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tv   Closing Bell  CNBC  March 16, 2018 3:00pm-5:00pm EDT

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years down to something like 14 issues a year. >> 14 issues a year? >> amazing. >> on this ten-year anniversary of bear stearns, bank stocks six of the past ten years gainers for the s&p bank index kwipt quite a recovery thanks for watching "power lunch." >> "closing bell" starts right now. hi, everybody. welcome to the "closing bell." kelly evans on this friday. >> and wilfred frost coming up, chairman of the council ofors talking tax reform. >> looking forward to that shares of at&t and time warner today. both trading lower could be the last day of trading ahead of at&t's federal court date next week we have the court date with the justice department verdict is sure to have massive
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implications on the way deals are made especially veticcal mergers. what it could mean for media and how much more for deals in this country. >> we will get into that, and joining us from los angeles, key factors on the table julia? >> a stake in the case, how the government handles vertical mergers, where a company buy as supplier or customer ran than a competitor at stake, what the future of the media industry looks like. pretrial motions begin monday with opening statements to wednesday and trial expected to last six to eight weeks. at the crux, whether the deal forces consumers to pay more to watch content. tv bills across america will increase by $436 million at&t saying that the doj is staking its case on projections of an insubstantial 45 cent monthly increase saying its committing to arbitration
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showing the deal won't up driving other companies, content costs higher and the prices will stay relatively the same with google, facebook, netflix, an somme and apple increasingly investing in internet content, this trial evaluates the con sergens of media and technology, at&t argues more ocompetition than ever. and battles the tech giants. watching to see if at&t is forced to sell off some businesses if the deal is blocked, then it could result in time warner sold off as parts and the tech copyies could be buyers back to you. >> julia, thank you. by the way, los angeles? >> what should i be saying >> gone with spanish los angeles. i'm not saying i have a perfect -- >> listen, i stand corrected it's a u.s. city i'm definitely wrong i apologize. >> and joining us to talk more about the implications of this deal also here at post nine from
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commerce street capital. welcome to you both. begin with you, dory, so many angles and implications here about big business mergers you think even the tariff stance coming out of this administration might have a bearing on what happens here what are you watching for? >> there is a protectionist stance coming out of the government and the justice department possibly the white house as well this did kind of come up unexpectedly so i think what we need to look for here is to see where the judge is going to stand, because the protectionist measures coming from the white house had been in other industries of national interest and not necessarily one in the media. >> not a foreign takeover. right? >> exactly broadcom was a foreign takeover. steel is a foreign takeover. what's the argument here on the matter of the government it's got to go with monopolistic pricing and competition. you look at that, is it real i think it's hard for people to tell i think at&t has a really good case here to argue, hey, we're
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the ones competed against. it's not like google and netflix are small companies without power. they've come in and dominated in streaming and we need access to it they're doing it as a defensive measure as much as offensive. >> what's your take on this? the doj, if they win the case, is it just implications for the traditional tech and so the traditional media and telco companies or implications for the names just heard dory mention like facebook? >> look, i think that if the doj wins first very surprised. their case is thin but if they do, i think it's hard to see what would pass muster the argument here is that combining big content with a big platform is inherently anti-competitive so i think it would make it hard not only for at&t to buy time warner or verizon to buy cbs, but apple to buy time warner one of the discussed potential buyers before at&t stopped in.
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tough for media companies stuck on both sides. being successfully competed against for all the growth in advertising and subscription, it's in the internet their efforts to combat that by combining with big platform companies would be thwarted by antitrust law. seems really unfair. >> dory what do you think the industries look like if the deal happens? and if it doesn't? >> on the investor's side, you got to look and pause, wait. where's the upside all in earnings and got limited growth and limited in acquisitions putting disney on pause. comcast on pause puts other deals on pause and bigger is not necessarily better just sort of like a banking industry all of a sudden the banking industry in '08 paralyzed without acquisitions from the big banks. you could see the same here. >> and some of these delivery companies, telcos and capable companies, foolish to now do these deals to try and by content given net neutrality
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rules softenened and rolled back is this a time to deliver the content and not bother buying it >> i think that at&t's made an argument that makes a lot of sense. using big data across their pipes and across the content can create new ad growth and innovati innovation big date sta where the world is going. what netflix is about and spotify. gets them bigger, more data. makes sense to shoot for this, but not until you see what happens in this case you can't do a big content deal until you see where the judge comes down >> by the way, even on comcast, analyst in the last couple weeks suggested breaking that company into the comcast and nbc university pieces, barton. so there could be -- market forces coming to bear on whether this makes sense at all. right? >> right if you can't then buy more content and leverage your pipes, maybe the next best answer is break up i'd be surprised if pe went there, but that the logical
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conclusion where the government is going here. >> we'd be vise surprised too. leave it there. >> something in the hawks -- >> best acquisition of all-time. thank you both. some stocks to look into today. mostly high, to cap off a volatile trading week. s&p up first time in five days bertha coombs has a look. >> a wearing of the green on the stocks on the eve of st. patrick's day. we'll see what volume happens going into the close expiration day for what they call quadruple rich for futures and options. that often leads to volatility heading into the close here at this hour we are seeing walmart and caterpillar helping boost the dow and helping the dow outperform at this hour in terms of the large cap today it has been more of a small and mid-cap story in terms
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of where the strength is today, and it really has been for the week small and mid-caps outperformed, not down as much as larger caps. nasdaq after hitting that all-time high, fresh all-time high, faded here as we've gone into the week. among the mid-cap names really shining, circuit, surging after better than expected earnings. u.s. steel moving higher, although u.s. steel had a rough week down 8.5% week to date in spite of the big surge in the steel name since tariffs were named. among the best performing sector this week, surprisingly, airlines even as we're seeing oil higher today. some of the them have done well. usair among our -- united rather, aul, among worst performers after all the controversy this week, guys, with the two pet incidents back to you. >> for sure. bertha, thank you. how about the financial sector meantime. climbing today
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mike mayo, banking analyst at wells fargo here at the new york stock exchange to talk about this. >> first, before we get to mike, today, of course, also marks ten years since the bear stearns bailout. >> if you haven't heard it yet, jpmorgan chase is buying bears stearns at a rock bottom price $2 a share. >> a crisis in confidence that continued to build as this week went on. and ultimately crescendoed late yesterday essentially lost its ability to finance itself and when you're an an investment bank levered significantly you need to finance yourself these things can happen like that >> we had the federal reserve step in historically basically pinned up the window for investment banks treating them like commercial banks. folks, investment banking will never be the same. >> it's scary that that looks old now. it was only ten years ago. feels like yesterday look back -- anyway --
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>> genuinely, everyone looks, it looks great in those pictures. let's discuss now some of these deals. not just bears stearns discuss that with steve iseman in a bit some of the deals done throughout the crisis starting with bear, jpmorgan deal mike, was that a terrible deal or decent deal it did boost investments significantly? >> great you played the clips. everybody in the financial markets that was around will remember $2 a share. bear stearns was $170,s 20 $20 million a year earlier and jpmorgan took them over a little more than $200 million so the day of the deal -- >> raised ultimately to line ten. i thought at one point a buck. the thing fluctuating quite a bit. >> exactly a stock that was $30 at closing friday. >> right. >> and you hear $2 a share that was increased to $10.
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they got, jpmorgan got bear stearns for $1 billion the value of the headquarters building at bear stearns we think that's what jpmorgan wanted, but they got that for the bargain price they got. >> a lot of litigation to come. >> didn't know -- day one. jpmorgan the market cap wept up $10 billion day one. everybody thought jpmorgan and jamie dimon were heroes. >> in march, seemed the beginning and end of the crisis. remember no one knew at the time six months later lehman would collapse and that was going to take everybody with it. >> we didn't agree that was the end of the crisis but would say it was a false positive for jpmorgan took jpmorgan five years to sustain have a stock price above the level of the initial surge exactly, the litigation costs so much more than any investor or jpmorgan on jamie dimon expected
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at the time. what looked like a home run turned out to be not quite a strikeout but not so rosy. >> which was the worst deal run around the crisis? bank of america, countrywide or something else >> probably countrywide. between the loans and litigation and those were the legal charges that just kept on giving bank america and bank america finely dug out of that whole for most of the decade. terrible timing, terrible price and tons of -- >> you talked about this earlier in the week. how poorly that worked out could have been opportunistic. >> 17% market share countrywide had in terms of mortgage origination. bank of america, 3%, 4%. didn't deliver what they wanted and way more costs. >> most was not delivered. some was delivered by bank of america, which went to have responsible growth part of the derisking of bank of america and risky in the banking industry.
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>> can't believe it's that low today. >> which is the best deal, though >> oh, my. pnc buying national city that was a home run. a take underpropelling pnc to be one of the better performing banks of the crisis. we thought they paid too little for nashville city, but that propelled that regional bank to where they are today. >> taking about takeovers, mike, ten years ago. what about today a bill going through the senate at the hoemt could reduce regulation for smaller banks will that lead to a sudden bounce of consolidation in the industry >> absolutely expect bank consolidation to accelerate. you mention the bank bill. that would raise the sifi limit allows banks to get bigger without the rick sk of additionl oversight and scale mattering more than ever before in banking. a reason to get bigger and a lot of extra capital between cost, capital and the
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drive for consolidation, we expect more mergers. >> mike, great stuff going to continue the discussion with you sticking around for most of the show today andstev iseman joins us i'm sure a fascinating conversation coming up. >> 45 minutes to go. quick check of the markets dow up 102 points. we have slight gains for all of the major averages. >> meantime, closing bell is just getting started >> announcer: next up -- more on bear stearns with us live, steve iseman the big short himself. we're also going to hear live from kevin hassette chair of the council of economic advisers, live after a very busy week at the white house. from tariffs to a new top economic adviser this is the "closing bell" on cnbc with kelly evans and wilford cross, live from the new york stock exchange at fidelity, trades are now just $4.95.
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just about 40 minutes to the close. up 0.4%. 92 points on the dow nasdaq negative. s&p up 0.2%. week as whole before the day, dow don't most nearly 2% nasdaq down just one cent. check out shares of security
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compa company. up indeed. the company setting its initial share price at $16 trading now close to $30 per share. you can see up 90%. >> nice first day for them. today marks the ten-year anniversary since the bear stearns bailout. >> people at bear stearns i've spoken with are stunned by what's happened here. >> on the conference call jpmorgan made no mention of layoffs. you can be sure employees will be look for a job before the deal is done. >> one individual told me 17 years saving for my kids college education and now have to start all over again the stories of retimes they thought were skyr aecure and no longer are. >> the financial crisis famsly depicted on the big screen in the big short. >> as some of you may know, bear stearns just received a loan from jpmorgan. of course, we're going to have to wait and see how the markets react, but that should lay to
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rest any concerns about the bank's health. >> my thesis is simple wall street took a good idea, mortgage fund and turned it into an atomic bottom of fraud and stupidity that's on its way to decimating the world's economy. >> from the time you started talking, bear stearns stock has fallen more that 38% would you still buy more >> yeah. sure of course i'd buy more why not? >> boom! >> still, steve carell's character there in the film based on steve iseman and now joining us now along with mike, still with us. very warm welcome to you thank you for joining us. >> thank you >> let's go back to that -- what was it coming into the crisis that you felt you saw that all of these other banks failed to see? >> you know, my opinion of the industry prior to dodd/frank was it was a horribly run industry that it was way over levered
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it lacked sufficient liquidity on the balance sheet to handle any stress and run by people who loved to embrace risk out of a combination of arrogance and a sense of entitlement when it came to subprime risk, a risk they didn't understand, dmoen how to monitor and extricate themselves from. i was just waiting for the disaster to show up. >> and bear stearns was the start for you? take us back to that day in particular. >> more the combination. you know my wife used to call me chicken little because i was talking about this for years, and probably as early as 2004. i got incredibly negative by the end of 2006. that's when i knew. >> positive on the banks now right? >> it's a different industry i mean, the industry owes an incredible debt of gratitude to former fed governor daniel tarullo who was really the bank reg later of the united states. >> do they see it that way
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>> they hate his guts. that's irrelevant to me, because he changed the face of the industry and mike and i were both ib credibly negative about the banks pre-crisis and both incredibly positive about the banks today. and one mpt reason is that tu ru tarullo transformed the industry tremendous liquidity balance sheets that are cleaner than in anyone's living memory, and it managed its risks better than it ever has, because it's now a heavily regulated industry and forced to come to this. >> mike, in terms of who else people owe a debt of gratitude to, back in the crisis, does the x sdi and economy owe a debt of greated to for jamie dimon for doing that deal to buy bear stearns in the first place and at that moment doing something in the interests of the nation and not in the interest it's of shareholders >> he thought a combination of both i did bring a prop with me, wilfred. i think that jpmorgan and jamie
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dimon thought they were getting this. >> explain what that is. >> this is the bear stearns headquarters building, 383 madison. they were paying, even when they had to up the price to $1 billion, it was worth $1 billion. i think jamie dimon and jpmorgan thought they were paying for the building and getting everything else for free. they just didn't realize they had all the litigation to go along with it. >> remarkable quote in the "journal" yesterday. no ever gn will buy a severely troubled institution, period raj cohen. do you agree with that >> probably true but also irrelevant. because the industry is so well capitalized today. i just don't see problems emerging for a very long time. >> let you answer. sheila, a couple days ago was on and concerned that the senate deregulation bill would actually lower, sort of take the pressure off capital to some extent are you worried about that now so positive about the banks
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and decided specifically regulation is the reason >> mike, you want to take that >> look, one word sums up one of the root causes of the prices. leverage bear stearns was levered 35-1. banks before the crisis had more leverage than at any point in the prior 25 years now the industry's levered 10-1. balance sheets stronger than in a generation and add about $1 trillion of additional capital and about $1 trillion of additional liquidity bear stearns -- >> you think it stays that way. >> it will stay around there. >> i would say that there's going to be some increase in leverage over the next several years. not anywhere close to where we were. >> clearly both of you are positive on banks. what worries you still was the wild card risks that people may be aren't thinking about or that could change your positivity of the moment >> i sleep very well i'm serious. i just don't see any systemic risk on the horizon. >> in any other industries
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sometimes in your describes of the risk-taking behavior we made the analogy, jokingly, tech is the new wall street. hard to imagine any industry being systemically important. >> there's always risks, people will always make mistakes but when the banking system is levered 35 to 40 to 1 any problems that show up are magnified. >> what about the size look at the size of the asset management businesses with companies like blackrock and others talking $5 trillion, $ 6 trillion concerns how much of the financials are keyed into these? >> like i said, i sleep fine. >> if it goes too far would you change your view and what we see on the horizon, whether the senate bill or possibility of rolling back a step too far >> it's early. i don't like the legislation that's probably going to be passed through congress. i've met a lot of congressmen and senators over the year the level of ignorance how banks work is staggering
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having congress pass legislation to change dodd/frank at this point is probably a mistake. i can't emphasize enough that the stress tests which everybody is complaining about made this industry light years better than it ever was. to remove companies from the stress test, from a systemic perspective, i don't think it's a great idea from a stock perspective, it will make stocks go up. >> touch on that more. ten years after the financial crisis, u.s. banks, faced up to the problem, took their med. jpmorgan cap's up 140% from the start of 2007. why have european banks failed to do that deutsche is half and still struggling >> european regulators took a different atattitude did not make the banks clean up their bank sheets. delever some not nearly to the extent ours have ballants sheets are still not clean. today i feel confident i can own
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a large institution. >> any serious issues? struggle like ten year it's ago in the u.s.? >> it type of crisis, european banks would have more problems than u.s. banks. >> yeah. so when you think, mike, back on that week that was ten years ago -- >> by the way, in the movie, that was mike. he was the moderator that scene that you played -- that was mike. he was the moderator. >> i was the blonde haired woman. >> he was a blonde haired woman. >> not exactly, you know, true, mostly there. >> poetic license is allowed. >> four sure. >> one final question before you go read three weeks ago short wells fargo. is that still a view >> in honor of mike who is a good friend, rather not talk about that on this forum. >> okay. then switching it, which is your top pick of the big six banks at the moment given your positive on the sector? >> top pick is citi group.
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i think you know, citi group was perhaps the -- of all the poorly run institutions it was "the" most poorly run and finally has a management team that -- is managed in the company properly and i think over time most potential upside. >> your pick >> steve and i are friends because we talk about being bearish several years before the financial crisis weren't having beers together. came to the same place we're friendly now now we both have the same top pick our top pick is also citi group. we were both super bearish ten years ago and now i'mbull bullish honesty group and yon c, too. >> stick with us longer. just more than half an hour to go. check in on broader markets. dow holding on to nearly a 100 point gape gain. s&p up a quarter of 1%
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news dak actual nasdaq lower by about a point. >> and nike, a second executive forced to leave. all as the company disposes complaints about workplace behavior break down what it means more the athletic giant's stock wn he we come back here on the "closing bell. our disciplined approach remains. global markets may be uncertain... but you can feel confident in our investment experience around the world. call us or your advisor... t. rowe price. invest with confidence. each day our planet awakens but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.
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so what else is new? humm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird. >> welcome back. time for an update with sue
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herera. >> what's happening at this hour, retiring senator jeff flake says he isn't ruling out a primary challenge to president trump in 2020. he has been a vocal critic of the president. >> as you know, i'm retiring from the senate end of this year it has not been my plans to run for president, but i've not ruled it out i hope that someone does run in the republican primary somebody to challenge the president. >> boeing's new 737 won't be delivered until next year but made its inaugural flight today. designed to carry up to 172 passengers at lower fuel costs per seat than the 737 700. it were fly 1,000 nautical miles farther than its predecessor the airlines already put in 4,000 orders noor particular aircraft. and fire crews in the texas panhandle continue to battle multiple grass fires that combined to burn about 40,000 acres.
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while both are at least 75% contained, a windy and dry friday continue to make it dangerous for the firefighters out there. and that is the news update this hour. back downtown to you see you in an hour >> sue, thank you very much. i wish we had film, but i think that's the new boeing plane that's small but can go transatlantic. that means can land in small airports opens up a whole new range of options. have to go to jfk every time you go home and that's a nightmare i think that's the one. >> i'll take your word for it. >> i'm going to e-mail and ask him that. 28 minutes before the bell near the session highs, 120 points on the dow. down half a percent and nasdaq in positive territory as well. still ahead, speak with chairman of the council of economic advisers kevin hassett on the ten-year anniversary on everything from bank deregulation to tax reform phase two. >> and the beer institute trade groups says the president's aluminum tariff is a massive tax
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wilfred struggling with the
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pronunciation of las vegas that happened during the break there's just -- don't think about it too much. the nasdaq trying for its first gain in four days. om up five points now. kate rogers has a look at movers there. >> see if we can hang on to the gains into the close dipping in and out of the territory all day. a strong report out yesterday. gave conservative guidance for the first quarter of 2018 but up near lly 9%. another mover, adobe been on the top and bottom lines in earnings report and a nice feed in digital media segme segment. stock higher by 3% down side in the nasdaq 500. biggers laggard, broad company strong earnings and a bid to take overqualcomm shot down earlier in the week that stock lower by 4%. back to you.
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>> thanks for that. about 24 minutes to go until the close. joining our "closing bell" exchange, from wells fargo security, and from and our own rick santelli at the cme. start with you, mike, if i may in terms of what's driving the banks over the last couple weeks? clearly, yields have slipped and bank stocks as well. are we in a position when everyone is fully aware of the positives, the valuations we need the yields to pick up again for bank stocks to perform >> what investors have been focused recently with banks, rates, revenues and regulation some concern with rates, where that's going, and some concern with revenues. lone growth picking up or not? and regulation, is it priced in? we think a little short-sighted. what's missed is this 25-year structural breakout for the benefits of scale, and that's where the large effort banks are seeing the best marginal margin. the best increment's margin than
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they've seen in perhaps generations. that's a longer-term theme that will attack a while to play out. short-term, people focus on rates and revenues and regulation. >> sarge what are you excited about, other than st. patrick's day? >> sticking with the facts or go anywhere >> anywhere. >> i still like the tax. down a little this week. stick with semiconductors for many reasons, ot taun mouse cau, and requiring 30 semiconductors each go to the cloud itself you need the adobes and sales forces, red hats those names. my focus is there. that's my largest slice of the pie. i am exposed to the banks. financials, and unfortunately exposed to energy because i came into it hot this year. that's been the laggard in my portfolio. >> got disappointing retail sales this week, but i know it's in your previous notes you're
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pretty positive on all types of consumers at the moment? to you, rob? >> sorry wil, i didn't know it was for me absolutely two favorite consumer staples and consumer discretionary even though numbers this week have been disappointing. they're attractively priced. visible earnings growth there. technically look sound i like financials as well. mike mayo hit on the rationale there as far as looking down the road probably going to be more of an m & a story. hopeful we might see a steepening curve and in fact seeing more of a twisting curve. like financials here as well >> rick, i was jolted by the jolts number this morning. how about you? >> absolutely. boy, the 6 million handles on that number getting more prevalent. quite amazing on the job openings as a matter of fact, outside of housing and housing wases did
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appointing, i'm not sure it can all actually be blamed on rates. we saw very strong influx through capacity utilization michigan, another fresh 14-plus year high. usurping october's read. also impressive. never put a lot of stock in the michigans and consumer numbers, always paid attention. really, since the november 16, 2016 election, if you followed that, you've stayed on the right track. as for what's going on with interest rates, even the dollar index to some extent looks to be 16th, and settle in the 280. dollar index, not that simple but virtually flat along with its euro currency. volatility down on all fronts. retail data bugged me this week. easy way to synthesize, inflation isn't cool it's about where it should be and going to build but not going
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to have a lot of octane. i think retail sales takes a little bit of octane away from some of those that were banking on a little bit more carryover from 2017. what's the long and short of that probably a little bit more flattening and a more tame long end but the short end, short end still has a fresh, hot, high yield going back to september of '07. >> wow all right. guys, thank you all for joining us today have a great weekend and happy st. pat's. sarge and everybody. mike mayo, rob morgan and rick santelli. 20 minutes to go 116 gain nasdaq trying to stay positive up by two. >> meantime nike shuffling after inappropriate reports of workplace behavior dames coming up. and chair of economic advisers weighs in or tariffing and taxes when we come back. keep it right here you're watching cnbc first in business worldwide. >> announcer: the bond report is sponsored by -- alerts -- wouldn't you like one from the market
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fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab. and a tax plan, phase two.
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making individual tax cuts permanent. >> joining us to talk more ar the president's economic policy chair of the council of economic advisers kevin hassett mike mayo on-set as well thank you for joining us how is it work with you and larry? are you guys equals? are you going to -- because you don't agree on everything. right? maybe you do. >> no, we don't. >> how does it work there. >> probably what will happen i do the tv hits on days like today, it's still cold have to wear my purple gloves. larry will come out on the other days i'm very serie to see gary leave. a great privilege to work with him. one of the best people, smartest people i've ever known and larry is a similar caliber guy and thrilled he's coming in. the national economic council is, in the west wing, and their job is to coordinate policy and to negotiate with congress when trying to decide what we'll do about phase two of the tax plan and so on.
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the council of economic advisers, our job analyze and provide objective analysis sorry to give a history lecture. clearly established the cea is supposed to be almost like an independent objective agency within the white house that just tells decision-makers what happens to the economy if they do this or that. so i'm sure with gary i was, every morning in the morning meeting that the nec held so the cae was represented. probe proesbably do that with larry and look forward to working with him. >> clearly gary is still at the white house. larry's coming in. lots of other changes in various departments. is it impossible to get anything done in the short term while the changes are taking place >> not at all. i have to say, it's a mark of the caliber of the two guys how smooth the transition plan is. i've spoken with larry and gary. larry's filling out paperwork. gosh, my paperwork coming in
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hundreds of pages i know how much work that is. when larry's ready to transition in, gary plans to depart and the, they're planning a smooth transition and hard to say exactly what day and all that. depends on factors outside of the control of us. just the guys who do the work every day. larry and gary have a really good plan. the staff at cea and nec was overjoyed larry agreed to join the president and a very smooth transition we did a lot of work today it's friday. if i look tired it's because we're still working today as well. >> talked to larry earlier this week about their plans to do phase two tack cuts, for example, making individual rates permanent among other things that doesn't come cheap. could increase the deficit again. larry's position on that is, so what basically says, i don't want static i want dynamic scoring i believe the growth will end up paying
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for it, solving all ills what does the cea say about that. >> our position from the beginning is that everything should be permanent. we also respected the legislative process. we knew that the economist's dream pax bill didn't become law didn't do any good for america's workers and think workers get the pay hike because of a tax cut and extend it, make it bigger and permanent not posturing or politics. the chairman brady and the president are serious about phase two on the taxes and the first objective make them permanent. >> but do you have an opinion on how much that would increase the deficit and how many growth would pay for that >> one of the things as an example that is not permanent is the expensing. and there are other things that phase out as well late in the five years. >> larry says, make that permanent, too.
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>> yeah. so the point is just that depending which thing we're talking about i can tell you whether that would pay for itself some thing doss. some don't i don't think the refundable child credit to get a model that to pay for itself we need a big increase in fertility. a big response to it, i'm not sure that's plausible. in the end, the president emphasized we inherited this tax code that was broken and had to fix it first you're right to emphasize that in the medium and long-term economists always say deficits matter after that, fix other problems starting and prioritizing tax cuts and defense was the president's decision and i 100% concur with that >> kevin, mike mayo. bank analyst here. >> hey, mike. >> what is your score card for success? four years from now, what would you like to see? is it gdp growth. jobs growth? at what point does that shift to
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concerns about inflation jv >> number one wages. the number one thing we talked about with tax reform and tax cuts talked a lot on cnbc and often at times with lea ovarry over t air. wages don't come from thin air bring the factories back home. capital drive will drive wage. american increased wages, the path that will happen through the tax reform passed. number one deregulation matters to. secondary thing, capital formation will drive the rate increases. by the way i checked before i came on. we're also at 5 million people that have gotten a bonus or pay raise because of the tax bill. only a couple months it's been there. >> quickly, what's the latest thinking on trade? is it now a move towards being more targeted to certain nations?
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and if so, is that very much focused on china >> i think that china part of it, you mentioned, something we've focused closely on if you look at the economic report of the president, which i suggest you all do happy to send you a copy we have a whole chapter on trade and it documents precisely and carefully what the president has been saying all along is correct. i have to say, if what the president said was incorrect we would have said that, too. that's our job trade deals are asymmetric we have really, really low tariffs on just about everybody and a lot of times they have high tariffs on us as an economist i was surprised. europeans a 10% tariff on u.s. autos, ours only 2%. that should bother everybody. >> and it is a legitimate thing. why do we do that and america doesn't? look into it got to go. thank you for your time. >> thanks. have a good weekend.
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up next, right back with the closing countdown.
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♪ ♪ wake up early, o. ♪ slap on some cologne ♪ i'm 85 and i wanna go home ♪ ♪ just got a job ♪ as a lifeguard in savannah ♪ ♪ i'm 85 and i wanna go home ♪ ♪ dropping sick beats, they call me dj nana ♪ ♪ 85 and i wanna go don't get mad. get e*trade, kiddo. welcome back to the "closing bell." just 2 1/2 minute to go. i'm excited. ringing the bella pint waiting for me 2 1/2 minutes time. get through it midhighs on the day. dow up 120 points or so. s&p up about a quarter percent
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and nasdaq just into positive territory. so it is in fact above the flat line as we stand three of the days this week it's been lagger. for the week as a whole outperforming. down only about a percent or so whereas the dow down 2 f%. utilities, outperforming because of the picture in terms of yields skip oil prices. jpmorgan over the last decade, its market cap has gone up 140%. of course, ten years since bear stearns. look at deutsche bank on the flip side fallen 50% over the same period of time. amazing. u.s. banks at the epicenter and took their medicine got through a and european banks quite the opposite joined by bertha and david bertha, takeaways? >> housing market, incredibly resilient. beginning of a downfall, sla
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collapse, bear stearns in the fall stocks have dull weone well tough trying to buy. tough trying to get through and get those mortgages approved. >> david main take? what's the main -- >> main takeaway, take money off the table in these all-time record highs for the tech stocks four of the top five are always making new record highs. start to trim there. wilfred, talked about the banks. put a little in banks and a little in energy lagged of late. main takeaway. second one is, don't have too high of expectations about the summit between president trump and kim jong-un. >> yeah. >> don't have too high of expectations there. >> and thank you both very much. have a lovely weekend. and approaching the close. over for me right now.
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here it comes. st. patrick's day tomorrow ringing the bell here, head of st. patrick's day tomorrow the market closing just off the highs. down only 66 points to the upside for the dow today not closing at the highs but i've got my pint so don't mind a very happy weekend happy st. patrick's day. over to you. didn't actually sip it welcome to the "closing bell," everybody. i'm kelly evans. finishing up on wall street for the day and week up and down. dow going out with only a 57-point gain despite a $2 billion buy in balance still the dow, second best performer in terms of quarter percent gains closed just below 25,000 russell 2000s the best up 0.6 of 1% s&p 500 added just under four points at 2751
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nasdaq fractionally positive up there to just 77481 senior commentator michael with us, evan neumark closing out the week and chief strategist, welcome, everybody topping the dow this week, mcdonald's boeing worst performer and big winner on the s&p for the week, cigna. laggard down 20% a little bit of a rebound there today. a tough kun, closing more stores toys "r" us liquidated more on that, too. what do you make of the markets? >> the fifth straight day a little bit of a sag into the close. it's not the action you want to see. really mild action i think in the last couple days so down 1% maybe a little more for the week came into the week hot i actually see it as part of the process kind of knocking arounds they little bit of a range
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still seems like a recovery from the correction but it's not like that all clear don't have momentum. >> surprising thing to me, fund flows. found out$43 billion last week record inflow, evan. >> who are those people? who are those people >> it's not like this was that great a week hasn't been a great couple weeks. >> i don't know who those people are. may have been right before, tax season, might get a little of that topping of the i.r.a. kind of stuff. >> and bond land. >> as opposed to trading money. >> what do you mean? >> coming to grips i think we have conflicting factors, really important ones this will be a 20% earnings quarter. year to year growth and eps, 20%. what we're report for the first quarter, when it ends. a lot of worry worry that the economy is really slow and actually strengthening. same time, we're actually having competition for savings. u.s. treasury ran a $160 billion
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in weekly t bill options the requirement, to finance this government, is absorbing savings and we have that conflict between strengthening earnings. >> what's your point >> not as easy as last year. everyone wants the magical 2017. we could only go up. never had a draw down more than 3% at any point in the year. one quarter of the volatility of a typical year but a constructive earnings outlook that's going to last it's around the rest of the world. we do have pressures involved. >> we've had this discussion a few times. usually in equity strategist comes on earnings will be great. going to be great. up 18%, 20%, whatever. i say, oh, i think probably most of that is priced in then we go, will there be a tariff won't there be problem we have right now, a little waiting for gadot a lack of clarity on what the
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sustainable growth vat of the u.s. economy lack of clarity on whether or not thesetariffs amount to something than just words from the white house. >> do you need that clarity? >> always a lack of clarity. investors -- they overextrapolate what's going on. this rush of inflows, delayed defying reaction really was the first double-dump it correction and nobody bought into the teeth of it, because that just is sort of not human nature. >> now like a month ago? >> right a few weeks seemed markets stabilized and a rush. folks in the group last week said it was the correction that scared no one. actually a very fleeting fear, because we actually built up a lot of cushion. >> and david, dow down 1600 points at lows flash crashing or something. >> in a day. >> in the day. what i mean. it was -- we haven't seen moves like that and yet again kind of --
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>> january up 6% or 7% on the s&p. a lot of stuff 20 give bacto gik next week, focus on the fepd dsd the tariff its. i like larry, his view it's unclear what's going on in the white house and it's very messy, i think. >> how do you look at tariffs issue? >> the most significant risk the world economy faces. we are a bigger world economy because of cross-border trade. do you really care about the copper inside an iphone or the end product? it has to get to a very interrupt everybody level to truly undermine the world economy. it has to be considered the biggest underlying risk. more from the idea central banks will go too far. >> is it possible comes out bet jer i mentioned this volkswagen executive admits i don't know why there's a tariff
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on cars. maybe the u.s. should look into that what if it turns out it levels the playing field? >> a lot of things china is reducing its still output already it is likely to make some trade concessions on industries it protects these things are fine. i don't know if you win if you say, this is all a negotiating tactic and say there's no risk around that. so this has to be considered a risk but don't forget that the underlying improvement in the economy is stronger breadth of earnings around the world. we'll have a world economy that's $6 trillion larger this year than last year. that matter, too. >> it did. and on the air saying earlier the q1, weakness in gdp. >> everybody year since 2010 here again. >> today also marks ten years since the bear stearns bailout. >> announcer: this is a special edition of "squawk on the street." live from a clearly rattled new york stock exchange.
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the once mighty bear stearns is no more. in effect, nationalized. jpmorgan chase and the fed taking it over taxpayers on the hook for $30 billion. >> interesting to look back. i mean to see it, remember all of us here what were you doing at the time? >> i think i was at the journal. but also trading i was writing about some of my -- i did some really stupid things back then i think i started buying the xlf right around 18 or 19. and came on and was on i think cnbc i was asked about it and said basically, it's -- i cannot believe the xlf going below 15 that would mean that most of the large banks are bankrupt in the u.s. turned out, they were mostly bankrupt the xlf went down probably plummeted around 8 or 7? >> 6 and change. >> and only at 28 today.
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only -- it's come up $10 in ten years. extraordinary. >> amazing >> that's a really important thick to think about investing looking forward, because it is still in the back of the mind of so many investors. large, rich investors have cash balances a quarter of brokerage kwt portfolios across the american economy bank deposit rise to 15% of financial assets and even at the market rallied it's been there meanwhile, the banking sector has twice the equity capital it had relative to assets back then and managed in a very, very different way. regulated in a very different way. >> steve iseman and mike mayo two of the guys the most bearish about the banks going into crisis and now resolutely bullish? >> there has to be something else another meltdown, absolutely won't be centered on u.s. bank probably affect it one thing to keep in mind. march of 2008. steve iseman was here earlier says this was brewing for years.
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for years it was, yeah, but it's contained. yes, put it aside. it did not come out of the blue. right now what are those worries that have economic negative feedback type implications i don't see that at this point maybe they're -- >> i think trade is obviously kind of one of those areas that you -- the one thing i'm, i have expressed concerns on before is that there is an idea that is widely accepted that when it comes to the fed or other central banks managing monetary control or the white house, able to negotiate through tariffs they can fine tune you can somehow -- tick this up a little here, a little there. japanese banks buy in. and fine tune this and the history of the world suggests you can't do that. >> i don't know it means it will blow up. >> that's what the concern is. there, people know trillion dollars economies you're trying
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to fine tunants always a solvency issue with too much leverage involved. not necessarily a misstep in economic or monetary policy, usually. >> monetary policy is on autopilot to a certain degree. look at the fed's reduction in balance sheet. $400 billion this calendar, $600 billion the next year. what gets it to stop probably an economy that's reached its peak it is a period where financial conditions tighten the fed didn't intend for it but again, there could be different kinds of recessions and when you look at '08-09, last one that severe across the world, world war ii. not that kind of reception. >> don't jinx it nike, shares falling after executive shake-ups in the work force. >> a lot of moiv moving part what we know more changes in nike's executive rank h.r. policies.
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confirming a second executive nike vice president jamie martin overjaw nike women's running training basketball businesses sshs no longer with the company. nike didn't comment further what exactly happened dow jones rost forced out earlier this week. in a memo to employees yesterday cnbc reviewed ceo parker says instances of inappropriate workplace behavior reported recently that tty disturbed him his heir apparent reported into decided to resign and will retire in august nike tells cnbc there have been no direct allegations of misconduct against trevor edwards. doug jones reports that both jamie martin and trevor edwards protected male subordinates with behavior demeaning to female colleagues and those from foreign countries. nike declined to comment on the nature of those departures however. parker will stay on with nike as
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ceo and chairman beyond 2020 and the company is changing various h.r. policies and re-aligning management to what parker says is to be closer and with a sharper focus on culture kelly? >> all right courtney, thank you. nike shares down a little less than 1% for more on what this shuffle could mean, the president of sw retail advisers. nike obviously a dow component one. biggest companies we have in the retail space, yet it has been challenged by adidas and others lately what's next? >> certainly has and the p.r. issues that have come out today certainly not the first, heard them from lulu lemmon and guests don't help the situation. for nike, a north american issue. business down 7% last quarter and the future of the stock. everybody's looking for this second half of the year brand new products to hit the market and revive north america numbers came out and
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outstanding. i think nike is still, continuing to lose share. >> mike? any thoughts on this one >> besides the overall industry challenges, that's still the predemocrat nant thing is there a basketball shoe cycle to turn things a little? a little glimmer for '19. >> surprised haven't outperformed on under armour more >> they have i think a larger piece of the pie that's not growing as 23569 as opposed to shooting out the lights. >> i wonder, details are so murky what happened with these executives does nike need to do more to explain to the public what happened and say that here's exactly how this came down the pike and how we're working to fix the culture? >> i think the pro be problem, companies come out and are vague saying there was a conduct issue. like investors in the street's mind wanders they have to do an internal investigation. it's helpful if companies come
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out and be more clear about the situation. i think we look at earnings next week and if north america recovers here and of course we have parker staying on longer so that introduces a bit of stability and lack of transition risk here. i think the stock will, action depends completely on north american numbers next week. >> look forward to that. thanks for your time buy, sell or hold on nike. >> no comment on rating on that one. >> i know you don't do the stocks specific stuff. >> the shoe cycle and what's hot in basketball. >> afraid they didn't teach me that in economics. >> thank you for joining us. great weekend to you. a lot more still to come on the "closing bell. >> announcer: straight ahead -- the "fast money" guys weigh in on the financials. one of our star cnbc's traders announcing today she's loading up on goldman sachs. should you this is the "closing bell.
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our next guest just rang the closing bell in anticipation of the upcoming st. patrick's day
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holiday. tom derricks chairman of a beer company. welcome to you. >> thanks for having me. >> i've been to the guinness factory. we did -- we're not big drinkers we didn't actually have the guinness at the guinness this was the one in dublin you're opening in the u.s. >> opening up a brewery, first time right outside of baltimore. since 1954, last time guinness was brewed in the u.s. $80 million investment home to guinness in the u.s. bring that magic we have over in dublin to here's in the u.s. >> make guinness itself there? otherwise, the poorest pursists' want the u.s. brewed stuff we want the good stuff. >> continue to be brewed in dublin we're trying to do, given the craft movement in the u.s. brought in incredible brewers from the craft brewing industry and trying to find a way to play with more in that space. could be a pilsner or ipa or
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lager. we're essentially opening up brand to play in this craft space and what better way than here in the u.s. >> beer sales in general industry-wide, in a struggle lately because people going to spirits. i wonder if the craft brewing thing ss thing, is it a global phenome n phenomenon >> seeing in areas, i travel the world quite a bit. in other parts outside the u.s., craft is gaining traction, but nowhere near the size that it is here in the u.s. when we wlook look from a guinns standpoint guinness stands for heritage and authenticity guinness around for years founded on harrieritage and authenticity squarely that's our place. >> has one every winter. >> i love guinness in the winter i told you it's much heavier. although you've told me --
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>> it's not heavy -- >> feels much heavy. >> 125 calories in. >> a good way, wintry warming kind of way. going to be a cold st. patrick's day tomorrow the parade will be cold tomorrow. >> ask you about tariffs a second, though the beer industry said, oh, our aluminum can costs are going up. this will hurt us. is it? >> so something obviously we're closely monitoring now in the spirits industry we've always enjoyed between the u.s. and eu, favorable duty-free transactions and look for those, hope they'll continue. woor monitoring. >> cost of aluminum is one thing. how much do you pay for that a big input? >> when you think about guinness a lot of our business is done actually in the on-premise coming out of a keg. >> right vgt when you look at our off premise business, more in your grocery stores, a lot of business is not very much from a bottle standpoint. we look at it again, say we hope some of the benefits we have
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continue but when i think -- >> more concerned if something happened with the u.s. and eu trade in general >> correct. >> do you think it might >> one of those things we're closely monitoring hope it doesn't. >> yeah. >> so you also oversee, you said before, sales across different products. >> correct chief sales office. >> you're not mr. beer market share over liquor at this point? >> no. >> but that is what some of the other pure play brirs are debre with >> when i look at my business now in the u.s. and guinness specifically look at our last 52 weeks in nielsen. guinness is having a moment. right now we're up over 6% on our core draft business. market, you said, relatively flat a brand around 259 years to be up 6% in this competitive environment, we're confident in our business for us how we find a way to play on consumer occasions. no matter beer or spirits.
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how do we find a way to bring brands to though occasions. >> thanks for your time. >> i'm still looking, waiting for the the guinness. >> i have a whole story about guinness and distribution. anyway, news on car icahn to ca >> additional information on carl i kaurn's stake in the rubbermaid parent. apparently in a march 13th s.e.c. filing, stake of 6.86% in newell brands. march fir1st, now trading aroun $29. a target by other activists investors as well. the stock up sharply on this news giving back some gains. a new piece of information, the size of that stake nearly 7% back to you. >> jackie, thank you. a pretty sizable -- think about of course, carl in general, what his plans might be. >> and i believe kind of aligned with the martin franklin, the
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other activist essentially trying to get new management new structure in there. >> he ran, jarden? >> yeah. >> sold to them. >> now looking at undoing a lot of that. we'll see with newell brands. financial secretary hear significantly underperformed the market since the collapse of bir sterns ten years ago today the fast money trade whether to focus on financials now. plus, toys "r" us getting ready to liquidate because of massive debt taken on more than a decade ago what that ans mefor the future of leveraged buyouts stay with us
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bank stock outperforming the s&p. up next, "fast money" trade on the band or bank to be most bullish on now plus he correctly shorted shares of irobot. investing shore shares of a dronemaking defense contractor here to lay out his case later on the "closing bell." at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies see it- and see it through-with digital.
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welcome back iheart media filing for chapter 11 bankrupt yesterday. comes on the heels of toys "r" us submitting its own liquidation plans. they share know fact both taken private and leveraged buyouts and bank capitstakes inh what do they have to say we asked our panel would the companies be in this position if they hadn't gotten into aqcquisitions that left thm with tons of debt? >> sears is still out of
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bankruptcy worst comp sales than toys "r" us always good company, bad balance she's. good balance sheet with companies facing secular challenges. >> and cash flow positive if it didn't have to service it's debt potentially a viable -- >> and it will be. >> the weird thing about lbls that happened in the past five, six years, rates have been so low that to end up bankrupt in time of historically low rates, you almost have to go out of your way to do that. >> flip that over. these would have been bankruptcy five other eight years ago as opposed to 12 years after they went private >> if not for the fact credit markets were generous. >> my point is that they -- it's weird we have not seen more lbos in the past five, six years than we've seen given that rates -- >> new ones aren't -- >> you have apollo, k care,
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people walking around with billions of dollars and have trouble putting the money to work not because the debt markets aren't friendly valuations are high. >> aren't great. restrictions on bank loans in terms how much you can loan to a levered company after the crisis also, look, i think you have to keep in mind these bankruptcy are a feature of the private equity market. not a bug. it's not, oh, no some of these deals go bad >> they're coming? >> you're operating on the edge how much leverage you can put on a business. >> and the other thing i read a headline said, bayne broke even on it take out money and basically dividend money out to the investors or take it out ---ants pay themselves to run the business. >> pay themselves the money to run the business and if it goes bankruptcy, worst comes to worst, broke evenants talking about it today looking back on the bear stearns collapse on the financial crisis, lessons learned. talking leverage, what's changed, made the system safer private equity, going through
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with the mitt romney presidential election. more comfortable with the idea some won't work out or look at iheart and -- >> returns are based on after defaults after bankruptcy, can show on paper that they're not taking these big hits along the way and harvested gains when they can. >> my view, it's going to be going forward, there won't be spectacular growth always be perceived as more niche asset class. returns not stellar, because they won't be able to use leverage people will look through thick and thin the market we've returned x or ymp and pension funds, something i'm willing to bet on. a niche asset class. kkr won't take over the world with klos. >> hundreds of thousands of employees. >> a rush into, a lot of
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investors getting into this indust industry i don't know if the ever going to like like '05. >> iheart, maybe wrap it together with satellite t. >> figure out something. >> somehow not involve inceptive stock. a tracking tax and no taxes paid. >> see about that. time for a cnbc update once again, sue herera. what's apping at this hour president trump's chief of staff reassuring president's aides no staff shake-up is imminent according to president's spokeswoman sarah huckabee sanders made the comments at the daily white house briefing. >> -- actually spoke to a number of staff this morning, reassuring them there were personnel changes. no immediate personnel changes at this time
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and that people shouldn't be concerned. we should do exactly what we do every day and that's come to work and do the very best job that we can. >> the federal aviation administration ordering an end to so-called doors off helicopters rides, unless passengers are equipped with quick release restraints it follows that chopper crash in new york city earlier in the week which killed five people. british police say they are treerti ing treating the death of russian anything lye glushkov as murder. found dead in his home earlier in the week. autopsy revealed he dies from compression to his neck. an associate of the kremlin critic boris gare sovshsky bere. back to you. how we finished on wall street dow up off the highs of the session still positive while the nasdaq maintained a gain of a quarter point there.
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s&p up, russell up nine. russell the outperformer. the other big stories today rapid recap. >> despite signs of continuing tur moim moil at the white hous, breaking news. >> february housing data on the start side disappointing down 7%. >> nike conducting a review of h.r. practices receiven complaints about workplace infractions. an ex-tense for parker and announcing retirement of heir apparent edwards. >> another nike executive out. this one, vice president jamie martin. >> it's been ten years since the landmark deal between bear stearns and jpmorgan originally the $2 share ended up being $10. >> i spent that spring and summer dreading friday afternoon after the markets closed because i would get a phone call from frank paulsen every other week with a new disaster.
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>> one of the lessons from ten years ago, look ahead. see what's coming. >> quarter pack gains today closing just below 25,000. >> you just heard, we have been talking financials all day earlier today, stephanie link and jim cramer said volatility could be good news for goldman a little higher on the session what do we think about goldman sachs? >> if i hadn't -- this is the ultimate volatility market and some guy calls me yesterday says it can't be worth more than 250. i said 15, we're on 16 >> that was jim and stephanie talking about their bullishness on goldman trading, closed around $267 today. what do our "fast money" traders think about goldman? david sieberg and guya adami join me now. david, goldman what do you think? start with you. >> super bullish on the stock. i agree. volatility name of the game.
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super well-oiled machine managed the business super well. volatility will help trading revenues no question. look at m & a. issuance business picking up repatriati repatriational picking up at these levels based on valuation, relative attractive and step in and own the stocks. >> are you a baseball fan, kelly? yes or no? >> started following the yankees. >> a yankee fan. for every yankee fan tons of people hate the yankees but the same people would love to play for the yankees. getting hate mail here, but those same people that hate goldman sachs, if goldman offered a job would be there like -- that what's my point? still the best bank out there. not about p.e., it's about price to book. book value at goldman last ya , quarter, $180. this environment, book value 1.8 or so. do the math. gets you about a $340-ish stock.
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>> guy, it's evan. happy friday. >> i worked at goldman as you did, guy agree with a lot of your points. reality is, they're struggling to get double digit returns on equity over the past few years there's not as much leverage trading margins. margins, commissions, everything's gone down how is this company becoming a high double digit roe company? >> that it's fair. right off fixed incomes is foolish. they'll re-invent themselves in some capacity and you're right listen, they have lagged morgan stanley in many ways passed them by to count out goldman sachs just off the cuff and say they should be trading at a non-multiple the rest of the space i think to me it doesn't make sense. look, jpmorgan is trading at a premium multiple and deserve it. goldman's should be somewhere close. >> goldman, well positioned but
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relatively recognized in the valuation already. much like the yankees, not exactly like they have great value for their money in regards to the previous team. >> tell you right now -- >> here's a -- >> that's not true. >> from downtown >> like, weeks ago. >> i'm a met fan. >> horrible. >> all right i am going to talk to you about -- mets versus yankees another time actually, what i was going to say, the underrecognized part of goldman sachs, might come out as the talk of the new ceo transition and all the rest of it, investment management and wealth management, all boring stuff on more than a quarter of this company now nobody really gives it much credit. >> david soloman is an operate understanding how to run businesses i don't think david is ready to take over. lloyd will be there longer than you folks think. got to go. i hear kelly saying all right. that means, wrap >> you know it the verbal ticks
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thank you very much. david sieberg and guy adami. much more coming up top of the hour all the action on "fast money" starts at 5:00 p.m. eastern time. up next, germ companies become popular investments but ben axler joins us to warn about one in particular he thinks just doesn't fly.
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you're gaining something from meeting mr. adderley. it's a calling to not only everybody in this neighborhood in miami, but to the nation how great we are. and how great we can be. ♪ ♪ i'll stand by you. ♪ i'll stand by you. ♪ and i'll never desert you. ♪ i'll stand by you. welcome back a new report out today delivers a scathing assessments of a
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company called cado defense and security systems here at post nine with us calling for the ceo to resign. we asked for a comment and they sead numerous analysts write research on or economy, the most reputable banks institutions in the world and encourage you to refer to these publications regarding our company. thank you for joining us in fact, an analyst much more positive on the company will join us in aesecond how is it so flawed? >> goes back to the dotcom era yet to find a business model spent over $1 billion, ebitda transitions and just reported 7% before is the value? it hasn't. insiders own nothing in this company. we have serious concerns about the accounting they don't depreciate any corporate assets, which you
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growing at 8 perce80%. worked with titan corporation settled during the period of 2005 and trading at 70 times pe. >> what's the market cap sorry to interrupt. >> about a billion 2. >> and -- >> so the customers right now for the business are whom? >> customers -- >> what's the growth story they're telling? >> customers, mostly u.s. gocht. approximately 90% of the business, firm fixed price contracts. not a lot of margin upside in the business they're now, sold one of their core businesses at a depressed valuation. forecasting they're going to generate cash flow we questioned why? y generating cash flow, why do this on to generating their drone business underspending in cap x they're only 1 #% of the market
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for drone spending how will this grow into a leading company when they spend nothing? >> bring in a manager and director who has a buy on the stock. the company suggests we reach out to you thank you for joining us first of all, do you share any of the concerns ben has mentioned? >> i think it's really important to look forward here i can appreciate the comments about management's history in the past but if you look forward, yes, this company spent about $85 million to develop a drone business they're smaller relative to larger peers but are doubling the business seeing nice growth there they're in sweet spots where clearly you're seeing an increase in spending from the u.s. government to dod in particular everywhere you read today, unmanned drones viewed as important force multipliers i like the stock here moving forward. i think it's important to look at what management's done in the recent past, which is largely deliver on what they've promised to the street and i see a really
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night upside from their position in the marketplace. >> we hardly disagree with that assessment investors have been forward looking for 20 years with this company and still aren't generating positive free cash flow delayed that expected for last year and furthermore the drone segment is not making money. still losing money on $120 million of sales. >> this isn't a new business line. >> acquired through multiple acquisitions going back a number of years the only new thing, this time is different. we think investors better brate for more disappointment. >> i say this time is important. tro li two lines in the business. from 2012 through 2016, half a trillion in defense cuts and u.s. military largely working down inventories a nice inflection and demand for the legacy target drones driving
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most of the doubles business in the near term and then a number of game-changing opportunities where the company has been spending money, which i think investors are comfortable paying for andthese are not generatin cash yet very true. they've been investing in the businesses, bu you have three or four significant opportunities that could be significantly game changing for the company, in my opinion. important to look at the two business here's. legacy business clearly starting to see growth. announced $250 in contract awards over the last few months's that reflects the fact we have hit a trough in the defense budget we are spending much more across the board from a recapitalization target training, readiness standpoint that's clearly going to see growth and layered on top, a number of much longer term opportunities as we are, i argue, going through a fairly significant transformation in dod spending. >> ben, final word >> bottom line, show me the money. this is a company again, promised for years they're going to turn a profit still not doing it still burning cash flow.
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>> you think it's going it zero? >> not zero. they've wisely raised money at very inflated prices recently. should thank the federal reserve for that no the business is much better capitalized than in the past. >> a target price for getting out of this? >> we think the stock is, 40% to 70% down side. a $5, $6, $7. >> risk to potentially get acquired anything of value in terms of technology >> you have to look at the construction of this business. the business was put together by some fairly mediocre acquisitions overpaid at 20 times ebitda and 70 pe for a money losing business we don't see anyone acquiring it. >> ken what do you think the company is worth although up 6% after hours >> price $16 base,s 13 $13. layer in opportunities, a $15
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stock. i disagree and clearly think they're going to show you money this year. the company's got generating free cash flow and a different marketplace today and that the last six or seven years. biggest distinction investors are making or should make here. >> the rally after shares down big together thank you. good discussion. joining us there to debate kratos. and organize, known for lush, green businesses and also what you're saving for retirement in a first of its kind saving plans. tell you about it, next. your brain changes as you get older. but prevagen helps your brain with an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory.
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prevagen. the name to remember. well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.
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welcome back even if you are work, saving for
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retirement can be tough. a recent survey found 20% of americans are saving nothing a big reason is many aren't offered a 401k plan. sharon epperson has more. >> offering a 401(k) plan can be costly and time consuming, making it a benefit that many small businesses can't afford. that's why the state of oregon is stepping in with a plan of its own. >> when small business owner josh allison decided to go from a career in biology to beer his focus was crafting the perfect pint giving employees a way to save for retirement may have been a goal but not one he was able to brew up on his own. >> you smend a lot of time, lot of energy working with these people, developing relationships, and they become family and you really want the best for them you want them to be able to provide for themselves later in life. >> now, thanks to a program that is the first of its kind in the
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country, employees at reach break brewing are given the chance to save for their future through a state-run retirement plan called oregon saves >> we are giving small businesses the same kind of opportunities that some of the larger businesses have, low cost savings for employees at no cost to the employers. >> reporter: about 55 million american workers in the private sector are not offered a 401(k) plan through their employer. most of them, 32 million, work at small businesses, which have fewer than 100 employees some may say why is that a problem? >> study after study shows that people are 15 times more likely to be saving for retirement if they are offered access through their employer. >> reporter: oregon saves requires employers who do not offer a 401(k) to automatically deduct 5% of an employee's wages after taxes and send to it their individual retirement account. workers can contribute a maximum
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of $5500 a year. the plan is managed by the state and workers must opt out if they don't want to participate. so far, many, being given the chance, doing it reach break's tap room manager, chris, who is contributing 5% of his wages to his plan says this is the first time he has saved for retirement. >> it's always something in the back of your mind but you always use youth as an exuse and say oh, i can always do that later now it's later cheers >> some critics say there is too much paperwork for companies that already offer 401k plans to complete in order to exempt them from the oregon saves program. but that's not stopping other states from following oregon's lead california and illinois are rolling out their own plans later this year. and two dozen other states have introduced legislation to begin the process, kelly. >> i think we are learning it's easier to opt out of a lot of these programs than to try to
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opt in sharon, thank you very much. >> sure. kroechl of united technologies is weighi ingn on the effects of a possible trade war. we have those details after this you're still here? we're voya! we stay with you to and through retirement. i get that voya is with me through retirement, i'm just surprised it means in my kitchen. so, that means no breakfast? voya. helping you to and through retirement.
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jim cramer speaking with united technologies ceo greg hays one topic that topped the minds for the aerospace and defense company is the possibility of a trade war. >> we import a lot from china. they import a lot of aerospace parts from us. specifically, from boeing. as know, boeing is the biggest customer that we have in the aerospace systems side a trade war, nobody wins and i think, you know, the fear is if we get into this tit for tat on tariffs, it's going to be a problem. hopefully the chinese react with some pause and we are not going to go down a bad path here but it is a concern. >> you can catch the full interview, jim cramer talking with jim hays on "mad money" with jim cramer. of course hays one of the first ceos to tangle with the trump administration over the closure of the carrier plant and so many
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different things for him this is just the latest. >> the aerospace and defense sector in general was in market terms a victim of this whole conversation we talked about boeing earlier. >> what's been going on with boeing it was one of the best performers of the year, multiple was higher than facebook and then -- >> it was up so much connecting the dots, if there is going to be retaliation from china in terms of order cancelling it would hit those areas. it hits this debate of here we are trying to defend the shawler industry in the united states that participates in a global commodity product, steel, and maybe it's going to hurt our high value-added great competitively positions companies. >> the u.s. has great extremely competitive global companies it boggles my mind why the trump administration doesn't let them compete. those are these companies' strengths. >> what's wrong. the trump administration says we have to go after china for
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cheating and imbalances, but that's a big f and don't we have to take a risk >> the trade-offs are mismatches. >> i think corporate america is a lap dog for china. the market is too big. >> possible, but the idea of putting a price umbrella on steel as a mechanism. >> it is a weird battle to be fighting when you went want to win the i don't have all war. >> that does it for "closing bell." "fast money" begins right now. >> "fast money" starts right now live from the nasdaq market site overlooking new york city's times square i'm melissa lee. traders on the panel today -- item item, david daliberti, stephen clarke, and guy adami. there is one name the chart master says is about to break out as soon as next week when you see the chart you might be pressing the buy button, too. steve wynn is long gone he and his ex-wife can sell their


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