tv Closing Bell CNBC August 20, 2014 3:00pm-5:01pm EDT
1986 for the s&p. closing high, by the way, is 1987. we may still get there. could be a new high after the minutes which were none the less seen as a little hawkish. "cloeti i"closing bell" is next. >> and welcome to the "closing bell." i'm kelly evans at the new york stock exchange where the dow, tyler, in the green pushing 17,000. >> indeed it is. it's the all virginia edition of the "closing bell." i'm tyler matt son in for bill griffeth here at the now darkened cnbc headquarters. we are also watching the -- >> oh, my. >> -- s&p 500, not very far away from the all-time closing high of 1986. that was set just about a month ago, july 24. more signs that the recent pullback was not the big correction that many warned of but the market did react a bit
to the fed minutes. yes, the initial impression was that they were hawkish. now perhaps the market re-evaluating that to some extent. we will get more on where this market and the economy is heading from none other than mohammed el erian. he is here exclusively in just minutes and have some good insight on why the market has continued to rally in the face of so many troubling geopolitical developments. and another tale on the any might be new data that shows americans are starting to struggle with paying down their auto loans. this coming after taking out record high amounts in car loans. some with iks is-year, seven-year terms. phil lebeau joins us with the details and why some say it is a canary in the coal mine for our economy. >> now let's take a look at these markets. we did take a leg lower as those minutes from the fed hit about an hour ago but since the dow is made up that lost groun grobd and then some, up 60 points to 16980. the nasdaq is up just about a point to 4528.
and the s&p within a point of closing at an all-time high. >> joining our "closing bell" exchange, keith fitzgerald and cnbc contributors jack from index financial partner, abigail from peak theorys. we hope she's wired in and ready to go. joining us from jackson hole where the fed is set to meek this week is steve liesman and from chicago, mr. santelli, rick that would be. steve, because you are in a beautiful place, not that we're not all in beautiful maces here, ste steve, but you're in an especially beautiful one. kick it off with your take away from the fed minutes. >> i think it's hard to walk away from reading those minutes, tyler. i think they're more hawkish than either the statement or maybe other statements that have been paid publicly by fed off e offici officials. i think that could be good. that would be on the outside for when the fed raises rates. if you thought that the fed as the market does would raise
rates in the summer, '15. maybe now it's a springtime event. it's certainly possible with the minutes said is that many participants thought that if the data improved more quickly towards their goals, then the fed would have to move more quickly. and some see that labor markets are returning to normal and that the labor under utilization, the so-called labor slack, is a lot closer to being gone than perhaps they believed last year or earlier this year. >> if that's the case, jack, why are the markets in rally mode here? >> i think that's good news. if you think about it. you know, remember why the fed is talking about being hawkish or at least why the tone is hawkish. because we're starting to see some real improvement. we're starting to see job growth. we're starting to see some actual action taking place within the economy. now, you know, when you hear people like paul ryan speaking all you can wonder is where we would be with the multiple with this market. you know, if indeed we did have some real solid managers. that's what's happening. if the market were -- if we saw interest rates going up because
inflation were the problem i think that we would be in a completely different discord here. >> rick santelli, let me jump in. let you jump in a head of a couple of others and get your take? >> i can't define what janet yellen and company are going to do and i think there's little correlation with using the microscope on the minutes and the outcome we're expecting at some point. normalization of rates. but what i can show you that's concrete is how much the curve flattened and in english what that means is short maturities got tagged, pushing the rates up. the long maturities, they stayed in the hammock. whether you look at fives to tens or fives to 30s, we like to look at 5s to 30s. that five-year held on to a half dozen basis points from 157 to 163. that 5s and 30s hovering in the zone where it's the flattest it's been in six years. believe me, if nobody wants to really dig down in the yield curve, you don't need to dig very deep. as long as it keeps flattening that has been a good dynamic
that seems to go hand in hand with the long end moving lower in yield because you can flatten the curve even with rates going up. >> and tie that together for us, abigail, what does that signal to you? >> you know, i think that when we look at this whole interest rate conversation it's a smoke screen on the part of the fed. one of their communication tools, i think it's entirely premature and relative to what rick was saying about rates, i think that the most important thing to look at here relative to the ten-year is the flight to safety. the continued rally here. relative to that smoke screen it suggests on the one hand the economy is healthy enough to take some kind of rate hike. on the other hand, you know, they keep kind of moving it up. i didn't see any sign they became more hawkish today. let's face it, they're in between a rock and a hard spot. over heated stock market at underheated economy. what can they say that's new? they have to divert investors. i think they continue to do a great job of that. >> keith, your quick thought on what the fed said and whether you perceive them as more hawkish than you thought as
steve thinks or not? >> well, i'm with abigail. i think i continue to believe that if fed is grasping and straws and making things up as they go along. using statistics that are meaningless. the labor pool to wage, all those things are moving in the wrong direction. when i look at the ten year, 2337, that tells me that traders are not letting go of the risk that they perceive in the marketplace. i'll take the rally under the circumstances but the traders not let going concerns me because that suggests to me there's bigger risks out there yet and i want to be cautious in here. >> i have to agree with you, keith. the ten-year yield is confirmed to go even lower. suggests that there's more, more to come on that bid to safety and i think it's om a matter of time before we see stocks correct. >> abby, abby, look, if you keep looking at that ten-year yield you will never get into with stocks and you will watch what is the -- >> wait a minute, jack. who says you got to look at the ten year and you can't buy
stocks? >> you can't be long tens and long stocks. >> here's the fundamental problem. >> you can't chew gum and walk at the same time. you can't hold the two positions, jack. >> the biggest competition for capital in equities is capital that goes into fixed income. that has always been the case. and what we are looking at right now are ten-year yields that are sending false signals. >> hey, jack -- >> signals -- >> 75% of people who own ten years don't sell them. >> jack, i think there's something else -- there's something else that we need to pay attention to here. it's somewhat walky from a technical standpoint but it's called a desht cross. it means there's downside momentum. on the ten-year yield, very accurate predictor of when the ten-year year is going to dif. not in a healthy way but in a bid to safety. for better or worse in 2000, 2008. we also had it before the crash in 2010 and 2011. >> can i just add -- >> forgive me for interrupting, guys. forgive me for interrupting. i love when abigail gets wonky
but we want to change gears just a little bit and from i think in kate kelly with some news as cnbc has learned more about the reported $17 billion settlement with bank of america and the u.s. government. what do you know? >> tyler, we've been wait for news to this deal had been reached as opposed to a lawsuit being filed which would have indicated that talks had broken down. we now understand that bank of america reached what will be a record penalty settlement for the justice department over their handling of mortgage backed securities to the tune of $17 billion. we're told that about 9 to $10 billion of that will be criminal penalty and remainder will be loan modifications and other consumer relief measures with the final details probably still being worked out. we expect an announcement soon. maybe as early as tomorrow. no official comments on it yet though so far. this would be a record for justice and certainly a key moment for b of a which owned countrywide and merrill lynch. that accounted for the majority of their exposures to these
subprime p mortgage backed securities that of course went bad during and after the financial crisis. and that accounts for this penalty really. >> kate, thank you. thank you so much, kate kelly. steve liesman from jackson hole, steve, i just want to bring you in. this is going to be one of the more significant things to come from the financial crisis. what do you make of it? >> well, i think there's going to be some concern. there already is some concern among fed officials. it's not their policy. it's just something they talk about, which is that a lot of these finds come from actions that were taken by healthy banks when they bought sick and ailing banks. the concern is not for the immediate future here but for the next time we have a crisis, there will be no private banks that will come in to rescue ailing banks and do so without public money. and it's well to remember that those actions by some of those banks early on gave the public side some breathing room before they were able to come in and
rescue the broader banking system. but there's concern about the next crisis here. >> according to jeremy siegel on this program yesterday we aren't going to have another financial crisis for 75 years. >> bologna. it's right around the block sdm that and a cup of coffee will get you a quarter in new york city. i don't think that's a smart bet to make. you need to bank on another financial crisis happening. >> absolutely. >> and for how it's going to run out. >> if you want to talk about the -- >> the previous conversation -- >> i was just going to say --s. >> i going to say about the previous conversation -- yeah, about the previous conversation -- >> go ahead. >> i guess we have a delay here. i was going to say, i would take -- i would be more careful about following the words of the federal reserve than i would following death crosses on the ten-year. >> the point that you're raising though, steve, is going to be exactly what the financial companies point out. i think we'll probably hear this trickling out if not b of a itself which wants to put a good face on finally having reached to settlement and putting it behind them, their investors and
others who watch this space saying, look, we're being penalized for our behavior during the financial crisis which is to help save the system. >> no, no, no. >> go ahead. jump? >> you're talking $17 billion penalty. everybody goes, who, who, who, we're collecting $17 billion. they booked $89 billion. this is a slap on the wrist. what they really won't don't want is a lawsuit that subpoenas all their records. it's a pattern that's begun since the financial crisis. as far as i'm concerned, $17 billion, okay, they went to the wood shed. but they didn't get smacked around a little bit. until we see that, it's business as usual. debt concentrates. consumer credit concentrates. the risks are bigger than ever. >> what patterns are you referring to? wait, wait, wait, wait a minute. i'll tell you what from my perspective, first of all, ba zil la is still walking around, okay? >> exactly. >> if you're thinking count countrywide why penalize bank of america. all the fine, all the money we gave them during the big vote, all the billions we gave the
banks that we're now taking back through the back door. but has there ever been a forensics as to how many people bought cars on refinance -- >> one thing to point out is if t. fact that mozillo is apparently going to be -- >> technically accurate here. rick is being -- i just want to correct something. we got paid back the tarp money by paying back the tarp money with interest. >> yeah, we did. >> no, we really did, rick. you can look at the records. >> regardless. >> why don't you call jamie dimon or call -- >> did we get paid for the risk? >> another point, rick, is that countrywide -- >> one at a time, everybody. within at a time. >> kelly, real quick. word trickling out -- >> that is accurate. >> -- subject to a new civil lawsuit related to his behavior when he ran countrywide filed by the attorney in los angeles. just out simultaneously with the b of a news. still no criminal sanctions. >> mozillo, correct.
>> the important point of the crisis which is in many cases it's been the institutions and not the individuals fingered for what went wrong. >> right. >> now you can argue there's a reason for that but at the same time it would be a lot easier in terms of a narrative and in terms of preventing some of the harms the next time around to really identify those people who you think may have personally been liable for what happened and opposed to institutions which have morphed almost beyond recognition these days. >> few people were held accountable. a gentleman from credit suisse found guilty of concealing the exposure to mortgage backed securities. the woman who worked at b of a as the so-called hustle program found liable of fraud. >> let me ask you a question, kate. keith said, i believe, that b of a and the other banks as penalized as they may have been, view it largely as a slap on the wrist and we have avided deeper penalties and subpoenas that dig into all kinds of stuff and steve who says, ah, but wait a
minute, next time around these banks are going to be so chastened and so fearful of getting in over their heads and subjecting themselves maybe to large multibillion dollar penalties that they won't be there the next time they might be called upon to help out the system. where do you come down on it? >> well, i think this has been very painf fuful for b of a, ty. if you look at their net income, the past penalty they're paying here alone, $9 billion, we don't have the exact number yet, that exceeds their net income for the past four quarters combined. they have paid $60 billion to date in fines related to the mortgage market and the financial crisis, mortgage backed securities and so on. this will bring them closer to $80 billion. that is serious coin. and their stock price in many people's view than depressed for some time. and it's been very difficult for their ceo to manage through this though it appears he has been. >> rick, i want you to briefly weigh in on this. if these banks weren't willing
to go ahead and buy up one another as they were failing, then it would have been entirely on the u.s. taxpayer potentially to fund this. would that have a better outcome than letting these bampgs, the health there up with, absorb it on their balance sheet? >> yes, not bailing them out. orchestrating making sure people's savings were taken care of like sheila baird did. no, we can't do that. we can't do that. that's free market. well-done, rick. >> appreciate everybody weighing in. as we incorporate that news into the discussion we are already having an quick programming note. scott wapner will be interviewing attorney general eric snyderman about the lawsuit on cnbc's halftime report tomorrow at noon. don't miss it. so 45 minutes to go, tyler, and the dow is up 65 and the s&p 500 here is sitting pretty much if it closes at this level, 1987 and change at an all-time high. >> yeah. just about .7 of a point below
it. mohammed el erian will give us his reaction to the fed minutes and looking ahead as the policymakers meet out there with steve and the moose in jackson hole if their annual pow-wow. wait until you hear when he thinks the fed will raise interest rates and his take on this suddenly red hot stock market. i would like to see moose out there with steve, by the way. also coming up, auto sales, we know how hot they been but a new report is showing more car and truck owners struggling to make payments. should we be worried about auto loans overheating and what that could be with the economic recovery? and keep it right here for hewlett-packard and l brands. results out after the closing bell. they could set the tone for the markets tomorrow. we'll be right back in a moment. e financial noise
financial noise financial noise financial noise spokesperson: you can get a $1,000 turbocharged with a new card volkswagen turbo. so why are we so obsessed with turbo? because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. avo: get a $1,000 turbocharged reward card on new 2014 turbo models or lease a 2014 passat s for $189 a month after a $1,000 bonus. habeing able to pay as we goo rawas crucial for a start up.s.
having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud for business.
'til labor day you doto reward yourself.t get a queen size serta mattress and box spring set for just $397. not to labor the point, but this sale ends soon. ♪ mattress discounters all right. the industrials are up another 70 points today. another half point gain or there abouts. s&p 500 within a touch of an all-time closing high. just about -- there's the all-time closing high. 1997-98. we're within a half point of
that. half s&p point. and the nasdaq is also higher by about three. kelly? >> and some late session help here potentially as art cashin mentioned a moment ago. there's a buy order, 600 million shares on the close. we'll watch that and also the big movers helping to drive these markets higher today with our bertha coombs. bertha? >> kelly, the big movers. but let's start with international, soaring on news germany's infineon will buy it for $40 a share in cash. apparently trading up about 47%. just below that $40 bid. meantime, apple hitting a fresh record high as investors look to its september 9th event. and likely new iphone unveiling. the company's market cap near $604 billion by far the most of any publicly traded company although well below its own record. right now it's trading up near $101. on the flip side, hertz after the rental car agency said the result will be below the forecast.
it is trading down nearly 10% on that news. but we'll end with american eagle flying in the face of what's been a really rough retail earning season after the teen retailer posted better than expected second quarter results despite a 70% drop in same-store sales. it is up better than 12.5%. kelly? >> i should correct myself. $600 million, not shares in terms of program on the close. now, thank you, bertha. a little over an hour ago rev l revealing the debate to raise rates and hike. meanwhile, the world's top central bankers and economists are gathered at the annual jackson hole meeting and they're anxiously awaiting janet yellen's first speech at that conference. >> joining us now on a cnbc exclusive with more is our friend mohammed el erian, former pimco ceo and now chief economic adviser at aleon. why don't i get your interpretation of what the fed minutes said and does it really change anything in your view?
>> i'm with steve liesman. these minutes are more hawkish and cone census expectations. you need only to look at the bottom of page 7 and top of page 8 where they talk about the labor market. with the exception of compensation, labor compensation, every indicator they look at has improved faster than they expected and their words and i have it here, that the labor market had moved noticeably closer to what's viewed as normal. so i see this as more hawkish minutes than what was out there in terms of expectations. >> it's interesting you mentioned that, mohammed, because it's the labor market that some people were saying had a dovish bias to it. they point to two passages. one being the continued large gap between where the labor market is today and where it should be in a longer run normal level and the other part being with regard to wages, quote, you know, the pass through of labor
cost has been more at tenuated. >> so the second point, kelly, is unambiguous. earnings have been stagnant and this is a big issue. on the first, it's subject to debate and we're doing to hear more from janet yellen offen the on friday as to how much slack is left in the economy. i can tell you if labor compensation moves within the next reports, employment reports, then there will be a change in the view of the interest rate paradigm. >> so, mohammed, if we buy your and steve's view that these minutes feel a little more hawkish than maybe we thought an hour and a half ago, why did the market continue to move higher after a little bit of a wobble and now we sit really on the all-time closing high for the s&p? >> so interesting. if you look at the dollar, if you look at the bond market, they are interpreting these minutes as more hawkish.
the equity market is wonderfully resilient, wonderfully resilient. the correlations have gone -- >> naively so? >> i don't know if it's naively so because you can argue that the market believe all the cash coming in, including from corporate balance sheet, is a better use for cash for the investor. i could make an argument but it's a really stretched argument at these valuations. >> mohammed, you recently, i believe, we're also talking about the role that merger and acquisition activity is playing here. and keeping equity levels elevated. >> oh, absolutely because a lot of these merger and acquisitions are not being done for offensive reasons. they're being done for deenss. to squash competition, to fa si facilitate inversions. they're benefiting from other objectives that individual companies are pursuing. and this means more cash into the equity market and investors believe that that's a more
efficient use of corporate cash. >> which, mohammed, is going to be, as we look back on this week, when we get to sunday or next monday, which is going to be more important, the release of these minutes or what we might learn in jackson hole and why? >> jackson hole and the two question, tyler. the first one is how do you interpret labor market slack? it is critical. absolutely critical. that is an open question. the second issue is something that i don't think people will want to talk about openly but it came out again over the weekend with the release of the book on secular stagnation. there is a very strong view which i agree with that the fed is trying to pursue too many objectives. what it is sacrificing is financial stability. that the fed is willing to trade off immediate economic gains for financial instability down the road. and that maybe macroprudential policies are not strong enough. look for the slack argument and the issue of financial stability.
>> that's fascinating because that goes back to the very debate we were just having about the $17 billion fine bachk of america's current quly in talks pay regarding the testimony crisis and whether or not that's going to keep these all together on top of one another, are going to keep institutions in the future from trying to rescue it appears that might fail. so, you know, if we are saying is right and we can't trust these tools to help before or while a crisis is hitting and we can't really trust that the institutions are willing to step up and bail each other out, then where does that leave us? >> so, kelly, that's the key issue. the excessive risk taking is not in the banking system. it's outside the banking system. and the potential risk, and i stress this it's a risk, is that when the market wants to reposition, it will find that the banks are not willing to use their balance sheet because of regulatory reason, because the market up anybodies them for
taking too much risk. the risk is outside the banking system and the buffer that the banking system used to provide isn't as strong, which is another way of saying liquidity risk is mispriced in today's markets and we need only to remember what happened in may/june of last year to remember how quickly that liquidity risk gets reprised. >> all right, mohammed, thank you, a always. great to see you. we've got about 33 minutes before the closing bell with the dow higher by about 67. the s&p 500 within about half a point of an all-time closing high and the nasdaq up about 3 2/3. >> we taste think resisted making any bedbug crack there's. did car don restaurants tell shareholders one thing about red lobster's outlook but another story to other group of investors. we will speak to a reporter who broke this fishy tail after the break. how worried you need to be
about rising auto loan delinquencies and repositions. we'll talk it out our phil lebeau who has new numbers. what can your fidelity greenline do for you? just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review.
that boosted usg. warren buffett in a note says we made a piece mistake when we overlooked the filing requirement. beck shir had convertible note since 2008 and effectively forced to convert the notes when they were called for redemption in december of 2013. this event triggered a filing requirement for berkshire and we were late in realizing that fact. kelly, back to you. >> yes. and that fine pales in comparison to bank of america one we were just talking about. thank you. here's where we stand in markets with half an hour to go, tyler. s&p 500 sitting just shy of a record high. and the dow within 13 points of the 17k mark. now, cnbc.com's john breaking news yesterday uncovering documents that dardon may have been telling two different tales to investors and shareholders about red lobster's outlook. >> and john has more on the story. fishy financial disclosure at red lobster. john, is there any new development today on this?
>> well, there's been a little bit of a response from some investors i spoke to. some were very surprised. on the other hand, there's been a lot of skepticism around this company for some time now. i think, you know, the question now is what happens. are these guys going to get in trouble for this? i don't have any real answers for you there but i can tell you a bit about the rules that they might be dealing with. >> and before we do, let's remind people bof what we're talking about here. so in conversations with one set of investors the company appeared to present red lobster's prospects to increase over time to generate $200 million of earnings by one measure, while simultaneously saying to these, actually we don't think they're going to get above $100 million. two totally different trajectories for the chain in the middle of this. >> that's right, kelly.
you will be amazed. if you see darden speak publicly and they talked about looking back at red lobster they said there was basically no sign of a
turn around. all the trends are going against them. this document i got hold of and reported on since a completely different tune. they say these issues are temporary. we've identified all of these low hanging fruit. this is going to get fixed. we're talking about ebitda basically, you know, being an easy double from what it is now. >> how could this have happened, john, and what would the motive be? >> well, it's hard for me to speculate exactly what it was but i tell you what the skeptics have said. the activist shareholders believe these guys are basically rushing this sale, trying to get it down quickly because they didn't want them to achieve their own goal. the activists wanted them to separate the real estate into a different company which now could still be done but there is so much property in red lobster that there's not as much upside potential through such a transaction. so those guys have been very, very upset about that. they've
spoken so publicly. they have not given me any comments on the story. i checked in with them. but that's where things stand now. >> that's going to be the group
to watch here. john, thank you so much for bringing us the reporting. we're going to keep an eye on it. senior writer for cnbc. and just a note, we reached out to golden gate capital who is deeply involved in the story. they are not commenting. we also reached out to darden and got this statement. quote, the nonpublic document you reference and all estimates therein were provided by that golden gate capital and red lobster as part of the debt financing efforting. any representation of this document as a darden document or darden projections is factually inaccurate and misleading. the full story including that defense from the company is available at cnbc.com. with about 20 minutes to go here, again, we're looking at potential headlines here. some records, tyler, for these. >> the s&p 500 about a third of a point shy of an all-time closing high. that's the suspense, i suppose, this hour. oil and gas producer magnum surging more than 60% over the past year. magnum's ceo will explain what's
driving the oil and gas company's growth and what he's doing to step it up even further, next. what if there was a credit card where the reward was that new car smell and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com over 20 million kids everyday in oulack access to healthy food. for the first time american kids are slated to live a shorter life span than their parents. it's a problem that we can turn around and change. revolution foods is a company we started to provide access to healthy, affordable, kid-inspired, chef-crafted food. we looked at what are the aspects of food that will help set up kids for success?
making sure foods are made with high quality ingredients and prepared fresh everyday. our collaboration with citi has helped us really accelerate the expansion of our business in terms of how many communities we can serve. working with citi has also helped to fuel our innovation process and the speed at which we can bring new products into the grocery stores. we are employing 1,000 people across 27 urban areas and today, serve over 1 million meals a week. until every kid has built those life-long eating habits, we'll keep working.
the suspense is the s&p 500. will it set an all-time closing high? it now sits about one-third of one s&p point below that level. kelly? on the flip side, oil just off its seven-month low. that hasn't stopped magnum hunter stock from soaring. it's up over 60% in the pastier. what is the company doing to drive growth? >> exclusive interview here on cnbc we're joined by magnum resources ceo gary evans. mr. evans, welcome. good to have you with us. everything is growing at your company. a ceo couldn't wish for more. the stock price, ebitda, revenues, everything is up. is it sustainable? if so, how? >> well, we just really begun a process we've been working on for three years which is begin developing what we believe are some of the best leases in the industry up in the west virginia and south eastern ohio. what you're seeing are the results today are just a
fraction of what you will see over the next couple of years. >> and, gary, what does that mean for, if we can, even just the price of gasoline for millions of drivers already seeing some relief at the pump here? >> we've had a drop in oil prices of $10 a barrel over the past three or four months. but i really believe that oil prices are going to be at a sustained level around $300 for most of our lives, maybe higher. if you look around the world an look at the demand for oil, it's still sustainable. now, our company has got a large position in natural gas which is predominantly what we deal with and fortunately the united states has a great supply and that price has come back as well. again, we're in an area where the refining costs are so low, we can make a great return. >> if this ceo thing doesn't work out for you you have a future in voiceover work, i promise you. >> that's very nice. >> this past woo in stay no a woo to p a there is hoo are is a
in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.
alert on the former ceo of countrywide financial, angelo mozilo, kate? >> angelo mozilo, who in many people's views is a poster child of the subprime crisis, a huge issuer of subprime mortgagers, which is to say countrywide financial, apparently facing civil charges from the u.s. attorney's office in los angeles. we're told by sources that the l.a. u.s. attorney is preparing a civil lawsuit against him. unclear what the details are, but it's thought to be along similar lines to a case he settled in 2010, with the s.e.c., in regards to the idea that he misled investigators about the risks embedded in the company due to subprime mortgages among other things, tyler and kelly. he settled that in 2010, for just shy of $70 million. but this would be a new and a justice department suit, at that. >> yes, it would. kate kelly, thank you, for now. as we continue to follow that
story. in the meantime, other news with our bertha coombs and a quick market flash, bertha. >> hertz coming off lows, dow jones reporting that carl icahn has reported an 8.5% stake in the rental car company. he says the stock is undervalued and may seek representation on the board. and we know what happens seek h well off the lows now down just over 5% after reporting disappointed earnings. kelly? >> bertha, thank you. now iowa, one of a dozen races that will determine whether republicans or democrats control the u.s. senate for the last two years of president obama's term. and race between republican joni and democratic bruce braley is dead even. >> john harwood is is there. john? >> tyler, i want to give you guys a flavor of the economic debate here in iowa from these television ads. joni ernst said she will cut
earnings and bruce said he will raise the minimum wage. she's against it. >> joni ernst doesn't think there should be a national minimum wage. and what does she think is right for iowa? >> i'm joni ernst and i approve this message because washington is full of big spenders. let's make them squeal. >> that's just the beginning of the economic divide in this race. let's run through some of the issues. first of all, obamacare, joni ernst wants to appeal, defund it. bruce voted for it. social security, joni said she will entertain structural changes. bruce won't, he'll protect it. environmental protection agency. she would abolish it all together. she will kurch i'm missions from power plants. minimum wage, she does nout believe in a meshl minimum wage. he would take it to 1010. and ethanol, he says she's
squish in on it. she says she isn't. both candidates say they support the i'm batted bank. that's good news for businesses concerned about that. the other piece of good news, guys, is that i had a nice sit down with joni ernst yesterday and i came out of it in one piece. >> i almost made a joke about it so i'm glad you did for us, john harwood. thank you very much. the latest out of iowa. there are about 11 minutes to go into the close here, tyler. you're very quiet there. >> no, no e i -- i was just going to get myself in trouble. i know when to stay back. i just -- i would say something and it would be on youtube. there is the s&p 500. we're looking at it just about on the level with the all-time closing high. 1987. stay with us.
it can bring out the worst in people. but the m-class scans for danger, corrects for lane drifting, and if necessary, it will even brake all by itself. it is a luxury suv engineered to get you there and back safely. for tomorrow is another fight. the 2015 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. with all the opinions about stocks out there, how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason
this on a day when the fed by some sxwerp tagss came out with minutes that were perceived to be a little more hawkish than many expected. joining us now to talk about all things markets is lamar vallery and scott. scott, what dow do you make of today's trading? >> tyler, i'm telling you. i did not read anything into those minutes other than the fact that if the situation changes, the fed may move earlier. in my mind the situation is not going to change much. for me the fed is still worried about the same things and it's unlikely they do anything on rates until at least the middle of next year and probably later than that. >> what's fascinating, omar, is the extent to which people have said, well, because the minutes are hawkish, maybe janet yell listen be extra dove vish now on friday. what do you make about that speculation? >> it's possible. to tell you the truth it's not focused as much about what janet yell season going to say on
friday as finding the individual stock. from a macro perspective obviously everyone is going to be watch that. we're focused spending all of our time looking to find the very best stocks. >> who is the cream of the crop then? >> i'm sorry? >> who is the cream of the crop? >> sure. one of the stocks that we've been buying is ever bank which is a florida-based bank. what's interesting about it, they're not really a florida bank. they're a national bank. what we like about it is that unlike the big name banks that have a fancy branch in every town, these guys are using -- are not doing branches but instead are spend that money paying you a higher interest rate. we think that's the way consumers are headed. i don't know about you but i haven't been to a bank in years. >> we've been talking about that. we talked about it last week. i have to get notarized but, of course, you can go to the ups store and get something notarized. folks, stay right there. we're going to come back with a closing countdown after this short break. and hewlett-packard and l brands are both on tap to report earnings after the close. our david faber will brung you the numbers and break them down
with our team of pros. you are watching cnbc first in business worldwide. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase. like 50,000 bonus points when i spent $5,000 in the first 3 months after i opened my account. and i earn 5 times the rewards on internet, phone services and at office supply stores. with ink plus i can choose how to redeem my points. travel, gift cards, even cash back. and my rewards points won't expire. so you can make owning a business even more rewarding. ink from chase. so you can.
drivers want to go further with their electrical vehicles. but you can't take a trip from lisbon to stockholm if you can't re-charge along the way. the green emotion project, funded by the european commission is using the ibm cloud to make this possible by creating a single charging and billing network across 28 countries. so drivers can travel as far as they want to go.
take your business further with the ibm cloud. the ibm cloud is the cloud for business. [b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. all right. the dow is up 59 points as we head into the closing bell about 2 1/2 minutes from now. the suspense is weather the s&p 500 will set an all-time closing
high. right now it's more than a point below that. it has plirted above that all-time closing high of 1987. 8 within just the past few minutes. rejoining us now for the closing countdown is our very own dominic chu and scott wren is back with us as well. dominic, what are you hearing down there on the floor? >> all right. here's what's happening on the floor. this has been one of those days where traders continue to talk a the lack of volume, the lk of conviction. that's under the commentary on the direction of the markets. what they are saying is that in this kind of environment when you have low volumes or little trading volumes, less than average trading volumes and you have a situation where there are no real downside catalyst, what you have is in essence a slight melt up or march up higher. not again. you can see there, five points on the s&p or 60 points on the dow. but just because there aren't that many sellers out there. when there are not that many
sellers the bias has been to move to the upside. so traders continue to cite that lack of volume. volatility here not exist tent, at least right now even with the fed minutes today. we saw a little bit of that drop. but when the got it all back and heading to the close, near at least session mys. another thing that a lot of traders are talking about is this idea that geopolitical risks are still evident and still in the marketplace but they're not being paid to as much attention right now and the real catalyst will happen on friday with jackson hole with both janet yellen of the fed and mario draghi speaking. that may spend a few waves through the overall market. >> 40 seconds. i wrote a radio commentary earlier today that said basically if you had basically done nothing two months ago, played past all the noise and the geopolitical stuff, you would be ahead of the game right now, right? >> you would be ahead of the game, tyler. we've been telling our clients, these geopolitical events only
have a small probability of turning into something bad. dom hit the nail on the head. low volume, good fundamentals. reasonable valuations, good, not great fundmentals. this mark is going to go higher. >> on that note we end the first hour of the closing bell. i'm tyler matt son in for bill griffeth. kelly will take you forward for hour two. >> thank you, tyler. welcome to the "closing bell." i'm kelly evans. we're just shy of the s&p 500, just shy of setting a new closing high here. going out at about 1986. just about 1988 was the level to watch. the now jones industrial average are having a strong day. up 59 points. 16979. not too far away from the 17,000 mark. all this after the fed minutes initially took the indexes lower but they rebound we'd the exception of that nasdaq which closed lower by one point. let's get straight into it now with my "closing bell" panel. cnbc contributor stephanie link
from thestreet.com and simply money advisers and courtney reagan, also joining us on the markets is "fast money" trader steve grasso. we have the markets and waiting fon earnings from hewle hewlett-packard and l brands. what do you make about the resiliency of these markets? >> it was a really active day. it's supposed to be a summer slowness type of time frame here and we had earnings from retailers that were a little bit better than expected. and maybe kind of better than feared, if you will. we had some pretty good nonresidential construction figures today from the dodge momentum insdeks, from the architectural billings index. that follows the housing starts numbers from yesterday. the stocks, the industrials are leading the way. then you had the bank of america settlement news. there was a lot going on. i think it was the bank of america settlement news that started to take us higher. as banks start to kind of get past these big overhangs and people can kind of see earnings
power for this group. >> how much nathan had to do with the minutes, so again, to raise this question from a couple minutes ago, but if the minutes truly had a little bit of a hawkish bent to them and then maybe janet yellen on friday will come out and take the sting out of that, are we going too far down into alice in wonderland territory? >> i think we definitely went down the rabbit hole, without a question. everyone is looking past the minutes. going, oh, yeah, minutes are nice. when is janet talking on friday? that's what i'm going to pay attention to. take that and remove the noise a all a sudden today i didn't know anything about the dam in mosul, i didn't know anything about the convoy going across the russian border in ukraine and we got a look at the economy and stephanie is not going believe me but, yes, the economy is doing nicely. industrials are up. consumer discretionary. >> that sounds familiar. >> take a look. doing very well. and then of course you've got financials. all of this talks to -- addresses what's been going on in our economy which is is is a
large segments of it are doing very pell. when you look at somebody making $55,000 a year they're not terribly happy with the way the economy is going for them. >> you raised something, courtney, i think it was dan greenhouse but the consumer discretionary index despite the number of high profile misses we have seen. trading it pretty much all-time highs. >> getting it right and really right. they that could turn on a dime, too. we've got a lot of cross currents going on with the different income levels. like you're saying, folks are making $65,000 or less feel different than those in the higher tax bracket. yes, we say the economy is improving and the fed may think the economy is improving but they don't. they don't think that. >> grasso, steve grasso joining us now off the floor. it was a pretty slow session in terms of volume before those minutes hit. what happened then? >> well, everyone waits -- there's always a catalyst, a reason to wait. today was all about waiting for
fmoc, late in the summer, late in august. people are looking for reasons to trade. that was the trading vehicle today. kelly, it's really hard to think that taper is going to end the rally. we're up basically 18% since the original taper tantrums. we're up 25% from that low after taper tantrums. i would say the markets digested this appropriately, wouldn't you? >> here's my question. if that's the case, is what the fed doing here, does it matter? oh, hang on. hang on. hold that thought. we will keep everyone on a cliff-hanger because david faber join us now with hewlett park card. >> hewlett-packard without with fiscal 2013 third quarter results. $27.6 billion in revenues. up 1% from the prior period. that is a significant gain because, of course, it has been a very long time. in fact, years, since hewlett-packard has seen a quarterly revenue number that was higher than the year i go per idea. it is only 1%.
nongap diluted 89 cents a share. up 3% from the prior period. and right in line of the higher end of their outlook. their gap number, however, was lower than expected due to what they're calling restructuring charges. and a number of other charges associated with that. that did come in below the estimates of analysts who follow the company. where was the strength? personal systems group. talking about the death of the pc. perhaps we've been saying too much about that was revenue growth there up 12%. part of this is part of a market share game. we have smaller players starting to watch their market share erode, lenovo and dell perceivably taking market share. big revenue increase of 12% led by commercial but also including actually growth in the consumer segment as well at the personal systems group as we all know. of course, margins there are extraordinarily thin but they are 4%. a lot better than lenovo's.
printing though, a different story. printing revenue performance, the company even admits was weak. profitability though, they say remains strong. and there are a number of things that they're doing at this point in terms of dealing with supplies and the channel inventory levels, the decline on the year overier basis that they hope at least will bring growth back to that business but it may be a while and may, in fact, pressure overall revenues although they continue to offer guidance actually within the high end of the range and a range as you might expect, only got one more quarter left in the fiscal year has now come in closely and tops out at 374 a share for a full year. overall, looks like a decent report from hewlett-packard. enterprise services revenue was $5.6 billion, down 6% year over year. i do wonder whether people will take a closer look at that. that's a long cycle business. it takes a while to turn. so we've been dealing with that, or they've been dealing with that for some time. overall though meg whitman saying the turn around continues and, again, they certainly will make a good deal of the fact
they were up 1% in revenues. and by the way, generated 2.7 billion in free cash flow, 3.6 billion in operating cash flow, and are on target to generate billion in free cash flow this year. bringing their cash position up to $4.9 billion. kelly, back to you. >> all right, david, thank you. good stuff breaking down that report. we've got more now to respond to those hewlett-packard earnings. ross gerber from gerber kawas i kawasaki. is it david or eric? my apologys. we have eric here. great to see you. >> hi, kelly. >> shares are looking for direction a little bit after hours. but what jumps out to you here? >> looks like the strength in pcs is picking become up. it's -- boy, looks to me like hp has shaken its august curse. it's been down an average of 15% in august during the last four years. that was the story i did yesterday. those are all on one-time events. no significant bad news but a
lot of the staple. i'm still earned about the on going problems and the enterprise services group. that's been a significant problem. doesn't look like it's going to be solved any time soon. probably not before 2016. enterprise group not to be confused with enterprise services. that's where ibm just sold its server business to lenovo. hp may be trying to capitalize that in server sales. >> ross, i know you've been much more cautious about hewlett-packard's prospects. what do you think with these numbers in? >> i think it's more of the same. revenue growth of 1%. that's not very exciting by any means. and i still think they're absolutely missing the boat by not getting in to 3-d printing in a big way. let's be real. you know, they're just like cisco and many of the older businesses of '80s and '90s. they really need to do something bold and big. i say that every time with these big cash flow companys with low pes. yeah, the valuation's cheap and
the cash flow is good. but what's going 20 get revenue going up and not being in the 3-d printing business right now in a big way is huge mistake for hp. this is their natural strength by far. >> what's the revenue of stratss to here, just pick the one that you -- >> it's a few billion dollars, at most. but it's like -- >> all right. it's not nothing, in other words. because hewlett-packard's third quarter net revenue is $27.6 billion. >> exactly. but, see, this is a business of the future though where revenues can grow at very high multiples and, you know, apple bout beats and it not going to meaningfully change the revenue but it changes the culture and changes a lot of the thought processes throughout the business. it's not just about revenue, per se. it's about invigorating the company with new avenues for growth. >> fair point. hewlett-packard shares are moving less than 1%. nathan, do they need to be bold? >> i'm sorry? >> do they need to be bolder?
>> they need to do -- i think hewlett-packard is a good example of what a lot of companies are going to have to experience. they doubled from 2012 to 2014. i think it's like coming home and your partner looks at you, now what? it was great the last two years, now what are you going to do? 3-d printing has got to be on the table. prksz c, still cheaper than both devices that i've got. so i think it's got a future. >> they've also though benefited, nathan, and kelly, they also benefit fred that move from new tech to old tech. so people were looking more at that pc business trying to grasp on to something. granted it has doubled as nathan said. it's been on a tear. it's a turn around story. but i think it's benefited more by being an old tech name versus going into 3-d. >> my point is now i think it's becomes a slow growth because where do you go from here? >> it is -- >> i would agree with that. the pc business is certainly recovering and we've seen it from a number of companies in this past reporting season. the problem is is lower margin
business, right? we're not going to get that juice on the bottom line even if you do get a top line results. printing is 21% of total revenues. that's a disaster. she doesn't have a plan in terms of fixing that. 3-d printing she's waffled on. they're going to make an acquisition, not going to make an acquisition. there's a lot of moving parts to the story. yes, to nathan's point, stock is run hard and i think it takes a pause here because what's so exciting here? >> what about you? in response to point about 3-d printing, generally being bolder? >> it's hard with a $3 billion company. if they were to acquire stratss toes, it's $3 billion, hp is is a $110 billion annual revenue run rate. that doesn't move. that doesn't move the needle. hp will probably do an acquisition but the other thing that meg has to do, she has to prove that hp can actually make a responsible acquisition. over pay our economy by $11 billion. >> proctor and gabl bl is about to dump a bunch of brands.
you've got to get smaller before you get bigger. >> interesting point. there was this attempt to spin off the pc business a couple years ago by meg whitman's predecessor and that -- there was a big push back against that approximately meg didn't want to do it. i think there's a possibility -- there's a consistent push to tried and consider divesting. one possible place to look is printing. that's not growing much. there's still some cash management and still some return on equity that you could manage there. might be a decent private equity plat. >> cloud and data center. areas are growing in the big companieses and they are really not a presence at this point. >> who would buy the printing business and at what proint price? >> if they were the printing business is is is very profitable. the prining business is a great business to be in. and it has the highest margins in hp. they could make an acquisition and spin it out as a printing company and get all the low margin businesses out. i think it would be a veriesqy e
effective strategy. when you talk about the last two years, look at hp over the last five and ten years. returns are very low if not negative and just because it rebounded from a super low price to 35 today, that's not such a great result when you've been an investor five years or more with them. >> seems like investors have been patient with meg whitman since she took over to stabilize the ship, get in there and get her hands dirty and figure out what worked and what didn't. move the company in future whether it's 3-d printing or whatever the choice may be. i'm sure she was careful probably about what the acquisition she's going to make after what we saw with autonomy. >> so much acquisition or just movement we should say in the retail space. we were speculatingn't a lexmark printing kind of play. could we see the assets moving around within the tech space? >> it certainly is a possibility. i think cisco needs to do something. i think ibm needs to do something. i think hewlett-packard needs to do something. to steve grasso's point, all
tech stories that benefit fred that shift from new tech to old tech. the old tech have to prove themselves because they had a big run and value you agszs. sure, they're cheap relative to the market and relative to new tech. but now you've got a show growth for them to see expnansion goin forward. >> thank you, everybody, as we dig through the results. eric from joining us. david faber will be sitting down with hp ceo meg whitman. it all starts at 9:00 a.m. eastern. also, straight ahead today, steve grasso will be coming up in "fast money" at 5:00 p.m. talking amazon looking on to take on alibaba and shanghai's trade free zone. that's another interesting story to follow. coming up here,former vice presidential nominee, paul ryan taking aim at obamacare this morning on cnbc. >> i think it's been terrible law and i think it's going to implode on its own weight. i really don't think this law is
going to stick and last because it's going to end up putting a lot of providers out of business. >> so are republicans doubling down on the bet that campaigning against obamacare will help them gain control of congress this year? maybe even the white house in 2016? that's coming up. plus, auto loans hitting a record high but auto repossessions are also surging. what's behind the recent spike and is it a red flag for the economy? we're going to ask our phil lebeau. you're watching cnbc first in business worldwide. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours.
welcome back. americans racking up auto loans at a record rate but they are biting off more than they can chew with the loans. phil lebeau has the details first here. hi, phil. >> these are numbers that will get people talking about whether or not the subprime market is truly hitting a point where people are going to say, um, things need to slow down a little bit. this is from experian. this is second quarter analysis of loans in the second quarter. look at the repo rate, up 70%. 60 days late, delinquencies up 7%. the average default, the average loan that is defaulted upon, $8100. when you look at what's going on in this market right now the dealers are clearly selling more
cars to subprooim. those with subprime kred did scores but 19.6% of all auto loans are subprime or deep subprime and that's below the industry average. we'll show you that in just a little bit. by the way the u.s. attorney is investigating subprime loans. earlier today there was a fine issued out of washington against one lender in texas for more than $2 million for supplying false information when it came to getting loans for subprime candidates. and here's what we're talking about. 19.6% of all loans right now are written for those who have deep subprime or subprime credit scores. that's well below where we were in 2007 and in 2009. you can see as question we look at the auto stocks, mixed today, no clear trend either way. you can see this is an industry that has not yet returned all of the way to where we were pre-recession, kelly, when it comes to supplying loans to those with questionable credit scores. but clearly there is an uptick there and almost everybody i
talked to today said, watch it. it's not to the point of blowing the whistle but it is worth watching. >> certainly, phil, because the memory of the subprime housing collapse is still so fresh. let me ask you this before we bring in the panel. what accounted and even though it's still such a small share of the overall. what accounted for the recent jump in repossessions. >> looking at the subprime market. experian said almost all the defaults as well as delink quns sis, lmts aalmost all of that g into the subprime market. people had loans written, they shouldn't have had them written. surely buying more vehicle than they could aaford and couldn't keep up with their payments and repossessi repossessions. total repossessions, second quarter, most recent data. overall repossession rates compared to all loans is less than -- it's 0.6%. it's also than 1%. >> let's bring in the panel here. context is needed, on the one
hand, uptick. you know there are potentially for worrisome signs. on the other hand, it's relatively healthy. >> i think this is what happens when you're at a 16.5 million sar versus 10, 11 million sar at the trough. the annual sales rate. selling more cars. clearly was a focus and a highlight when you listen to the bank conference call on second quarter. that was a highlight. c and i loans were strong and auto loans were strong. it's not surprising to see when you're lending more you're going to have more issues -- more issues. i think to the point that was making in terms of the repossessed cars, as a percentage of total loans, really 0.6% is really not too concerning. we've got to keep an eye on it. >> nathan, what do you make of it? >> it continues to show this is an economy with haves and have nots. the average loan amount which phil reported on of a monthly payment was $474. that's $5600 a year. that's for one car and that's
before insurance or before you put any gas in the thing. husband and wife working. all of a sudden you're talking about 10% of the average american's gross income. $56,000. 20% of that is going to transport tags to get to the job. all of a sudden if you want to know why there's no first-time home buyers increasing. >> pressure on the retail space? >> exactly. think about more money being diverted to more places. cellphone bills or starbucks runs or car loans. what are folks putting aside when it comes to not paying bills. is the car loan the first thing they get rid of? >> in a weird way what this indicates is this is not a be n beginning of a crash in the way it was with a housing market if this isn't about prices are falling and suddenly people -- so it's a different dynamic. in other words, if we're just getting to a tipping point that people can't take on much more here. not that that's any better for the economy. >> you can't compare the housing
crash. one, it's a sliver of what the mortgage debt problem was several years ago. also, when you look at the securitization, you're not seeing nearly as much securitization of the subprime auto loans as you saw with the bad mortgages. it's a fraction of it, too. this is a reflection of the consumer out there. particularly on that lower end. >> it certainly something we're going to keep an eye on as we have. phil lebeau, thank you for bringing us the latest detail there. appreciate it. s&p 500 closing just shy of an all-time high today in spite of all this. and it's not just stocks rallying. bond prices also keep heading higher. who has it right, stock or bond investors? jpmorgan will join me next. is president obama directionless? that's what politico thinks. coming up, ben explains why the president may have already checked out despite having two more years in office. we'll also get ben's take on
where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com welcome back. it's enough to make any investor's head spin on the one hand s&p falling to a short of an all-time high. on the other hand, released the minutes with some members wanding to make a relatively prompt rate hike. plus, more news is expected from jackson hole, wyoming, tomorrow with the economics symposium is held. and geopolitical concerns,
middle east, russia. one has to wonder how investors should navigate this environment. joining me with thoughts is global with jpmorgan. >> thank you. >> you've had a long career. how would you stack up today's environment relative to what you've been through? >> it's a perfect environment. you have a tremendous amount of liquidity. you have central banks being very cautious about tightening monetary policy. and it's all creating asset price inflation. and when you look at where thes asset price inflation is occurring, certainly we're seeing credit spreads come back in from the wobble of a couple weeks ago. equities did well today. i think it's also a testament not only to the liquidity but also that corporations have gotten a lot more sanguen about how they manage it. >> that's what everybody sees, understands, and frankly a lot of people don't like it because they feel like it's false. why did you say inflation and not appreciation, for example?
what do you mean by as the price inflation and do you see in addition perniciosu about it? >> when we look at the way asset prices have gone up and how fundamentals have i'm pmproved t of it can be attributed to fundamentals. if i look at the high yield market and look at the yield rate of 1% xtxu and credit spreads are 400 basis points, that looks very fair to me. when you look at the total yield of high yield, 6%, that doesn't strike anyone really as high yield these days and that's the difficulty our clients are having. and a lot of it is because central banks have engineered such a low interest rate environment. and that's why when we look ats asset prices and we think about where government bonds are trading and a lot of u.s. government bond curve has a negative yield, that's asset price inflation. more than appreciation due to
fundamentals. >> help us figure out as an individual investor what's to make of this. your first word to describe this environment was perfect but the more you get into it the less perfect it sounds. what's a person to do here? >> i think you have to watch the federal reserve. and today in the good cop/bad cop, you have the bad cop with the release of the minutes and certainly it gave some airtime to the hawks on the flmc. i think friday morning we expect the good cop to come out and chair yellen and she should be very care flul the way she describes the employment and jobs market and she's going to talk a lot about the slack in the market and that's going to give the mark a sense that the fed will be very careful and how they normalize interest rates and how they withdraw liquidity from the system. so they don't disrupt the recovery that's under way and still. >> is the fed and other investors who worry about things
being too pricey, over valued, bubbly, frothy, however you want to put it, they're mentioning stock market, bond mark, everything gets lumped together. do they have the right to have these concerns? >> today they're not, right. because if you ll ll liquidate position yaurn earning zero. we're learning only so long investors, whether they're private or institutional, are going to keep money in cash earnings. then they get encouraged to go back into the market. so i think for that to change, you're going to see -- have to see the fed begin to lift the fed funds rate, restore some yield to the money market curve and start to get money market yields back up to at least a zero real rate. >> two quick last questions. how much longer do you think the current cycle long and remarkable has yet to go? >> we think a couple more years. if we look -- and there are a number of things that come into play and we're looking mostly at
risk appetite. and we think we're about two-thirds of the way through the positive side of risk appetite. so a couple more years. and the other metric we look at is when do you see large corrections and typically you see a hiccup when central banks start to raise short-term interest rates but the big problems occur when they've actually finished raising interest rates. >> second and final question. in a word, if you can, liquidity is priced today. you can look at the junk bond space, shouldn't that be more of a concern here or not, in your view? >> well, i think there's so much liquidity out there and i think about i've i've been in the business a long time 33 years. i can't ever remember a time when there's been more interest in investing in bonds and if you think where yields are that liquidity has to find a home and you're getting new definitions of liquidity when the ecb starts
posting negative to deposition sit rat deposit rates. as we all try to make heads or tails of it, appreciate it this afternoon. >> thank you. thanks for being here. coming up, new report finding the irs isn't set up to accurately collect a tax critical to funding obamacare. find out if that story is burning up the hot list when we come right back. plus, are republicans trying to make obamacare a top issue for the midterm elections? >> i think it's a terrible law and i think it's going to implode under its own weight. i really don't think this law is going to stick and last because it's going to end up putting a lot of providers out of business. >> politico's ben white is here to react to congressman ryan and whether they think it will win them control of congress and the white house.
and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review. female narrator: it's posturepedic versus beautyrest it's posturepedic versus beautyrest with up to $400 off. serta icomfort and tempur-pedic go head-to-head with three years' interest-free financing. mattress price wars are on now at sleep train. ♪ your ticket to a better night's sleep ♪
welcome back. we're used to hearing about big banks getting hit with big fines but when warren buffett gets slammed by the fed it's a stunner and hot item on the web for that story and for what else is on cnbc.com, the site's managing editor joins me now. >> you've got it right there. whenever you have warren buffett in a headline, berkshire hathaway, fined, maximum penalty, people are going to dive into it.
but it's only $896,000, which is a rounding error to berkshire hathaway. they did violate -- >> bayou about three shares of class a stock, i think. >> exactly. did -- 4 1/2. >> it's the second time they did it. the ftc said, nope, don't do that. >> yeah, good. >> a more serious story though. trucker shortage. it's been going on for a few years now. but you may not have noticed it because the economy was so depressed that, you know, there wasn't that much goods and services going around. now that everything is getting better all of a sudden they're looking around going, hey, 30,000 truck drivers short. >> tighter regulations and there might be more after eamon jaffers' investigation. more comcoming. >> exactly. >> good paying jobs. >> yeah. >> but it's about 50 grand for your average truck driver. if you're a suicide jockey, 70 grand. that scale may have to come up a little bit. >> what's a suicide jockey? >> somebody who is transporting hazardous materials, dynamite,
explosive stuff. that's old cb talk from the '80s. i played around with that a little bit. finally, our third story. all the apple developers are beginning to get the eeb by jeeb byes because the new iphone 6 is expected to come out, ios 8 platform. they've got to make sure all the old apps still work and then they have to design new apps to work with the new system. so a lot of upset over there. that's something that's at tracking viewership as well, kelly. >> i'm sure they've got to stay ahead of it. thank you for now. good to see you this afternoon. we've got more earnings. bertha coombs, is this l brands? >> it is l brands, parent company of victoria's secret reporting earnings of 63 cents a share. that's a penny better than the estimate. on $2.68 billion, slightly ahead of estimates. the stock is getting a boost though because their guidance is also well ahead of estimates as well when you back out items, their guidance for the third
quarter is 26 to 31 cents a share. estimates is 30 cents. as far as full year, they are guiding, again, x items, 313 to 330 a share versus the estimate for 317 a share. so they are getting a bit of a boost on that. no comments in the release. we'll see what happens during the conference call. kelly? >> all right. in the meantime, shares up 1 1/2% on that report. sarah palin has done it and so has jack kemp, former gop presidential nominees turned to best-selling authors. now congressman paul ryan is hoping to follow suit. he visited "squawk box" this morning and made some waves. what he said is up next. later in the show, the als ice bucket challenge sweeping through the nfl. the new england patriots and new york jets and world champion seattle seahawks are all joining the cause. "closing bell" answers the call as well as others. that's coming up. [ male announcer ] don't just visit miami.
tdd#: 1-800-345-2550 life inspires your trading. with millions of reviews, tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. welcome back. republican congressman paul ryan speak out to "squawk box" this morning being vocal about why he feels obamacare should be repealed. our very own eamon jaffers has more. >> we're just 76 days away from the midterm elections. and the fate of the senate hangs in the balance of republicans take control of the senate. they might have a little bit more say over what happens to obamacare and, as you say earlier today, republican congressman paul ryan was on
"squawk box." he was asked about what the fate of the law should be. take a listen. >> i think it's a terrible law and i think it's going to implode under its own weight. i really don't think this law is going to stick and last because it's going to end up putting a lot of pr viders out of business and i don't think americans are going to sit contently with the notion of price controls and the federal -- >> repeal and replace. >> paul ryan also said in that interview that he's going to have a lot more to say about health care and what he thinks out to be done in terms of obamacare late own this fall. so as we get past labor day and in the heart of campaign season you're going to start to see republicans coming out with some of their thoughts on where things ought to go. again, all of it with the eye on the senate and whether or not they can take control there. and then what they're going to do for the remainder of president barack obama's two years in office. guys? >> that's the question, eamon. thank you. for more reaction let's bring in ben white here along with our panel. ben, what did you think when you
heard these comments from paul ryan? first on obamacare and do you think this can be a winning issue for the for them in the midterm? >> it doesn't surprise me that paul ryan would say that. it's an absolute piece of fwos pell to the republican base. you have to say i would repeal obamacare. paul ryan knows as well as the rest of the republican leadership knows they can't do that and won't do that. even if they get the senate back they won't have a filibuster approved majority. this will be a base election, midterms almost always are base elections. if you get a guy like paul ryan go on "squawk box" sand say, well, i'm not sure i want to repeal obamacare, that's a prescription forgetting people to not show up at the polls. gop can't repeal obamacare but they can't say they won't try. >> interesting because, nathan, i see you shaking your head here. >> my office is about five miles from boehner's district and one word they've taken out of any conversations is the word repeal. you don't mention repeal. you say we're going to modify, we're going to change, we're going to adapt.
all of a sudden ryan comes on and says, oh, we're going to repeal it. is this once again an example of two republican parties? >> no, i don't think so. i mean, you know, boehner may have different issues in his district or may have a different approach to that. but the republican party has not come up with its alternatives, what it would replace it with. you know, in eamon's report we're going to come with you with our proposal for what we would put in place for obamacare. they don't have anything right now. top line for somebody like paul ryan when it comes to the mid terms has got to be i don't know like this, we're going to get rid of it and then maybe at some point they come out with something better because in 2016 you're going to have preside presidential candidates still running on repeal, running against a lot of folks who are benefiting from obama dl care and provisions. i don't think it will be a tenable position to have in 2016. in 2014, i think they can still talk about repeal. so that's why it doesn't come as a surprise to me that ryan would continue to push that line. >> also getting news to the
extent theist doesn't have the funding it needs to raise revenue from the medical device tax. i guess my question is just, you know, does the gop need a concrete plan or can you actually run against obamacare simply on the basis of we don't like this, it really doesn't work and we're going to find ways to try and make it work or adjust it or modify it going forward and that that's enough of what perhaps voters want to hear? >> well, i think that's a perfect example on the medical device tax. i think that's one of the main things that we will try to do with the majority if they get it in the senate is to attach to a spending bill they send to the president, you know, measure that would repeal the medical device tax. something like 70 senators who don't like it already. it's very unpopular. i think they can run on that one specific, get rid of that tax people don't like. you have revenue coming out of obamacare used for the subsidies. the substance of what you do once you get rid of that tax is harder. that's one specific they can run on.
the other one is harder and why repeal is easier to say. look, this is terrible. we'll come back to you later with the details. maybe they do come back with the details rue right now it's one they can run on. >> well, interesting. as you say more of a 2014 issue perhaps than 2016 but we'll take it as it goes. ben white, thank you for now. >> pleasure. >> good see you. earnings market movers, fmoc minutes. dom chu has his thoughts. tomorrow we'll head out west to the annual jackson hole economic policy symposium and talk to charles, the president of the federal reserve bank of philadelphia for his take on interest rates and fed's next move.
welcome back. the s&p 500 just points away from a record high despite what many are calling more hawkish tone from the federal reserve this afternoon. dominic chu joins me now to wrap up the day's action. >> kelly, you know it's the middle of august when you've got traders coming up to us saying, dom, half my clients are not even in the office today. for that reason we got the third lowest full day trading volumes of the year so far. just about 2.5 million shares consolidated trade in terms and the average is 3.3 billion. so again, a much lower than
average trading volume day. and that's where you kind of saw things become a little bit interesting around federal reserve minutes released right around 2:00 p.m. we saw the dow up 40 points. it lost 30 points relatively quickly on what was interpreted as on what it was interpreted as a slightly more hawkish comment from the fed. we gain all of that back again. as you see the markets move and gyrate the way they are right now, you got to wonder whether or not volumes have something to do with it. also, watching what's happening with the interest rate complex. we seen them take higher with the ten yield across the yield curve. the dollar is rocking on those comments. as you put all of that in perspective, it will be interesting to see whether or not anything happens on the geopolitical front. for right now, it doesn't look like it's having too much of an effect on the markets. what will, say traders down here, is what will come out of the fed and the annual symposium in jackson hole. any kind of comments out of there the next couple of days. >> that may provide a catalyst for the markets, whether it be the upside, that's the path of
least resistance like we have been saying a while or traders are reasoned to take profits off the table. >> stay right here, too, in terms of indicators, we have been talking about this market from overbought to oversold, stephanie, you say it's bounced back on this rally to overbought again. >> it is, it's certainly something to watch. the setup going into friday is not exactly ideal. you want to see us oversold, whatever she says the market would react ostively anyway. at this point we have to hear what she has to say. i think the economic data i am looking at tomorrow is the pmi numbers, were also the initial claims, of course, then you get a whole slew of retailers, again, gap and roth stores and children's place and sear's. so we will get a lot more of an indication in terms of the consumer end and how that's fareing. >> and going back to sentiment levels about this market. it's not just stocks overbought. it's bond, too, incredibly overbought. so it will make friday's look,
if we bought to that extent on stocks and bonds the rumor? what does it take? >> interest rates will flow up, all of a sudden, we don't have all the uneasiness around the world. i think it will be interesting to see how yellin talks markets and rates back down now that we've run away, if you will, from all the geopolitical events. >> what happens if we get food and comment at the same time yellin comes out? >> then you wish you were bonds. >> i think we go back to the economic data, i think that's the most important, if we are seeing a recovery, it's actually a good thing. you got to get the market to do whatever it does, make a shopping list. >> guys, the feds said it, right. they said they will need more data to make sheer decision, if you got them fed, leading indicators, all these events coming out, home sales numbers coming out. >> that may be at least that track of data that the fed wants to see before they even think
about maybe aggressively or at least moving up a time frame on raising interest rates. >> good stuff, dom, thank you. yesterday, "shark tank" kevin o'leary was here, he made me an offer, well, i couldn't refuse. >> it's only one mr. wonderful u wonderful. i'm going to do it. >> you probably know where this is going. so we'll show what exactly happened here yesterday and some other cnbcers did after this. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running.
we're changing the way we do business, with startup ny. we've created tax free zones throughout the state. and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov
habeing able to pay as we goo rawas crucial for a start up.s. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud for business. e financial noise financial noise financial noise financial noise
[ music playing ] welcome back to the als bucket challenges has gone international. yesterday after the show, i completed the task with assistance from our wonderful panelist mr. kevin o'leary. >> that's the first time i actually seen the video of him doing that. >> baseball happily stepped up to the plate. steven bloom and a good friend and c in bc's tanya bryer is
challenged. john slozar and jo anne morris. so. by the way, in case anyone was wondering about the important monetary as picture of this, just last saturday a.l.s. this time last year raised around doctor 200 million. as of today according to their website they raised $231.5 million. they've tripled. it's only wednesday. >> as americans, we gave $298 billion. that was a 4% increase, our giving is outpacing inflation. >> philanthropy, you mean? >> philanthropy. i would like to see more of this. >> you hope you donate to a.l.s. in addition and the other donations that you marksd you want ideally it to go up. everybody share the wealth. >> it has not happened
cincinnati? >> if any of you want to go to cincinnati, we can do it. >> it's a world away. >> there is a nice piece in cnbc.com. can you see how this is changing the philanthropy modem. let's talk profits and earnings. we heard just this hour from hewlett packard, earnings in general has been there, according to rich petersen of s&p, capital iq the s&p 500 is trading between e 15.1 times. >> it's fair. if you think the economy is get e better, you might get more earnings growth. kevin o'leary was doing a great job yesterday going in multiple expansion. >> you can go to 20. >> i think the revenue growth is poised to go higher.
>> the s&p 500 almost closed at a record high closed his call to 2300 by year end. if that were the dow it would be raising the forecast by 4,000 points. >> the thing is you have to accept the fact you will not see tripling and doubling of stocks. you have to see good things ahead. you got to wade in the pool. if you have been sitting on the side lines, the hard part now is you will get good returns. you won't get fabulous returns. individual investors have to come to terms with. >> in the meantime, we have a bunch of retailers tomorrow. >> we have a bunch tomorrow. >> which one is -- are you going to be streaming of tonight? >> gap. i got about 24 hours to ring the bell. >> all right. it's time for an ice bucket challenge. thank you for being here this afternoon. "fast money" is coming up in a few moments with melissa lee, who is back. what's on tap?
>> hey there, we have the first initialized app rating. we will dig deeper in terms of penetration of these camera systems into cars and europe's north america as well as asia. >> that was a nice ipo down here. >> it was. it was. >> more to follow. over to you guys. >> "fast money" starts right now. live from new york city's sometime's square, i'm back in action tonight. it's good to be back tonight. hewlett packard's conference call is starting right now. they were in line with expectations, shares are slightly lower in the after market session. we will bring you the latest session from the call. apple hitting an all time high crossing 101 share per day. >> i state what happened my parameters were originally. i thought my i don't know side was 85. i wanted to wait for a break of that old high, which i guess was par 72, 74, somewhere around