tv Fast Money Halftime Report CNBC October 8, 2013 12:00pm-1:00pm EDT
duelling war of words continuing in washington, guys. >> eamon, thank you so much -- eamon, thank you so much for that. we watch simon, back here, now, the vix jumping above 20, the dow off 80 points. >> and the dow down now 82. obviously, we're watching exactly what happens this afternoon. from our team, that's it for "squawk on the street." >> now time for "half." guys, here's what we're following on "the half." the perfect storm. why one of our guests says the d.c. duel is good for investors. he'll tell you where the opportunities are. twitter's true test. the professor is grading what the sought-after social stock is worth. the top story is now the deadline at nine days, the shutdown saga drags on and our question is, are the markets too complacent about what potentially lies ahead? it is "halftime," so let's play the action. joe terranova, i'm going to you first. are we still too complacent about what could happen? >> well, i think if you're being
complacent right now, then you're not in the right frame of mind. because what the market is doing right now, and i'm very respectful to my -- you know, those that are on the show with me over the last couple of weeks -- but many people keep saying buy the dip. well, you have to understand that this is becoming a more significant correction, clearly, than we saw over the last couple of weeks. and what you have to factor in, scott, tekt technicals coming into play. >> steve weiss, vix is up, dow down 850 points since the september 18th highs. is the market really prepared for going over the edge? >> i don't think any market is prepared for defaulting on debt, particularly when you're the usa. no, it's not. i don't think it will happen. i don't know anybody who does think it will happen. i do continue to expect volatility right up until the time that we hopefully get an agreement in d.c.
so i'm actually anxious to put money to work. but i'm unwilling to do it now, because i shat losing money, and some days i'm very good at that. so i'm trying to be patient, pick my spots. >> simon, that's what makes this market tough to navigate. we don't know what will happen in d.c. we don't know how bad the are the rick is going to get or the lack of a deal is going to be, if we do go over the cliff, what's it going to mean to the stocks? >> i think they're going to rally in november, december. you're a hedge fund manager, your risk has been off for a while. performance terrible. you're looking for the markets to pull back. and every time -- i know we've had this, and i respect what joe was -- every time we have an opportunity for a dip, to get in, unfortunately, it's the consensus, and that's what the market wants. more importantly, what sectors do you want too avoid? i think the consumer confidence is going to take a hit through this. anything consumer staple, high-end retail, hit. any of the names that are selling off purely on the risk-off trade, i'd be going in and i'd be buying until my hands
bleed. >> the next guest thinks it will get worse before it gets better, says it's gad thing for investors. paul richards is the head of fx distribution at ubs, live on set, and he'll tell us why this is good, because many people think it will be real bad. >> it could be bad, scott. depends on your view of the political outcome. i think the market underestimated the situation back in september. we were so focused on the fed, we forgot about washington. so now, here we are one week into thing, absorbed by it, and we're in danger of overreacting, in my opinion. i think it will get slightly worse before it gets better. i think we go into friday, the weekend, we have nothing. come monday, you could have a brilliant buying opportunity for this market. >> which is why you call what is taking place and what could take place a perfect storm for risk. explain it. >> absolutely. well, i think at the end of the day, these are politicians, a lot of them have to get re-elected in 13 months' time. they are politicians. they're ghing to ultimately react to the polls and the polls are starting to look pretty poor for some of them. and i think that they have an obligation to look after their
constituents and ultimately they'll do the right thing. so couple that with doing the right thing and the fact that the fed is on hold, it's sounding like good call by the fed now, and that's a perfect storm. >> john najarian, what's your thoughts? you buy s&p at 1,650, so 13, 14 points to take out of the s&p were you get in. >> that's not bad idea at all. i think we'll see that flush. certainly the rhetoric between the president and the house speaker, boehner, has ratcheted up, and that's why you've got fear reflected in the markets both in the sell-off and in some of the volatility paul's spoken about. obviously, we've said it many time, you can't get the toothpaste back in the tube. if they let this go too far, this is going to be a significant problem. now, i do believe paul's right, and that 1,650 will be a good
buying opportunity. [ cheers ] however, as you can hear behind me in the vix pit, there's a lot of folks who think we'll slam right through that if indeed the president wants to continue his rhetoric along with the house speaker. >> a fair point, right, paul? this could get a lot worse if we're overestimating the ability, even at the 11th hour, to come in and make a deal. >> i don't underestimate that at all. they have to get something done. i don't think we'll see anything until the last hour. we could tip over the debt ceiling, but in my opinion, by just a day. i think in a week, we could be looking and say, this looks a lot better and we'll regret the opportunity for not putting the toe in the water here. >> guys, how do you sneel. >> paul, could you clarify the 11th hour. it's been explained to me over the last couple of days that the 11th hour maybe is not on the 17th. on the 17th, the treasury can no longer issue debt. but they still have 20 to 30 billion available to pay bills. so the 11th hour possibly comes on maybe the other side of the weekend, more towards the
22n22nd, 23rd. >> but that's too technical, right? >> no, it's not. in terms of managing money, we understand we have not reached the default point on the 17th and we walk it forward another weekend, that gives the market, which is already in a vulnerable place, further position to decline. and like john said, you can't put the toothpaste back in the tube at that point. >> mark understands the 17th to be a deadline. there better be a decision by the 167th. we better not go over the cliff, the edge, or you're going to see this market sell off, certainly a hell of a lot sharder. >> if market participants were smart enough, were it resolved on the 17th, the 20th, it will be marked down. can i finish -- you and i were talking about the show. you said that all of the hedge funds are -- pretty much all the ones you have spoken to and i have spoken to, have taken risk off. >> yeah.
>> that's crucial in the underpinning of the rally you see coming. >> i think it's a big thing. hedge funds do not have risks. the other thing i like, if you go back to the beginning of september, you had the fed and you had washington brewing. what i like is if we can just get through the situation. apart from the fed decision, the fed chairman decision, i don't see any problems ahead. and that really gives me confidence to go after risk, if you hold the view that a debt resolution is coming. >> you mean earnings. you're confident enough that earnings will come in good enough? >> i think bank earnings -- every hedge fund i speak to, bank earnings is the number-one focus and hints, obviously, big numbers tomorrow. get through that day. that may not be good. into the weekend, i don't see good things coming. by monday, it could be okay. >> the other trades you would do, besides s&p, 1, 650. you like dollar-yen. why? >> brilliant opportunity for risk. beijing could go into qe 2 when
the fed meets. it's long in the u.s. dollar if we get a resolution. i like dollar-yen a lot. >> paul, thank you so much, as always. >> anytime. >> paul richards, ubs. how is the shutdown likely to play out in washington, and what will the real impact be on wall street? let's ask a man with experience in both places. harold ford jr. is a former congressman from tennessee. he's now a morgan stanley managing director and live at 30 rock. good to see you. >> good to see you, too, man. >> so the president kales boehner, says he won't negotiate. then he's only willing to noeshtd if the governments open, the threat of a defate is reversed, speaking at 2:00 this afternoon. what will happen here? >> you know, i've listened to the start of the show and a lot of good points were made. one or two things to the political dynamic. the fact that there's now a conversation between the democrats and chief republicans, meaning boehner and obama, is a good thing. for the last several days, there's been no talk. two, the think we're moving away from obama care, or affordable
care act, as the linchpin, if the conversation is accurate and the president said he's willing to have a conversation about debt and budgets as long as republicans don't hold the country shauj around a debt ceiling debate and debt ceiling, that could be problematic, shared on the show already, could be a good thing. we're moving closer and closer perhaps to reality, than i think one of the former guests said by monday, tuesday next week we could have some sort of resolution, or see somehow we get out of the mess we're in. i'm partially encouraged. don't get me wrong. i don't like where we are. i didn't think we'd be here. i'm encouraged the conversation isn't no longer what ted cruz made it out, health care, but turning to structural issues, giving paul ryan and sorries the opportunity to emerge. >> you've been in the scraps that have turned into down-right skrums. i think it's fair to say. behind the scenes, is there a lot more going on than we would know about publicly? >> i think there's not been a
lot of conversation over the last several days between senior people in both camps. i think the fact they're reporting, calls are being made, conversations being held, is a good thing. i watched speaker boehner over the weekend on one of the sunday talk shows and he made clear he was hoping the president would negotiate with him. the fact the president has reached out is a positive thing. again, i don't mean to applaud or amplify, at all. only the fact they're talking and moving from health care to deficit reduction, spending controls as the linchpin for this conversation means we are getting closer to some resolution. whether or not we trip the debt ceiling onto, i don't know. i think it's likelier now, than it was a few days, before october 17th, which is an important day, we could find a resolution. >> i mentioned how you're a bridge in many ways between washington and wall street. you have a good eye on how both places may be feeling about this. you think the markets have gotten too complacent about what going over the edge really means? >> no, i think -- i think your
roundtable, your normal roundtable had it just about right. there are members of congress, pedestrian americans, who watch what's happening in washington and they look at the dow, the beginning of the day, end of the day, as some sort of bomb ter of how everyone -- barometer of how markets are reacting and the fact that there is some reaction is positive in terms of getting congress to act. don't get me wrong. i'm not urging or hoping the market responds negatively. it's certainly awakening those in washington to the implications of inaction on their part. >> you make an interesting point here. you call one to watch here a man who's been off center stage for a while, and that's paul ryan. why? >> he's a serious thinker. he's the most respected guy on the republican side when it comes to dealing with bhuj ets and spending controls. if he re-emerges, or if he emerges as a serious voice and a big voice in this conversation, i think that means that we're finding a way to begin to talk about ways that could bring us to a resolution. the president's made clear. obama care is off the table. it passed. the court declared it
constitutional. and the president was re-elected. the fact that one small group in the house think -- believes they can undo it led by a senator -- junior senator from texas is preposterous. let's talk about what's really separate -- what's a problem for the country, and what many americans all believe, we spend too much in washington, and how do we begin to address that? the president agrees with that. the republicans agree with that notion. we now have to come together and figure out how to do it. now that the conversation is turning to that, it's a good thing for -- again, i'm into the applauding for where we are, but it's good thing to help us get to a resolution. >> understood. harold, thanks. >> scott, thanks. >> all right. harold ford. dominic chu. >> well, scott, we've talked about certain talks, the mim movers -- momentum movers, it's about the upside. you know the names we're talking about. think linkedin, up 95% so far. the business networking site. internet radio company pandora up 169%. put priceline, tesla, netflix,
all of them in there, are they showing signs of weakness? they rose quickly, but they could fall fast. momentum trades will be a focal point for traders especially if the prolonged talks go on about the debt ceiling and government showdown. scott? >> joe? this is a critical point. >> it is. >> for many of the stocks. >> nasdaq down as well. small caps down, significantly as well. let me be clear. i talked about a war on momentum last week and i screwed up that trade. let's not think i'm making a ton of money with my comments. that being said, the comment that i made to you about next week, i don't think the markets have -- you're right. i don't think the markets we're talking about a monday deadline, i think the market is in touch a technically vulnerable place, i think the fact you see momentum stocks going down significantly today, they need a resolution by friday, in my estimation. >> i want to know about the individual names which people have hung onto for a long time.
and whether now is the time to get off that ship or whether there's some opportunities still left in these names? >> go ahead. >> no, no, i think we're talking about the risk on, coming on. and these are the high-beta names that you're going to start buying to get the return before the end of the year. momentum stocks on the downside, not on the upside, buying more facebook yesterday. fundamentally, we like the name. technically, it looks strong. >> down 5% today. >> down 5%. i will be back buying more into the weakness. that's what you need to do. those are the stocks on the momentum, on the upside, that will turn around. if you believe to joe's case, more serious, yes, a lot more downside, but that's not our thesis. >> john najarian, what's your thought here? >> judge, i think that many folks were focused in on facebook, as simon was talking about, saying that maybe that's where they raise money for the twitter ipo. i think what you're seeing today is both what joe was saying as far as those momentum names dying off, and raising money or getting cash rich, so that you have money to invest and potentially get into that twitter ipo.
so both it's the risk that we face going into the debt ceiling issues as well as the raising of cash from these basically we've talked -- >> are we buyers here, doc, or are we running around -- >> certain ones of these, yes. i mean, last week on panex and tesla, i feasted on thashs because folks were feasting. today, you'll get another chance. and like i said, and paul richards said, you'll get a flush today, perhaps after the president speaks today, and i'd take that opportunity to get into some of the names. >> joe, you don't think so. >> no, i don't. i don't. i don't think you do. i think a lot of it has to do with the algorithms that follow the momentum names. clearly, they're backing off the -- the bids are gone. can you see they're evaporating. you've got such a speculative length in all of the names. they have performed incredibly well this year. i think they're rolling over. >> people made a lot of money in
these stocks. if you're worried about the market, what do you do? you take the profits, significant profits, go home. you don't risk losing them all, as people saw they could do with apple last year. >> they're not selling off on big volume either. if you are looking at volume in the needs, it's just high -- >> yeah, you're right. coming up next on "the half," when carl icahn tweets, the street listens. revealing yet another position using the social site, and we're trading that action. plus, how hedge funds are making money from the government shutdown. kate kelly joins us and reveals two ways big funds are profiting from the d.c. dysfunction. [ bagpipes and drums playing over ] [ music transitions to rock ]
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and now, talking with carl icahn, tweeting his support today for a board of directors change at nuance communications. joey, let's talk about talisman first. what do you think about this one? >> first of all, they had this call. excellent job. pete made it its final trade. you're talking about a canadian company behind the curve in terms of monetizing the shale assets. i love what carl's doing. i have been talking to others about this being a favorable theme in 2013, 2014. monetizing shale. that's really all we have right now. do you follow a call-in? yeah, i think you do.
i think you follow him in, just as you should have followed hess, eog, and oxi. >> i agree with that, judge. >> about talisman or nuance? >> about both. in fact, i am long both, although i sold a ton of stock against the talisman, pete had it last wednesday, and the stock ran to the upside here, the options more than doubling. carl is money in the bank. and when this guy tweets, obviously, people listen and respond. >> yeah, no doubt about that. let's move on. navigating the shutdown, a confusing task for individual investors. but hedge funds, they don't have it any easier. kate kelly has this side of the story. >> good to see you, scott. i think this has been a thorny patch for hedge funds. a couple of different things. you're seeing just overall light volume. if you look at yesterday, nyse volume, versus even the average for the prior week, which was week one of the showdown -- i'm sorry, shutdown, or showdown -- >> it's both. [ laughter ]
>> a freudian slip that was apt. you're seeing muted volume. i think one thing people are doing is going long the vix, obviously. we had a recent high that we hit intraday yesterday, looking at numbers way up from where they started. >> we're going above 20 today. >> yeah, renewed dish even the vix. people are expecting choppy markets. that said. some of the traditional plays in an environment aren't working. you might think gold would benefit from all of the uncertainty and some of the fear and anxiety out there. that's not really happening. i'm told that some people think the shutdown could go till halloween, that unless you see a major market tumble, there really won't be a catalyst for resolution. and that has people somewhat nervous, but not so nervous that they're sending shares down. >> those wouldn't be the shorts, the people that are short the market. they tell you that it's going to halloween -- >> well, you know, that came from a hedge fund manager who plays both short and long positions. >> i'm guessing he's short.
>> yeah. >> well, i guess. the point being, i think people are not seeing a resolution anytime in the immediate future. >> point being, it's what paul richards talked about, simon, others, you have this pent-up demand to get back into the market. you have a lot of cash ready to be put at work, put to work. and once you get some sort of resolution to all of this and could you have this flush for november, december, and a sizable rally. >> right. and i think that's the thing this year. >> that's what the funds are betting on. >> right. there's been so much sort of bull energy. people have been wondering when the party would end all year. now we've got some continued dysfunction in washington. but what i'm hearing is that paralysis on capitol hill is something that's already baked in. and it's not going to cause the market to break. we need to see some other indicators that really cause worry. >> if you tell me earnings will be strong, if we're going to see double-digit growth, then, yeah, i'm ready to go back into the market. i want to. i believe it's the right move. the economic growth is going to be strong as well. yes. but i'm not going back into the market on the expectation that hedge funds, who've
underperformed all the year on a pullback, are going to think this is the last run -- [ overlapping speakers ] -- i would tell you, simon, an actual hedge fund manager, who has underperformed all year, and now the market rolls over, has a higher propensity to run for cover and get out. >> the big news is the fed continues to be accommodative in this market. that's the big news. >> we're past the point that -- [ overlapping speakers ] >> -- real negative news to stop the market from -- >> the negative news potentially comes on friday. i think earnings -- financials have to prove themselves. >> everyone has made the trade that you're talking about the last 18 months has underperformed the benchmark. >> absolutely. [ overlapping speakers ] >> -- muted return, right? we have an s&p up 18%, average hedge fund is up 4%, 5%. >> a little more with september numbers, but not far off. >> i was talkings end of august.
it's been a tough year for the average guy. it's the heavy hitters you're seeing double-digit returns. >> and they want to get paid. >> the point is, if they see an opportunity to get in, they're going to get in. if they think there's money to be made, if you get this -- >> absolutely. >> -- nonsense in d.c. out of the way. >> here's the way it works. if the market keeps going up and you have a hedge fund manager telling the investors, i'm bearish, i'm bearish, i'm cautious. he's not going to get in, because then he's violating his discipline. but if you get in a hedge fund manager, you get the buying opportunity, now they're getting in, because they can't afford to underperform the market any more, and it's okay to lose money if the -- not really, but if the market is going down. >> i want to get a comment from dr. j on the vix and what we've seen there, doc. we are over 20 today. and we -- >> yeah. >> -- have been rising. >> exactly, judge. screaming higher, in fact. the level of shouting here in the pit behind me. there has been so much buying. that's been met with supply, however. in other words, the demand, people looking for that
protection have scrambled into the vix, and it's driven it through 20, as you say, now, 22 was roughly the high last december as we were going into the sequestration and/or whether or not we would miss the end of the year -- which we did -- and the very next day they basically went back and fixed it. we could certainly see a whoosh of air, a vacuum, if you will, to 22 out of the vix, and that's what a lot of the buying was betting on. >> vix is up 50% since its september highs. >> it is. and interesting, the spot volatility is -- it's happened four times over the last 12 months. each time, a multimonth rally. it's an interesting spot. >> all right. we'll watch that. kate, thank you, as always. >> thank you. >> kate kelly, as we head to break.
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let's solve this. welcome back. as we make the turn, the top "three trades." first up, apple. john najarian, stock is down a little over 1%. we know when they'll report earnings. >> knowing that, scott, is a big deal, because the 28th is after when people had been betting than it would have been, so that straddle has come in by $7, the one that would have expired october, and still does expire october 25th. they rolled out to the other options that will cover them for this bet, which will be a
market-moving event. >> joe, talk to me about the call from goldman on precious metals. >> jeff currie in london, talking about precious metals. you have to be careful. i know jeff's work. jeff has talked about precious metals being a sale if, in addition to a fiscal resolution, you also get tapering and economic growth accelerating at 3%. if you don't see that, then obviously, it's not a slam dunk. i happen to think gold is in a trading range. >> i don't know if this is even fair to the folks down in plaino. steve weiss, jcpenney today, they put out a statement. they say some things are trending better. the stock is up as a result, 4%. it's at eight bucks. >> they said that same-store sale comps are down 4%. big deal. we don't know what they're paying to bring those comps to that level. in other words, are they making money? >> as i said, they're getting better. >> they say they're getting better. let me read something to you. so here are two statements,
okay? you tell me if there's any difference. >> while we're young. [ laughter ] >> a new market campaign, style, value, incredible new brands, updated experience, yada, yada, yada, continued enhancements to the customer experience, both in our stores, with our customer -- core customer while attracting new customers, jcpenney. enhancing the customer experience. that's what was said. that was said when the stock was $21.51 on february -- february 27, 2013. let me just go to what was said yesterday. or today rather. by mike ullman. >> you're good at this. >> and finishes an exceptional experience when they shop with us, reconnecting with our customer. the same words, almost exactly, but guess what? the stock was three times higher when they said it. the point is, you can't always believe management. >> weiss. >> and what their expectations are different -- don't stay with the stock. there's no -- nothing to be gained here. they're going to lose money for the next three years.
what do people want out of it? >> are you done? are you still short? >> we have to go to break. >> are you still short? >> i am short. >> cut to the chase. the debt ceiling debate is freaking out stocks, but if we hit that dreaded ceiling, what will it mean for treasuries? we find out from jackie deangelis and the futures now crew. hey. >> hey, thanks, scott. here's what's so interesting with this. while all of the rancor in washington has sent the s&p down 2% in about a week, bonds have stayed remarkably quiet. so jim murio, why have bonded shrug off the default concerns and what would it mean for treasuries? >> i'm not sure they're shrugging them off. i think they can't figure out if the knee-jerk reaction will be buy treasuries when they're the very thing that could potentially be downtraded and the thing that could be defaulted upon. what's most interesting today is the rates on the short end of the curve are spiking higher. to me, it's the first time we've actually considered default as a possibility. today. i do think, however, if things start to deteriorate in the stock market, and default looks
clearer, the knee-jerk will be to buy the long end, as odd as that sounds, because that's what people sdo. >> rich, you hear the noise. you're looking at the ten-year yield. what is it tolling you? >> jackie, we're pinned in a range 2.60 to 2.65, and the yield, i had a conversation with an institutional client today. they said, in fact, they weren't going into treasuries right now. they're looking at cash. remember, cash is a position. that would explain the pop in the last 30 days, and the sideways trade. conventional thinking says if we get some kind of deal, yields continue the trajectory, and if this drags on and continues to the end of the month, potentially we go down to the 2.50 area. so that's the range. play the range. >> all right. we'll have more on bonds on the live show. we'll also give you a trade. we'll also be talking to expert matt tucker from black berock. he has a bold warning for d.c. politicians. that's futuresnow.cnbc.com.
>> all right, thank you. stocks continuing to lose altitude. let's look at the s&p 500. the heat map, telecom bad today. utilities and consumer staples are in the grown. -- green. energy, industrials, financials, there you see the rest. the list is long and distinguished today of the stocks selling off. coming up next, the number-one ranked food and drug ranked retail analyst in the country joins the "the half." she's bringing alone the top picks. it's the moment of truth for yum brands. that stock in focus today. will earnings give some much-needed momentum? "street fight" is skoming up with two traders hungry for action. coming up with two traders hungry for action. ♪
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about 9%. a lot of the momentum names, as we continue to point out, selling off hard. these are the names that have run pretty far and pretty fast, whether it's netflix or priceline or facebook or tesla, or linkedin there, down 7.3%, groupon, throw that in the mix, and certainly pandora, as we highlight. >> press releases from each company i'd like to read right now if that's okay -- [ laughter ] >> you could save us and the viewers that pain. yum brands set to reveal earnings in four hours. will tonight's numbers give the company much-needed momentum? 1:30 on the clock. doc, make your case. >> okay, judge, back in the old days, yum brands used to get 50% of the revenue from domestic sales of their food items. now, they only get 28%. obviously, that means the growth is overseas. you look at china. they had two headwinds, avian flu and they had that chicken
issue. those are behind them now. i think china goes back to work for them. europe recovering according to the july quarter, as well, judge. and take a look at the expansion into africa and india, as well as russia. i think this is a no-brainer to buy at 71. >> yeah, i agree. it's a great company. this is not the quarter to own it. i don't think that the flu scare is behind and the poultry scare. i think the same-store -- same-sale comps -- sss. >> easy for you to say. >> the input costs continue to go up. double-digit labor costs, occupancy costs, a lot of expenses on the -- >> where are they seeing double-digit labeler costs up? where are you seeing that? >> look with the fx. a lot of exposure on the earnings of the currency. the fx is crazy. the emerging markets, with europe, the weakening of the dollar over here. if you really want to own one of these stock, look at the hot ipos, nestle, noodles and company, potbelly, no emerging
market exposure, done well, and that's where i mutt my money. a great company. with them coming out, klc coming out with a -- coming out with a lamb-burg, whatever it is -- >> i like the two you mentioned. i live pb, pb, i love noodles, but the real growth here, 1,900 new stores this year, yum brands. >> not this quarter. >> joe, who made the more compelling argument? >> go with john. on september 10th, they had the analyst day, chinese, yum brands, they talked about reinventing the brand, some of the positive news coming out of there. clearly, you're seeing that kfc is working, margin growth back to 20% the end of 2014. i like john's thesis. >> tell us who you think won. use #bull or #bear. we'll give you the results at the end of the show. let's stick with the consumer. the annual ranking of the best sell side analyst is out. and our next guest has been the number-one ranked analyst covering food and drugstores for 12 years running.
let's welcome meredith add letter of barclays. welcome. congratulations on the honer. >> thank you very much. >> let's go through the list here. a chart of cvs. you tell us why you like it. make your case. >> okay. i mean, i think cvs is extremely well positioned. we've got a lot of stuff going on in the health care. and we think that they are positioned to do businesses that will allow them to grow and take advantage of everything that's going on. you know, the biggest, i think, question right now is how is it all going to play out? but we think the stock is properly valued for any of the uncertainty that's ute there. they generate a lot of cash. very disciplined about the use of cash. >> steve weiss? >> meredith, it's been a while. how are you? >> i'm good, thanks. how are you? >> good, good. the bear case on cvs, i'm sure you've heard walgreens, as well, is that they're going to -- that with obama care, it will disintermediate the pharmacies, because it will require them to do their prescriptions by mail
and get cheaper prices. cvs has built a system for that. but they're generally not the big players. how do you answer that? >> well, for one thing, there are many medications that it doesn't make sense economically to do on mail. anything that's acute, and you need a 30-day supply, it won't be done. pharmacists do counsel patients and that's very important. of course, as you say, cvs has built the capability of filling a maintenance medication at retail, and it will cost, you know, cost the same to the patient. odd will you enough, they like that. they like it out of the store. so i don't see -- by the way, if you look at the market share, mail order has been losing market share in the last four, five years. so i'm not worried about that. >> right, meredith, make your case for gnc. >> they're remarkable at developing new products, and merchandising the new products. i think they are already a very
established brand in the united states. they have a lot of locations, so it's less of a growth story from new units than it is a growth story from products. however, the company also introduced a new loyalty prog m program, which is freely much better than the program they had before and that's driving traffic. it's not very expensive. of course, it's connected to a strong underlying growth profile for vitamins and supplements. >> meredith, thank you so much for being here. appreciate it very much. >> thank you. >> all right, meredith adler. doc, a trade on gnc. >> i love that. and i love the link on amazon's home page when you buy stuff, and drugstore.com, things like that. when you go to drugstore.com, you see the gnc. that helps move product they wouldn't see otherwise. >> never mind the drumful of supplements that pete probably goes through? >> no, pete goes through a couple gallons of those every week. >> i'm sure he does. up next, he came on the show and gave you the playbook on facebook. now is back. to give you the trade on twitter
before the stock, even ipos, the dean of valuation at nyu. aswath damodaran. ecember 17, 19, the wright brothers became the first in flight. [ goodall ] i think the most amazing thing is how like us these chimpanzees are. [ laughing ] [ woman ] can you hear me? and you hear your voice? oh, it's exciting! [ man ] touchdown confirmed. we're safe on mars. [ cheers and applause ] ♪ hi. [ baby fussing ] ♪
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of the hour, we never hear from him. but today, we're hearing from john paulson. he'll talk about one of his greatest plays, emphasize "play." shutdowns, debt limit, defaults. how should you position the portfolio? get your stocks, bonds, commodities advice right here, this next hour. and you'll want to tune in for this -- we're live from steinway's headquarters in queens with the classical piano sopranos the five browns. that's the next hour. >> ty, thank you so much. not so far, joe, the traders are quick but not always right. last month, joe made a bearish call on netflix. let's listen. >> yesterday, my final trade was to sell netflix, which i have done. this is a momentum stock. i don't want to wake up one morning and find out it's 50 bucks lower. fundamentally, the company's in good shape, but it's very rich here and i don't want to take what i view right now as outsized risk. >> joe, so you take today's move
into consideration when we had this conversation, but talk to us about it. >> first of all, i've really screwed this trade up big time. i've been trading around it over the last couple of weeks. it went up to 334. would i buy netflix up here? no. absolutely not. i would not buy any of the momentum names yet. steven talked before about waiting. you need to be on the sidelines, waiting to see stability back in the overall marketplace itself. i'm out. i screwed it up. that's probably the reason why it will go down further. coming up next -- >> i know that feeling. >> the dean evaluation. aswath damodaran will be with us when we come back.
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welcome back to the halftime show. it is the most anticipated ipo since facebook and the big question still remains, what is twitter really worth? who better to ask than the dean of valuation himself, professor aswath damodaran of nyu stern joins us from new york. good to see you again, professor. welcome back. >> glad to be here. >> what is twitter worth? let's go right to it. >> i can give you my estimate. my estimate of value is about $10 billion. let me back up and explain why i did what i did. i'm a realist. i know that an ipo is a pricing game, that it's all about mood and momentum and promise and potential and everything is about mult. s and comps. we need to get a sense of the underline reality ands i was trying to start a conversation,
pay $10 billion, $15 billion, $20 billion for twitter what does the company have to deliver. to get a $10 billion, deliver by $12 billion in revenues in a decade. that's not easy to do. you might think they can do more but that's the conversation we need to be having. >> what was your biggest surprise from your read of the s 1? >> my biggest surprise is how much they were spending to get the growth they were. when you're a young company growth often comes easy because that first growth you're getting the revenue growth with relatively little cost. twitter seems like it's spending a lot to get the rare amount it is. maybe this will pay off in future growth, but that's a number to watch out, how much they're investing to the growth they need. >> you lay out a scenario you put forward three perspective market caps and it certainly sounds like the market cap that
this is ultimately going to be is going to be well beyond the range that you would urge people to take a look at this stockp. $6 billion market cap, you call a buy, $10 billion neutral, $20 billion, you say stay away from come hell or high water. >> i really think it depends on what you call yourself. if you're a trader all bets are off. you're betting on price. if you're an investor and think about value i think at $20 billion an awful lot has to go right for the $20 billion to be a break even. forget about making money. so it really is a function of how you think about yourself as an innvestor. trader or investor. >> don't you want to see a company when they've got such a big position in terms of a market, they are the market, and such a big load around their business don't you want to see them spend a lot of in uny to keep that intact. >> oh, absolutely. you also want to see that money pay off in multiples of revenue. i'm not worried about them
spending money. >> no, i understand. that comes next. first you have to get everything in place, then you leverage your cost base. that's the way businesses grow, isn't it? >> it depends. these businesses you can see them investing like this for the first six, seven, eight years. it's not an infrastructure business where you spend first and live off that infrastructure investment. technology fades so fast you can be spending money and contemporaneously getting the revenues and keep spending money. i have to watch to see if this is an initial infrastructure investment or a problem they're going to have. >> one of the points you raise in your initial math here, i assume, i think this is what we're talking about here, for every $1.50 increment in future revenues twitter will have to invest a dollar in capital allows me to estimate the number including everything, correct? >> that's exactly the question of disagreement you will get between bullish investors and bearish. if you believe they can become
much more efficient in delivering revenues for every dollar of investment, what more. that's a question we all need to debate. >> did you see the report, and we are have to run after this, bob peck put out, the well-respected analyst who said that, you know, he put a buy on the stock yesterday, $50 price target on the shares. first of all, have you seen it? >> yes. >> and what's your thought? >> it's, as i said, this is a pricing game and bob is very good at playing the pricing game. i wish him the very best on that number. as an investor i still have to base my judgment on what i think the value i'm getting for my investment is. >> we're going to get you and bob on the show and have a good debate as well. the nice to talk to you. professor aswath damodaran. >> comments? >> sentiment that's the only thing that's going to drive it. the valuation it's going to be ridiculous wherever it comes out. it's the psychology of the market, if it's going if their favor it's got to work. >> probably in twitter, doc,
weigh in, twitter's best interest after the whole facebook -- >> something on the table. >> exactly, judge. only bringing a billion public. if it's got a 10 or $12 billion handle for the total value and they only bring 1/12 of that, this is a huge buy given that. >> final trades when we take a short break and who you think won our debate when we come back. bny mellon combines investment management & investment servicing,
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we tallied the results because the people have spoken and you said dr. j won the debate on yum brands. in your honor give us the final trade. >> final trade buying puts in home depot, judge. >> simon? >> i like the communication equipment. >> steve weiss. >> still think the long bond is going down as long as it's going to go in terms of rates. i buy tbf. >> and joe. >> interearnings want to buy calls on panl, palo alto
networks. the dow down about 850 points now, be since the september 18 lts highs. it's another down day on the street as the shutdown rolls on. have a great rest of the day. follow me on twitter @scott womanper in cnbc and "power lunch" begins right now. >> "halftime" is over. the second half of your trading day begins now. >> thank you vef very much. if we hit deadline day on october 17th what will be paid for and what won't. who will get money, who will be in the cold? social security, federal salaries, defense contractors? we have the list. also, those obama care website glitches apparently not getting any better. the head of health and human services miss sebelius starting to feel a bit of the heat. jon stewart style heat. if sebelius worked in the private sector would she still have her job today? we'll tackle that one.