tv Street Signs CNBC August 21, 2014 2:00pm-3:01pm EDT
so over. >> "street signs" begins right now. has the fed fear faded? the market surprising many be being strong. hi, everybody. we're going to ask if stocks can stay this way even if higher rates. plus the one thing that may quietly hurt real estate more than anything else, few are talking about it. where the bank settlement money really goes. yeah. and we finally put mandy on ice with this ice bucket challenge thing sweeping the country. >> certainly is sweeping the country.
okay. 27 is today's magic number. do you know what it represents, brian? >> number of ice cubes in the bucket? >> oh, no, way more than 27. maybe 2,700 ice cubes in that bucket. that is the number of times the s&p has closed at a new record high this year. can you believe that? by the way, that is 17% of the time so far this year. we could make it to 28 today. looks that way right now. the nasdaq 100 doing very well hitting a new 14-year high. despite the more hawkish tone we were talking about yesterday in the fed minutes, the market barely blinked. even our own steve liesman was surprised by that. to you think the narcotmarket w take a more hawkish tone in its stride? >> it's certainly interesting, mandy. i was interested with what happened with the short end of the curve. i saw the two year was down in yield and up in price. surprised to see that especially after these minutes hinted at or suggested there was a
conversation at the federal reserve over the issue of earlier rate hikes. we did have john williams on today, the san francisco fed president. he kind of affirmed the notion of a mid-2015 rate hike. it's well to remember, whatever the fed says, they have promised that there would be a considerable period between the end of quantitative easing and the first rate hike. everybody takes that to be at least six months. the notion that maybe the market feels like the profit outlook is secure enough, the economic outlook is secure enough to withstand a rise in rates is something new that's coming over the market and it's something worth watching for sure. >> all right. so, steve, stick around. just how big of a surprise is it that stocks are going up again? i believe we still have steve, if he has not hit the fly fishing river just yet. jimmy, were you surprised by yesterday's action? either one of two things is happening. the market is saying, yeah, okay, fine, we condition deal wi with higher rates or were robots
and everybody after labor day will have emotion in the market? >> it's august and you can't put as much weight on moves as you could other times of the year where there's more market participants. that being said, when you look at from the broader issue down and look and the people are lending ten-year money to poland at 3.10%, why wouldn't our stock market look attractive? even if it's going through the handoff from being force fed by our fed. i mean, the point i'm trying to make is there's still plenty of global liquidity of the stock market. i think that's one of the reasons they're not worried at all about ending quantitative easing because the world is going to do their heavy lifting. our ten-year yield is not going to get that out of whack with european yields as long as they keep pumping money in it. i am surprised. i'm not buying it here. >> nonetheless, jim, going into tomorrow when yellen is going to speak, everyone on the street including their dogs thinks she's going to be dovish. the uber-dove. do you think the doves are overexposed? how vulnerable are they,
therefore, going into tomorrow? >> i guess if i have to attribute that move to something over the last two weeks, we're looking at jackson hole thinking she's going to be dovish. that's what we're positioned for, positioned for perfection out of her. to me, it seems like we're probably a bit overdone. as i say again, i'd rather for a shore term be a buyer than a seller here. >> steve, is there any way to gauge -- you've done your fed survey over and over again. i haven't heard from you in a few weeks, man, you're slacking. what's happening? no. any way to gauge the market? most people we talk to think rays should go up sooner than later. >> we actually just did one, brian. ais sorry i didn't send you a copy. we did a special jackson hole edition of the cnbc survey. it gets to one of the things, it showed that they expect a very long, slow gradual rate hike cycle. in fact, we asked when the terminal rate would be, and that was 3.2% in the fourth quarter
2017. so go from july 2015, to the fourth quarter of '17. that's 30 minuteonths. i talked to a guy who manages tens of billions of hundreds of billions of dollars and said it's not so much when the fed hikes, it's where it goes to. and i think the market's pretty -- when the fed twins hi begins hiking it will be gradual and not to a high place. >> let's talk about when they might start. even just today, bob, we've had a number of pieces of better chan ch than expected -- if indeed the fed is truly data dependent as they say, do you think there's a chance they're going to move to the exit much quicker than the street is expecting? >> much quicker. i'm not sure, mandy, maybe a little quicker. remember the employment cost index we got about a month ago. i think that's what's among the things along with the gee wro
geopolitical issues that spooked the market. sinces then, we've gotten inflation numbers that are better. as long as inflation is contained, better economy coupled with marginally and slowly rising rates is not bad news at all for the stock market at all in my view. maybe the pace of gain will be different, when multiples are rising because rates are falling and earnings are growing, that's the best of all worlds. >> bob, you've been doing this a long time. does it bother you as much as it's begun to bother me the last few years, we're obsessed, me, mandy, the show, the network obsessed with the fed, timing. we forget the other macro issues. the fed sneezes and this or that happens. i don't see how that environment is healthy at all. >> brian, i love it, just for the record. >> we got very dependent on every word that came out of the fed's mouth. where the comma was, et cetera, et cetera. and appropriately so. because we were in unchartered waters. when we get to the point, i think we're getting there, where they get their wishes, a little more real growth, a few more
jobs, a little more inflation, you know, it's not that they become unimportant. macros. watch real gdp, watch the weekly unemployment claims, watch monthly job numbers and most importantly watch earnings. if they're okay, the fed will continue to recede in my judgment. >> remember, too, the central banks have inserted themselves over the last five years into the normal -- >> that's what i mean. i'm not blaming you or us necessarily. we've bought into it, jim, we've bought into that. >> there's nothing to buy into. you can't judge it. they're there. they are controlling a lot of the price discovery process in many different assets. and not in its entirety but they're there significantly. so we have no choice but to hang on every comma. >> yeah, they're communicating, overcommunicating all the time. very quickly since you're the trader, jim, how do we trade on the back of that? i can see one thing that's taking the fed's hawkish tone yesterday in stride and that is
the u.s. dollar breaking to new highs this week. that's got to be bad for gold, bad for commodities. what's the trade on the back of this? >> i actually think you should be a seller of gold. the dollar is going to continue rallying. particularly against the euro and yen at this point in time are the only real currencies that matter that much to the trading world unless you trade those particular pairs. gold has lost its luster and has to face a dollar rallying against the euro and against the yen. i think for the timebeing we sell gold. >> steve, you're a music guy. can we end on a little elvis, baby? little less conversation, more action. >> action out of jackson. listen for janet yellen tomorrow. we have charles coming up at 4:15 today and jim in the morning. we have three more fed presidents coming. dragi speaking, too. >> pump the banking flesh. you're quite the lyricist.
today, it's down again. see there it's hitting a two-month low, extending losses for the fifth session, as we're saying the u.s. dollar keeps up its strength, back of a number of economic data releases today. talking m ining commodities. is natural gas drilling in north dakota getting in the way of farming for food or is it the other way around? we're going to take you live to the front lines in that controversy. plus we're going to tell you what might be the biggest single risk to housing that really nobody else seems to be talking about. but as we go to break, let's take a look at home improvement names. why are we showing you home depot, lowe's and sherwin williams? sherwin williams, paint company at its high going all the way back to 1969. we're back right after this. [ woman ] the cadillac summer collection is here.
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july existing home sales came out this morning and they were stronger than forecast. and they've now risen for four straight months. let's get straight to diana for the details. another good piece of economic data. is it as good as it seems? >> reporter: the arrows are certainly pointing in the right direction, mostly. take a look if you will. sales of existing homes in july rose 2.4% from june, but they're still down 4.3% from a year ago. realtors calling that the cyclical peak in july of last year, when investors ruled the market. they're now down to 16% of home buyers. cash buyers, though, still at a
very high percentage, nearly a third of this market. median home price in july still up 5% year over year. less than the double-digit jumps we saw last year. that's a relief as we see mortgage-dependent buyers coming into the market. the share of first time home buyers in july increased ever so slightly, but they're still way off the historical norms. all this could change, of course, if mortgage rates go higher. rates hit their lowest point of the year at 4 .12% on the 30 year fixed last week. look, we've already come off that low just in the past three days and all eyes will be focused on janet yellen tomorrow to see if we should expect rates to go higher any time soon. back to you. >> all right, diandiana. stick around. we want you and our guests to comment on this. they boost sales, boost refis, but could low rates also be a negative for housing because the more people refinance, the less
likely perhaps they are to move if they don't have to because rates will be higher and they'll have to spend more, so they won't. tim rude from the collingwood group agrees with that, diana, she disagrees with that. if i have a 4% mortgage, in five years it's at 6%, 7%, why would i move unless i have to? >> yeah, thanks. you're right. it's too much of a good thing is kind of the problem. low mortgage rates really were kind of the savior of the housing market. you get into 2%, 3%, 30-year fixed that's a once in a lifetime opportunity. you're never going to pick the bottom in terms of real estate prices. you're not going to be afforded too many opportunities like that. like a 100-year storm. but the other side of that is the fact right now you've got so many home sellers that are trapped into their houses because they have these low interest rates. so if you're thinking about as a move down, move up buyer, the 1% gap between 3.5% to 4.5% rate looks like a 12% tax. either way.
so it takes a lot of the incentive out of it and certainly when you compound that with the rates we've seen and the inventory out there is so anemic and not that attractive, there are not a lot of reasons to move up or down. >> how many homeowners have a rate at 4% or lower? >> the last few years you've seen 20 million refinancings. interest rate of 4% or below. core logic did a great studty that said, look, about 4% potential sellers in 2014 didn't sell because their interest rate is too low. this is a market where you've got 2.5 million homes at inventory. that's a big deal. >> diana, you think my theory is complete garbage. why am i wrong? >> i would never say such a thing to you. >> it's fair. >> never use the word garbage. nobody is trapped in their home because they happen to have a lower interest rate. if you're a move-up buyer, you have to you you're buying a
bigger house, better house, you're going to be paying more for that house, right? people don't buy for an interest rate. they buy according to what their monthly payment is going to be. >> right. >> if they're a move-up buyer, their monthly payment is going to be higher. >> they have to rationalize that. >> their monthly payment will be higher. by the same token, they know that going in. it's not like they're losing some amount of money. the question is can they afford that higher monthly payment? i think that's what you're seeing the people who didn't move, it wasn't that they were trapped. it was they couldn't afford the more expensive home. home prices are up, too. >> we agree, diana, that's my point. >> hold on, i think we just had an earthquake. no, it wasn't an earthquake. i'm sorry. >> that was my belly rumbling. let's use my example to prove your thing. the house is $100,000 more and the interest rate is 2% more a year. it's a double whammy. many families can't take two.
>> it's a double whammy because the price is higher. what's trapping homeowners, negative equity and near negative equity. that's a much bigger deal than interest rates moving a bit. if you refied into 3.5%, today you're looking at a little over 4%. it's on a bigger house. again, if you're moving up, you're going to pay more no matter what the rate is. >> tim, do you want to have the final word on this? >> i'll say you're both right. if you think about 40% have that 4% interest rate or lower, that's their problem. why do you think the other 60% of the market of homeowners with a mortgage don't have a 4% rate? they don't have any equity. right? they're trapped in their house. they have either too little or no equity or quite frankly don't qualify. so those are people that even if they wanted to or so incline to move, they can't. they don't have the equity to make a down payment and probably don't qualify. >> tim, diana, good debate, good discussion. you can agree with me any time,
diana. it's fine. going to the supermarket in america has changed radically in the last decade, like walmart selling groceries and whole foods of the world on the other end of the spectrum. let's bring in a new guest to "street signs" who sat patiently through that, but wanted to jump in. rick carroll. focusing on grocery stores. you guys got strip malls all across america, i should say high-end malls and grocery stores. >> we call those open air shopping centers. >> open air shopping centers. i used the derogatory word. >> much nicer word. >> all i can say is there's a misunderstanding certainly in some aspects of real estate is what interest rate impacts are. if we think about our business, a rise in interest rates would point to an improving economy and i would say our retailer's health would be better and improve our ability to drive
revenues through the form of higher rents in shopping centers. >> that's an interesting point. you're saying a higher interest rate is a good sign for your business. how is business right now? rates are still so low. >> our business has been very good. really when you get back to the key to our business today, if you look around your neighborhoods, there's nothing being built. we're really at a period of time where there's very little new supply coming on in the shopping center space and allowing us to drive revenues. our revenues are up now 12 quarters runs. >> you know, there's nothing being built in my neighborhood in central new jersey because there's a lot of half empty. i'm going to call them strip malls. you have open air shopping centers. these are nast nasty ugly strip malls built 30 years ago. these eye sores, some near my home bring down property values. they're ugly. they're not your properties, but they're there. how do we avoid that 20 years from now? >> i come back to the way we approach our business. we're operators. we have the largest grocery anchored portfolio in the u.s.
and our focus is really to continue to invest and enhance those properties and we have to our portfolio older properties, in-filled properties, where we can take below market leases, we can reinvigorate those properties with no tenants and some of the new nisinitiatives mentioned, some of the grocery store vehicle, whole foods, walmarts. we do a lot with kroger, the largest landlord in the u.s. we withcan really invigorate an improve those over time. >> you mentioned walmart is one of your clients, they're doing something interesting. they're experiencing with a smaller format, aren't they? how does that translate to your business? >> it's been very nice for us. we are a large landlord to walmart. we worked with them early on on the small store rollout. we've been able to do stores with them coast to coast. california, denver, charlotte, florida, we're working on something with them in virginia.
it really is a nice opportunity for us to -- we look at it as an opportunity to really upgrade in some of those shopping centers and be able to perfect and move to really a really strong grocer like walmart. >> stock's been strong. 3.34% dividend. just 20 seconds, to our national audience of investors, how do you sell them? it's a new name for a lot of people. >> you mentioned a great thing about the dividend, and as we continue to grow our revenues, through taking below market leases and bringing them to market, as cash flow improves there's a great runway to raise the dividend. it's a great total return play. >> cool. mike carroll, thank you very much, thank you for rolling with the free-flowing -- that's what we do on "street signs". you will not believe what a former bank ceo said should happen to bank executives caught up in mortgage wrongdoing. plus the potential downside
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the fracking boom in north dakota has been great economically. tensions are starting to rise in the state. morgan brennan is live in williston, north dakota. we were debating on this set. clear this up for us. i see the giant flame behind you. a good shot. is this farmers or ranchers or both? >> it's a combo, to operate within the agricultural sector in general, actually until only the last two years, agriculture was the top industry here in north dakota and it was only just surpassed by mining which makes up oil and gas makes up the mining sector. in the last couple of years. so that's about $8.5 billion of the state's gdp versus agricultural's $7.3 billion of
gdp. you've got a lot of farmers out here. where with re right now, we're on a 3,000 acre farm owned by a local farmer, tom wheeler. i'm staring, when i look out this way, i'm staring at wheatfields. when i turn around, it's a giant flare with natural gas being burned off by a local plant. >> wow, just how bad are things going to get? >> reporter: so, i'm sorry? >> just how bad are things getting out there then? >> reporter: yeah, this is definitely turning to across the balkan, ranchers and farmers and the oil and gas industry. in the last year or so alone, we've seen more than a dozen class-action suits brought forth by mineral rights owners because of these natural gas flares on folks' properties. many of those farmers and ranchers. the tensions are mounting. the interesting thing here is to solve an issue like this flaring, these folks all need to come together, work together, and need to allow more pipelines to be built on farms like this
one to reduce the flaring. so it's a -- tension is mounting, but also for a long-term solution, eefverybodys going to have to come together. >> were you there last night? when did you get there? >> reporter: yes, we've been here since tuesday, so we've been drivie ining all around, w been seeing many different areas, many different sites, many different farms. >> yeah, no, i was going to say, morgan brennan, thank you very much. mandy, what i was going to say. the thing about it, she can't hear because you don't realize how loud the flaring is as well. >> i can tell. she can barely hear us. >> it sounds like a jet engine. also it's other worldly. you're in the dark and see the flares, it's kind of -- >> like landing on a different planet. >> it's -- i love the people of williston, but i'll say this, it's creepy, scary. like, wow, there's open flame everywhere coming out of the ground. >> hard place to live. >> very nice people, though. sears shares down 17% just this quarter.
any sign of a turnaround, or is sears going further into the ground? we're going to ask experts coming up. plus, it's my turn to take the ice bucket challenge. unlike my colleagues who took the easy way out, what wimps, look at them, they put on their gym clothes. i'll do it in a full ankle dress, hair, makeup, tiara. you cannot miss this. .m. - on te 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. 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.
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comcast business. built for business. here's the problem on a day like today. the dow hitting a high, the s&p 500 all-time high. the naysayers will point to volume and say, yes, but the volume is only 307 million people. there you go. trades, mandy, if you're at home with a 401(k) plan -- >> you're happy. >> you don't care about the volume. >> you care about the fact that you've gone up. >> your portfolio's gone up again today. >> you have more money in your bucket to retire. >> natural gas flame. >> okay. let's also get -- that's the macro picture, right? markets as record highs. let's get to the micro picture. the individual stocks where we get views, analyst recommendations, et cetera. number one, american eagle, an upgrade to buy from neutral. >> maybe it's helping. stock up more than the market. up 2.5%. inventory levels appear to have stabilized. pay a 4% dividend, believe it or not. very high for a retailer, by the
way. shares shot up 26% in the past month. >> madison square garden, downgrade from hold to buy. >> yeah, the company that owns the knicks and the arena. the firm said the company lacks near-term catalyst. msg in the red. down 2%. there's your call. >> intermune, a downgrade to market perform to outperform. >> always a lot of chatter around itmn. stock down 1.5%. citing valuation. potential takeover, premium already largely baked into the stock. lot of people talk about this company is maybe getting bought one day. did shoot up earlier this year, but down today. >> okay. let's move on to foot locker. target increased to 58 bucks from 54, currently at 52 and chae change. >> ubs forecasting above consensus eps of the second quarter. stock's had a pretty good year. up 50% in the past 1 mon2 month
>> under the radar name of the day, photonics, a plates manufacturer, upgrade from buy to hold. >> noting a strengthening position in taiwan. their target on plab is 11 bucks a stock. just a couple of cents over 9 bucks. about a 20% upside seen by needham. that's it for "street talk." let's talk numbers and let's talk sears. sales down. the stock down. any real sign of a turnaround for a legendary american corporation? let's start talking numbers with stacey of sw advisers. stacey, how bad is it at sears? >> it's bad. you know what, sears is like a daddy long legs that you're plucking its legs off and it essentially just can't walk anymore. >> that's a hell of a metaphor. >> it's basically just selling off --
>> you wouldn't do that, stacey, would you? you're way too nice. >> i wouldn't. it's selling off all of its strong assets in order to pay for what they call a transformation. the transformation is not happening. they've underinvested in their stores overtime. they're not a destination anymore. people don't do one-stop shopping anymore. their margins are under intense pressure in order to get sales moving. and they're burning massive amounts of cash. and with the debt payment due in 2018, this is not a story you want to own. >> wow. okay. you don't want to own it. what about the technical side of here? of things on sears? is it sort of a -- i don't know, a daddy long legs going on there, rich? >> buying weak stocks in weak sectors is not a strong play and we're not going to start today. i'm with stacey on this. if you bring up the chart, i'll show you why there's significant downside from current levels. first, let's look at a year to date chart. see this stock stumbles right out of the gate. we're down 50% from the december highs before we can even get out of january. now, we do get a sharp
bounceback. all we really to is run into resistance at $45 and close that gap from earlier this year. that gives us our down trend, mandy, that down trend morphs into a bearish triangle. see the breakdown around $35. measured downside to $25, mandy. clearly you can still sell the stock here and save yourself from money. if we zoom out real fast, i want to show you this long-term chart, mandy. it's actually somewhat embarrassing for sears. see that double bottom around $21. that's an inviting downside target. we could revisit that and perhaps go lower from there. mandy, one last thing here, short interest in the stock. 53% is sold short. it would take 29 days to cover. that's the only thing that gives you a reason for pause on the short side here. once again, don't be a buyer. if you do short the stock, be very careful. >> don't be a buyer of the stock, but brian and i were just, you know, discussing in whispers here, i mean, is there a chance maybe either of you can answer this that someone might come out and buy sears?
>> i hope not. >> i would say absolutely not. >> no? >> there are so many interesting stories out there. this is one you really can't fix. i mean, the amount of investment dollars they have to put into this company to transform the stores and the real estate, i mean, basically they have sold off all of their good real estate and part of the bull case, if there is really any left here, is they will be able to sell their interest in canada in order to keep funding, but canada is a mess as well. who would buy it? mandy, just want to say, when you do the bucket challenge, food luck, but i just want to put a suggestion in for eddie. >> i already actually have the person i'm going to nominate. thank you for the suggestion. >> you're supposed to nominate three people, aren't you? >> you supposed to nominate three people, but i think we reached peak ice bucket challenge. >> better metaphor than long legs -- >> check out the online edition
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what we're doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. i think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when it's needed by the consumer. a smarter energy system is made with the ibm cloud. the ibm cloud is the cloud for business. is caused by people looking for parking. in a city that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing;
allow this small start up to go provide a service to municipalities. citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. stocks are up again today, surprising to some people because the fed was hinting about raising rates and really just hasn't derailed the rally. coming up on "the closing bell" we have the fed's charles plosser, kelly, what are you going to ask him?
>> mit's interesting, i was looking at the commonly cited hawks in wyoming, red tail hawk, coopers hawk. in any case, we'll be hearing from another hawk at the federal reserve. he is the one who dissented from the fed's decision last time around, issued a different statement as to why. we're looking forward to hearing what he has to say to our own steve liesman. they'll be joining us live from jackson hole, kicking off the session there as the fed tdebats evolutions in the market. we're waiting for janet yellen tomorrow. her speech is the biggie. plosser today could certainly move markets. the news broke on this very program yesterday. bank of america will pay nearly $17 billion to settle charges of selling bad mortgages but the questions that we have are, have the right people really been punished, and where is all the money really going? herb greenberg joining us now, so is andrew -- i probably
screwed that name up, i'm sorry, from enterprise community partners. we'll just call you andrew j. >> works for me. >> it's a lot easier. the money is good and hopefully will be put to good use. when i hear $7 billion to struggling homeowners, i want to make sure it gets to struggling homeowners. to do we know when bank of america writes a check where the money actually ends up? >> they don't write the check. what they do is write down principal on underwater mortgages for folks that are deli delinquent. there's a lot for non-profits and land banks to restore communities that have been hard hit by foreclosures. they do the activities, report it back to the court and say, you get credit for these activities. so it's not like -- >> it's kind of like deductions rather than simply, you know, here's -- >> correct. >> here's $1,000, miss drury, for your home. >> exactly. exactly. they're writing down principal for borrowers, see the relief directly and turn around and let
court know they wrote down the following mortgages. the court checks, make sure those were in fact eligible based on the various activities that the location es are target appropriately. half have to go into communities that were hardest hit by the foreclosure. there's new lending activity for first time homeowners, low and moderate income homeowners, as well as new rental lending which is really important as well. >> who actually decides how that's allocated and to who exactly and who qualifies for some of these handouts? is it up to each individual state to lobby for it and carve out a piece of that settlement? >> it's based on -- some of the states have specific minimums the bank has to act within. that's largely the state attorney's general that were tantamount, critical to bringing the settlement to bear, but the hardest hit areas are spread across the country and ultimately the bank does its activities, has to get credit for the work in those hardest hit areas, so there's that focus
based on just geographic need, but there are elements that say, you know, for example, almost a little more than a third of all new rental lending is going to happen in the state of new york, for example. so there are some pieces that have specific state requirements. the state of california gets -- needs to get credit for about $500 million worth of activity. most of that has to be focused on principal reduction. >> okay. we're going to leave it there. andrew j., i got it, i think, close. you're welcome back any time. you're terrific. i apologize for the name screwup. herb greenberg, which i can say. all right. let's switch gears. i almost drove the car off the road this morning when i heard former wells fargo ceo on "squawk box" basically say we need to send some people to jail. do you agree with that? >> yeah. i think there are some people who knew what they were doing and some of the people who knew what they were doing got away with it. look, there was -- i'm not saying who should or should not go to jail. i want to make that clear.
back in the good old bad days of 2006, 2007, twooifr, i was right about a company called novastar financial. it's been reconstituted. it's a penny stock that doesn't do loans anymore. it was a subprime lender in the day. we were doing research on that trying to figure things out. the ratings agencies were saying their loan packages were also -- >> you said the word there, ratings agencies. right? because the reason novastar can get away with it and others, ratings agencies say the bonds are okay. >> every single time i raised an issue, they said the rating agencies said our bonds are fine. and then as the whole thing started to tgo on -- doing your research, talking to brokers who used to work at this company. they're saying, oh my gosh, you should see what's piled up on chairs in offices. >> we have to go. i love the points. supreme courts may say corporations are people, but the reality is corporations don't make decisions. people, a man, a woman in charge
of a division says to somebody, do this, and all this mortgage settlement stuff where they pay the money, coming out of the back end like andrew j. said, i'm going to call him that from now on, instead of this dude did this and has to pay the price. >> all i know is this, when i see this stuff, we knew it back then, we wondered why bank of america bought them. it was the fed orchestrating this deal, that's what i wrote about the time. the question is how did all the other firms, subprime lenders that were much smaller get away with it and go on their merry way? >> rant over. >> i hope you have more rant inside. we'll get you back on for finishing of the rant. >> we're minutes away from my ice bucket challenge and have a different challenge for all of you, so do please stay with us for that. it's certainly more common to see older cars on the road. good news for used car dealers but may be very good news for auto parts retailers. we're going to pick the best of the best stock for your investment, coming up.
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used cars with a little tarnish spell cha-ching to the dealers. how long can the used car profits last and why is it so much higher than new cars? >> reporter: mandy, it's hard to hear you because i'm in themiddf a used car auction. they are auctioning off this honda civic. the going bid is $3,100. this is what it takes to make money in the used car business. it is what you do here when you buy and sell cars on the used car auction line. here at the manheim auto auction. winning bid was $3,700. guys, this is all about making money on the wholesale market. look at the change in prices in the wholesale market going back to 2009. they have been on a tear over the last four years. as we move forward we'll come over here. now they're going for a little over $12,000. it is the profit margin that you want to watch when you are talking about used vehicles.
it's nearly double what it is for new vehicles. $2,600 is -- or $2,361 is the average profit margin on a used vehicle and the hot part of this market right now, certified pre-owned vehicles. those are the ones that are in demand. >> some of the warrantees on some of these certified pre-owned cars are even better than some of the new car warrantees. so i believe that people absolutely see this as the standard and the type of car they want and they feel really good and assured this is a car that's been one-overed from front to back and feel good about it if you aren't going to buy a new car. >> as you quickly take a look at the dealership stocks, we are back here live at this manheim used car auction, wholesale auction in matson, illinois. this is what they call the late day auction. some of the less desirable models, brian and mandy. this suv right here, i think they'll get about $1,200 for it.
that's not what you and i would pay if we go to the dealership, but this is where they make their money and this is the hot part of the market right now. >> phil lebeau, you're going to leave with six cars, i can smell it already. certified preowned sales are on the rise. good news for used car dealers but even better for auto parts retailers. mike, you cover all these guys. who's the best of the bunch? >> hi, brian. good afternoon. pt best of the bunch we think there's two. number one is o'reilly automotive. just a fantastic executer. they are still expanding across the country and they're buying back their stock hand over fist. the other is advance auto. they recently bought the owner of car quest. there is a ton of synergy associated with that deal. it will create tremendous amount of shareholder value. we'd buy both of these stocks today. >> a moment ago we were talking
with phil lebeau about the sustainability about this boon in used cars. do you think that as more and more people get back to the jobs market and more and more people keep on breaking down on the side of the road -- >> hopefully you won't break down in the road, but i think it is a great point. as the economy improves, what happens is vehicle miles traveled increases and that's good for the wear and tear on vehicles. so these two stocks that i mentioned will absolutely benefit from it. that will only reinforce our bullish view on the names. >> you've got a buy there on o'reilly automotive with a target of 1. 72. thank you so much, michael. it's only fair, i soaked jim cramer so the soaker becomes the soakee. so after the break, i'm shivering at the thought as i'm going to take the ice bucket challenge. but brian, it is also for a good
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>> okay. i'm cold just looking at that. yes, michaelle, i do accept the challenge and of course, it is for a fantastic cause. brian, i believe you're going to do the honors and soak me. you tried to get out of it. i said, no, you are going to be doing this. >>vy no interested in doing this but as long as you donate. >> i have the checkbook out there on my desk. i was going to write the check out now but you said no, get all soggy and wet. i will donate and i also encourage everybody to donate as well as do the challenge because it is for a good cause, once again. ready? possibly the coldest day so far this summer. >> how we doing this? i'm not good at this. you got to turn around. >> i like to see it coming. >> no. >> i'd like to see it coming. >> no. >> like to see the enemy -- oh, come on. you didn't even do it over my
head. >> is there a second bucket? >> i have to nominate somebody else. so cli that, our wonderful intern on "street signs." would you like to come over here in it is her last day with us. she's been absolutely fantastic and she's helped us on a daily basis. we wish her the very best of luck. in "street signs" new tradition, the way we wish people luck is to tip a bucket of water over their head, brian. >> which we're not going to do -- so are you officialry -- by the way, thank you. carolina has been great all summer long. we treat our interns like dirt, usually working 18, 19-hour days, plowing the fields. helping put together street talk. you're doing great, going back to boston, back to school. you've been terrific. >> thank you so much for everything. >> are you doing the official nomination. >> i just officially nominated her. >> i will be doing it in the next 24 hours. absolutely. i accept the ice bucket challenge. >> thank you very much for all your hard work, as well.
>> if you'd like another challenge, i can go get another bucket of water. we've go 90 second left in the show. >> can you run that fast? can you walk that fast? >> of course, it is a market day here. you know everyone's saying, the fed is sounding more hawkish. we don't care, we're still rallying. we could close at another record high on the s&p, brian, for the 28th time this year. can you believe that? 28th time so far this year. >> it's all owed to the ice bucket challenge. today anyway. listen, i liked what happened with the market action yesterday. stocks did not tank. some people called it taper tantrum or tightening tantrum, whatever you want to call it. you're learning more about the federal reserve than you ever wanted to learn about in college. >> good news is good news. we're getting stronger than expected economic data these days. if we have to bring forward the
rate hike expectations, that's because we have a stronger economy. right? good news is good news. >> i remain confident in the u.s. economy. >> go usa. thanks a lot for watching, everybody. see you tomorrow. welcome to the "closing bell," everybody. i'm kelly evans at the new york stock exchange where we have green arrows and some significant levels to watch here. >> sure do, i'm scott wapner in today for bill griffeth. the dow is above 17,000 once again. market seemingly will not stay down. but will it last? closely followed market technician tom mcclellan is calling for a major market sell-off heading into september. he will be here to tell us exactly why. so much of the stock market has been riding on interes