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tv   Squawk on the Street  CNBC  February 12, 2016 9:00am-11:01am EST

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stevenson and david dorman. interested to hear the executives perspectives on what's happening now. from the market perspective. so far it doesn't necessarily seem to think it matches up. >> the scenery and feeling out here had a calming effect on the financial markets today. looking better on this friday. >> have a great holiday weekend. join us on tuesday. right now time for "squawk on the street." ♪ >> good friday morning, welcome to "squawk on the street," i'm kafrl carl with sara eisen, simon hobbs, david faber at the new york stock exchange. cramer is off today. stocks looking higher on this final session of a tough week. retail sales come in okay. for the week the dow and s&p down about 3%. europe's rebounding as dich cha
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make deutsche makes news. ten-year back is almost to 1.7. oil holding on to that surprising reversal from yesterday. jack dorsey square up double digits on news that visa took a 10% stake in the company. >> aig is on the rise after announcing a 14% dividend increase, most importantly carl icahn representative getting a seat on the board and john paulson also taking a board see the. and another heated democratic debate last night with bernie sanders again taking aim at wall street. we'll bring you some highlights. and global banks getting slammed. what's behind the selloff and why? some names are starting to rebound this morning. futures extending their gains after data showed january retail sales rose a better than expected 0.2. a rally in oil prices helping to increase positive sentiment. yesterday at an investor
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conference in puerto rico, hedge fund manager john paulson told michelle caruso-cabrera that he believes the markets have been overreacting to economic news, though he stopped short of saying they were getting in with big, new, long positions. gold yesterday, the biggest one day gain since the financial crisis. we visited 1812, what a moment that was when the uae suddenly said there may be a cord natd c coordinated cut. >> january retail sales seemed decent. 8 of the 13 categories showed growth. better, we got a revision higher from december which had previously shown that retail sales dipped, now they're in bo positive. this is what we need, the u.s. consumer spending.
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>> the -- i don't think you're out of the woods yet, the main fear that we have to mention coming out of europe and japan again is this fear of negative interest rates. not only have the central banks not got qe working, they're damaging the banking sectors around the world by their actions. that has been the story. until you get through the march 10th meeting with the ecb, will they move further into negative rates? what will that mean for sovereign debt around the world? you have a number of open questions, worth mentioning that deutsche bank which has been the eye of the storm for many people, is buying back 5$5.4 billion of its unsecured debt. whether that is able to turn -- we are in an environment where overnight we've also had, of course, other members come through with dividends within the sector. that's pleased the market. if you can shot money, y show t
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stocks can rebound. >> the first time stocks have shown some life in quite some time. our own banks are suffering greatly. yesterday not a good day at all for the banks, yet again. though some news, perhaps, helping them this morning including jpmorgan's chairman and ceo jamie dimon choosing to use about $25 million of his money to take shares of -- >> did he pick a bottom? >> it's one year's salary. it's interesting he chose to take one year's salary to put into the bank. >> though his salary includes compensation which includes stock. he owns almost 7 million shares of jpmorgan. it's a significant amount of his net worth. he's a wealthy man, but that's riding on his performance and the performance of his bank. >> do you remember the ice
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bucket challenge from a few years ago? >> yes. >> maybe we should have the ceo buy back your own stock challenge. jamie dimon doing it down 15%, 16%. would james gorman spend a year's salary buying back his own stock? citigroup cfos, coos have been buying back stock. but those banks are still hurting coming back to that whole discussion about low interest rates. >> it is the biggest purchase from dimon, open purchase since the london whale. we mentioned john paulson and the comments he made to michelle caruso-cabrera. he talked a bit about this idea of whether or not there's a disconnect between the economy and stocks. take a listen. >> there's a disconnect between the performance in the stock market and the performance of many companies, particularly, you know, that we've invested in in our portfolio. that the companies are actually doing very well and yet the stock prices are declining. so that -- that's kind of an
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imbalance and eventually that will sort itself out. i would say the market is somewhat overreacting to the current state of the economy. >> let's kick the tires on that statement by paulson last night much joining us now is david kelly from jpmorgan funds and thomas kostov joins us, financial markets economist. david, do you think paulson is right? the markets have overreacted? >> absolutely. i think we'll look back at this period and call it the immaculate correction. this is a correction not based on the economy, it's not based on earnings prospects, it's not based on high interest rates. as we look at it, i think interest rates will remain relatively low and the economy, as paulson said, is looking fine. we expect gdp to grow about 2%
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faster than it did in the fourth quarter but there's no sign in the labor markets or from consumers of the economy falt faltering. >> yet the power and ferocity of what we have experienced in foreign markets is extraordinary. how do you explain what they've been doing? >> i think the central banks need to look in the mirror and ask themselves some questions. first of all, negative interest rates, you know how i feel about zerp, you can imagine how i feel about nerp. it does nothing to help the economy. it gives doubtss about the health of the banking industry. i think the central banks are spreading uncertainty and that's contributing to the problem. i think a lot of it is uncertainty. we're in a low inflation environment. i don't expect double digit equity returns, but that's okay in a low inflation environment, but buyers are not buying because they don't see upside
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because they are not factoring in this low inflation environment. that's contributing to it. but i don't think we'll sustain the low levels for long. >> thomas, you can explain it -- yesterday janet yellen was talking about whether the fed might adopt negative rates in this country. she said we thought about it in the beginning, we thought it wasn't useful, still it's on the table. why would you go to negative interest rates around the world when it destroys the profitability of your banks, if banks enable lending, cash flow within the economy. why would you put negative rates through the system and encourage everybody else to move to negative rates? >> so, the first thing is that actually many central banks are doing it. so the question is whether the u.s. is also considering negative interest rates because other banks are doing it. we think the ecb will cut rates further into negative territory
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next month. there is a global environment moving towards negative rates. also in the u.s. there's the fear that qe is not working as it was in the past. the effectiveness of qe is diminishing. you have to add new tools, and the focus is turning to negative rates. >> but we've -- we've watched the central banks do what the central banks have done, they saved the day, but for how long do you continue the central banks to continue with stuff that's untested. let me ask you the question again, rather than saying that's just what they're doing. why would you move to negative rates? >> i'm not sure if it's really, you know, that helpful, but i think from janet yellen's comments yesterday, that the fed is looking at negative rates. if there's a bigger downturn down the road, the fed could move into negative rates. >> so what we've learned, david,
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is that policymakers, central bankers are not giving investors the confidence they need now. earnings are not doing it. can the economic data in the u.s. turn the tide if we continue to see numbers like this morning's retail sales? can that give the markets the catalyst they need to recover? >> yeah. i think that will happen. i think over the next few weeks we'll recognize that just because wall street is worried about a stock market falloff we're not seeing a follow through in terms of consumer spending. that will help. to be fair to janet yellen, she's not saying that the fed is going to negative interest rates. i like the question you're asking here, why would you do it? because at some stage the medicine becomes poison. qe had become poisonous. it wasn't helping growth, negative interest rates would hurt more. janet yellen is not talking about negative interest rates. if you look at the u.s. core inflation, it's moving up. i don't think the fed will go in that direction if we can get past this worry that the fed
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will apply more medicine, if we can get the doctors out of the room, the patient can recover. >> i didn't say they were moving to negative rates. she said it was still on the table and they were evaluating it. >> it's like everything is always on the table. >> she said that they decided against it and it wasn't a good idea, but she said it's back on the table. >> well, i think the question is mostly about legality of it. but the real question is the transmission mechanism. there's no evidence whatsoever that this would actually stimulate economic demand, more than that as you pointed out, it would hurt the banking industry, hurt confidence and slow the global economy. just because medicine in small doses works doesn't mean you quadruple the medicine. at this stage low interest rates doesn't work, don't do it. >> i would love to see them get the bank of japan and the ecb in a room and explain the effect on
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everybody else. thomas, where do you see the upside and the opportunity as a house at the moment? what will work further down the line for you? >> we are a bit worried about the u.s. economy in 2016. we think the first half we were a bit worried about oil production, the impact of the energy sector, feeling the impact of lower oil prices. we think oil production in the u.s. has to come down, and it will come down a lot. potentially as much as 1 million barrels a day. that's a lot. this could be a drag in the first half. in the second half, i'm worried that consumption and car sales. car sales could start to moderate. so, quite a few headwinds for the u.s. economy in this year. >> in the meantime, the long weekend awaits for all. thank you both. >> thanks. when we come back, a rough morning for zillow after the real estate website posted a wider loss. we'll talk to the company's ceo
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later in the show. first, sanders and clinton taking off the gloves during last night's democratic presidential debate. we'll have highlights. and another look at futures ahead of the opening bell it looks like we'll get a rebound. it's early, but dow futures up 128, s&p up 17. nasdaq up 40. more "squawk on the street" live from post nine at the nyse when we return. in new york state, we believe tomorrow starts today. all across the state the economy is growing,
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last night in milwaukee bernie sanders, hillary clinton squared off in their first debate since sanders new hampshire primary victory. our chief washington correspondent john harwood is in d.c. this morning with highlights. good morning. >> good morning. another democratic debate, another blistering exchange on wall street and wall street money. hillary clinton still the front-runner in the race said you can take it as president obama proved and then have tough regulations for wall street. but bernie sanders called that view dangerously naive. >> i debated then senator obama numerous times on stages like this. he was the recipient of the largest number of wall street donations of anybody running on the democratic side ever.
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now, when it mattered he stood up and took on wall street. >> let's not insult the intelligence of the american people. people are not dumb. why in god's name does wall street make huge campaign contributions? i guess just for the fun of it. they want to throw money around. yes, i believe that it's a result of the illegal behavior on wall street that they're a wall street that drove this economy into the worst economic downturn into the great depression. >> now, you hear strains of that rhetoric on the republican side in the denunciations of people like ted cruz of crony capitalism. donald trump promise going after big business. but it's much sharper on the democratic side. we can expect the rhetoric to be more intense as we move to the next contest where hillary clinton is trying to come back, and jeb bush, kasich and rubio
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are trying to stay alive. when we come back, the latest on icahn, john paulson and aig. later an exclusive with qualcomm's steve molankof. don't go away. i've been called a lot of things. i have read all of your books. did you learn anything? i learned that humans are complicated. we're emotional. absent-minded. and we make some really bad decisions. my trade-off analytics can help companies make better decisions, but i am still learning what makes people tick. what makes you tick watson? natural language processing, reasoning algorithms, statistical parsing. now you are just showing off.
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al, how you doing. hey, mr. hamilton. vo: know that together you can establish a meaningful legacy. with the guidance and support of your dedicated pnc wealth management team. . >> aig announcing its nominated hedge fund manager john paulson and investor carl icahn to its
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board of directors. they posted a wider than expected quarterly loss but added another $5 billion to an already robust buyback program. the biggest news being received by investors after the close yesterday. digested a bit today is the addition of two members to its board of directors. they'll take their seats in may. one of them a representative of my icahn, people involved in the negotiations tell me icahn approached the company. remember, he took a significant stake in aig in the fall of last year. wrote a few letters, made it obvious that he was considering a proxy fight, wanting the company to break itself up to de-sifi -- remove the significantly important financial institution definition it has, as he said, and the regulation that comes with it aig fought that aggressively but he approached and said i don't want anybody off the board, i just want somebody added to the board. that's important because a proxy
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fight would have challenged existing board members. they go from 14 to 16 members, they add a representative of mr. ica icahn, and john paulson goes on the board. interesting that he chose to do that. i'm told again by people involved in the negotiations that that was somewhat surprising. but when he has to go on the board, they said sure. as is typical of these situations, you get a one-year standstill so peace has broken out a year from may when they take their seats. there's unlikely there will be any letters or anything else. they will be behind the scenes. josh sterling, an analyst who has been critical of aig's management, comes out and says now is the time to buy aig with a big win for the activists. he believes the share, and the fact they're on the board of directors will help shares to go higher. allowing them tone gauge with the full board and a full set of nonpublic financials to both
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challenge management's plan as well as explore other strategic alternatives. simon, it is interesting when the activists choose to take board seats, they get locked up. we have seen a number of significant losses by activists who were in shares that they can't sell because they have board seats. i'm thinking of williams, where keith meister has board seats, and they suffered significant losses. or even hess where elliott has been on the board for a long time. >> nonetheless, aig admits they need to slim down, the question is the degree and whether that becomes a public fire sale under pressure from icahn. just down to property and casualty, and at what speed do you do it? if they're locked in, they can say it's not in our economic interest do it at that accelerated pace. for the sake of the business you may find they do far better longer term. >> i think what this does is put each more pressure on peter hancock, the ceo, to deliver on the goals that he's already set
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out in terms of cutting costs, in terms of increasing the returns overall at aig. he's been a guest here a few times, since mr. icahn showed up in the shares, most recently on january 26th where we asked him about whether there is urgency in terms of pursuing his plan. >> yes, there's a sense of urgency to deliver results as quickly as we can. does that get move up when you have a large activist who is happy to send off scathing letters all the time? >> this company has kept its eye on the ball through a number of years where many people had opinions on how this company should run better or had their own views on how we should do things. if we listen to our clients and do what they need, we will meet our ambition to be our clients most valued insurer and deal with our investor and other stakeholders that
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promises as well. >> avoiding a costly proxy fight, aig shares looking up this morning. >> it's not in the nature of management to be smaller, that's not how you guarantee their remuneration down the line? will they stick with the sifi designation? >> they have said all along, i'm sure this will come up in board meetings, they say they benefit from the diversity of their benefits and the regulatory restructure that they're dealing with. >> opening bell just a few moments away. don't go anywhere. inancial port. it's also important for your life. celebrating, welcoming, and surrounding yourself with people of all kinds is an investment in both you and your community, and we're all the richer for it.
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you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell in under two minutes time. the premarket trying to mend somewhat a difficult week as the dow and s&p down about 3% for the week to date. japan overnight more pain, down almost 5%. it will be the worst week for the nikkei since the financial crisis. of course we're headed for a three-day weekend here in the states. and china opens monday after having a week off. so a lot of weird calendars.
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>> cover your shorts. >> you wonder if the market can rebound and bounce back on a day like today heading into this three-day weekend with global turmoil continuing. >> the fear would be that something positive happens -- usually something happens -- negative happens on monday when you can't trade so you have an event risk. the most dangerous position to be is a short position, that's where you lose the most money. the temptation is to cover the shorts. >> especially after karoda and abe say they met. >> it's not working. what they're saying is not working. it is indicative of what's going on globally now which is questioning central banks and the confidence in central banks that have been relied on from 2008 post-financial crisis. that's not working. >> all three of the major central banks facing their own
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demons. debt in europe, equity in the states and japan. janet yellen had to deal with testimony this week. there's the opening bell and the s&p at the bottom of the screen. at the big board, the u.s. coast guard reserve celebrating its 75th anniversary. at the nasdaq, scholastic corporation, and clifford the big red dog celebrating valentine's day. we're not done with data. michigan sentiment coming up in a half hour, and dudley taking some questions at a press conference might be interesting. >> might be soothing. >> yeah. >> he often has that effect. of all the central bank presidents, he's important because he's part of the core of the fed but he has paid close attention to the economic data. in fact, it was him who brought up the confidence read as an important signal which is why we're looking for that at 10:00 a.m. it can often be a realtime read on how consumers are
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reacting to market turmoil. so far with the retail sales report, consumers remain resilient given what we've seen in the markets. you're seeing it in the stock market open. technology and consumer discretionary the leading sectors. >> big names could be the banks, led by jpmorgan after jamie dimon announces that he will spend $27 million of his own money equivalent to one-year's salary on buying back jpmorgan stock. that's a move you had around world markets, notably in europe, big banks coming into the banking sector. one of the top gainers is wynn, which had pre-announced its results back on january 15th. today essentially came through with the co steve wynn indicating that the las vegas business is off to a terrific and roaring start, and macau is holding its own. macau has been the concern for many people. perhaps getting less bad as things stand. but a decent pop for wynn,
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jpmorgan and other banks. >> dow is being barbelled by jpmorgan on the upside as we get news of the dimon purchase and on the down side boeing, which had that awful day yesterday on reports of an accounting probe related to the 787. today boeing cut to neutral, price target to 120 from 142. they called it the straw that broke the camel's back, even if it's just a report raising doubts about the profitabilities of the 787 program. not that commercial delivery sentiment was that great any way after their guidance after the quarter. >> is there no statement from boeing? would have thought they would release a statement, wouldn't you? if the stock was so badly affected as to where they were? i'm surprised there isn't. i'm watching oil bouncing back. wti back above $28 a barrel. brent crude oil, there was a speculation that hit the markets
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yesterday that the uae was finally agreeing to opec cutting production. uae is an ally of saudi arabia. and that they have been a hold out thus far on cut to oil production. there's brent up about 5.5%. we'll watch that through the session. it has proven to be a leader for stocks. >> wake me up if the saudis are involved. >> we have to actually see it. >> maybe we'll see something over the weekend. holding out hope. certainly a move. or perhaps just an oversold condition after yesterday wti went to 26, which is a new low since 2003. >> which we mention best buy? oppenheimer is downgrading best buy to perform from outperform. it feels that the u.s. consume every spending is likely to moderate further in the near-term. that's brian neagle there. oppenheimer's best buy down just 2%. in a market that's ripping higher. the dow up 120 points.
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as you get short covering in general on some of those banks around the world led primarily, carl, from europe. >> yep. oppenheimer cutting not just best buy but bed bath & beyond to perform as they do say macro noise will inhibit consumers from making what they call discretionary purpokrescra purchases. williams freeport has almost a 13% gain year to date. year to date i think four of the top six performers are somehow related to energy. williams, after obviously what happened last year. >> they have been whipsawed. freeport put it in perspective, still down 41% for the last three months. 73% over the last year. we talked about carl icahn, about aig, he's a large holder
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of freeport, of cheniere, of chesapeake, all of which have been crushed. i think he has board seats on all three as well. but to your point, carl, they have sort of been moving higher at least recently. a great deal of volatility. such an anomaly to see so much green on my screen in front of me. i'm sort of paralyzed. >> also helping freeport has been the rise in gold and copper, which rebounded. especially gold. you look at gain of the gold miners this year, up 60% which has been beaten down the last few years. >> gold is up 17%, i saw. >> so far this year, which people -- it's interesting because we're going back to levels now on the s&p or looking for that level back to august during the selloff, during the chinese scare, the chinese currency scare. what you didn't see last august was the flight to safety that we have seen this year. gold rising, treasuries surging. yesterday the ten-year yield going to the 150s. the dollar not so much a safe haven which is a silver lining.
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dollar index now at a four-year low it has been slammed against the japanese yen. which is a problem for japan, but could be helpful for earnings. >> that may be why gold is higher. i don't understand why in a deflationary world you would buy gold, unless it is going become an inflationary world. >> negative interest rates are so scary, buy gold. >> i don't understand negative interest rates, let me buy gold. >> currency devaluations. >> it was interesting the two top trends that went viral this week, negative interest rates and kanye west. >> kanye who just tweeted again this morning. >> about negative interest rates? >> it's probably not far away. the degree to which he is engaged on twitter, i just joked that twitter will have to declare him material attorneys at some point.
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>> how many people follow him now? millions? the release of his new album, he's in a beef with taylor swift. >> watch square today, visa discloses this nearly 10% stake in the company making that credit card issuer one of the biggest in the mobile payments. we know the volatility around square, it struggled to regain its ipo price. >> presumably they've been adding to that position through -- as the stock fell. why would you buy square? because visa is sitting there watching what it does. you think visa will acquire square at some point down the line? possibly. but it might just be sitting there seeing what new things they come up with, what dorsey is saying about the future of the industry and mimicking it through their own country. it's not just barbarians at the gates, it's barbarians within the organization. maybe they are -- >> they're not involved in
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management or anything like that. >> but as a major shareholder, they will have access to management. >> yeah. >> maybe it's just seen as a legitimate boost for a -- >> for visa. >> for visa investing in square. >> they have their own version of square, don't they? they have their own system for that. so, they haven't bought it so far. >> the only other stock i wanted to mention was kroger and the fresh market after a report yesterday. watching kroger, the biggest u.s. grocer besides walmart. reuters came out and reported there has been an action for the fresh market. don't know if you heard anything about this which is a much smaller organic premium focused grocery store, less than 200 stores around the country, but that kroger was one of the bidders in this auction, according to reports by reuters. and other private equity firms like apollo were involved. kroger doesn't speculate here. the stock is up 2.2%. >> been an aggressive acquirer.
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>> yes. >> jpmorgan and goldman leading the dow up 103. bob pisani is on the floor this friday. >> just off the highs. nice moves in financials, energy, tech, builders. i want to show the nikkei, we're at another low here for the nikkei. a lot of people blaming it on negative interest rates. the negative interest rate announcement was january 29th. the nikkei was dropping from the beginning of the year and so was the yen. the yen was strengthening through january. i know it's gotten worst since the negative interest rate announcement on january 29th this trend happened well before that. over in europe, a nice move up with deutsche bank leading the banks, buying back about $5 billion of unsecured debt. unicredit doing better. so are daimler. in the u.s., besides the financial and energy leading, it's nice to see home builders
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with some gains. low rates, we'll get very low rates, diana olich was talking about it. nice to see a gain for them. banks are up. talking about jpmorgan and jamie dimon's $500,000 share purchase. who can blame him? stock is down dramatically, double digits, and others have been doing this. they don't get the publicity he gets, but a number of insider buy hag occurred the last couple weeks. so the ceo and chairman of citigroup each bought 1 million shares. zion's ceo and cfo, huntington banc's ceo and cfo, and key corp. many of these stocks are below tangible book value. jpmorgan is one of the few above tangible book value, wells fargo
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above. goldman sachs, bank of america, citigroup, these are strange numbers. i expect more buying from insiders in the future. look at some of the strange things going on. bank of america n april of 2010, bank of america was $18, s&p is 1200. today, it's $11, and s&p is down 1800. s&p is up 50%. you can say maybe the street doesn't feel management is any good. i don't know. other banks have got this problem. citi is down 20% in the same time period as well. so they're de-valuing banks dramatically here. speaking of the de-valuing, look at exxonmobil. i've been noting how strong exxonmobil has been, $68 in april of 2010. oil 83. today 79, it's up nicely, about 15%, and oil is down 75%. exxon's up 13% and oil is down 75%.
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that's a neat feat for exxon. that's the safe stock in the whole energy complex. right now the dow is 128 points to the upside. carl, back to you. >> i'll take it, bob. thank you very much. let's head over to the bond pits and rick santelli. good morning, rick. >> good morning, sara. even though we had a boatload of volatility in treasuries, remember handicapping low global growth has been pretty easy. ten-year is not doing all that much heavy lifting. all you need is eyes, maybe a pair of glasses, just be awake the last several years. as you look at tens on a two-day chart, today is different than yesterday. volatility, listen, there's a lot of speculating going on. there is. the machines are plugged in. the reversals in stocks, the reversals in extremes from tense. it mostly only matters on where the market closes. that's been going down, too. a lot of attention paid to the yield curve. i totally agree. i also totally agree that lots
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of securities in the hands of central bankers may distort the signals. but it is what it is. everybody is looking at this, tense minus twos, flat today, not yesterday, technically, going back almost precisely to the beginning of january of 2008. let's look at another yield curve trade. i'm not sure if the signal is better, but it's going in a different direction. 30s minus tens. if you look at this chart since may of 2014, notice that we're not at widest or steepest, but very close. we're comping now to october of last year, that closing was 86. we're right there. this is one i want you to watch. i think it's important, a year to date of bunds. bunds have been basically moving down. yields around the world going negative. how can our treasuries not go down? so there's distortions there. obviously. if you look at the dollar yen, this is the trade that has everybody baffled. you heard bob pisani's wonderful
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report on how the nikkei is getting destroyed, the currency not so much. not only if you look at one week but the year to date. that's of the dollar. it looks like a ski slope in denver. simon, back to you. >> worth pointing out the euro and the yen are funding currencies, correct? >> absolutely. >> people borrow from low interest rates and investors around the world. when people cancel trades and take risk off the table, they sell those assets and go back into the euro and the yen. that's the problem that both central banks face, correct? absolutely it. it also underscores when you want to manipulate outcomes, there's a lot of things that are not necessarily easy to overcome and this is one of those situations. >> that's why the central bankers are paid so well. rick, thank you. let's go over to jackie. the big story is you have this 13-year low on oil prices and the rebound continues. >> good morning to you. a $2 pop in oil prices bringing
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us up to 28 and change. after we went very close to $26 yesterday. now, this is ahead of a three-day weekend. as you mentioned before, when it comes to the equity market you can expect short covering in oil. this is how traders want to be positioned when heading into a holiday because you don't know what kind of headlines can come out. a lot of variables out there. still discussion over that uae headline as well yesterday about opec considering a production cut. these have been headlines we've been seeing for the last few weeks. this one a bit closer to home. the dollar drop that rick santelli mentioned over the last week, roughly 3%, could be having a bit of an impact here today even though on the day we are slightly higher. volumes have been high here at nymex and the cme, saying wti futures traded at a new record. early to calculate where we are for the week, right now a 9% loss in crude oil. even though there's a little euphoria, don't get too excited, the volatility is likely to
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continue. back to you. >> jackie, thank you very much. when we come back, a week to forget for the banking sector, despite today's rally. more selling ahead or is now the time to go bargain hunting? dow is up 103. in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. like in utica, where a new kind of workforce is being trained. and in albany, the nanotechnology capital of the world. let us help grow your company's tomorrow, today at
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it certainly has been a rough week for the big banks. is today's rebound a sign that the worst is over? jamie dimon putting his money where his mouth is. buying almost $27 million worth of his stock. should others follow? i think city, b of a are trading well below tangible book value, jpmorgan is trading at about a 10% premium to tangible book. so jamie dimon was buying his own company's stock at 10% premium tangible book. and he's actually had a good record of buying his own company's stock at good times. i think the main message is that the banks are all very well capitalized and well reserved.
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all of the major banks have common equity tier one ratios of 10%, 12% of risk weighted assets. that's a r and they have reserves of loans against 1%, 2%. citi's loans are 2.5%. >> how do you describe a 22% slide off the highs? >> sometimes the market panics. there is a concern that global economic weakness will push the u.s. into recession. there's concerns about the european banks. european banks are in much worse shape. their commercial nonperforming loans are ten times what you see in the u.s. banks, overall nonperforming assets in the u.s. are five times. and if i may i think the fact that the two leading presidential candidates are not the ones the market would have expected six months ago has the market nervous.
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>> how destructive are negative interest rates to a banking sector? >> well, first of all there are not negative interest rates in the usa. >> it's clearly happening in the rest of the world. it's driving the yield on treasuries lower. the rate environment is decreasing for banks, and now there's a discussion on humphrey hawkins about negative rates. >> honestly, it doesn't matter very much. the banks now greting 50 basis points on their reserves at the fed until december 15th they were getting 25 basis points. if it goes to negative 25, that's not a very big impact on the bank's income statements. unfortunately i think the real damage that negative interest rates have on the sector is that it -- and on the economy is that it's a negative signal. if central banks are going to negative banks, that's a negative signal about their economies.
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i don't think it works for the u.s. for those reasons. >> the market is not giving it good judgment hart. david hilder, thank you. coming up a closer look at one of the sectors that is up this year. don't go anywhere.
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♪ investors in utilities have had reasons to smile in 2016. they're positive so far this year. morgan has a closer look at that sector. >> for a second, i felt like i was at a wedding with that music. you could say the sector is powered up. the dow jones utility average is 5.5% higher since the start of 2015. compare that to the 9.5% loss since the start of the year. here's why investors have flocked to this so-called safe haven sector. global economic uncertainty. a wave of m&a in the space, falling treasury yields and dividend cuts that have made utility payouts seem more attractive and stable. these stocks are getting pricey.
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look at this. this is the s&p utility sector forward price to earnings ratio compared to the broader s&p. you can see right there that that's jumped. still there's some stock picking to be had. guggenheim likes higher growth names for clean energy regulations, he likes dominion resources, american electric tower, and nextera energy. he likes nat gas and renewable energy adoption. dan eggers recommends exelon after a weak 2015 stock. and pinnacle west, which thanks to 6% earnings growth and the fact that that utility's allure as a potential takeover target. carl? >> morgan, thank you very much. when we come back, breaking news on consumer sentiment plus zillow's ceo, spencer rascoff as the markets try to hold the gains.
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. good friday morning. welcome back to "squawk on the street," i'm carl quintanilla with sara eisen, simon hobbs and david faber. trying to end a six-day losing streak. dow is up about 108 points, oil is helping as well. almost a 6% gain after that reversal use. breaking news on consumer sentiment and inventories. rick santelli has that. >> business inventories up 0.1, as expected. last month revised positively by 0.1%. still couldn't reach break out to positive territory, remains down only 0.1. 90.7 is your preliminary read for february from the university of michigan sentiment group. 90.7 is much lower than anticipated. remember, this is preliminary. so we're competent to the finals, our last final was 92. how far back do we have go to find a number lower than 90.7? not very far.
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october's read was 90.0. 87.2 in september of last year. so, i know that many believe, like the new york fed president, that this is an important number. i don't disagree. wish it was going the other direction. carl, back to you. >> rick santelli, thank you very much. new york fed president bill dudley had some comments on the economy. steve liesman has that. >> get ready for come cognitive dissidence here. you may think the market this the economy is terrible, bill dudley saying key sectors of the u.s. economy are in good shape and then he adds monetary policy is still quite accommodative and monetary policy is limited in its ability to respond to adverse events. he's bouncing off a big consumer credit record out from the new york fed. he said the financial system is clearly stronger, the banking system better capitalized, the household sector is in much better health than the early
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2000, the house old debt service ratio is the lowest in this survey of the new york fed which goes back to, i think, early -- late '90s. and the data in the report this morning, household debt delis delinquency falling to 5.4%, the lowest since 2007, down just a tick from the prior quarter. household debt did rise by 51 billion in the quarter but not the delinquency. helocs were down, auto and student loan was up. some positive remarks from dudley. >> wouldn't you say, when you add that with janet yellen's testimony this week that the core of the fed is a little bit more optimistic than this market seems to be on the economy? >> i think i might take out the words little bit. >> a lot more.
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>> it's not that the fed is so optimistic it is that the market is so pessimistic. the federal reserve officials are seeing a different economy from the one being forecast by this stock market. >> steve, thank you. for more reaction to the dudley comments, the breaking economic data and the market which has lost a little bit of the gains, the dow is up 98 points, let's bring in bill smead. do you agree with the idea that the market is more pessimistic than what is really happening and we need to buy. >> we see that in the sentiment data, and individual investors have been the most varied since '08 and '09. there's no question that you have to remember that if you do have two consecutive quarters of economic contraction and a year
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where the economy contracts, it will probably do 98 or 99% of what it did the prior year. i find it interesting, people divorce their stocks for that, they don't divorce their spouse if they do 98% less for them. >> the fed is talking up the economy, company ceos are talking up the company, portfolio managers are talk up the economy, yet this market is still feeling gloomy. even with the rebound today. looking at 0.6% for the s&p 500. the question is is there something that the market knows? something that these financial stocks are sniffing out that we just don't know about that is just not being discussed? >> don't go with the talkers. go with what people do with their money. when jamie dimon buys $27 million worth of his own stock, which is twice as much as he bought in the aftermath of the wale trade in the summer of
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2012, you realize somebody who knows more from the inside than any single person in the united states thinks that dudley is right. >> though, inside buying has not been a strong indicator to get back in. not this year. >> no, no. it's a-ye year and a half indicator, not a 90 day indicator. in steve's report, the housing reserve indicator started in 1980, and we had four straight quarters where the household debt ratio is better than any 36-year histories of it. you have 86 million people between 20 and 39 who are starting their lives. it's hard to have a bad economy when most of them are employed and they're forming their lives. they're buying their first house or their first car of substance. having children. it is -- all this negativism is all about foreign contagion and
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russia imploding didn't stop us in the '80s. >> fairness, people did get pregnant during the great depression. can we throw up a chart of -- a five-year chart of the s&p? i want to nail this idea that the stock market represents what's happening in the economy. we forget where we've come. if you look back between 2013 and 2014, the stock market just went straight up. it rose over 600 points on the s&p, 40% in two years. not because the economy was great, simply because the central bank had underpinned it and anesthesiaized it from anything that was happening. now it goes round and round and round. the idea that the market is suddenly falling because it rediscovered risk and is repricing may have nothing to do with the economy economy, but it has everything do with the central banks pulling back. >> i kindly disagree with you.
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we were on the front lines that whole time. we started our mutual fund at the beginning of '08. here's what you got wrong. what happened in '13 and '14, the individual invest and professional invests who stayed away from the market in '09, '10, '11 and '12 decided after '12's bear market to get into the market. you find dogs chase cars and people chase stocks what we're having here is the punishment for people waiting five years into the bull market to get involved. that's the way markets work. we shouldn't infer anything special about a 15% decline in the market. that is just life. that's the way markets work. you get compensated in the stock market because you're willing to take the high variability and the possibility of the next 12 months you could lose. >> i'm sorry, surely the risks were higher in 2013 and 2014 or whenever the fed embarked on qe, the risks were palatable, yet
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the stock market rose. it is not an apples to ams comparison. i understand the importance is to sell products to people that are watching, but for those looking at the shape and cha q eshe what qe and central banks did, that is an overarching logic. >> there is a faith shown in policy and central banks, and then a faith shown in the freedom of human beings to live their lives. and what everybody right now is doing is focusing on the policymakers, the interest rates, all that stuff, they're not focusing on people living their lives. no one gets up in the morning and says i'm not going to breathe today because the fed chairman says this or i'm not going to go to work today because of people on television worrying about what the stock market is going to do. the beauty is this is how markets work. what you know is when the crowd is pessimistic and they can tell
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you everything wrong in the world and the ceo of jamie morgan is buying 27 million worth of stock, you should probably pay attention. he was demonized in the big short movie, even though the only reason their penalties were associated with penalties that banks they bought that the federal government wanted them to buy not sins that were committed themselves. >> bill what are you buying? >> we like the banks, we like healthcare, and we like traditional media. everyone hates the traditional media, even though cbs is -- cbs is making a lot of money, we own more cbs affiliates than any company, disney has been hammered. so the banks, everybody hates them. they hate amgen, and they hate merck because of the politicians scaring everybody. this is hog heaven. everything we're involved in is hated because of the current circumstances, but our portfolios is the cheapest it's been for three, for years, pace
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the highest forward dividend in the last four, five years. it's quite exciting if you have a three, five-year time frame in mind. >> love the passion. up next on the program, european banks rebounding today. but they've lost a quarter of their market cap just this year. it is a huge reason, of course, why wall street has been under pressure. we will go live to europe to milan where the selling inceni intensified on italian banks. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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>> banks and in particular european banks are the heart of the selloff this year, deutsche bank and credit suisse down, and deutsche announcing it will buy back millions of its own debt to shore up its balance sheet. we go to milan. andrea, welcome to the program. a lot of people are looking at europe and perhaps unsure about what is going on. in simple terms, how systemic is it for people outside the eurozone? >> you're right, simon. here european banks in 40 days
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they suffered more than in the last quarter of 2008. if you can remember 2008. the big question is this a systemic risk coming in and starting from the banking system? now, probably authorities are saying, no. the system here is more solid in 2008 and there was a systemic response, but investors are really nervous about that you were mentioning deutsche bank, it's in focus. today the news was good. they're ready to buy back some 5.4 billion in terms of the senior debt. showing more strength, but also commerzbank. investors know and they're taking into consideration the low growth and zero rate environment this will be difficult to maintain and many bank also have to revise targets.
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there's a lot of pressure. in addition, there's new regulatory framework that started on january 1st which are the rules that will ask private investors to phase four banking crisis. this creates pricing on bond -- on banking bonds. so the market in a certain situation, they sell everything from shares of banks to bonds of banks. we will look for what mario draghi can do on march 10th. he will not have many arms to play. at the same time it will be the politics that will have to play the game now giving more reforms and more strength to the idea of the european union which is one of the main sides of this crisis. europe is divided, fragmented in terms of the new challenges like immigration, they have difficulties in finding you are
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neek response. this is what the market is questioning. if this will be another big crisis or just repricing of the assets in the banking sector, which is down more than 30% from the main indices. >> andrea, so for people that are not invested in banks or bank bonds, how systemic is it? in other words, will the shareholders have to take losses because they have to raise capital? will some of the bank -- the senior creditors be bailed in because that's the new system? and then everything sorted out? they have taken their losses, everything is re-priced? or do banks go to the wall and governments have to get involved? how serious is it? >> well, this is a very good question, simon. we went through, you know, the asset quality review, stress test and the last test from the ecb, supervisory mechanism, and the european banks, especially italian banks, they passed with good results. if you take seriously what the
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ecb did in terms of testing the strength of the ratio of the european and i tallitalian bank basically the answer is no. there will be no reason to have more capital increases. just two weeks ago, the president of the italian banks said there is no reason for italian banks to raise capital in the future. he stated there would be more needs of consolidation, because costs are too high, and bad performing loans in italy are roughly 200 billion of gross performing loans. these problems will have to be phased one by one. apparently the ecb remained really stable in this rate. also the rating agency, they did not make any move asking the banks to do more for the future. >> there are two main banks in europe, it was true 20 years
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ago, and it's true today. when we come back, zillow facing some challenges in the fourth quarter. stock is down. what is the outlook for the rest of the year and how big is their market? looking for 24/7 digestive support? try align for a non-stop, sweet-treat-goodness hold-onto-your-tiara, kind-of-day. live 24/7 with 24/7 digestive support. try align, the undisputed #1 ge recommended probiotic.
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despite the plunging temperatures for much of the northeast, this month marks the start of the spring housing market. it is unlike any other for a variety of reasons. diana olick has more. >> two big reasons, mortgage rates and listings for sale. both extremely low. let's start with the popular 30-year fixed mortgage, it hit 3.5% yesterday, one quarter point away from the record low rate set back in 2012. we started this year over 4%, and we're even higher than that last summer. what is so interesting is that the plunge began after the fed raised rates. the expectations is that
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mortgage rates would rise through this year. not so much. at the rate today borrowers not only save on a monthly payment but can qualify to buy a more expensive house, which in this increasingly expensive housing market is key. that brings me to the second reason the spring is unique. record low supply. the expectation is that supply would improve during the slower winter sales months. did not happen. inventory levels were down 4% at end of december, just a 3.9 month supply of homes for sale. that's the lowest since the start of 2005. back in 2005 we were buying more houses in january, showed listings down from a year ago and 7% since september. people wait until february and march to put their homes on the market that addition of homes will not come close to meeting demand, that pushes home prices higher in the bidding wars.
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i will tell new this neighborhood realtors are already asking sellers who have not listed their homes yet to please show them, they have nothing to show. >> wow, that speaks a lot to inventory, diana, thank you very much. shares of zillow falling nearly 4% this morning. 26% this year. company reported a wider loss for the quarter as well as a drop in unique visitors. one bright spot was advertising revenues. joining us is zillow's ceo, spencer rascoff. good to have you back. good morning. >> good morning. >> this drop in the number of agent advertisers has raised eyebrows. why is that happening? >> well, it's very deliberate. over the last two, three years we have the strategy that we've been following and executing really well, which is prioritizing the best agents. we don't want any agent to be a premiere advertiser of ours, we want the best agents. we have been culling the agent count. we have tens of millions of leads a year of people who use
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our website and we want to connect them with great agents. great agents have great service and they are more likely to bring those leads to commission. we said last night we think we're responsible for generating around $3.6 billion worth of commission out of the $75 billion worth of total commission. we're focused on taking the great leads, giving them to agents who work to get commission. >> how is it good that the company actually draws fewer agents than before? why is that a positive story? >> because our revenue is growing. we're charging more for the remaining agents. our premiere agent revenue growth for 2016 is scheduled to grow about 27% year over year. fewer agents spending more money, that's good, because revenue is growing much faster as a result. the agents that can convert leads into a higher rate are willing to pay more in exchange for generating those leads.
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we want the best agents in a given community, that's why premiere agent revenue is growing and is scheduled to accelerate growth because we're reaping the benefits. premiere agent revenue up 27% year over year and our guidance for 2016 is an acceleration of that revenue growth. >> the unique story, though, down 13 quarter on quarter what explains that. >> that's seasonality. as people go from q3, which is peak shopping, into q4, it's a decline. year over year, unique users are growing 10%, 20% which off the huge base of 100 million unique users is past growth. leads at the bottom. contacts from consumers to agents is growing quickly. 40% to 50% year over year. that's what matters, is contact volume, that's healthy because these are engagement on the site, and that continues to grow. >> the other mark on the quarter was that legal bill, the
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increased litigation cost. how much longer will that hang over the profit picture. >> you'd have to ask rupert murdoch that. we're focused on integrating, news corp. is focused on litigating. you see this all too often in business, companies that lose on the business battlefield resort to the courtroom out of desperation. we've been sued by news corp., we're forced to defend ourselves. it's baseless, i try to put it out of my mind and turn zillow into a $10 billion revenue company. >> you heard diana's report. wonder what you think about the spring selling season, how demand is shaping up relative to what we see on inventories? >> diana is spot on. the reason inventories are so low, people don't want to list if they don't know where they'll move to. there's less inventory because of negative equity. still around 15% of all mortgage holders in the u.s. don't have equity in their home. even if they wanted to list,
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they can't. that's why inventories are low. housing demand is good. zillow's forecast is about 2.5%, 3% year over year, the market is active. but she's right, inventories are low. >> spencer, we asked this of a lot of start-ups whose stock has come down. how are you recruiting and retaining with less valuable currency on that front? >> well, in that sense i think we're relatively advantaged. you have to be crazy to leave a stable successful company like zillow to go to a pure startup. if you're going to a series "a" or "b" round company, you probably won't get funded. there's a decent chance you'll be out of money in 6, 12, 18 months. zillow group is sort of a sweet spot for recruiting. each of our offices continue to win best places to work awards locally. we have a strong corporate culture. because of the mission that we're on of trying to create this real estate marketplace, people are fired up and pumped to work out our company. the decline in our stock market
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value, i don't think it's hurt our retention. i don't think we lost any employees to startups or other big companies in the last 6, 12 months, we're hiring from google, facebook, pick your startup. people leave to come to zillow grope. >> spencer, always good to see you. spencer rascoff, ceo of zillow group. straight ahead, the family drama at viacom taking its toll on the stock. shares trading at a six-year low falling more than 25% this week. more on what it means for the future of that company when we come right back. you can't predict... the market. but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... our experience. call a t. rowe price retirement specialist
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good morning, i'm sue herera, here is your cnbc news update. secretary of state john kerry meeting his south korean counterpart on the sidelines of the munich security conference. the world health organization says possible zika vaccines are at least 18 months away from large-scale trials. officials telling reporters in geneva that 15 companies have been identified as possible participants in the search for a vaccine. a gas well in california that's listen leaking methane for months has finally been
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capped. an estimated 2 million tons of methane was released into the air. gop presidential candidate donald trump look at that hair, autographed a baby's hand with a sharpie during a campaign rally in baton rouge. the boy, named curtis ray jeffrey was also, you got tsh i was sucking on a trump-themed pacifier. you can't make this stuff up. quarl, back to you. >> part of the job. >> really? did you see that? >> a trump-themed pacifier. it's one hour from the open. let's see where the indices stand. dow is up 172. leading the dow, the banks, jpmorgan and goldman sachs and travelers, leading the s&p, dunham brad street and freeport.
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sumner redstone's resignation and then comes the inevitable question the fate of his controlling interest in the media enterprise. shares of viacom are down 23% this year as the succession question continues. our next guest says it is the latest example of a vicious power struggle over family fortunes. joining us to explain at post nine is "new york times" columnist jim stewart on a friday as always good to see you. good to see you, too. >> family feud, there's a long history of this. this is a perfect story for you. >> probably because i've been around long enough, i remember a lot of these. i used to cover herbert haft in the '80s. and he was a feared corporate raider for a while. after he gave up that career, he had a big empire, dart drugs, crown books, he turned on his son, broke off with his children, divorced his wife and business partner of many years,
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took up with a much younger woman and amazingly married her while he was in intensive care at the age of 84. he died without ever leaving intensive care. hopefully with a smile on his face. he didn't care. the litigation went on forever. ultimately the assets had to be sold. >> how does the sumner redstone soap only pcompare. >> it's not as extreme. i mentioned the gucci case where the ex-wife hired a hitman to kill her husband and succeeded and went to jail. there's some extreme examples, but it's pretty much of a mess. shari redstone, his daughter, is at odds with phillippe dauman, chairman of viacom. it's unstable. if they don't reconcile fairly soon, the assets typically end up getting sold, which may be
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welcome to investors, particularly when you look at viacom earnings this week. i'm amazed the director said we want continuity, that's why we're picking dauman. why do you want continuity in a company where the shares are down 50% in the last year and all the performance looks to be dreadful. >> sumner planned for this for a long tichme. that's why he has a trust with seven trustees that will take over upon his death and/or if he's deemed not capable of taking care of these things himself, jim. he's had this plan in place for a long time. nothing says when he does pass that there's a forced sale. to your point, i think there certainly will be and there is tension between shari and dauman, and perhaps trying to see what she can effect in terms of change amongst the trustees, she's outnumbered 4-3 family versus nonfamily.
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>> there are a lot of trusts out there. people point to the hearst corporation, but you don't have a situation where management and family are at odds. that's been carefully handled so the family is careful with the managers running the company. here this is very unstable. it's interesting that ultimately, when sumner redstone is no longer alive, the trustees do have a legal fiduciary obligation to act in the interest not of his hand-picked successor but of the beneficiaries of the trust who are his grandchildren. that gives them leeway to exercise their judgment. they're going to have to be very concerned about potential lawsuits. once it's all in the courts like that, i think the end game, if it gets to that point, it's clear. that doesn't in the end solve the problem. the real issue is that disconnect between really who will be the largest shareholder, his daughter, and the hired
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management. and that's going to have to be reconciled or i do think the company will have to be sold. >> an important point is it doesn't mean the company, viacom and cbs are being sold, you could also sell the 80% stake in national amusements which is not nearly as large as the voting power that goes along with it. >> that's correct. that's another unusual twist. >> yes. >> unfortunately, they got this volatile mix of an aging entrepreneur who did not want to give up control who has been in his personal life behaving in a somewhat erratic manner. you have heirs whose interests have to be concerned, the hand-picked successor. this is a recipe for mayhem. >> the cbs transition was smooth, les moonves becoming chairman. >> that seems to have gone well. nobody rejected to that.
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shari redstone has not objected. >> he's not a trustee either. >> and cbs compared to peers is doing well, moonves is respected. >> how the rich behave, do they behave differently than other house olds other than the dollar signs? >> i think they do, they have had no monetary check on them for so long. it looks like they're used to getting their way, and as they get really up there in age, they keep expecting to get it. whether that's having affairs, romantic entanglements, hanging on to control, turning against your children -- >> or paying your ceo enormous sums while they have not performed particularly well. >> half a billion. >> marry thompson had an interesting story about that. >> the cfo -- >> you've done columns on comps as well. that figures into this also. >> if you had to generalize, you would have to say the really, really rich don't feel they have to live by the rules that most
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other people conform to. >> if they created the wealth themselves. >> especially when they created the wealth themselves. this is a fascinating example. >> we'll look nfor it in the times. thank you. still ahead, amid the recent drop in cloud stocks, we'll hear from the ceo of qualcomm in an exclusive interview. that's coming up in "squawk alley." this show will be back after a short break. hey, jesse. who are you? i'm vern, the orange money retirement rabbit from voya. vern from voya? yep, vern from voya. why are you orange? that's a little weird. really? that's the weird part in this scenario? look, orange money represents the money you put away for retirement. save a little here and there, and over time, your money could multiply. see? ah, ok. so, why are you orange? funny. see how voya can help you get organized at
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like you saw right there, financials again part of the s&p 500 rally today, up 18 points. the top sector today, financials, up about 2%. still down 3% for the week overall. just yesterday nearly half of the financials sector in the s&p 500 hit a 52-week low when the sector was tracking for five straight days of losses. among the names leading things higher, aig, jpmorgan, prude prudential and citigroup. for the year financials still the biggest losing sector, down about 16%. at least for right now, some of the bulls saying financial stability from the financials still a reason why the market is trying to find a reason to get more bullish. we'll see what happens as the morning progresses. >> some relief for today. let's get over to the cme group with santelli and the santelli exchange. loads to talk about this week. >> loads, literally. whenever i have something to
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talk about, especially when there's loads of it, i always go to ira harris. you have something you want to read before we get into the meat of this? >> yeah this is from karota's speech, he made the speech in tokyo last week. i pulled this out. this is an amazing comment from the japanese who are usually low key. but he said this, indeed the constraint of the zero lower bound of a nominal interest rate which was believed to be impossible to conquer has been almost overcome by the wisdom and practices of central banks. including the boj. i'm convinced there's no limit to the measures for monetary easing. unbelievable. >> listen, first of all, before we even think about that, let's each weigh in on how we think negative rates should be used as strategy to cure what ails the
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global economy. >> not at all. this is terrible. terrible. think about it from a liberty standpoint. what they're talking about is once they go negative, then they'll outlaw cash, which means that you and i no longer have really freedom over the control of our money ultimately. because if they don't outlaw cash, and you and i go running to pull cash out of the bank -- >> it changes the whole dynamic of that off the table. >> nothing says it more than japan if you have ever been to japan, i've been there quite a bit. my son is a japanese expert, well known, it's a cash society. they're going to make things happen here. the consequence also pls will p and it's playing out there. >> let's take it a step further. let's assume there's some grain of a minor positive in negative rates, and i don't think there is. i think it's the worst idea ever. the retail public won't benefit.
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do you think there's going to be one human on this planet as negative interest rates continue to invade the planet that will get credited every month when they own the house because of the negative rates? >> no. >> never going to happen. the people do not share in this at all. no, this is all theoretical. we come back to what we talked about for years already, i tongue and cheek will say the economic central bank is not rocket science. you cannot predict the last outcome, it's much more of a behavioral science. maybe it's a 70% probability, but the 70% probability leaves 30% uncertainty, you're seeing it play out in new hampshire. >> central bankers are supposed to be conservative nudgers with a macro view of the economy. to think they'll do an experiment like this without any idea of how it could possibly turn out, and there's no --
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we're out of time. >> there is outrage. >> we'll carry this on on dotcom and we'll rip off the sensor tape on ira. come and join us. what the co's of the banks should do is call the bluff of the central banks and take money out of retail checking accounts. then you'd really see the mud hit the fan. >> i'll tell you what, simon, i'll make a prediction, we'll talk about this on dotcom, if the average person on the street who knows so little about the federal reserve, if they happens here, they'll get inquisitive. their inquiries will lead to putting the fed on top of the radar screen. i think that is what we'll talk about when we switch over. >> thanks, simon. thanks, ira. switching to dotcom now. up next, oil prices surging today on reports of an opec cut. really? west texas is moving. what is there to these rumors? "squawk on the street" will be
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right back.
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welcome back to "squawk on the street." shares of activision blizzard down about 10% in the early
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trade. the video game maker's fourth quarter results missed both top and bottom line analyst expectations, despite strong sales of its "call of duty" franchise game. however, they are increasing their quarterly dividend to 64 cents a share, but it's not helping. the stock was up almost 20% over the past 12 months. certainly shares to keep an eye on today. double their normal trading volume. >> thank you. let's take a look at where we are on crude. crude is surging again today. joining us here at post nine, michael cohen, head of energy commodities research at barclays. you put in some decent gains yesterday. were you moved by this quote from the uae, which arguably was mistranslated to some people, by some people, and run with by the wuls. are you persuaded that opec is about to cut production? >> no, we're not. we think it's a lot of false hope. basically, what's been happening over the last month is as the market's gotten increasingly short, anytime we see these kinds of headlines, they result
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in this kind of rapid change in the price. that's what we saw a couple of weeks ago when there was news that minister novak was quoted as the st. petersburg forum as possibly willing to, you know, entertain the idea of a cut. but i think there's a couple things you have to keep in mind here. you know, the issue is, is that there's a lot of distrust on both sides, first of all, between russia and saudi arabia. russia has not followed through with cuts in the past, only very small amounts. it's also the winter. they can't really cut production that much at this point. also, it's a bit of a blunt stick for russia. so they can actually change the taxes, but they aren't -- there's a lot of different companies operating russia. they can't actually do it. so anytime that saudi arabia or uae or any of these countries that have cut in the past say that they're willing to cut or at least entertain the idea of it, it obviously, is going to move the market, and that's what we've seen. >> i guess in many senses, they've come so far now, why pause? >> yeah. >> michael, the other commentary that's going around is the
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storage at cushing. how soon do we run out of store at cushing and does it matter? >> we don't think we run out of storage, but we think it's going to become increasingly expensive to store that extra barrel in curbing, and that will result in more oil coming down the coast, down the united states, and filling up in the gulf coast. so we're going to see movements in the differentials, movements in the time spreads. and obviously what we're seeing right now, at least yesterday, the contango steepened, and resulted -- >> this is where prices further out are higher than prices now? >> exactly. >> so people that are hoping that all the swimming pools will fill up, that will result in a drop in u.s. production? that's a bridge too far in your view? >> we do expect that u.s. production is going to adjust and it already has. remember, it's been coming down 50, 100 barrels a day every month for the last several months since april. we expect that to continue over
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the kouf the course of this year. but is that enough? even if we see 7,000, 8,000 barrels a day less u.s. production, we have iran increase its supply. saudi arabia, so it's basically just offset. and we're left with a market that remains in oversupply, at least through the end of the year. >> back to the geopolitical issue of the middle east for a moment, can you give us an update on the tensions between saudi arabia and iran, which flared toward the start of the year, and what that would mean for the potential of an opec cut right now. >> i think it makes it definitely harder for the two to come and sit at a table and agree on anything. and i think what saudi arabia has said continually is that they want -- they're willing to adjust their production, but it has to be with other opec suppliers, and other non-opec suppliers. so from iran's perspective, they've been under the burden of sanctions for a long time now. they want to increase that output just as much as anyone. so this whole idea that venezuela has been talking about
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a freeze for all opec members of production is just not going to work for iran. >> michael, one of the big events of the week was that janet yellin was on capitol hill for two days this week. the fed raised rates and was ready to raise rates another four times this year on the basis that they believed that falling energy prices were transitory and that they would rebound. and yesterday she said, actually, we were surprised by what happened to oil at the end of the day. so how long do they have to wait, do you think, for the big rebound that they're expecting? >> so, our economists believe that we're going to see two rate hikes this year, one in june and one in december. and my understanding is is that the market's currently not really pricing, that there will be any rate hikes this year. so i think this is part of the circle of what's moving oil, what's moving the macroeconomy. they're all extremely correlated right now. when oil is falling because of a demand-side issue, ie, concerns about china, than the stock market, oil, all of these are going to move in lockstep. >> i guess my question is, is
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the fed going to be continually surprised that oil prices don't rebound? >> well, i'm not sure. i don't know if we can say whether they'll be surprised or not, but what we have to look for is in the jobs data and in the unemployment data, that has to be what they're -- >> but what about just better economic data in the u.s., indicating better demand for oil? will that have the potential to move prices? >> well, it's possible. i think what you have to watch, of course, in the u.s., is that the drilling activity is down, railroad activity is down, so diesel demand, for industrial-led growth is far, far lower than it has been in the past. and if the fed looks at that and says, oh, you know, this decline in drilling activity is having an effect on jobs, it's having an effect in texas and north dakota, then they're going to take a hard look at that, obviously, when they make their decision. >> have a good weekend, michael. >> let's send it over to jon fortt with a look at what's coming up next on "squawk
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alley." >> we'll take a look at this tech sell-off. a little bit of a respite today, but what's the impact going to be silicon valley, moving forward. and visa unveiling a sizable stake in square. and qualcomm ceo will talk about one factor that's bigger than the asia slowdown for their story. you won't want to miss it, all coming up on "squawk alley." here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey?
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td ameritrade. at ally bank, no branches equals great rates. it's a fact. kind of like bill splitting equals nitpicking. but i only had a salad. it was a buffalo chicken salad. salad.
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good morning. it is 8:00 a.m. at square headquarters in san francisco. it's 11:00 a.m. on wall street and "squawk alley" is live. bl welcome to "squawk alley" for a friday. nice to have a show again after a couple of days of janet yellin. jon fortt and kayla tausche at post nine. and


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