rate of facebook and linkedin near term because it's smaller, so if you say 1 times sales is where those two are trading at, maybe make it 34 times sales, you look at twitter at 56, it seems a little excessive. but i think one of the best things i ever did in my life was downgrading dell on the sell side analyst at 40 times earning in 1999. then i watched it go to 80 times earning. the message i'm trying to bring across when you're in bubbles and people just want to own
something, you know, you can have value and obviously dell went from 80 times to below 10 times. people will drive stocks to levels you never imagined humanly possible. >> nasdaq, let me interrupt you, we're running late on time, nasdaq had an incredible run. is tech in a bubble? is the nasdaq a bubble? >> i mean, i think when you look at where stock prices have gone as somebody remarked earlier it's all been driven by multiple expansion. it hasn't been driven by fundamentals coming in better than expected. so to that extent yeah, do i think nasdaq has gone up too much? the answer isyes, but could you be in the phase like yere 000 whe in early 2000 stocks wen up another 20% early before they crashed, yeah, that's also likely. that's why for us, you know, you're asking about individual positions and i look at twitter and go well you know what, would i be short twitter here if i didn't have longs and facebook, yahoo! google, nielsen and some
of my other favorites no, i wouldn't because, you know, you're just asking to get your ad handed to you. twitter go to 70 or 80 it could. >> in the 30 seconds i have lef? >> it's still part of the portfolio. you have to be careful of a sell-off following december 18th when they announce the china mobile deal. it's likely we may pair back some of our shares. it's one of our biggest longs right now. that's trading, it's not instin if you look out over the next year, you know, china mobile should add about $3 billion to revenues, 2 to $3 in etfs. that's how you have to think about it from a longer term as opposed to the near term where there could be a softness. same thing with facebook. get added to the s&p 500 on friday. >> yep. >> stocks should run until then. and then could you expect weakness the following week? yeah. that's very reasonable to assume because that's just how these stocks behave. >> dan, great information. lot of headlines there. appreciate you coming on. look forward to 2014 with you
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stephanie link one hour debate on tiffany you get the -- won our debate. >> long mastercard. >> pete. >> long boeing. >> mario tomorrow on the half. "power lunch" starts now. >> "halftime" is over, and "power lunch" and the second half of the trading day start right now. >> very interesting week on tap but the bulls clearly not waiting for bernanke and company. the fed decision set for wednesday, but the bulls are taking control. the dow up 133 points, about a full percent p s&p 5001786, two-thirds of a percent higher and there is the nasdaq back above 4,000. but the time table and market statisticians say we're probably a little overdue for a pullback. maybe we had it in the last couple weeks but today we'll take a loo