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tv   Fast Money Halftime Report  CNBC  August 1, 2012 12:00pm-1:00pm EDT

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stocks reinforcing options reinforcing stocks. and some of that was part of the problem. in the flash crash. so let's just put it this way. the humans in the systems made it work out. >> art, always good to get your take on this. that does it for us, the halftime report is up right now. hi, welcome into the fast money halftime show. we'll continue to follow the story that's taking place with the stock market and the volatile trading off the open. you can loob at the s&p 500 heat map and see more green on the board ahead of the big fed decision. there's where we stand across board. but you know, we want to continue the debate on where social media stocks continue to trade. facebook continues to get hammered today. that stock has been certainly getting hit day after day. i know you're looking at
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something a little bit different here on the screen. we continue to follow what's happening in social media stocks, we continue to follow what the fed chairman ben bernanke may deliver today at 2:15 eastern time. we'll certainly be all over that. but guys, let's take a look at what's happening with social media stocks right now. facebook continues to get hammered, dropping to new low again, it briefly broke below $21. >> joe is on my right, you have to give some credit to him, he's been saying for quite some time it stay away from it. i would agree. i think we've been saying collectively stay away. you look at linkedin and you look at the valuation of the stock, it's trading sometimes 60-something times forward earnings. the story of a lot of stocks, i understand that people get into them. i understand the attraction towards the facebook, the linkedin, or the zynga. but i don't understand the attraction towards the valuation. so i think the companies are
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fun, make sense, i don't think the stocks make sense. >> this is a train wreck that doesn't seem to want to end. you look at zynga, i had people tweeting me this morning, asking them, well this stock is like the next whatever. facebook is the next, people responding with nokia. yahoo, zynga being the next r.i.m. is it time to get anti-social altogether from an investing standpoint? >> guy and i are both anti-social to begin with. so that's the headwind for you. i think in the case of facebook, i said this to you the other day, think you're getting close to potentially having a trade in place. i have not seen what you want to see would be a significant volume selloff in reverse intraday. but let's talk about linkedin which going to report earnings after the close. and i think that's your social media opportunity there. they're able to bring new products forth. you've got the sales networking product that's going to come out. they're getting some user engagement growth. and it's really become a tool
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that you need to use in terms of acquiring or getting the edge in the job market itself. so linkedin, the valuation might be a little bit rich. i wouldn't be afraid of it right here. i like it and i think it's going to attract a lot of capital. >> the difference between those two stocks, take linkedin and facebook, the way that i see it, is that linkedin offers a service, right? people are paying to get a service. you may say that facebook has 900 million users who don't pay for a damn thing and that's the issue that needs to be resolved. >> ultimately, it's about the bottom line. and you're absolutely correct. if you take a look at the broader definition of social media, to me, it can't be broadened. groupon, let's talk about social media. that to me is a bad retailer with very limited barriers to entry. pando pandora, that's a radio company just using the internet. the real focus comes down 0 yelp and linkedin as well as facebook. but linkedin, go back to how it originated. the ipo was a better run ipo, expectations were lower.
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so what investors make the in is take of thinking is that they know a company because they use it. and they get excited about the hype. you got to go back to fundamentals, if you don't understand the business model, you have to stay away and not too many people understand the facebook business model at this point. >> john, what do you do with any of these names? is it time to get in? is it time to never look at these again? are you afraid when you see a zynga approaching a $2 a share, when facebook trades barely above $21, half of where it was the day it opened on wall street -- what are you to do as an investor who hears a lot about these names and who doesn't know what the hell to do except watch their stock prices go down day after day. >> i'm going to agree with gilles that i haven't seen the big flush. i have seen the big funds that own tons of this stuff, still and they have to be cursing themselves that they do own it. but these guys have lately
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judged, come in, bought the 20-puts, sold the 15-puts, that's the finance spread. and that's not terribly bullish, but it is more or less a position you would put on if you just wanted to basically say, i want to hold this stock but i think it could slide all the way down towards 15. that's what a lot of people have been saying mid teens, for this name with this lock-up and the float increasing in august. and then it's going to increase again this year. in november and so forth. i mean there's a lot of pressure here, i think there are ways to play it but i would love to see that flush, that gilles was talking about. and to joe and weiss's points, this one you need to be able to find a way to make money. linkedin makes money, that's real business, facebook, it's not. >> we'll get back to this discussion in a second. let me get to the other story that investors are clearly trying to figure out this morning as much as the trading community is. and certainly all of us and take a look at shares of knight
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capital. it's been one of the biggest stories of the day and the volatility right off the open. and many questions today being asked about what's happening over at knight capital. how if at all that impacted such volatility we saw off the open today. you can see knight capital shares now down 20%. they were down even steeper than that, dow jones reporting that a knight capital software problem seen driving erroneous stock trades. you had a couple of dozen or so stocks that had wild gyrations off the open. some up double-digit percentage points. some down double-digit percentage points, which have sense corrected themselves. we're investigating this for you. trying to figure out exactly what happened. but joe terranova, what does this tell you, is this another reason for the individual investor not to trust the market? i would flip that and say, this is a reason why this shows the individual investor out there that the system worked, right? you had people on the floor of the stock exchange, there was a
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problem, they stopped trading the stocks. they're trying to figure it out. they got to the bottom of it. there wasn't a giant flash crash or anything like that surrounding it. why can't we look at it that way? >> i think the way you need to look at it and understand that someone who was formerly a participant of a large trading floor community. my belief is we need to repop late some of these trading floor environments and get them to move a little away from the electronic platform. that being said, is that going to happen tomorrow? no, it's not, i think it falls back to the s.e.c. and the s.e.c. really their regulation of the industry itself. specific to knight capital for a second, a name that i've mentioned in the past as a name that you want to own. it has not performed over the last six months, so i haven't spoken about it since then. but i will surprise you with this one. i think you'll see the analysts based on the price decline and come out on a valuation basis and say you want to own it. >> steve, does the system work here? should investors feel confident about what they're seeing today, amid questions of another example of how they shouldn't trust the markets?
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they had human beings down there, right? they did the right thing it appears at least at this point. we don't know exactly what caused the problem and we're trying to investigate that as much as anybody else. but did the system work today or not? >> no, the system did work, because it stopped for a major panic. you saw an opportunity for some people, investing in one fund. the fund manager told me he came out and saw a stock like radio shack up 20% for no reason and just shorted it. so some people made money. as far as the normal customer, retail customer, they'll look at this and say you know, sure, it helped a little bit. it wasn't the may 6 flash crash. but i'm still pretty worried. so it doesn't instill confidence. i don't think they get to your point. as far as knight goes, we don't know what the liability was. what i heard was that instead of buying stocks through a program and algos that came in within ten minutes that they should have bought within five days. they bought within five minutes. that's one we don't know if that's true or not. but the point is what i'm surprised at is there was not a back-up technology, a solution
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to prevent this from happening. >> let's go down to our bob pasani who has been on the floor of the new york stock exchange all day following this story. bob knows as much as anybody on the story on the issue of high-frequency trading, algorithms. bob, what's the latest on the knight capital group shares? >> well the question is, what exactly happened. what i feel confident in saying is that this was an erroneous trade or series of trades or an algorithm for sure. there is no one i've talked to who thinks that the kind of volume that happened at the open was done deliberately by someone. it's not done that way. nobody would want to try to move the market or create that kind of confusion in the market deliberately. so this is an erroneous trade or series of erroneous trades. what could have happened? it's quite possible that there wan algorithm or a human error or mechanical error in the way the systems communicate with each other. that is quite possible. what we need to do is number one, invest more money in making
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sure these systems are more robust and connect with each other better. and i would agree with calm of other points you made. i think you need to make sure there's some redundancy in the system, some confirmation that the orders are actually the ones that people intended. i agree with your point, scott, i think that the system responded very quickly. you'll notice the s&p did not have any dramatic gyrations. the dow did not. individual stocks did. but they responded within 30 seconds, and people were yelling and screaming. i'll tell you why i think the system worked pretty good here. if there was a major problem, it would have spilled into the options market. you would have seen a lot more chaos. but we didn't see that because i thought it was caught fairly quickly. and to that extent, i laud the systems at this point for working but we need to do some kind of improvement. >> bob, thanks so much for the update. let us know if you find anything
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new, we'll continue to investigate the story as well and bring you any new developments, whether it's from the knight capital side, the nyse or for that matter, anyone else. more halftime report is up after the break. up next, business insiders henry blodgett joins us with his take on anti-social media stocks. plus mid summer stock plays go with july's top dividend payers, some answers to that question coming up. and it's fed decision day, steve liesman with a preview. >> we're going to look at why bernanke won't act or might act. does he surprise the markets with qe 3 or signal heavily that it's coming tomorrow? we'll have that discussion when "fast money" comes back.
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welcome back, bob pasani on the floor of the new york stock exchange. we have a statement from knight securities regarding what happened this morning. here's the statement. an initial review by knight indicates that a technology issue occurred in the company's market-making unit related to the routing of shares of approximately 150 stocks to the new york stock exchange. knight notified its
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market-making clients this morning, to route listed orders away. the company's otc securities and trading and its other businesses are not affected. the company continues to review internally. that's the end of the statement. scott, two things of interest to me here. first, knight is blaming a technology issue for the problem. and saying that the company's market-making unit related to the routing of shares of approximately 150 stocks, there was a technology issue. they did not identify what the source of that technology issue was. and they also said it related to the routing of shares, to the new york stock exchange. and that the over-the-counter securities business was not affected. so here's a little bit more information. but it doesn't exactly identify what the source of the problem was. obviously there was an issue with the way knight was interacting with the new york stock exchange. it appears that they are indeed the source of the problem here. we don't have any more information other than it was a technology issue. the one thing i would say, scott, is the phrase "technology issue" indicates this was not a
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trader who put in some kind of erroneous trade. that there was a problem with the software itself. with the system the way it interacts with the new york stock exchange. >> and bob, will we get, the reason why we're seeing such a big hit in shares of knight throughout the day may relate and i would like your input, bob, to the question of liability. but also if they themselves admit they notified their market-making clients this morning to route clients away. any loss of revenue? obviously that would come to knight by having to route orders away. is that an issue as well you think? >> i don't know what their liability at all is, that's a securities law question. that gets very technical. but the fact that they notified their clients immediately to route listed orders away, indicate that they were aware of the situation and attempted to take some kind of corrective action to make sure it didn't get worse. i'm not trying to be legalistic. but they're obviously putting that in for a reason to tell people they were aware and they
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were acting responsibly. the question is what exactly happened. i suspect that there was a simply a software problem. this says to me there was not a human being, there was not a fat finger trade or anything, it was a software problem. these systems are very complicated. they interact hundreds of different programs, hundreds of different systems interact. all around the united states to bring the modern market-making system that exists and it's sometimes just messes up. we need to have greater redundancies. we need to invest some more in that. but i don't see it going away, scott and we're going to have to try to do better. >> bob, i mean look thankfully there were human beings on the floor of the new york stock exchange today, designated market makers who could intervene at a moment's notice and get a handle on the situation. >> i'm glad that knight has made a statement here. because i've been saying all morning from where i was sitting at the open i'm surrounded by the traders on the floor, there
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did not appear to be a problem with the nyse systems at all. but then again, anything could happen. but they appeared to be working fine. everyone stopped trading or halted stocks very quickly. and i think that prevented any kind of wider problems from occurring. certainly it didn't spill into the options market, which is what i was concerned about initially. >> on that note, bob, thanks so much. keep us up to date. john, bob makes an interesting point. glad you're with us today to discuss the options angle of all of this and how it impacted trading overall. >> just as bob said, kudos to him for the great reporting. but knight was where we saw the unusual option activity. believe it or not, as soon as people heard there was a software glitch, judge, they went right for knight and they bought the ten puts in august big-time. they bought them for 20, up to 40 cents and then those options exploded of course, as the stock got hammered as the news got out. also point out that the volume of trading on the new york stock
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exchange during about the first 45 minutes of trade today, was about 150% above average. so those 150 listed stocks they routed, virtually all of that volume it seems, or a vast majority of it did go to the new york stock exchange. and that's why that needle jumped so much on the listed volume on the nyse. it didn't go over to the nasdaq at all. nasdaq, last i checked was still trading below the three-mo average. >> knight is continuing to review the issue at you see on the bottom of the screen. it's been a tough few months, given the losses suffered from the facebook ipo debacle and now this. >> absolutely. and as far as knight, i'm not so sure that you could say it wasn't at the end of the day a human error. we know the end of the day, technology controls, i don't know if they're off the hook. but the issue here, other firms put in orders and say they were orders to match the volume. then that affected what their customers did. so it's not just an issue with knight at this point.
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>> i just also think it's important to note, given the issues over the last several months regarding the facebook ipo, all the situation, and scenarios that followed that. that knight does, and i don't think it's by accident, mentions in its statement here, guys, that it notified clients that it was in touch with its clients and that would be a serious issue, i think, cited by some in fact if they hadn't been in touch with their clients as perhaps they should have been. let's bring in henry blodgett, we initially had him on to talk facebook and sial media in general and research on the street. which we hope to get to. but henry, where's your faith in the markets this morning? >> i'm watching you guys, fascinated. i missed the whole scandal this morning, so it's very interesting to watch it unfold. >> do you have any broughter thoughts on what you make of the whole thing? the fact that again, you know, you did have human beings on the floor of the new york stock exchange, they did intervene in the situation. perhaps it could have gotten worse had they not done so. we don't know the answer to that question. we don't know exactly beyond a
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technology issue, which caused this. but give me some more of your broader thoughts. >> the broader thought obviously is that trading has gotten so unbelievably reliant on technology. between the high-frequency trading and a lot of hedge funds locating servers closer to the exchange so they can get the extra microsecond edge. these are big issues for individuals who have no way to access any of that. so now when you get confirmation that you can have a big technical error like this or the nasdaq screw-up of the facebook ipo, i think it should be a warning to people that we're all depending on technology that is very capable of breaking down and screwing everything up. >> let's talk facebook, if we could. 18 buys on the stock as we sit here right now. can anybody in their right mind, should anybody in their right mind have a buy on this stock, given what we know now, about some of the issues facing this business? >> i think ironically, you see this with all stocks that crash
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like this. the lower they go, the more attractive they get. the more people want to run away screaming, of course, because they've been burned and so for the forth. i think as i said before the ipo, the big mistakes that everybody made is facebook's fundamentals are deteriorating. the margins are going down, sales are decelerating. and yet at the ipo, people were willing to pay absolutely astronomical prices for the stock on the theory that facebook would pull a rabbit out of a hat and produce some business that was going to reaccelerate growth. as of this point, they have not done that. at $20, the stock is actually getting into a relatively reasonable range with the expectations that we have today. which are about 65 cents next year. we're getting into the 25, 30 times earnings range. you look at apple, it trades at less than 15 times, so sure, the stock could get cut in half from here, that's possible. it's getting more reasonable. >> are there more expectations that you mention? or are they simply hopes at this
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fact? people seem to be giving, still wanting to give facebook the benefit of the doubt that they're going to get it right. yet it hasn't shown the market one iota of reason as to why it will. >> i think if you step back from facebook, what's going on is that facebook, i think is in a multi-year period, where the stock is going to adjust from being a hypergrowth company, where every quarter, quarter after quarter, the company blew away expectations. to a company that settles down into a long-term growth rate that's going to be much more modest, we're going to get a reasonable sense of their long-term margin and earnings potential. but that process is usually terrible for stocks, you look at microsoft, google, amazon, they all went through these five-year to seven-year periods where they basically moved sideways after the original blockbuster growth started to change into more mature growth. i think facebook's right in the middle of that. i think the stock is going to be very volatile, maybe you can
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make money trading it, i don't know. but i think until we get stable revenue, where it's not decelerating and we get a good sense of the long-term margins, i don't know why the stock goes up from here. >> so i've asked, i've tweeted out a question for people today, facebook is the next what? what is it? give me a stock comparison to what facebook is. i've gotten some interesting responses. we ask is it the next aol? is it, people have responded to me saying it's the next nokia, the next yahoo, those are the kind of names being thrown out today. >> hopefully it's not those and i don't think it is. i think facebook is really tied into something where they're networking everybody together. that some company will be doing this. for a long period of time. whether it's facebook or somebody else, so they've tied into that. the question is, can they really monetize it. before the ipo, everyone convinced themselves that this was going to be the next google, you just had to be involved, because no matter what price that people paid, the stock was going to go up. the truth is when you look at
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google relative to facebook, google's earnings and revenue were growing much faster than facebook at this period in its life. >> henry, you may be revealing more than you want to about the mobile device that's in your wallet that's having an impact. >> sorry. >> i agree with henry. the thing about linkedin if you want to go back there, if facebook decides to get into linkedin's business and what are the barriers of entry that makes linkedin deserving of a 75 to 80 times forward multiple. i don't know what they are and i don't know how you would buy facebook at any price right now given the problems they're going to face with the mobile devices and how they monetize that. i think they have a lot of questions to answer before i would consider them. >> 18 buys, joe teronova, how can you have a buy on a stock, 18 buys, only one sell and 15 holds. >> we've said over the last six weeks, incredibly difficult to figure out what the right
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valuation, what the fundamentals are going to be until you hear the actual earnings call. you heard it, i'm surprised there are so many buy recommendations still on their stock, that shouldn't be. coming up we continue to track the highly volatile trading activity in the markets and knight capital today. and he's considered one of the street's leading voices on fed policy, ed yardeni gives us his magic bullet. one hint, it ain't the fed. sometimes investing opportunities are hard to spot. you have to dig a little. fidety's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.
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welcome back, how should you position yourself ahead of today's fed meeting? steve liesman, cnbc senior economics reporter joins us with a preview. the most recent gdp at 1.5 and adp, better than expected, just wondering what that does to the 23ed and also keeping in mind the ecb is tomorrow. >> that's a good point. there's a lot of mixed data that's out there. and i think there are some different -- i want to go through the odds. if we were at the horse track and handicapping. let's talk about the horse named signal action. put it off. okay? i'm saying that's like a 4-5. that's really where the street is right now. that the fed does not move at
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2:15 today. the announced qe 3 today, i would say that's like what is it, bought in keeneland, arabian prince, that's a 2-1, or 3-1. there's a couple of favorites, one has been bet down. announced contingent qe, another possibility. we're going to do qe, based upon certain criteria. for example economic criteria. this is also horse running a different race here, the change forecast date for low rates to 2015. that one is something that's out there and could actually happen. i want you to listen to what bernanke said at the humphrey hawkins testimony that told you when and how he would act. take a listen. >> we are looking very carefully at the economy, trying to judge whether or not the loss of momentum we've seen here recently is enduring, we are looking for ways to address the weakness in the economy should
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more action be needed to promote a sustained recovery in the labor market. that's it, he tied it right there to labor. >> and one more chart. >> never mind. there's one thing here i think tells you a lot. this thing shows every quarterly gdp report since the recovery began. the ones that are yellow are the ones at 2.5% or above. those are the ones in which you can count on it to be basically growth fast enough to lower the unemployment rate. the bottom line is growth has been not on a sustained basis or any type of regular basis enough to promote growth. >> here's a tough question for you, steve. but you like tough questions. what do they want the u.s., what do they want people to do? what do they, what are they telling people to do without telling them? do they want them to buy stocks, buy a house, buy a car? save their money? there's clearly some message in there that they can't say
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outright. >> you know i think if bernanke had his way, he would take people who are, take either the banks or the borrowers that are close to being able to refy and say, why don't you do this. the lack of sensitivity of refi and the housing market to interest rates is probably the most bedevilling thing for bernanke at any monetary policy maker in these times. >> the other issue, i want to bring in ed yardeni in a second. but in a perfect world you'd have the ecb meeting and the jobs report before the meeting with bernanke. >> my guess is that draghi has spoken to bernanke and bernanke may have an idea of what draghi is going to do. but in a perfect world, the ecb's action, i think is more consequential for markets and more consequential for the outcome of the economy than any action the fed would take. and i've been surprised at how much skepticism there is among economists and guys on the street about the efficacy about any action. >> i'm so glad you said that
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let's bring in ed yardeni of equity research. very happy to have you here. i know were you listening to what steve had to say. give us your thoughts on what your expectations are and certainly relative to what steve was just mentioning. >> i think steve's absolutely right. the fed has been very focused on the subpar growth in parallel employment. and it's really been kind of on the borderline. it hasn't been all that terrible. but it certainly hasn't been as good as anyone, any of us would like. the adp data, which i actually think is pretty decent data, on average it does track the payroll data pretty well. past two months, they really weren't all that bad. so i think the fed is going to be hard-pressed to jump in with any shock and awe radical program. and i agree with steve, they'll probably give us more language that indicates that they're there for us if we need it. but it's relately not apparent that the situation is bad enough to really waste the ammo and
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there isn't much ammo left. >> in your estimation, what did you think that bernanke is hoping that the shock and awe doesn't have to come from him. but draghi instead. >> i would like to discuss with steve the whole draghi thing. i think draghi spoke off the cuff. it was not a prepared text. >> it's a huge test of draghi, a person the markets are getting to know. and another fascinating question, in my opinion, whether or not the ecb talks to the markets with the same sophistication that the fed talks to the markets. >> well -- >> the fed guides the markets and it has ways of fine-tuning expectations, i don't know that draghi is there will. but i think people expect that he is. >> steve, i read the speech. it's a verbatim remarks, there was a transcript and the ecb's website. i found it to be a little bit of a strange bizarre speech. i mean there was an analogy -- >> the bumble bee and the euro.
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and hispanic spiked other the bond and the yields. and he looked at his calendar and said i'm going to talk and say something to calm everybody down. but he didn't think it through. he didn't clearly check things out with his colleagues on the ecb. >> i think it's worth pointing out, ed, we've seen and heard as i reported yesterday and others have reported, that the bundesbank is walking it back a little bit. they've not necessarily been out there saying yeah, we're right along with draghi. >> so you're saying the bundesbank is not on board? >> yes. >> i completely agree with that. he kind of spoke off the cuff and really didn't check with his colleagues. >> ed, let me steer your attention specifically to the stock market itself. right a lot of people look for your advice and certainly people like you in times like these. what do you tell them today, given where we stand right now with the markets, all the issues facing us, the economy, the fiscal cliff, the fed may or may not do what the market wants,
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europe, et cetera, what would you do right now? >> begin the headlines, given all the reasons to be bearish, the market is holding up remarkably well. it's up so far this year it's up on a year-over-year basis. the large markets have been a safe haven on a global basis. if you're a global investor in equities you have to be somewhere. the u.s. is certainly filled that need for a lot of investors and i think the market is going higher, i'm looking for 1450 by the end of the year. earnings and expectations are coming down. i think they are going to hold up over $100 a share for this year and next year and the multiple is running around 12, 12 1/2, which all things considered, giving we're looking at extremely low interest rates for quite some dime, i think the market has some upside potential. >> what areas of the market would you advise people to look to? the dividend payers that continue to do quite well for investors? >> that's a good place, that has
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been a good place to be. it's been picked over pretty well. and you know, it's become so consensus and the crowd of traders they say that maybe that's not quite the screen you want to put on your investments. i think health care looks pretty good. there has been a move towards the defensive sectors. consumer staples and telecom are awfully expensive at this point. health care is still reasonably priced and got very little overseas exposure. it's got a lot of links to the domestic demographics, so health care stands out and industrials, as a way to play in a global economy that's growing. but u.s. companies benefitting more than others, maybe. >> there it is, ed yardeni, grateful for your time today, thanks so much. more halftime after the break. a hedge fund giant returning $2 billion to investors, who is it? and why? details coming up. wouldn't it be nice if there was an easier, less-expensive option than using a traditional lawyer? well, legalzoom came up with a better way.
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welcome back, bob pasani down on the floor of the new york stock exchange, we had a statement from knight trading a short while ago and now a statement from the new york stock exchange regarding the rather strange trading activity at the open. here's the statement. the nyse and nyse mkt are
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currently reviewing irregular trading identified by other people and systems in 148 symbols between 9:30 a.m. and 10:15 a.m. eastern time today. the nyse and nyse mkt will provide updates with respect to these reviews, at this time, we believe nyse systems and circuit breakers operated normally. during this period and we're working with all market participants on the issue. now this follows the statement from knight where they specifically came out and said that there was a technology issue that occurred in the company's market-making unit related to the routing of shares at around, in approximately 150 stocks at the new york stock exchange. that's what we've got now. scott i would note that there was, by my count, seven, eight, nine stocks from the dow industrials that have had very unusual activity. a number of them including alcoa, american express, bank of america, caterpillar, dupont, ge, pfizer, at&t, verizon.
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ge's four times normal volume. american express, almost as much volume so we're dealing with some very large numbers. >> bob at this point we're not seeing any outsized gains or losses in the stocks you mentioned. we're taking a look at the board of those stocks as you mentioned them. i see news crossing. let's throw up shares of knight capitol group. bob you can comment on this as well. this is stock that was getting hammered pretty well today. right now it's down 20%, that's actually off of the worst levels here. we understand now that egan jones has cut knight capital group to b, from b-plus. again ratings agency egan jones reportedly now cutting knight capital group. so we'll see if that has any additional impact in the shares of knight. bob, you want to comment on that? >> well, no, not on that rating change. but i would note that it's important that they have, they have now identified a technology issue, not exactly what the technology issue is but they've
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identified that relating to the routing of shares. now that goes a long way towards helping us out. we saw huge volume coming in at the open and the question was, was there some problem with the nyse systems or not. apparently there is not. and was not a problem. the problem was with the way knight was interacting with the nyse. >> yeah, all right bob, thanks so much as always. an announcement today from hedge fund giant louis bacon, he's returning $2 billion to investors, citing 18 months of disappointing investment returns. kate kelly is ahead of the story and joins us with more. kate, you can give us the reasons but when you see issues like what happened today and what others have cited, whether it's regulation or otherwise, no surprise people are throwing in the towel at least to some extent. >> no, absolutely, scott, louis bacon talks quite a bit in his investor letter. >> the hedge fund industry is atwitter about the news today.
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he essentially says he's going to give back about $2 billion to investors in his flagship fund, in hopes of becoming more nimble in the markets with less assets to worry about. for those who know bacon, the move is not a surprise. he's been considering turning this fund into a family office for some time now. say these people and narrowing its girth is one more step towards doing that. today's move, which comes on the heels of essentially flat results for his fund this year so far, about 3.5%, which describes his own performance as disappointing, makes bacon only the latest hedge fund head to step back. two years ago, trucklemiller says the interim has taken a cumulative toll and lat summer george soros turned his fund in family office, saying the move was an unfortunate consequence of new circumstances, aka the dodd-frank law, which requires
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enhanced fund disclosures. it all raises the question, who's next. given his place in the macro-manager pantheon, paul jones may receive some scrutiny in this regard. still, his flagship is humming along, managing more than $8 billion with returns of more than 3% so far this year. >> kate, thanks so much. i guess the headline here is, it's tough out there. right? i mean for a variety of reasons. >> well, it is tough. i think what's made it tougher than performance are the regulatory requirements, so these people are saying, i got enough money, i just want to manage it myself. not have to worry about investors, it's no different than walmart saying i'm not reporting monthly sales, they just don't want the scrutiny and they're wealthy enough. i know plenty of managers that are giving back money, chris shumway gave over $4 billion back last year and became a family office. so you can see the trend continue. >> let me jump in on something here, scott, if i may. louis basically says the markets
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have become an absolute nightmare. the traditional macro playbook is not playing out because of monetary policy and meddling on the part of central banks, what's going on in the eurozone. he literally says, i shudder to think of the stress that's going to occur during the next credit liquidation cycle, at least the banks would have made a market, however wide, and taken on inventory. but he thinks that because of wrongheaded financial regulation, aka dodd-frank, which he actually describes as kafka-esque, saying it's named after the two members of congress the most protective of the gses in regulation. he says the most plain vanilla securities, also to the market's detriment. >> that's the most relevant point of the entire letter. that's the by-product of dodd-frank legislation. and i think going forward, scott, you have to understand when the markets get in that chaotic type of environment, the liquidity is not going to be there as it's been in years past. you can see more of these mini
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arch coal trading near the lowest level in a decade. a bit of a lift today up nearly 2%. digging through the fund amount ls with dennis gartman. welcome to the show on fed day, as well.
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let's talk coal. why do you like it? >> because nobody anywhere likes coal even slightly. coal's been under pressure from all -- from all fronts, primarily because of the weakness had gone on earlier this year with nat gas prices fallen. with it turning around, moving the other direction, it's time to start looking at coal. one of the old stories i have liked for years in the past. start to like again. i want to own the thing that is did you drop them on the foot will hurt. time to look back to the simple things in the economy. steel, coal. >> kol? >> the easiest to look at because it's an etf. allows me to get by and take a look at the kol. the etf. >> don't want you to be in trouble there, dennis. gold, where's get going? >> what gold is telling you today the fed is doing nothing. the hope is that the fed would be expansionary.
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the gold has taken out support here. i own gold in yen terms, thankfully. gold's got a problem. below $1,600 tells you that the market thinks the fed will do nothing. >> joe? >> you don't think there's gold play right now? >> dennis, thanks so much. talk to you again soon. >> cheers. >> let's make a pit stop on nat gas up more than 5% over the past 5 days. jeff kilburg, when's the trade here? >> well, judge, we are seeing nat gas up 31%. no doubt about it, a little bit dependent upon the weather and as this heat wave continues, dennis is right to see that coal, those companies considering switching to coal won't do that. i think the ung, the etf that tracks the nat gas, coming down as nat gas settles down to 2.50,
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2.60. >> one stock to look at, that name is apache. i think around 85 or so. the range is 80 to 100. if you believe the nat gas story is intact and i somewhat do. it looks interesting. >> steve weiss, what about you? >> look at devon today. stock's down. too early in the higher gas prices to flow through the bottom line and stay away. i think gas will come down in september. >> joe, what are your thoughts on this space? >> natural gas, a while back. wanted to buy it. where it is now, valuation basis, understanding the hot weather, the reason for the rally will begin to dissipate. i don't think you want to be as long as you were six, eight weeks ago. >> i'm with the panel, i guess, and with killer. i like when natural gas, judge, went from $2 to $3 on the contract, that was a massive move and now with us just over
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3.10 it could pull back a little. rather than adding to longs here, i would wait for it to go sup three. >> jeff, got to run. your final trade on treasuries here ahead of the fed. >> i like the ltl, still. i think ben bernanke just like when weiss is at the pedicure on a friday sitting back and relaxing, ben is sitting back and relax. be long treasuries. wait for draghi tomorrow. >> final trades on the other side of this break. . you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter.
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