tv Fast Money CNBC August 19, 2013 5:00pm-6:01pm EDT
side. the do you down below 15,000. nasdaq down 13 and two-thirds points. that will do it for the "closing bell." thanks for being with me. i'll see you tomorrow. have a fantastic night. "fast money" begins right now. live from the nasdaq market site in new york city times square. i'm brian sullivan in for nearly everybody else today. our traders pete najarian steve grasso. let's get to your big story that fast is following. that is the rising rate threat. the ten year yield getting closer to 3 percent by the day so the question that we ask, will rising rates really kill this rally and how are you trading it? pete let's kick it off with you. >> i don't think it will kill
the rally but there is no doubt it will have an impact on the rally. they will at least give us an opportunity to look for opportunities you're always looking for which is a pull back. you want big percentage pull backs to get in. i'm looking at a name like mow sayic. even the forward pe add around 11. i think that area is giving you the opportunity to step in. it's not always easy but it's never easy. it's a warren buffett style trade. now i think the opportunity is in -- >> jim, i'm easily confused. here's my question, if yields are going up that means bonds are coming down which means people have money. isn't the rotation into stocks goes to continue? why is it necessarily a bad things for equitities? >> if inflation was the reason
it would be all right. you have a strong enough economy that's causing the fed to talk about taper. >> the fear is people will stop buying houses cars anything that has to do with interest rates. >> with the fund rates pegged at zero, at three percent you're talking about being too steep. you're going to cap it at three, a little more than three percent. the damage is done. >> that's bullish for an e trader charles schwab where we've seen they can charge fees again because they're not getting paid on it. it's bullish for them but negative for utilities. you want to stay out of utilities, out of the home builders to an extent but the home builder stocks have been beaten up so much that i actually played around in dhi. >> i think the right way to look at this is that higher rates will have a disproportionate
effect. it's difficult to look at the whole u.s. stock market and say this is mon lengthic. first of all higher rates are typically accompanied by a stronger economy as jim pointed out. second, to what extent are we discounting this? home builders are in bear market territory. they're down 20 percent. are you arguing for another 20 persian clobbering. earnings estimates haven't dpon down that low to justify it. we can look at a sector by sector basis, look deeper at equities, corerelation between names in the s&p. we don't have to say the market is going up or down because of rates. pick your spots, look for names you like. >> the dow is up close to 20 percent this year. i know it had a rough four day downstretch this year. i get it. it may go down further. markets have gone up for the most of the year and everybody knows at some point qe is going to end.
do we know when? no but we do know it will happen. the market is supposed to discount information. >> everybody seems to be in agreement short term people are going to react. the immediate reaction is going to be getting out of the equities. that is not necessarily the case. i think we're all talking about a list. where will be the best opportunities. home builders are one of them. the option markets however, that's a trade. home builders i would put in the category of the airlines. these are trades. you look for the opportunity. these home builders have been absolutely beaten. we've seen short term options and in the short term have had great returns. >> you're either prekog or you read the show run down. this is a good segue way. home builders are down nearly 20 percent in the last month.
of course it's off a huge run. lets hit our call of the day. wells far go outperform among other things. compelling valuation is one reason for the upgrade. so would you buy this one? >> i think you have to. they have been able to pass along increases on a lot of their communities. so it's not based on -- they haven't seen any material effect rising rates. at this point i think you have to dabble a little bit in the home builders because the stocks actually took it more on the chin than they should have. >> there is multiple names you can go after depending on where you want region. dhi -- >> more urban living. you have outer price points the sand states if you will. >> i would avoid. >> even as a trade? >> i don't dislike the stocks but i genuinely believe that the leaders of the next phase of this are not going to be the leaders of the last phase.
if you look at the xhb you've got a pretty substantial case to make for the head and shoulders. >> the xhb is not the accurate one to look at because it's not the home builders. they call it that but it's none of the home builders. it's bet bath and beyond and everybody who feeds into these names. you want to look at individual names that you have to create because that index does not exist. >> let me throw something out on these names. a lot of times it's not what the actual effect of rates will be but the perception of the rates. right now the street is rethinking -- >> you can't argue that the effect is hard transpired. >> that's exactly my point. look, the broad stock market is off about four percent right now but a lot of stocks are off more than that. the stock market is in pretty good shape. the market discounted what the
fed is going to do. you want to buy the things that have been beaten down the most. i agree with pete this is a trade here this might not be a long term investment but a nice entry point. >> this is why the next pieces of data are to important. we haven't seen the data come out that reflects a bump in rates. the data is six weeks to two months old. >> the last starts number was a disappointment. one of the first retailings we've got since the may 22nd bernanke event. right now growth investors are looking for things that are improving. they will not find them in housing numbers. as a result this group is going to let left for dead. >> a lot of times it's the perception that the sky is falling. that's what you are seeing with people that are looking for a new residents. that's not the case and they'll turn around. >> sdrnt it say -- >> you have to remember that everyone is geared up for taper
so nobody wants to catch this falling knife. you could see a little sloppiness and softness into those numbers for the next month or so. once you get a sense of urgency and worried about rates going up the first thing you do is pull the trigger. >> i member just a few years ago six percent was gold gold jerry. now 4.5 percent is death. when did that happen? i'm going to get on my unicorn and get out of here? >> it's all about perception and people are looking at six percent as a much higher rate. >> one percent jump in rates on a $300,000 mortgage is about $180 a month. if that's going to decide whether you can afford a house, you shouldn't buy. let's look at after hours. >> speaking of perception shares of retail urban
outfitters beats the analysts estimate. sales came in a little lighter than expectations but the profit margin story is giving investors something to be happy about. gross margins improved over the same time last year as they reduced the number of merchandise markdowns. basically they didn't discount inventory for sale. that's why investors are happier about it. you can see shares up five to six purse in the after hours. >> hard to believe but it was nine years ago today that google went public came out at $85 a share, rose 18 percent or so on the first day. we'll look at how far it's come and where it goes from here and if they have a bigger lead on competitors than they've ever had before. plus steven roach will tell you
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anniversary. nine years ago they serve up an ipo and with 19 million shares there was plenty of cake to go around. the birth of google is legendary. two stanford phd students set out to work on a research project. within two years they unleash a search engine that revolution niezs the internet and turns google into a verb as commonplace as kleenex. an august 19 2004 google made its debut at $85 a share, making 1,000 employees millionaires overnight. but the party was only just beginning. google soon emerges as the major player in online e-mail software and video, android becomes the most widely used mobile platform on the globe and we catch a glimpse of how much google could become a part of our every day lives with google
glass. today the shares closed at $865 as they take the company toward a new decade one question remains, is google the knew ibm player of our time or will other players finally catch up? >> nine years ago today a little search engine that used to be called back rub went public. since then google shares up more than 900% from the ipo. with more on where it's been and going, let's bring in dennis berman and henry blog. henry, listen where it's at now is probably so much more than where people even the most optimistic thought it could be nine years ago. >> extraordinary. >> how much more gas is in the tank do you think? >> the search business is still growing almost 20 percent a
year. that's the main engine of the company. question is whether other things can kick in at the massive level than they are already. the question is what kicks in after search? >> what do you think? >> advertising, video, youtube, they made a huge bet on that. they're positioned in mobile. so they're spreading search to mobile. they have a better position than they do on the desktop. the question is whether they kick in but search is healthy and will drive them for a while. >> we talk about the stuff and i made a comment earlier today and some people thought i was nuts which is at what point do they get too big that we need to worry about how big they're from a government perspective? >> we see the government getting more interested in what they're doing with the motor roll la acquisition. i was just thinking about that. when you think about their role
in video, their role in mobile phones and software you got to start asking that question and you have to wonder ten years from now are we going to be in a microsoft situation. some thoughts about breaking up the monopoly. i see ten years down the line that google sprinters into a few different companies, perhaps a core internet software company, maybe spin out a device arm or do something different. >> could you see android being a separate company some day? >> they just bought motor roll la so in the short term not at all. but you can definitely see a company of this size become so hard to manage. that's the real key point that henry brings up. that want to float balloons in africa, they're building glasses, cars.
can they rely on the margins of the advertising revenue. it's powering the engine but can it forever. >> two years ago google was left for dead. facebook was coming on strong and apple on an upward tear. it came out of nowhere to regain its innovation strategy. how long do you think they can keep this up whether you think google glass is innovative or not but the driverless cars. they're always coming up with something. >> they get us talking about these innovations, the glass, the car, the new mobile devices which do a few nice tricks. they have gotten into our heads and gotten most importantly into the heads of software developers who are the key in making sure that they're willing to work there. as it stands right now, frankly, i don't see much in the near term that says they're going to slow despite the great marketing. maybe henry has a different
view. >> larry page has come back very bold move. he shook things up immediately saying we're going to get back to our roots. a lot of people left the company, turned things over and that accelerated the innovation. >> did you see two years ago where they said, hey, guys you're missing the picture. >> they still are one product company. they have all these sexy things going on the driverless car is so cool. >> i think you're making a huge point. they regime are a one product company. >> so is exxon mobile or ibm. >> exxon has physical molecules. google has an ailing rhythm. >> google has a printing press that manufactures u.s. dollars 24 hours a day. >> that's illegal by the way. >> highly unlikely that somebody
disrupt search. >> yahoo! did it to aol. >> google has a big advantage which people missed with apple. apple is so dependent the product search. search improves incrementally. on mobile they have 95 percent shares. it's extraordinary where they are. >> isn't the explosion that everyone forgets about, youtube, most people don't talk about it anymore but that's the explosion that i see that's characteristic of a growth company. >> they're dominant there and broadcast dollars are going to go there gradually. it's not going to be fast or as profitable as search but it's going to be a big business. >> let's bring in dennis berman. >> if they have 95% of mobile search right now where is the growth? $8 billion last year but it's
going to be 8.25 this year. that's not a large growth number. >> but the rate of mobile penetration is absolutely astounding. if you look at the traffic to a business inside or something else, people are giving up their pcs to go to a mobile environment. the company is how well you can monetize on mobile. the real invasion is going to be two or three years out they've concocted a way based on where you are -- remember you're giving up your personal data. they're a higher quality search and people are willing to pay more. that's the real growth opportunity for google. it's happening right now. i don't see that slowing down in any real way. >> some day we'll all be riding in the google hyper loop. >> that would be nice. >> guys thank you very much. >> see you on the other side. >> exactly. if we survive the 800 mile per hour.
let's trade google. >> sounds like you're loving it here? >> i don't love any stock. i have a prenup with any stock i get involved with. but the market is vote k as we speak. google is up 30 percent and apple is down. why. one is growing and one is not. google is growing at 18 percent a year. perfectly reasonable tons of cash, not a lot of competition for their core business. i can't imagine this stock not getting getting getting to 1,000. >> i'm actually still long the name. i did sell about two-thirds of my position around the $900 level. i'm waiting for a little weakness in the stock but i'm still in a believer in google. i still love it, probably my all time favorite trade. so short it? >> i don't like playing against google. for them if they come out with something big, this is the type of stock that can explode.
>> you have good support, so if it drops further the buyer should come in there. that's a great risk reward. >> what's not to like when you own the mobile search area. that is an area i think is growing. when you talk about google chrome, 750 million active users per month. there is a lot to look at right now and say they're somewhat of a monopoly but these guys are making the money, they've got the great balance sheet. this is a company that i think does get to -- >> that sounds like a buy? >> yes. >> i'll say i'd rather buy the cheap tech stocks. google may have another 15 percent but i'm more certain that apple has 15 percent. >> give me a chance i'll take yahoo! >> the only problem with apple is it's become a buy back story. >> i like it. >> but a guy that needs sexy growths -- >> making money is sexy. >> i hear you.
>> you know what's sexy? sexy back. time for the big movers of the day. we call it pops and drops. the first pop is a name we just talked about, apple, despite the steve jobs movie's bust what do you see, jim? >> we just talked about it, the buy back story is still there. you may not like carl icahn but he gives them a reason to buy. >> another pop intel popping today. >> sold to you. piper jaffray upgraded from an under weight to neutral which i know gets people excited. if you need a reason to bail out of your intel you just got one. >> you're dropping the pop. >> they're a year away from getting a chip into their mobile devices. it's a lower margin business. there is nothing i'm excited about here. >> the next one is my favorite
industry for the next decade. i'm not invested in it but 3-d is going to be the next big game. actually dollar stores are my favorite industry -- >> i did think you were going there. >> i got ahead of myself. >> they talked about the sales being stable right now. i like this entire industry especially if we are starting to go on this downward push. a little bit of concern in the market. i like dollar stores. i think dollar general is one of the best. >> now to stra ta sis, steve. the other name is 3-d systems. i love 3-d printing as well. i think it's a great technology but this name seems to garner a lot of the attention and seems to be the most credible company. i don't know what that even means but when you talk to people they like ddd and this
one. >> i've been told i'm going to be replaced. >> i'm long hewlett packard. they were once interested in 3-d printing and they have to get reinterested. >> we're getting a pop for hall bet, the fish. a german man reeled in a 550 pound fish. the massive fish took three men 90 minutes to real in. they did need a bigger boat. it couldn't fit in their current 19 footer. he's waiting to confirm the record. >> tastes like chicken. >> did he catch it while shirtless? >> why is it shaped like a -- >> still ahead regulators rubbing up the latest settlement
involving fip cal poen. how will he support his lavish life-style. a deeper dive into that story after the break. a look an how to play beaten down cat pillar. inventory decreasing and steer clear to the big cat or time to jump in? street fight coming up. vo: i've been around long enough to recognize the people who are out there owning it. the ones getting involved and staying engaged.
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our visionary cloud infrastructure and global broadband network free you to focus on what matters. with custom communications solutions and responsive dedicated support, we constantly evolve to meet your needs. every day of the week. centurylink® your link to what's next. >> welcome back. lets it's turn now to china, specifically one industrial name heavily leveraged to that nation caterpillar. you know them for tractors and
mining equipment but some say concerns are overblown. buy or sell the big cat. time for a good old fashioned street fight. jim is our cat bull josh is our cat bear 90 seconds to make your case. >> anybody who is saying that you are short caterpillar because of china is about a year late to the game. that's why caterpillar is down from 116 to 86. leave that aside. i know jim chain knows has been saying that. once the global economy starts to pick up it's going to earn $10 a share. i'm going to buy that all day long. i like to buy them cheap. a like them with a strong brand name. you correspondent get better than cat. the number two, most people don't even know. you have a management that can't be beat. you have cash flow of 10 percent.
more of it's going to be paid out in dividends and stock buy backs. look to see more of a buy back and dividends. that's it for me. >> the one thing we agree on is the stock is cheap. it's cheap for a reason. this global economic turn around is not a foregone conclusion. right now you're seeing this discount in place and i think the thing with caterpillar, very simply is until this management team can demonstrate the ability to even hit their own forecasts, this stock is probably stuck. you've got a flattening 200 day. you've had basically no movement since 2011 but with a ton of volatility. -- 2010 excuse me. at the end of the day this stock is going to be a proxy for china whether you like it or not. that's how it's going to trade.
that's how it's perceived. >> pete you're going to be the jury and maybe the executioner. >> josh, one of the things you swayed me with but it's not to your side you said it's gone nowhere over the last two years. however, when you look at the last two years this is the low end of the range. when you are looking at this in the low 80s and it's been above 110, this is a great opportunity to buy. >> tell us who you think won our street fight. tweet us @cnbc "fast money" using hashtag bull or bear. we'll have the results at the end of the show. the world's second largest economy is battling but you can put its explosive growth an ice. one of the leading experts on china, he's been to china many times, lived in china for years, we're pleased to have him on "fast money." what's your general outlook for china right now? >> fears of a crash are
overblown. china is slowing, we know that but the government has got plenty of ammo to deal with further downside risk borth both in terms of monetary and fiscal policy. they're trying to do some big changes in the broad macro structure of the economy so they're prepared to take a short term hit. >> are they losing their edge as a producer? >> i don't think so. their wages are still maybe five percent of ours manufacturing compensation, that's benefits and wages. they're going up at a rapid rate from a low base but they've got scale, infrastructure new capacity and new technology. they dwarf any of the smaller economies in asia in terms of what they can deliver to the global marketplace. >> there is a lot of discussion
about treasury yield. will china help keep yields on u.s. treasuries low or add to the pain by selling off and jacking up rates here? >> no selloff right now. china buys treasuries because they want to manage their currency very carefully but over time, over the next two, three, four years, china becomes more of a consumer less of a saver. they have less surplus savings to invest in treasuries and other dollars based assets. they're going to rebalance away from the treasury play and if we don't rebalance away from our deficits and lack of saving that's going to be a problem for our rates. >> most of the gains have already been seen or priced in and that this process of going from infrastructure economy to more of a consumption economy is a multi-decade process?
>> the urbanization story is mid strange right now. the urban share of the chinese population, 52 percent last year headed up to 70 percent by 2025 or 2030. with that type of push they're going to be a high investment economy for years to come. i won't mention jim chain knows name but you hear from him that you can't keep putting infrastructure in place is wrong. they need a lot more to build over the next 15 to 20 years. >> what do you think on steel, copper on coal, is it too early that people have been betting on china and using those as a proxy
trade. is it too early for them to buy those stocks have have been beaten? >> i think the china crash landing, manufacturing implosion story is in the price. it's been beaten down. the latest numbers are starting to stabilize. i don't look for a massive acceleration of the chinese economy the seconds half of the year but if china puts in a bottom here, gdp you'll see that play out. >> there's been a perception that through the 90s that they had a competitive advantage because it didn't give a hoot about the environment now people are forcing them to take care of the environment, it should raise costs is that something to be concerned about. >> it is. they have the mother of all environmental degradation and pollution problems. they tell us they're focused on it. i hear that every time i go there and i can't breathe when i go outside. you know they have to deal with it.
this is a major source of civil protest, potential risk to social stability and it's not costless. they're leading the world though in terms of ramping up in alternative energies and i'm hopeful that they will begin to address this and the structural trance makes of their economy, moving from manufacturing to services where the carbon footprint is a sliver will be helpful in dealing with that problem. >> steven, thank you very much. quick story about steven. in 2005 do you remember this on my previous network we were talking about the housing market -- >> yeah. you were the last guy to refinance. >> no. we were talking about me buying a home. he said what kind of loan did you take out. i said a 30 year fixed rate. you looked right at me and said,
so you're the one. i'm in the same home with the same loan. >> you never refinanced. >> i can't. i don't think i have the equity. i bought the day the market peeked. >> hold on and one of these decades you'll be able to do it. meanwhile enjoy that 25,000 square foot house. >> that's just the dog house. thank you very much. coming up a new development in the crackdown on hedge funds. reaching a deal with the s.e.c. and releasing a statement, a few of them. we've got the details. first the top trending trades. day after this. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online
>> big news that he settled with the s.e.c. with admission of wrongdoing and a ban of at least five years from the security industry. technically he'll still be able to run his company, but he won't be able to make any investments or raise any money. he can't associate with brokers, dealers or ratings organizations and have to pay a fine of $18 million. he said he's happy to move forward and get this particular legal issue which deals with using $113 million in investor money to help pay his personal taxes behind him. in addition he runs the longer term investment manager group which is publicly traded and the wireless company. it filed two lawsuits last week against companies it accuses of blocking business operations.
a huge fall from grace. falcone and his wife a high fashion mother and movie producer named lisa maria were once fixtures in the new york society scene and their charity donations including a pot bellied pig used to play will better in their daughter's school play. it may be a lower profile existence at least until he can get through this probation period and hopefully for him come out the other side. >> thank you very much. we appreciate that. i'm sure there will be more on that story as the day progresses. we're hearing that jpmorgan is facing regulatory issues. what are you hearing about them at this hour? >> according to the "wall street journal" which is still the main source on this the department of justice and specifically the u.s. attorney for the southern district of new york is looking on a criminal level into issues that were settled i believe last month on a civil level with firk
in washington over jpmorgan's alleged manipulation in the electricity market in a couple of regions, one dealing with california and the other with the midwest. in the settlement order which came to a settlement of $410 million which was the largest enforcement action for them they highlighted about a dozen strategies in which they allege that jpmorgan sought to manipulate markets and get preferable prices for their entities. more details are yet to come. >> kate kelly, thank you for bringing us both of those stories. we appreciate it. still ahead, will the board room brawl at jcpenney impact the retailer's bottom line. we'll head to the options pit next. ters to look for the best possible price -- maybe even better than you expected. it's all part of our goal
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this you get burned. this is my retail trade, remodelling trade, home builder trade. i would definitely be playing with 20 percent of whatever you want to risk. >> next up best buy, they're the second best performing stock in the s&p 500 so far this engineer. josh? >> this is a phoenix but i don't like the setup going into earnings. they typically miss an average of 21 percent to the downside whatever the consensus estimates are. stock is up 160 percent year-to-date. what more do you want out of it? could it have a great report and explode higher of course flip a coin. typically this setup does not reward long trades. i would avoid it. >> sticking with retail jcpenney, certainly one. most talked about stories of the year. the retailer reporting their quarterly results. brian stutland who are the options pits say?
>> the index in the pits behind me. talk about this the bond market hates that. the borrowing rate has increased tremendously. we saw that in the options market. we saw a put spread expiring this friday to play to the downside. they're betting that jcpenney would trade below 1214. that's their break even. this is a definitely a negative bet. option volatility is skyrocketed. there is a lot of fear in this. normally it moves about 7 percent. options players are playing for an 18 percent move in the stock. you got to be careful if you are invested here because it could be a nasty selloff if things don't go well for the stock. >> still ahead we're trading your viewer tweets everything from city to the short bond trade. that's all coming up right after the break. stick around. [ indistinct shouting ] ♪ ♪ [ indistinct
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ensures support a breakthrough. and sooner than you'd like. sooner than you'd think. you die from alzheimer's disease. we cure alzheimer's disease. every little click, call or donation adds up to something big. >> not so fast steve grasso. our traders may be quick but they're not always right. in june steve made a bullish call. take a listen. >> it does look weak on a
technical basis but power plants are switching from goal to nat gas happening right now. there should be a floor in ung. i would dabble at these levels. >> the stock is up 11 percent. steve, are you sticking with the trade? >> i would say that september is a better month to play nat gas going forward. instead of abandoning the trade i would buy xco. >> xco, got it thank you. meantime, folks, you tweet it we trade it or they do. let's get to your tweets to our crew today. josh why has citigroup done so poorly in the last seven to eight days. >> i looked at this and i wanted to say something good. listen, this is the only mega bank that didn't take out the may highs. i have a problem with that. tech nickly it tells you that the high conviction buyers aren't there and i think it will stay that way.
this thing is down 5.75%. i like bank of new york melon. i think they are much better leveraged for what's to come which is higher rates. huge oceans of cash balance that will benefit where they weren't making a profit on it at all. i would go with bk over city. >> pete, what do you think of qualcomms january 2015 calls. >> that's so far out to the future that i don't think you want to overread that. i don't think it's something that any of us would want to be trading off of. even january of 2014 that's getting closer so i would start paying attention to that. this is obviously somebody who is sophisticated but i don't think you want to follow this from a trading perspective. i'm one of those folks.
i'm not going to be looking at this. >> steve, disney? >> i love the content providers, i love disney but the chart doesn't look as constructive as lion's gate films. i would play lgf. >> jim, when is it time to enter the short treasury trade, the tbt. >> the short answer is never. this is a public service announcement, don't play with these things. it's like playing with matches in the middle of a gas station. first off, we've already had the rise, about 140 basis points or so in the ten year treasury. that trade has gone. we talked about that at the beginning of the day. further more, these things are derivatives and you have to be aware that there are costs that get involved with trading these things in and out. you have to have the microscopic one day trade on this and i wouldn't short it. >> good job, everybody. your first move tomorrow when we
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>> our hard working staff of hundreds of unpaid interns tallied the votes and you said that jim won our bull fight with the bull position saying buy the stock. it's time for our final trade. let's go around the horn beginning with pete. >> spectra energy. they bought the september 33 calls back at the end of may. they just today started to buy the september 35 calls. i think the stock is going higher. >> jim? >> the refiner marathon petroleum corporation. i like them cheap and when they spit back cash -- >> doesn't it sound like the lowest pe. >> these guys print money and give it back to the shareholders. >> steve? >> pandora, they're showing up in more and more autos. did you know half of all listening is in stock.
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