Transcripts For CNBC Closing Bell 20140711 : vimarsana.com

CNBC Closing Bell July 11, 2014

We are. We got a papal disconsent im sue herera in for kelly evans. Kelly will be back on monday. Were watching a market that is having a rough week, as you know. Its been very volatile, but its trying to end on a positive note, and if it closed right now, it would be positive. Well take you through the final hour of trading. Plus, we have these stories also ahead today. Is the consumer sick or are some retailers, though, using them as an excuse, as they might do . Right. Are they blowing it . Are the consumers doing the weather . Theyre pinning their problems on the shopper. We dont know if thats appropriate or not, but were going to debate it. Rentacenter, the Container Store, walmart, all of them saying consumers are hurting them and their bottom lines, but is that legitimate . Were going to take a closer look at that. Ah, yes. Meanwhile, wells fargo, the nations biggest Mortgage Lender. So, when its newest chief Financial Officer said in an interview people are just not buying homes, that got a lot of attention, and john scluzbury will be here in a closing bell first interview to clarify that. They had earnings out today. The stocks been down. Well talk to john coming up. Speaking of homes, do you own a home . I know we do. But if you do two separate homes, by the way. Two separate homes, thats right. Are we married . Yes, just not to each other. To other people, right. This is coming up later, saying you are a new part of the class of fools. Todd shone berger says that owning a home is for suckers and should not be interested part of the american dream. Youll want to hear the reasons hes saying that, later. And final hour of trading, lets show you how weve been trading so far. The dow was down 54 points on the open this morning. This trading pattern will look very familiar. Weve seen this the last few days. Selloff on the open and then a gradual comeback through the afternoon. Were coming off the highs of the day, up eight points right now. Nasdaqs up 15 points, technology back today after lagging the last few trading sessions. And the s p 500 index at this hour is trading up a point at 1,965. Lets kick it around in the closing bell exchange, beth lily, ken mahoney and Michael Gapan from barclays and our own rick santelli. Just in the last few minutes, gang, the white house came out and said that the annual budget deficit will fall to 583 billion, much lower than last year, and they say that next year, the deficit will be below 3 of gdp. Beth lily, i guess good news. Its not moving the market today, but good backdrop there. Incrementally, were Getting Better on financials, arent we . Absolutely, and i would contend and we contend that the economy is definitely improving. Its slow, but were getting traction, and all the signs are that things are improving, that, you know, we see employment back to prerecession levels. That 8. 7 million jobs that we lost have now come back, but theyre in lowerwage jobs. And so, youre seeing a slower consumer, but we do believe that there is traction in the economy and things are improving. Ken, do you agree with that at this point . I mean, because we have seen better jobs reports lately, yet, there seems to be a large disconnect between main street and between wall street, and that seems to be widening. Yes. Its been that way for a while. You know, this is going to be a tug of war for the bulls and bears through the next couple weeks, no doubt. If you look at it here, history is on our side here. Twothirds of companies that report typically report where they meet or exceed earnings expectations. Now, this has been a tough week, no doubt. But i think the market still has a lot going for it. Theres a lot of cash sloshing around. You still have underinvested bulls. And you still have a lot of Money Managers kind of having this performance anxiety. So, granted, not a perfect market, but well still go with the choppy market but with an upward bias. But even as we wonder about the health of the economy, there are those who fear that the easy money policy will start now to fan the inflation flames, finally. Ed daiki, pimco is out saying its time to buy t. I. P. S. , treasury inflation protected securities. Would you agree . No, im not a bond buyer at all. I prefer equities over bonds every day of the week. I think the thesis pimcos had for a long time, which quite frankly has been a good thesis, the new normal of slow growth, low Interest Rates, i think theyre in the ninth inning of that call and i think the opposite is happening now. I think the economys picking up, picking up more than people expect. And what you have to ask yourself, the consumer isnt buying, but you know who is, Corporate America. Corporate americas buying everything in sight. Theyre buying back their own shares, theyre buying other companies, and now thats why the earnings per share looks so good. What was that, rick . Thats why the earnings per share metrics are often quoted as a great positive. If they had bought back all their stock but one share, their earnings per share would be through the roof yeah, you know, michael, what about that . Because there are those that say that Corporate America is not growing from the bottom line. Theyre using their bottom line to buy growth. And therefore, you have to look at the earnings and the metrics a little differently. Do you buy that argument or not . I do. At least theyre doing something to improve that bottom line. So, activitys better than not doing something. I agree with the basic flavor that everybody has presented, that soft growth doesnt have to be fragile, soft growth and moderate growth will get it done over time, that equities are likely to bubble higher. And a combination of corporate activity on the Balance Sheet as well as a gradual improvement in fundamentals will keep earnings per share doing well and equities likely bubbling higher. So, i would just echo the sentiment that youve heard from the other guests so far. I dont know if wed want to use that bubble word. I dont know, michael, about that. I mean, i know what you mean, however, im a little worried about it. Very fair point. Very fair point. Hey, rick, for some reason, i thought of you when i saw those budget deficit numbers came over the wires just a short time ago. Im glad you did, bill yeah, i know. Im glad, because you know what . Everybodys crazy okay . Heres the analogy. A family of four has a dozen credit cards that are maxed out and they put them in the bureau drawer. Thats our 17. 6 trillion debt. On their new credit card, theyre way below their limit. Thats the United States of america right now. Yes, its a great improvement. We had 08, 09, 2010, over 1 trillion deficit. Now theyre getting in line with where they were in the Bush Administration going back. Definitely a huge improvement. But the fact of the matter is, until it goes into surplus, the tail were dragging along, which is approaching 18 trillion, is not getting smaller, and the office of management and budget and the cbo both agree on one thing, once we hit around 2017, it all goes back the other way. So, i mean, you dont buy the notion that you can only turn the ship slowly, you cant turn it on a dime . I mean, we are improving, though . Oh, no, i agree its an improveme improvement, just like jobs are an improvement, but when people wonder why the economys underperforming, its because we cant differentiate between a big debt were carrying and smaller deficits, or the fact that a credit card isnt really income, its debt. And ed deicke, this still doesnt make you want to buy tips . No, not at all. The one thing thats happened is everybody said when the government started spending less money, they wouldnt hire anybody and unemployment would get worse, but Corporate Americas stepped up and started hiring people. In fact, Corporate America is complaining that they have a lot of positions to fill but dont have qualified applicants to put into those positions. So, i think job growth is going to continue to be stronger than people anticipate, and i think thats going to be the engine thats going to drive the economy and eventually start to turn around these deficit numbers over a period of time. And youre right, its not a speed boat, its the titanic. Bad analogy, but nonetheless. Its a big ship, not a small one. [ everyone talking at once ] common denominators were speaking about today is that Balance Sheets of Corporate America, which have a lot of cash. And in boardrooms across america, theyre looking at how to deploy that cash. All of it is shareholder friendly. So, whether they buy back shares, raise your dividend or buy other companies, all of the above, its very shareholder friendly, and thats a very positive for this market. Right. You know, beth, though, i worry a little bit that there are some valuations out there that are stretched. Do you view the market as undervalued, fairly valued or slightly overvalued . I would still say fairly valued beth. Weak. Beth. I would say that the market is slightly undervalued. Really . I mean, we saw a big year last year, but were still finding areas to put money to work. You know, carl icahn was out today talking about being very selective with investments. And i would reiterate, were using the dips to buy stocks. We think its slightly undervalued, but not overvalued, because what are you buying, beth . What are you buying . Theres two stocks to talk about, bioscript and orbcomm. Bioscrip is a Home Infusion company, new ceo. Hes coming in, expanding ebitda margins, hes cleaning up the company. Theres consolidation in the industry of the Home Infusion. And hospitals are trying to push people out of the hospitals into home care and bioscip is a direct beneficiary. And the other is orbcomm, which is a Satellite Company transitioning to a telematics company. Theyre launching a bunch of satellites. Youll see a rapid acceleration in ebitda, margins are going to expand, and we think both stocks can double over the next several years. Classic stocks. And totally misunderstood by the market. Okay. Michael, final word to you, if we could. Is the market underestimating the fed taking away the stimulus, the october date . I mean, i hear a lot down here about the fact that theyre worried that the market is complacent. Even though they know the punch bowls going to be taken away. There were a couple fed members out today who said the markets underestimating how soon thats going to happen. Does that worry you . Michael . Not as much, because i would say even that worry that its going to come sooner than you think, the feds been clearly communicating where this is a tightening cycle thats going to start later and be slower than normal. So, even though it may start a bit sooner, on balance, its still going to be more accommodative than they would have been in a regular tightening cycle, and thats generally positive for stocks. So, i would say that its a worry, but if you have a long enough time horizon, it shouldnt be too much of a worry. All right. Thank you, folks. Appreciate you stopping by. Have a good weekend. Thank you. Thank you. See you later. We ha 50 minutes left in the trading session with the dow up 15 points. Its been a narrowly traded day, but a day much like weve seen this week, down in the morning, down 54 points in the open, now were coming back and finishing, at least right now, positive. Were going to talk some earnings, specifically wells fargo coming up next, because the new cfo, John Shrewsberry is breaking down earnings. Its a first on cnbc interview. And well get his view on the housing market, a perspective you dont want to miss since wells fargo is the nations largest lender. And also, a consumer funk. Weve been talking about it all week, blamed for disappointing earnings from some retailers, the way weather was used as an excuse last quarter for many other companies. Well, two pros will weigh in on an issue that could affect your portfolio and your wallet big time. And a little bit later apes together strong. Oh, yeah, youre going to rush to see that, arent you . Im going to rush to see that one, oh, yeah. Will the new apes movie breathe moji not the hollywood receipts . And which studios stand to make the best gains through labor day . Yes, were talking about the end of summer. I thought we just started summer. We have. Far from the end of summer. The pros are going to chime in. That and more coming up on closing bell. Stay tuned. If you have moderate to severe rheumatoid arthritis, like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira, your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Take the next step. Talk to your doctor. This is humira at work. Welcome back. Plus signs today. Not big ones, but after the kind of market weve had, well take them, i guess. The dow is up 16 points after having been down 54 on the open this morning. S p is up a point and a half. The nasdaq and the russell are leading the charge higher, so its like weve seen the last few months in this market, unlike this week, but we are seeing plus signs and green arrows today. And the bulls will take that, right . So, lets go to dominic chu on the movers in todays trading session as we close out a week. Tgif, dom. Tgif, for sure. Lorillard and reynolds on the back of the tobacco side of things. They are convening merger talks. Lorillard up 2. 7 . Then, Shire Pharmaceuticals issuing a statement confirming that it met with abbvie to discuss the terms of abbvies 51 billion takeover proposal. Shire up 4 there, abbvie down marginally on the session as well. A tough day for private mortgage insurers. Thats mgic, thats raid radian, genworth financial, all moving lower, some by a lot. Mgic down about 9 as the federal financing House Authority issues proposals to tighten requirements for private mortgage insurers that do business with both fannie mae and freddie mac. The agencys saying the proposed rules will help ensure that approved insurers have sufficient liquid assets to pay possible claims. And were going to end with the big one, wells fargo lower after posting secondquarter profits that matched wall street estimates, but its mortgage revenue dropped 39 as lending volume did fall from the same time last year. Bill, sue, its interesting, because we kick off Big Bank Earnings season a lot more besides wells fargo to come next week. Back to you. A lot will be reporting at that time. Thanks, dom. On wells fargo, about a month ago at the Morgan Stanley financials conference, wells new cfo, John Shrewsberry, gave his candid take on housing and he has a unique perspective, because wells fargo is the largest Mortgage Lender in the u. S. Listen. People just are not buying homes at the pace. People are getting priced out. Thats a possibility. Its a regional set of explanations, but its just not quite where we manniimagined th would be. Well, John Shrewsberry joins us first now. Its a first on cnbc interview. He is also a member of the cnbc cfo council. Welcome, john. Nice to have you here. Welcome, john. Hi thanks for having me. Lets start with the home situation. You said last month that people were really not buying homes, that maybe they were priced out. It didnt improve this month. Can you expand on your thoughts on that and whether or not its the specter of higher Interest Rates or insecurity about the job picture . What is it, do you think, thats Holding People back . Sure. Well, actually, in the Second Quarter, just to be clear, our Mortgage Business was way up over the first quarter, down from a year ago because a year ago we were still at the end of a very low Interest Rate refinancing boom. But this year, actually, this quarter things looked really good. Originations up by more than 30 and our pipelines up by 10 billion. But whats Holding People back from what we might have thought was going to happen in the purchase market is a combination of available supply. Its just a little bit harder to find a home in certain markets, either because people are priced out or because new Home Development isnt what it was before the crisis. So, i think thats at the margin one of the items that were looking at. That in addition to demographic factors like people forming families later, people not getting as excited about housing as they used to. But its still a great business for wells fargo. But will it only get more difficult down the road . The last couple of times we spoke with your predecessor, tim sloan, we talked about the refi market and how that had pretty much dried up because of rates stabilizing and nudging a bit higher. People had done the refiing. They were done with that. Now, as the fed begins the process of raising rates at some point, taking the easy money policy away, will we now start to talk about Mortgage Origination dropping like it did for the refis . You could

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