Transcripts For CNBC Closing Bell With Maria Bartiromo 20130

CNBC Closing Bell With Maria Bartiromo September 4, 2013

The entire hour tonight. Aig ceo Bob Benmosche is with me. Well say hello to bob. Thank you very much for joining us, bob. Nice to be with you. We want to jump into todays Market Action and talk to you and our other guests, before we get specific with bob on the aig, the regulatory environment, and lots to talk about with bob. Tom is with us, todd from land capital and our own rick santelli. Thank you very much for joining us. Bob, let me kick this off with you. Does it surprise you to see this market move higher even in the face of so many uncertainties out there . How do you characterize things right now . Well, we see everything and ive said this for quite a while a very core strength to this economy. Businesses are doing well, and i think the problem is growth, and people investing, putting a little bit of money at risk to create new ideas, new busines s businesses, new technologies, and, therefore, new jobs. So what youre seeing here is that theres a lot of strength here in our economy in particular, around the world. And so, this is just a sign that market also continue to improve, because they believe profits will be there. Yeah. And, of course, the growth part of what you just said is critical. Todd, let me ask you. Would you put new money to work in this market right here . Absolutely not. Look, we are definitely the feeling on wall street is something is going to happen with syria. And right now, that is the headline driver. We could talk about fed tapering. We could talk about the upcoming jobs report. Right now, what moved this market today was syria. And if you really want to see the quick reversal, look at gold in the final hour. Gold shot up right after the senate panel voted we can go in and strike. Yeah. You know, its such an uncertainty, though. You have to ask yourself if thats the headline of the day, how come the market was up 100 points today . Go even further than that, though. You had the president speaking this morning and here he gave some clues, okay, lets talk about the red line and pushing accountability and everything else. And then that leads traders here to believe that, yes, congress will not end up doing something, but still the senate panel voted it forward. Heres the thing that traders want to know, those. Whats the ancillary risk . Even though we might attack syria, whats going to be the outcome for that region and, therefore, you have to look at oil prices. And, also, fed tapering. Will they be able to taper if we go to war . Well see about that, the next meeting of the fed, september 17 and 18. Todd, where are you on that . Would you put new money to work here . Yes, maria, the way were viewing things is this is a sentiment backdrop that continues to be very supportive of higher stock prices. Weve seen pullbacks like this before, most recently the may june period. This pullback really isnt any different other than whats driving the pullback. Today, its syria. Earlier in the year, when we had the pullback into the beginning of 2013, it was the fiscal cliff. Lately, its been tapering. But all in all, weve got this, as your guest host just explained, weve got this underlying strength in the economy, and better yet, weve got a lot of nonbelievers out there. Whether youre looking at sentiment pools, whether youre looking at Short Interest i just checked right before i came on the show, its amazing. Short interest on s p 500 component stocks, now up 14 since last years lows, yet the s p is up 21 over that period. So we still have a lot a lot of skepticism, hedge funds underweight, a lot of todd sideline moaning. I love the optimism. Here we go, though, last earnings season, what, s p 1. 7 in earnings, First Quarter at 3 . Historical average at 7 . Were just not seeing the Earnings Growth right now. You have to wonder where its going to come from in the second half of this year. Thats not and thats true. And i hear you. And that is one of the anchors of this pessimism that were seeing. How many quarters in a row have we come in absolutely scared about how what Earnings Growth would be, scared to death of what that would do with the market. Yes, earnings havent been great. The key is they have beaten expectations quarter after quarter. Yeah. Rick santelli, jump in here. We had the yield on the 10year moving up again today. Whats your take on where rates are going, and whether or not that equates to sort of the economic landscape out there . Well, i think it equates the economic landscape with the managed aspect of rates where they are. How that will filter through as the fed has less effect on rates is anybodys guess. The auto sales were good, and many auto sales, especially the loan side, isnt going to the highest scores, that get the great incentives, which really are playing games with the price. Theres a lot of auto loans that are in the subprime. So its baked in the cake. I dont know that higher Interest Rates on government benchmarks is going to affect that. But 5s to s10s, look at this, five years are up more than any other maturity. At 1. 74, extending the historic run to 24 months. Whereas, the long end, the 30year bond, normally associated with wild moves, is a dozen basis points below its august comp, which was a twoyear high going back to august. So i would continue to keep an eye on the 5 year and the debates on syria and the taper, it keeps chugging along, making new passes at 24month highs every session. And, Bob Benmosche, youre an investor of fixed income. Tell us how you approach investing, and what corner of the market, given that weve seen a tick up in Interest Rates. Were focused on clearly the most important thing we start with, so we have an advantage, not just trading for yield. Were trading for our liability. So were looking at a threeyear, fiveyear guarantee well make to a client, and out in the marketplace to look for that kind of paper to do that. So thats the large part of our fixed annuity business. On the life business, were looking around the globe, as well as in the u. S. , for an opportunity to get extra yield over whats in the general market. So its hard to find good yield right now. Are you yes, i was going to say. Are you able to find the higher yield . Where is yield in the bond market . I think its were looking at corporates, were looking at mortgages and so on, were looking at some core you know, the cnbss, for example, some of those activities. But were being very selective, very careful on our research to find the right names to be able to get the credit. You have to be careful. You dont just grab something without real careful thought for research. Is that the alternative for you, given youre not optimistic about equities, you dont youre not optimistic about the economy. Where do you allocate capital . Heres the thing, now. Weve been expecting the fed to continue with 85 billion. Clearly, theres diminishing returns there. So theyll have to start tapering. Then you have to look at where the Earnings Growth if were going to have any earnings power. Were just not seeing that right now. So, therefore, this going into equities right now, is probably not the most prudent thing to do for the second half of this year. But look at alternative investments or even look at things like gold. Clearly, we do strike in syria, gold will go through the roof. It might be the optimal place to be. You want to buy gold here . I would definitely buy gold here. Buy gold at 1,392 . Gold is the best trading sequence right now, because you can trade it off of the headline news, maria. Look, here we go. We start thinking well be shooting off missiles, gold goes through the roof. Yeah. Next thing you know, you subside, it goes down. A great trading story. I believe you. Gentlemen, thank you very much. We have a lot with Bob Benmosche, our guest on the market. A lot of todays rally fuelled by redhot auto sales. Phil lebeau has the story. Reporter you look at august auto sales, the best pace since november 2007. Officially the sales pace last month coming in at 16. 09 million vehicles. Thats not total sales. Thats the pace of sales. And again, thats the strongest since the november of 07. Who led the way . The japanese big way honda, toyota, nissan, all posting sales gains of greater than 22 . You see mercedes with 20. 5 , gm 14. 7. Everybody much better than expected. On the luxury side. Look at the Sales Numbers from bmw. Sales last month jumped 45 , overall luxury auto sales up 31. 5 . Thats practically double what the Industry Sales growth was last month. The ford fseries, this is one stat that caught my attention today. Ford sold an fseries pickup every 42 seconds in the month of august. Its raising production in the Fourth Quarter not just for the fseries but all vehicles by 7 . Take a look at shares of ford and gm. They had a huge day today. Maria, its not often you see ford and gm up 3 or 4 in a single day, but both of those stocks are up today on the backs of the best auto sales since late 2007. Maria . Yeah, and pretty good returns to both yeartodate, as well. Phil, thank you very much. Great reporting as always. Market flash on blackberry now. Dominic chu. Reporter the lateday surge for the smartphone maker blackberry. Its on the heels of a dow jones report, according to their sources, blackberry is looking to conduct a rapid sales process and find a buyer by november. The report goes on to say that the company has held talks with possible bidders, and that it s is and its advisors, rather, are planning to begin the option process soon. So if youre looking for a little bit of a reason why those blackberry shares popped at the end of the session, it could come from the dow jones report. Well bring you more details later. So its definitely taking a populate. All right. Dom, thank you very much. Much more with my special cohost of the hour, Bob Benmosche. Plus, Standard Poors crying foul, calling the 5 billion lawsuit against it retaliation for its decision to downgrade the u. S. Credit rating back in 2011. Stripped the usa of its triplea rating. Well debate it coming up. Very interested to get bobs take on that. Also ahead, the Senate Foreign Relations Committee taking a vote on syria today. A house vote may not be far behind. Congressman Gregory Meeks tells us whats next. Stay with us. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. announcer at scottrade, our clto make their money do more. Re ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. Welcome back. Call it a big withdrawal. Aig closing all Bank Accounts on september 30th, following new regulatory limits on doddfrank. Aig is the the only insurer to make the exit. Aigs Bob Benmosche, my cohost for the hour, weighing in here. Bob, the government is stepping up the scrutiny. First off, whats your take on that . And what do you see as the biggest regulatory hurdle you face . I know what youre going to say, because we talked about this a lot. You always ask me about hurdles. Lets talk about the positives of this story. Right . Thats what i usually talk about, the positives. If you want to whats clear is look, when i became ceo of metlife, it was 1998. And one of the greatest concerns was what was going to happen with deregulation of the financial system. And glass steagall failed, and we had a new law, and everyone wondered what would happen with the insurance companies, investment houses and banks. Of course, you remember sandy had actually started the ball rolling with the citibanktravelers. Yeah, basically did it before the law was law. Absolutely. He was the forerunner of that. And so, whats happened over the period of time until now is weve really not figured out how to regulate those kinds of companies. You have the crisis in 08. And so, what i believe is happening is were regulating ourselves back to some form of glass steagall. We dont you know, if you want to take insured deposits, deposits insured by a government, and then you want to trade your own account and you want to be an investment, or you want to be an Insurance Company, then what volcker is saying is you have to have more restrictions on those activities, because the governments standing behind the deposits. And so, what i think is the hurdle were dealing with is how we begin to work our way back, to be competitive, but get out of some of the things that are necessary to protect bank depositors. Thats what we do. Can you do that, though, when you still have this whole too big to fail . You know, requecan you protect consumer deposits . I think banks can. They have to limit the amount of risk on their books. They have to reduce the amount of leverage. They have to be careful what theyre sources for liquidity, which is what happened before. You have deposits as a source of liquidity. But when a crisis comes, because of the government guarantee, you hold onto the deposits. But the commercial paper went away and other sourcing of funding, because thats how they operate. Insurance Companies Operate totally different. Our job is to go out and talk about protecting you from some longterm event, life expectancy, retirement, you know, a disaster down the road, in terms of flood, what have you, and then we have the liability. And then we match assets. We buy investments to match off to that liability. But if something goes wrong, you dont tend to take your money out as quickly as you would from a bank, because if you have life insurance, youre not just going to cancel the life insurance. Youll hope the Insurance Company approves. If you have a longterm annuity, you wont take that out. If you have Car Insurance with us, you wont say, well, im cancelling my policy and bringing it to some place else. You dont have that mobility of your money. So for us, we want to make sure, as we think about this new era of regulation with the fed, is weve got to maintain sufficient liquidity, but recognize our liabilities are different than the banks. Yeah, a very important point. When it relates to the banks, everything you said has occurred, right . I mean, they are in a much healthier position today. Capital has been raised. Risk has been taken down. Yeah, but listen i have been listening to you. I know this is the part of the story thats important to you, and the story thats not out there. And yet the scrutiny continues. The scrutiny on jpmorgan, for example. Theyre looking at the hiring practices of jpmorgan. 200 hires in china. Were they related to, you know, just trying to get business deals in china . Even with the improvement that weve seen, has the scrutiny also ratcheted up and stays there . Until we can improve this economy to the point were creating jobs and people have more confidence in the economy and in their ability to retire thats a huge issue. Everybodys retiring at certain ages now, in the 50s late 50s and 60s by five to ten years, because they know they cant live on the money they put away. And so, until confidence comes back, until people can say, gee whiz, i can retire and do it safely and not run out of money before i die, if all of that confidence comes back and jobs come back, i think the pressure will come off the regulators. The public is angry. Right. And the public says you didnt arrest anybody. Well, you cant arrest people for making mistakes that werent intentional. You can say you were stupid. Well, theres no law against stupidity either. Yeah. Thank god, because wed have a lot of people in jail. Yeah. I would say that right now, once the public sentiment calms down, the economy gets better, the regulators will not be under the enormous pressure to do something. Let me ask you about aig in particular. We had Bruce Berkowitz of fair home capital on cnbc this morning. The top holding is aig. Yes. I want to get you to react to what he had to say about your company. I think youre going to like what he had to say. Listen to this. And when you look at todays stock price with aig, its still selling significantly below a liquidation value. So at some point, the stock market price of aig will meet the book value of aig, which i take as a proxy for the liquidation value. So how do you continue this move that youve obviously been leading, bob, since you took over . Youve got consistent dividends. You announced the 1 billion Share Repurchase plan, a ton of cash on hand. How does this continue . You have to constantly reinvent your business. And were in the process of doing that at aig. And technology, not only plays a big role in cell phones and ipads, it does in our business, as well. How so . Data management. Mining, big data, data mining. The more you can do to analyze in terms of whats going on with risk, risk selection, pricing of risk and so on, the more you could be more scientific about it as well as intuitive from an underwriting point of view about what risks and how to deal with it. When you put that all together, it will give us an ability to grow our business, but do it in a way that we dont take on what i would call black box risks, so that we have a better sense of how much to charge and what are the probabilities of something going wrong so we can make at least our cost to capital, which is our goal. So were going to continue to grow our business. Use technology to come up with better information about the business we take on and put on our books. And i think over time youll see we continue to grow. So whatever is todays liquidation value is for bruce, my hope is he keeps chasing that carrot, because the liquidation value keeps going up, book values keep going up, and thats good for the company and its share 40e8ders. Hes clearly a happy shareholder. Youve been raising cash and not done

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