Transcripts For CNBC Closing Bell 20130308

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If the dow has any kind of a gain again today, not only would this be its fourth consecutive alltime high, but the dow would also be higher all five days this week, something weve not seen since september of 2011. Really extraordinary. Its been a little while. How good is too good for this market . Are investors worried that strong reports on the economy such as todays jobs report will cause the fed to start winding back the Free Money Party . Is that why were not up more today . Rick santelli and Steve Liesman will get into that coming up. That alone is payperview material and more reaction to marias big interview yesterday with black rock boss larry fink who predicted a 5 pullback for stocks. Remember, he was ahead of the curve last fall when he was talking about everybody should be getting into equities. That was in october. He was way ahead of the times. Well see what he says. Really was. Says longer term works cares what happens in the next few weeks or few months if youre in this market. Pretend 20, 30year periods so still very much bullish on equities. Bullish day. 50 points higher on the Dow Jones Industrial average. 14,380 last trade there. Nasdaq composite also doubledigit move here, up 11 points even on the nasdaq at 3243 and the s p looks very similar. Looking at a steady situation the last couple of hours or so. Bill . Lets talk and kick it around with our guest. The stat master himself rich peterson from is p capital iq and Quincy Crosby also joining us at the big mark, mark lacheney and Derrick Jones all joining us. Regale us with some stat about this stat that weve gone through. As a fan of the s p 500 im saying were not there yet. 1 away from a record high for the s p 500, so great week. Since the italian elections, up 4 . Had a very strong week for m a and strong week obviously for equities and the jobs numbers today. Really, real took everyone by surprise but thats the fly in the ointment now. If were getting closer and closer to a 6. 5 Unemployment Rate the fed is targeting for when they would get back offer q sgle put this back into perspective for us in terms of what were seeing and whats behind this. As bill said, you are the stat master. Inters of m a and cash on Balance Sheets, you just gave me a great stat in the commercial break. Ten straight quarters where the s p 500 companies have more than 1 trillion in cash . Right. And the other stat is the fact that theres only been a handful of times when the s p 500 has gained 5 or more in the month of january. Right. Those subsequent times from february to september the average gain has been 14 so that gives us optimism for movement upwards. Off to a good start, quincy, but weve come very far very fast, right . We have, and no doubt theres a pullback, but the key is do more investors then go in. Are they sitting and waiting for it and then do they have the confidence to go back in in the credit markets have been very, very accommodating for the equity markets riskier assets, and thats what we need to see. Credit markets, keeping a nice underpinning for riskier assets. Rates are so low in the credit markets that it makes the stock market that much more active. That also. The italian elections, we had that little blip. The markets dont want to see the credit markets giving us a warning. Daryl jones, how do you want to allocate capital here . You know what, number one, we think you want to play u. S. Consumes. We have what we think is a very strong outlook for the u. S. Dollar so that will be very good for the u. S. Consumer. The other thing you and i have talked about, maria. U. S. Housing continues to accelerate to the upside. Core logic home prices last month, up 11 year over year so any derivative play on housing is where you want too play. Be long and overweight u. S. Equities. Mark, you hanging on to this gain . What are you doing here . Yeah, absolutely. Under a Scenario Analysis we do d part of our outlook 2013 piece we painted a probability wed see 1680 on the s p 500 so given that outlook were kind of constructive when would you see 1680 . By the end of the year. Wow. And were on path for that at this juncture, and its really on a couple of factors. One is equity risk premium compression due to Macro Economic risks receding on a domestic basis. Capital spending revival and housing recovery and consumption continuing to do reasonably well, if not remarkably, given the state of the consumer, and as a consequence though not only do we think u. S. Equities are appealing, nonu. S. Equities to us even look more appealing because of more attractive evaluations. Nonu. S. Equities meek what, equities, International Equities . Maria, International Equities, particularly in the epicenter of the sovereign debt crisis, europe, and even in certain select emerging markets, particularly eamerican inning asia and namely there china. Quincy, what about you . How would you allocate capital to keep a part of this rally . Wed be basically in the United States, but we also agree the dollar, visavis the euro is becoming very attractive for european stocks. As long as growth stabilizes, some of the Huge Companies will get a bid with the euro. One of the anomalies of the market later, the Leadership Group has been the financial sector, but when you go back to the last highs we set in october of 07, the financials are the big laggards. They are still down roughly 50 over that time. Do you expect them to play catchup at some point . Well, not only the financials, bill, but also i. T. I. T. Is the laggard year to date. 4 for technology versus health care is up almost 11 . You look at these metrics. The march 09 lows, the late great mark haines are called for four years ago. Almost every sector of the s p 500 is up 100 or more and if you look at october 07 to present, only four sectors are up led by consumer discretionaries and staples. Do you think it represents buybacks for the rest of the year . I think carl icahn says so. Buybacks, dividend hikes and m a and where we are now. Going back to m a and looking at past records, looking at highs, 2000, m a was 1. 6 trillion, although time warner deal. Another deal in 06 and 07, private equity. Were nowhere near a bubble. I think you uttered a wow when mark said 1680 on the s p this year. Do you see it going this high . Weve definitely on the bullish side of things, and i think where that does actually come into play the economy is still very slack, so if the economy real starts to accelerate to the upside, which, by the way, some of of the recent data points, thats where you get a number like that in the short term. If the economy tightens up, but the risk obviously is the fed might, you know, get out of the way which people are concerned about in the short term. Does todays number change your mind in terms of when the fed starts winding back given the fact that the employment number is definitely much better than everyone expected . Much better. Economists like to see trends. One month does not make a trend. They are going to make sure that it is gaining traction, and then they will Start Talking about using words about the overall economy, making it stronger, better. The tenyear yield has crossed over, too, after the data came out this morning. We expect it to see higher, but the fed is even talking about keeping their Balance Sheet exactly the way it is and letting run off so that the market doesnt suffer dislocations. Have to run here, folks. Let me take a quick survey. Everybody likes this market of the four guests we have here. Who expekts a correction and how much of a correction do you think could happen . Rich . We could be in a quiet period. 95 of s p 500 companies have reported earnings. Not going to see earnings coming back until april. Alcoa coming out so dont be surprise if treads water near term. Quinci . A 5 to 10 correction, a geopolitical risk, a credit marketinduced risk by the eurozone but youll see new investors come in. Mark . I think 7 , plus or minus. I think we could see any number of those factors including perhaps a little bit more noise coming out of washington with regards to the continuing resolution and what, if anything, is going to be addressed with the sequestration, so as a consequence that could be the catalyst, but nothing definitely, you know, lifethreatening. And daryl jones finally. We dont see a correction, you know. This is still one of the most hated rallies, and we think sentiment is negative, and the market will continue to go higher. Well leave it there. Thanks, everybody. Appreciate your time today. Thank you. And well see you soon. The dow industrials on track to close at its fourth consecutive regard high today and other impressive winning streaks at play as well. Lets get to josh lipton with the background. Reporter marking momentum clearly to the upside here. Another record high for the dow. The blue chip index on track to close higher for the tenth straight friday in a row. The russell 2000 index, smallcap companies, also trading up to a record high. Some of the biggest movers in that group this week immersion mgic investment and home oowner choice. In the broader market, the s p 500 hit a new fiveyear intraday hie and the s p on track to close higher all day this week. Something we havent seen since last august. The s p midcap 400 index traded up to an historic high as well, and the nasdaq composite trading at a fresh 12year high. Also worth mentioning here, the financials, nearly 30 of all new 52week highs today are in the financial sector, including dow component bank of america, citigroup and regional banks like regions financial. Alltime high for Asset Managers including franklin research, t. Rowe price. Bill, back to you. 50 minutes till the close. The dow, any positive close is an alltime high and the s p now is 15 points away from its alltime high. Wow. Larry fink has been calling this record rally months ago. He was right, so is he correct again when he told me this yesterday exclusively. I would not be surprised to see a 5 correction here, and, you know, we are seeing a slowdown in flow, especially etf flows in the last ten days from the record setting flows we saw in the last quarter, january and february. Well get into that a little later on in the program. Also, todays better than expected jobs report is just the latest sign that the economy is improving. When we come back, liesman and santelli duke it out on whether that should mean the fed should start easing up on the stimulus efforts sooner than the markets would like. Call citigroup the comeback kid after it aced the stress test. Find out if its time to hop aboardth citi bandwagon. Thats coming up on the closing bell. [ with stamps. Com] you can print real u. S. Postage for all your letters and packages. I have exactly the amount of postage i need, the instant i need it. Can you print only stamps . No. First class. Priority mail. Certified. International. And the mail man picks it up. I dont leave the shop anymore. [ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. Welcome back. Jobs data coming in better than unexpected and the Unemployment Rate is at fouryear lows, but stocks are off of their highs today but still showing a very nice move. Yeah. Some may worry that better than expected Economic Data could mean the fed may take the cheap money punch bowl away is this a risk that could be reality . Lets duke it out. Two people that know this story better than anybody, our own Steve Liesman and rick santelli. Steve, what do you think . I dont think so much. I think theres a lot of slack in the labor market. The fed has made a commitment to remain to keep purchasing bonds and keep quantitative easing policy in place past the point where we think its already needed, partly because theres been all these false starts before, bill, and i dont think this is enough to move the fed or meet their criteria of substantial improvement in the labor market. One more thing, i think that you could have a rise in the Participation Rate in the coming months if the job market is really improving than could raise the Unemployment Rate. Rick . Lets look at the number today. Believe me. It was much better than expected, no doubt about it. But we now move back over 40 in terms of the number of people unemployed that have been unemployed for over 27 weeks. If we had the same labor force Participation Rate we had when the president was first sworn in, the Unemployment Rate would be very close to 11 . Having said all of that, i think you just agreed with me. You make it sound like the fed is not going to pull back any time soon, rick . Well, im getting to that. Okay. The point is that i think things can always be better and five years into this crisis i think its all disappointing. It would take five years at the present job rate to get to where we were before the crisis, but one thing that makes no sense is how this ties in to the criteria i disagree with and whether that criteria, the fed means they should stay or they should go. There is no crisis. Why they are still in crisis mode is beyond belief, and i think its wrong. Rick, 40 of the people out 27 weeks or longer, and some 7. 7 of the population unemployed. The u6 is 14. 3 of the problem and thats the crisis. Theres a crisis of unemployment in this country. And how is the fed addressing this crisis . The fed is addressing it the only way it knows how, by pushing down longterm Interest Rates. The only way it knows how what you say after that is an experiment. Absolutely. I dont think we should have that experiment. We should have an experiment to put people back to work. Why are you an apologist for this organize significance . You are, you absolutely are. Put america back to work, and you know what . And let america get back to work the way the country has put people to work ever since it started to be the shining light on top of the hill, without all this micromanaging european style banking steve in, terms of looking at these numbers and sort of peeling back the onion in terms of the Participation Rate, what does this tell you about the sustainability of this recovery . And how many how many months in a row do you want to see numbers like this in order to feel like were moving the needle, that we actually could start change the feds behavior . Part of the problem is we dont understand the dynamic of the declining Participation Rate. Weve done three of the past several months, weve done north of 200,000. At the same time the Participation Rates continue to fall. We know that some of that is the result of the aging of the population. Another piece of that is discouraged workers. I think youre going to have to do 200, 250, even 300 for several months to come, and i happen to know the Federal Reserve believes it has a large margin of error before it gets to a point where slack in the labor market decreases, and you have a problem with with wagedriven inflation and thats the thing its on the lookout for. Rick, ill play devils advocate by asking a question that probably has no answer and needs to be asked anyway. Where do you think unemployment would be if there was no fed buying program at this point, no kweezing . Oh, i think of all the dynamics, including todays report would be significantly better. What wouldnt be significantly better would have been the one year following the crisis, that would have been worse. On the mend sam zell style, hit a real bottom and everything would have been healthy and we wouldnt have these dumb discussions about where where would stocks be, might be or Interest Rates should be because all of this is a country game. Its not a parlor game. And it deserves better than federal experiment. Its a parlor game. Show me any proof that what they are doing really makes any difference at all. The economy is better despite them why do you sit there and cover the Interest Rate markets if they dont matter . If lower Interest Rates are insignificant markets do matter. The fed matters less. What are you doing there, there, twiddling your thumbs, i dont think so . Give me a break. Apologist for the fed. Why do you stick up for these im not sticking up for anything. Experimentation. Saying what the policy is and the reason for the policy, and over four years, rick, ive yet to hear a better answer from you. This economy doesnt need wise men from ivory towers. Well let you go at this point, but we just did notice, at least you guys are wearing the same suit today so you agree on something. Good to see you both. You did not disappoint. Thank you, guys. Have a good weekend. Heading towards the close with 40 minutes left and were heading higher again. The dow was up 83 points. That euphoric rally on the open this morning following the jobs number, it has since pulled back but still a healthy gain of 60 points. Any positive close is a new record today. Have you looked at your 401 k lately, bill . As a matter of fact i have. This market rally making people very happy to open that 401 k statement. Most are back and then some from the depths of this crisis. Coming up well hear from someone who says 401 k s are hurting more than they help the debate. Stay with us. Citigroup topped the banks in the very last stress test. Goldman sachs passed but not with flying colors. When we come back, well get the trade on which stock can help your portfolio makes the winning grade coming up. music throughout why turbo . Trust us. Its just better to be in front. The sonata turbo. From hyundai. Goldman sachs passed but not welcome back. Most of the nations largest banks passed the feds stress test with relative ease. Courtney reagan is looking at how the big banks are trading in the wake of the results. Reporter without a doubt citigroup is the most improved player. Shares are up more than 2 since yesterdays results showed just how much the bank shored up its capital position. This year analyst think sti will have no trouble getting approval. Two regional banks, bb t and suntrust surprising analysts with their stress test strength. No news is good news for the regional banks. Shares of state street and byn melon moved higher. Bank stocks taking it on the chin today are the ones with the biggest Capital Market businesses as the fed used a severe stress model. One assumption used is the stock drop of 50 , and that hurt the firms that rely mostly on trading. Goldman, jpmorgan and Morgan Stanley. These three came out of the stress test. Goldman at the bottom of the heap and Goldman Sachs shares were sent lower today. Todays Stock Performance aside, analysts do expect them to approve capital plans of all the nations top six banks next week. Bill . Security, thank you very much. Which bank could be the best buy in light of the stress test results. St citi, the most improved or Goldman Sachs . Lets talk numbers. Goldman versus citi. On the technical side j. C. Ohara and fundamental side Abigail Doolittle with the Seaport Group and a cnbc contributor. Abigail, would you buy either of these two banks . Bill, perception is everything, and i think that these Bank Stress Test results are likely to shift Investor Perception of risk in favor of citigroup and away from Goldman Sachs. Citigroup looks more bullish. When we dig down on citigroup we see they have been doing all the right things, cut operating expenses and increased bad loan reserves and increased overall capital. All this makes it more likely that the fed will approve the banks request for 1. 2 billion buyback next year this. Will support shares. I think were looking at a 55 to 65 stock over the next 12 months. Goldman, on the other hand, looks like a trading black box. Their ratio was well below the firms estimate. 5. 7 relative to goldmans 8. 6 . This does not breed confidence. Investors will be nervous about this, and i think that youre going to see these shares trade off, maybe down to 135 or so, especially dpepgd on what happens next week if they do make a buyback request. More bullish on sti and not very much on goldman. J. C. What, do the charts tell you . I agree with be a gail. Look at a chart of citi and one of goldman and put them together, they are the exact same chart so i cant say i like one better than the other because in essence, its insane, look at chart. Look at the chart on the screen, going back to 2011 and you normalize, it they are exactly the same. Yesterday youre actually seeing some divergence with recent headline news. Citi trading up 3 and goldman down 2. 5 . Are these favorable charts in your view, or not in. I think both of these charts are going higher. I think that the lack of divergence that youre talking about, v. Y. , we could see a little bit of a break here. If we look at valuation, citigroup trading seven times pricetobook value and goldman at 1. 06 times, and i think we could see a little bit of a shift there, seeing citigroup trading up closer to its book value near 64 and goldman trade down near 143, if not lower. So i think we could see a divergence with citi going up and goldman going down just on this sort of shift in perception and then also that valuation shift. I agree with you. But the correlation over the last two years have been extremely high. 0. 8. I, you know, use an exam. Go to Yankee Stadium and look at the big screen between the innings, see the classic subway race, one subway verse the other subway and who gets there first. At the end of the day both are going in the same direction. Thats true right now, but goldman has really had the tailwind of, you know, being the best bank on wall street and really recovered from the financial crisis. Citigroup has had an even better run over the last six months than goldman being the black sheep. Now its the shining star so when you put that together with its valuation discrepancy, i really think we could so citigroup trade up here and goldman start to trade down a little bit. Very good. Looking forward to the subway races at Yankee Stadium k. Only mean spring is right around the corner. Please, let that be the case. Thank you, both. Have a good weekend. Final stretch of trading. 30 minutes left in the trading day. We do at this early time have an indication of the buy side as we approach the close. Take a look at whats happened the last 15 minutes. Highs. Day, gain of 60 point. Could go higher in the next 30 minutes. Well be watching that, unless, of course, things get pared off. Were getting the hand signals from the boss over there. Just ahead, a former chair to the president s council of economic advisers. He says the jobs numbers are good but not good enough yet. 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After all, whats the point of talking if you dont have something important to say . If you dont have something important to say . Humans. We are beautifully imperfect creatures living in an imperfect world. Thats why Liberty Mutual insurance has your back, offering exclusive products like optional better car replacement, where if your car is totaled, we give you the money to buy one a model year newer. Call. And ask an Insurance Expert about all our benefits today, like our 24 7 support and service, because at Liberty Mutual insurance, we believe our customers do their best out there in the world, so we do everything we can to be there for them when they need us. Plus, you could save hundreds when you switch, up to 423. Call. Today. Liberty Mutual Insurance responsibility. Whats your policy . Welcome back. Good news today from the labor front with the economy adding 236,000 new jobs last month. Certainly beating expectations. Indeed, but with 12 million Americans Still looking for work, our next guest says we still have a long way to go, and hes not sure were going to get there unless things change this washingtonch we welcome back the former chairman of the council of economic advisers during the final years of the Bush Administration and now hes professor at Stanford Universitys graduate school of business. Welcome back. Thank you, nice to be with you. Good to see you. What do you think needs to change in washington to improve the labor market . Well, if we look at the labor market, you know, obviously these numbers were good, and were certainly happy about them. I would say the most important point that i would take from these numbers is that they are all moving in the right direction, so, you know, these come from different series and different questions and different surveys, and the fact that the Unemployment Rate was down, the fact that jobs were up, the fact that hours of work were up, all of that is a good sign, but the reason that i am concerned is that the overall picture still remains pretty bleak, and the easiest way to think about that is if you look at the number of jobs created since the turnaround, were somewhere around 5. 7 million jobs, sounds pretty good. Right. The problem is that you need 5 million just to keep pace with population growth, so were really not very close to where we need to be, and if we look at the long run situation, were still in pretty deep trouble. So, let me ask you, ed. Do you think that this kind of a number, such a strong employment report today would actually be the beginning of the fed changing its behavior. Would they start to look at these numbers, and i recognize what youre saying, look, were not there yet, and theres a lot more to go for improvement, but just looking at the job numbers is this the beginning of the fed saying lets start about thinking about winding this down . Well, i think if it were sustained, the fed might start thinking about that, but you have to remember that the monthtomonth variation in jobs numbers is really very significant, so, you know, i know ben quite well. We served together, and im sure that he and the other fed governors are looking at this carefully, but they are also taking into account that you need to see sustained development in order to change policy, so id be very surprised if they were inclined to shift, at least for another few months of continued if this continues, great. Right. And then i think they may think about it, but not in the near future. Let me go back to my first question, what you feel needs to change in washington to improve the labor markets. To this point were relying almost exclusively on monetary policy. I gather you want to see more on fiscal policy, yes . I would like to see essentially four things happen. One is the budget. Thats the obvious one. People are talking about, that the sequester is a part of it. We need to improve our tax policy right now. We dont have a very progrowth tax policy. We need to move in that direction. Our trade policy needs to improve. One of the nice things i think that the president talked about in the state of the union is improving trade between the United States and youre. Thats a good start, but weve got, again, many, many different areas that we need to think about, asia in particular, and then the fourth would be getting a more rational regulatory policy. I dont think our regulatory policy has been particularly productive in terms of helping the environment, helping grow the economy, and my sense is it probably has been negative in terms of investment by business. What about the sequester . What kind of an impact would these Government Spending cuts coming, what kind of an impact on jobs will that have on later on in the year in. Minimal. First of all, its a relative small number if you look at size of the sequester. Its smeller than the typical growth in the budget. If you go back a year or two, we grew the budget by 150 billion to 200 billion and talking about cutting somewhere in the neighborhood of 250 billion in the next ten month and 85 billion overall. Small numbers relative to the tote a. Im not a big believer in the effects of changes in expenditure on government growth. Did it when i was in the government, and to be honest i dont think that the policy was particularly successful as we look back on it, and i dont think that the ones that president obama enacted in the early part of his term have been particularly successful, so rolling that back is not going to be significant in terms of economic growth. In the long term, maria, i would say that, you know, this is a move in the right direction. Unfortunately, the discretionary spending, as we all know, is a relatively small part of the package. Right. We need to get on the entitlement side and get that in a more rational direction and get some control over that. Until we do that we have a significant drag on the economy in the long run. You have a president that wants to close loopholes and a congress unwilling to do anything and the gridlock realistically. Ask what kind of tax reform we would like to see and what kind of tax reform do you expect to get . Well, closing loopholes may bring in some revenue. When we say loophole, thats a very loaded word. I spent a year thinking about tax policy before i was president bushs chief economic adviser, and let me tell you, you know. What is one persons loophole is another persons incentive, so thats not thats not an easy thing to do, but primarily that thats a tax increase, and thats not a progrowth policy. What we need to do is we need to think about ways to encourage investment. The easiest way to do that is to think about what what we usually call full expensing of capital so that you allow businesses to invest without taxing that investment or at least moving in that direction. That would be a progrowth policy. What we did to Capital Gains recently is and dividends is a move in the wrong direction to my view. Good to see you. Thanks for joining us, ed. Thanks, ed. Thank you. Well see you soon. Heading towards close, 20 minutes left here. Looks like well do it. Looks like well have an unprecedented week. Any positive clothe is a new alltime high. Deja vu. All this talk all week has been about the dow closing at record highs and also not too far from an alltime record for the s p 500 but another index hitting a new alltime high blowing the dow out of the water since march of 09. Thats from the bottom. Thats next. Also, are dell rivals hewlettpackard and lenovo looking to buy dell . Both reportedly looking at dells books. Well get the answers from lenovos president of the americas in an interview youll see exclusively right here on the closing bell coming up. Stay tuned. Arrival. With hertz gold plus rewards, you skip the counters, the lines, and the paperwork. Zap. Its our fastest and easiest way to get you into your car. Its just another way youll be traveling at the speed of hertz. Welcome back. If you think the dow owes record run is impressive, youre right. The blue chip index is up 119 since the march 2009 lows. However, that is nothing compared to the russell 2000 bob pisani point out. The shawlcap index has skyrocketed by 173 since the market bottomed in 2009, and its hitting new highs again today. Mr. Pisani . Yes, and isnt it impressive. The russel is outperforming the bigcap index, up like 8. 5 , but russell is up almost 10 , 11 so far this year. Very impressive to watch it. One of the reasons small caps tend to do better is as a perception that the economy is growing, small caps usually tend to outperform. So they tend to leave the market then . Thats the very good thing about it. The russell, and those had a dont know, its 2000 smallcap stocks. Dont think thats like an amazing number. Actually a very small amount and typically they are 1 billion or less in market cap so youre only owning a small part of the market. The average market cap is probably 50 billion or 60 billion so youre only owning tiny companies. The great thing is on the markets, when the economy is going up, these tend to outperform. The down side its a little more volatile than the s p 500 and you dont get as much international exposure. These companies are local. They dont sell to pakistan and india. I know we throw this word smart money around, but its typically the smart money that goes to the smallcap stocks first. They are the ones out there beating the bushes looking for the Small Companies and identifying where the Growth Opportunities are. They can turn around very quickly because their fairly small. You can invest in these. Etfs with available. Put up the iwm, the main exchangerate traded fund mere oregon the s p 500. The russell 2000. Excuse me, the russell 1000, fairly low cost to only whole thing, and, again, your risks here are if the market gets volatile, this can get volatile, too, a little more volatile than the s p 500. You want to own smallcap stocks. Its a different section of the market. Youre going to have somebody thats going to come up here and say is it too late to buy them though, when you consider the gains that that index has had especially since the march of 09 lows, just this year had an incredible gain as well. You have to have a thesis and a directional idea about where the markets are going. If you believe that the u. S. Economy is continuing to expand and that this is only the first part of an expansion in the u. S. Economy, you definitely want to own smallcap stocks. If you dont, might want to revisit that idea. Part of that diversification process. Jump in any time. Have 15 minutes the closing bell sounds. Happy International Womens day. Youre wondering when you can wish bob and i happy International Mens day. I looked that up. Its november 19th. I thought every day was Mens International day. 14,401 is uncharted territory. Were looking to close at another alltime high. And it would appear Retail Investors are really starting to pour money into this market but jpmorgan says they are 100 late to this real. Hes here with that warning coming up next. Also, is your retirement and risk if you rely too much on 401 k s, and somebody says yes, even though 401 ks are doing great. Back in a moment. 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. Too late to get into this game. According to joe taney from jpmorgan funds, the Retail Investor at this point is over 100 late to this rally. So are people about to get burned . He joins us now along with our friend david darst from Morgan Stanley Wealth Management who has his own reasons not to get the Retail Investor in this market right now. Let me start with joe. Why do you say they are late . Lets just clarify. Not saying its too late to get into the markets and they shouldnt be getting into the market. Many people ask if the Retail Investor is finally starting to participate in this real, and, of course, you look at fun flows, were starting to see the Retail Investor start to participate. Does that mean they are just wrong . I dont think they are wrong but i just mean they are late. You missed a 100 rally, doesnt mean theres anything left but they are unfortunately a little bit late. Tell them what you just told me. I think this is like a Cocktail Party and as joe just said the party has been going for several hours and if you want to enter now it better be a cameo appearance, come in and have a quick cocktail. The hors doeuvres are out, booze getting watered down. Theres a bear market check list. Are we entering a recession . No. Is the fed tightening . No. Is investor euphoria present . No. Theres froth, but its not a bubble. Right. Are valuations stretched . No. Are transportation, bank stocks and the Transportation Bank and the small caps doing poorly and getting beaten up, no, and finally are bond spreads widening . No. They are actually narrowing versus treasuries so on all six of those say that this party could continue for a little while, and youve got to enjoy it but realize that you better sort of have a quick snack and be ready to take off. This is really amazing. Earlier we said there was a bias to the buy side. Thats what were seeing. We see the market trading up as we speak. Only ten minutes before we close, and were up 76 points. Theres 1. 3 billion to buy right now on the floor according to art cashin. Which sector do you think is still right in terms of valuation right now and which is stretched . From a valuation standpoint and lock at defenses, so many investors have been searching for yield over the past couple of years with very, very low Interest Rates, obviously their value as is look a little bit stretched. On the other side, if i look at some more cyclical areas, areas like technology, largecap stocks in general, i think they continue to have room to run on the back of some attractive valuations. You have had a laundry list of stocks for a couple of years that ive been back here to buy. Would you still buy them at these levels . Can you buy them and you want to get things where you have momentum behind you, okay, where you have tailwinds pushing you, slum jay, halliburton and mexico is going to begin drilling for oil and all this batchen shale, all the shale plates. This is good. You cant touch that oil and that gas without baker, halliburton, schlumberger. Mexico, we like mexico and we like japan hedged. Maria, we started talking about that at the beginning of the year. Would you believe this, maria, its up 17 so far this year, and we think it with run another 40 to 50 if mr. Abe continues with this reform. Hes got a 70 Approval Rating now. I think its interesting because, you know, this is a story where japan has been down and japan hasnt seen money flows for years. Suddenly its a sham and looks like the economy is on the side of investors. The household sector in japan is sitting on 16 trillion worth of cash, and they are only 6 allocated to equities. In the u. S. Its about 32 . We had a trend, a theme emerge this week on this program reluctantly bullish. Reluctantly long this market. A lot of guys coming through here saying were still long this market even though were reluctant to do so because of these valuations and the level where we are. Are you among them . I think i understand that point of view. If you think what investors have had to deal with over the past few years, so much macro uncertainty, its been scary getting into this market, especially distinguish the roller coaster ride. Now youve got market levels, different market hitting their alltime highs and the s ps. 13 points now. Although were barely hitting the alltime highs in price, we eclipse alltime highs in profitability well over a year ago, so from a fundamental standpoint the underlying momentum remains in place. Italy, china, watch the international situation. I think if theres anything that could perhaps. Look, the debt the debt downgrade is another possible warning sign if we have one more the United States, but the fact that the house is passed, this continuing resolution through the end of search the, that takes us to the background. If thats given a green light, profits, want to see profits come through, 70 out of 100 is warning about the profit outlook so you want to see them be proven wrong and profits surprise to the upside to continue staying in this market. All right. Great. Good to see you both. Thanks so much. See you soon, guys. David darst and joe taney joining us. Coming back for the closing countdown for this historic week and the dow heading back. And this is from a buffalo zoo and the cubs name is luna and later meet a ferocious market bear warning investors to get out of this market right now. Its coming up on the closing bell. Youre watching the closing bell on cnbc, first in business worldwide. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. Okay. Hello, maria. You there somewhere . Were at highs of, above 70 points and a minute ago we were 14,404. Its come back a bit, but got to look at this as an enormous victory. Going into the weekend, bill, more money coming in into this market. The dow was up 83 points on the open after we got that much better than expected jobs report. Lets put things in perspective, and heres the market today. This was the rally on the open this morning and gave it all back right away and thought whats going on . Now we drifted higher just off the highs of the session here with a gain of 60 points. Lets put things in perspective, maria. What do you think . The dow, this being an alltime high, we went back to october of 2007 this week and took out the old highs and were setting new highs as we go. The s p, were getting closer, the old high was 1565 and now were at