Transcripts For CNBC Squawk On The Street 20140306 : vimarsa

CNBC Squawk On The Street March 6, 2014

Staples and childrens place, well break them all down for you. Paypal cofounder reed hoffman fires back at carl icahn and ahead of tomorrows big jobs number weekly jobless claims did decline slightly as we said. Well start with retail. As we mentioned three big misses, costco biggerthanexpected fall in profit as deep discounting during the Holiday Season hurt margins. Childrens place announcing an 18 drop in Fourth Quarter earnings. Highly promotional market in Severe Weather and then staples missed on revenues said its going to close more than 200 stores by the end of the year now that nearly half of its sales are generated online. People are calling it a triple whammy in retail and obviously tough news for obvious reasons. Disconcerting mostly by costco because costco when i saw the number, hey, thats not so good but when i read the release they were telling you they were unhappy with their performance. Its the new pattern where someone says, look, its not just the weather, we didnt do that well. Food costs not that good. Foreign not that good. Theres a currency switch. I think that this is the takeaway of a great retailer not doing a great job so thats more important. Some of the places its been iffy. Staples has been downright horrible and i think the consumers are staying away from staples. People are saying i am not shopping there. Big consolidation in the industry didnt matter. Lets back up on costco. This was the height of the cycle of their fee increase which we knew was sort of a risk. Theyve missed now on estimates three times and this is the worst one and they dont give guidance so in a sense this is almost as much as analysts getting it wrong as well as the Company Getting it wrong. I think whats difficult they have such a big Food Department and theyre not raising prices. And yet the cost of so many foodstuffs are going jane just did a big piece on bacon. Yes. You got to pass your food price on or else you are going to get crushed. Kroger has been able to pass on costs. They had a magnificent quarter today. This is the return of the old supermarkets doing well and safeway being bid for and costco, i dont know what they have to do. They dont want to lose customers and they dont like to have a customer be disappointed. I went through the costco magazine this month and the heavy skewing is much more towards how to be able to get insurance. Cars. Cars. But not food and food has been a bear for them. They dont do buybacks regularly. They dont do things that would boost the stock in the short term. Yeah. You are more interested in waiting for a better entry point here. I wish they gave us something here. It did say the last few weeks have been good. Macys reported a bad number and then said as the Conference Call went on that postvalentines day it was good. Stock was down a couple of bucks and then reversed and finished up and has been off to the races since, so maybe costco which is not a Promotional Company at all can say, look, we think things are more in line with the last few weeks but this is a disappointing number and food is such a tough business. You mentioned staples, they missed by six credibilities. North american comps down seven. But as we said nearly half of their products are now online. Right. Europe was in the black. They i think had 500,000 products online. Five times what it was at the beginning of the fiscal year, thats a Silver Lining . They are still a brick and mortar outfit. The competition in that space whether its from costco or amazon is amazing. Shutting 225 stores. I felt when office max and depot got together there would be a letup in price wars. Its a very competitive environment and i dont think people like to shop at staples. That would be a crisis. I dont know what i would do if i worked in the management of staples to try to figure out how to make my stores more attractive, but whatever they are doing its not working. A lot of commercial space will come online between radioshack and staples and childrens place. You are so right. And i know that some of the Real Estate Investment trusts are indeed somewhat on pins and needles. Don woody has a lot of businesses not under pressure. Steve tanger from tanger factory is saying you do not need to necessarily worry about us. But at the same time i do know that theres a lot of stores going under and you need to have something that is, like, you know, that is local or involves something that cant be amazon. Pet food, okay . Pet food. Pet stores. Right. Because other was what is happening you are getting amazon and theres negative comments about bed bath and i know people continually think its been amazon. Yes, real estate is not going to be a charmed place, sears, kmart, good luck trying to sell a lot of referee . I keep coming back to what shuts of starbucks told us a long time ago about peaking mall traffic. Yes. By the way Howard Schultz telling you please stop fretting about the price of coffee. This is not the first rodeo of coffee. Coffee up two bucks, brazilian drought. Other analysts will sweat it and make you worry about it but theyve got things locked in until 2015. And another big story ebay getting another defender against carl icahn, reed hoffman who is a former paypal board member argues on linkedin that icahns idea of spinning out paypal from ebay is shortterm thinking. It says it still has massive Growth Prospects but to someone who isnt investing in the long term its just a cash cow thats ready to be slaughtered. Are they trying to circle the wagons . I guess so. I like if theres a debate about whether there should be a spinoff. I think the people whose integrity are being challenged are i would love to see counseled if i were involved in a growth industry. I have felt that more focused paypal away from the incubator that is ebay could really give a look at then on the line mastercard and visa. Also i think paypal would benefit from a very focused management that says, listen, well be in that business and not worry about the gross merchandise that comes through the organization. You know, look you were siding with carl . I am siding with carl. Im looking at this in many different ways and i keep coming back to the idea that ebay is in a fight for its life with the Amazon Web Services competitor, okay. Ebay is traditionally has been saying, listen, koreas a problem, germanys a problem. Ebay has to fix its problems and maybe if they were focused on ebay and not growing out paypal, ebay would do better. Mr. Done know he, i think his analysis that they should Stay Together may be antigrowth. Versus what i think that they could get from these two different divisions. Interesting. He has been, you know, the andreessen integrity question that you mention, they almost havent dignified with a response at least not early on. The issue of the split they say they studied upside down, sideways, seven ways to sunday and theyve been saying that consistently for weeks. You get this situation and eight want to analogize versus nelson peltz, theyve done a lot of work and say, listen, the two companies do Better Together and yet there is a clearly a rigorous challenge to her view. I think icahn is offering a rigorous challenge to the notion that paypal shouldnt be spun off. I got to tell you paypal would be worth a fortune. This market wants a new mastercard and visa, that would be the one, wow, in is terrific. I worry about square, i keep hearing about square, a paypal competitor. If they were to come public maybe you would see a valuation, wow, paypal is really being valued of a discount because of the jumble. Carl has another letter today, another tweet this morning. A lot of letters. The consistency of his salvos is surprising. Well see if it gets him anywhere. Look, yesterday was the first time i saw no, monday was the first time i saw ebay didnt go up on the saber rattling, and wow, ebay dont ever forget if carl icahn had not made his initial noise the last quarter was bad, okay . It wasnt just soso, it was bad, and that stock would be under 50 and carl icahn maybe that donahoe should say smoke em peace pipe. And i will tell you if donahoe would be the worst provider over corporate governance, why is he wide open. He does not impress me as a man hidden by anything. He is not hiding. I agree. When we come back markets Holding Steady as we said ahead of tomorrows big jobs numbers. Well tell you how to play it. And nike announcing a partnership with the world cup and the ceo of nike. What a get. A dow component. Great guy. Will join us live a little later on for an exclusive interview about that, the whole state of retail under armour, uf name it. One more look at futures. The nasdaq is on track for five weeks up. Hasnt done that since october. Well talk about reasons why, jim, when squawk on the street comes back. Tall the building is, or how ornate the halls are. It doesnt matter if there are granite statues, or big mahogany desks. When working with an investment firm, whats really important is whether the people behind the desks actually stand behind what they say. Introducing the schwab accountability guarantee. If youre not happy with one of our participating Investment Advisory services, well refund your program fee from the previous quarter. Its no guarantee against loss and other fees and expenses may still apply. Chuck vo standing by your word, thats what matters the most. Welcome back to cnbc, im Michelle Caruso cabrera at the breaking news desk. The euro crosses over a buck 58. You can see the strong move and its a result of the ecb, mario draghi has been talking about in the wake of their decision to leave Interest Rates unchanged. Whats moving the markets is what draghi did not say. He did not acknowledge any concerns about deflation nor did he talk about any extra policy measures beyond the traditional ones. There you see what is happening with the euro. There are concerns within europe openly expressed in the market about whether or not europe is facing the possibility of deflation. Draghi did not acknowledge that. The economic wonkspeak that he used that would give uf the code that lets you knows thats what his thinking, he said inflation exations over the medium and long term are firmly anchored. That would suggest at this point no other additional policy innerures. Overall, though, still incredibly dovish. Talking about extending, keeping the Interest Rates very low for an extended period of time and being willing to do all that is necessary but clearly from the Market Reaction today, the market was looking for the possibility of even more. Carl, back to you. Michelle, thank you so much. The feds bill dudley just hit the tape talking about what he calls pocket of market froth. Of course, Richard Fisher in mexico city talked about market valuation hitting eyepopping levels. Its a theme that cramer has hit consistently over the past couple of weeks including last night on mad money. Yes. I think some stocks are frothy, but i dont see a peak here because many stocks are not frothy. Its a twotrack market and unlike 2000 the bizarre frothy track is smaller than the reasonably priced track. That was not the case back then. I think you need to take profits but im not telling you to short them plus in many cases like google and facebook the companies were not like they were in 1999. They are earning gobs of money. They are trading on earnings. All right. This is an important yes. This is an important right here a lesson, a primer, a tutorial on whats going on right now. Youve got a lot of companies that people were betting were just going to be growth on revenue and thats why you buy them and you look at a facebook and it flipped. It flipped at 25. Theres another whole Group Another cohort thats the salesforce. Com work day cohort. They are absolutely valued on revenue growth. They are momentum stocks and the final cohort that everyone seems to be possessed by which is the hope cohort. I mean, how can under what under what world can you expect tesla to be up at these levels . Why, why, why, why do we have solar city at these levels . Why could netflix, why is amazon. And the answer is, please, stop saying thats the whole market. You are ignoring a wells fargo that is trading at an incredibly low multiple. You are ignoring the general electric, the stock is trading ridiculous, its trading as if theyll never get it right. Certainly jeff immelt thinks theyll get it right. This track of normal valuation, 17 times earnings, thats not so bad. The sales times sales i could understand why someone wants to short salesforce. I think they will be obliterated if they do. And the final group, we see a lot of stories start joining the tesla group and were seeing that in some biotech. Ill get worried. They dont remember what 1999 was like. We were valuing stocks as if they were all going to be amazon. And manies dont exist. 300 Companies Got wiped out, okay. And we were valuing them as if every one of them would be the next coming of a yahoo which was so valued. So, please stop comparing this. Please. So, when dudley and fisher come out, right, and they talk about not just valuation but margin debt right. The spread between benchmarks and corporates, are they being paranoid . Fixed income i dont like. I think that rates could go higher. I think the economy is a little bit stronger. Fisher i totally discount. Hes been so wrong. Hes a really nice man which is what i usually say when someone is dead wrong. Its okay. You have every right to be wrong. Everyone has a right to be completely and utterly wrong, mr. Fisher has exercised the right repeatedly. Hes a good man. Dudley, i dont know, hes new. See how the hawks gather forces over time. The first 11 amendments, the bill of rights, the 11th is actually, it says you have every right to be wrong on air. How smart was jefferson . Madison . Foresaw cnbc. Todays the anniversary of dred scott. That was a bad decision. The Crimean Parliament has voted in favor of a march 16th referendum on whether the region should join russia a move that kiev has declared illegal amidst ongoing diplomatic wrangling the u. S. Secretary of state set to meet with his counterpart in rome, lets send it over to jim maceda who is in moscow. Evening, jim. Reporter hi, carl. Well, thats right. The Crimean Parliament has voted today to join russia effective immediately. Now, that vote has no real political weight until a referendum on the peninsulas future which as you suggested will take place in about ten days. Also this parliament is not even recognized by the Ukrainian Government in kiev. But all that said, the vote will certainly raise tensions in crimea especially among the 40 or so percent of crimeans who are not either ethnic russians or pro russians. Some of those pro russians crimean mps are already warning that this vote means that ukrainian soldiers on the peninsula will be regarded henceforth as occupiers and well see how that plays out on the ground. Meanwhile, secretary of state john kerry is meeting again with russian counterpart Sergey Lavrov in rome, continuing the talks about an end game in ukraine. One of the goals yesterday in paris was to get the russian lavrov and the Ukrainian Foreign minister to go face to face, be face to face in the same room, but that never happened, so kerrys at it again today. The russians, of course, say the new interim government in kiev was put in place by a coup, so when lavrov was asked in paris if hed met his ukrainian counterpart, carl, he apparently replied whos that . Thats how bad its getting. Back to you. Man, that is thats cold. Thats the cold back in the cold war, jim, thank you very much. Jim maceda in moscow. When we come back, its cramers mad dash as we count down to the opening bell. One more look at futures a lot of news going on. We havent gotten to half of it yet. Were looking at an up open, though, squawk on the street from the nyse straight ahead. 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Call today and well make it easy to move that old 401 k to a fidelity rollover ira. Youll say weve got nothing in common about 8 30 before the bell and lets get cramers mad dash, watching tiffany today, jim. People in the Retail Industry have been telling me over and over again, look at this Tiffany Management team and notice how they are taking it from a boutique and trying to be broad, and Gross Margins are better and citi recognizes this, too. Its not a slouch story no doubt about it. But when i hear new management really taking on costs which has never been the case and really kind of blowing things out with the global brand initiative, i think tiffanys one of those great names that youve never gotten hurt by and now i think you will start making a lot of money. Citi does take it to a buy talking about stabilization in silver. Yes. My favorite line they say its a company not just for gift buying husbands and boyfriends but a store where women can actually go treat themselves to something more modern and more moder

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