Transcripts For CNBC Closing Bell 20140324

Internals that are breaking down . Well have that coming up. James paulsen is not surprised by todays red arrows but hes also not worried. Hes here to talk about how hes playing the volatility. Is this a buying opportunity for him . It could be for you as well so stay tuned for that exclusive interview. Also, the fight over tesla continues. On friday on this program we had the arizona lawmaker who is now fighting to overturn that states ban of direct sales to consumers. Today the president of the Arizona Auto Dealers Association will join us exclusively presumably to give us the other side of that trade. That should be very interesting. Thats coming up later on the closing bell. So many people following that story. Here is whats happening in the markets. The dow is off 21 points as you can see there. Thats well off the session lows. Were climbing back towards positive territory, but still about 0. 1 to go. The nasdaq, this is the one getting all the attention. Its off 1. 2 . 50 points today down to a level of 4,225. The s p 500 is declining pretty off about nine points. Off half a percent, 1,857 is the level as we enter the final hour of trade. A lot to talk about with our panel. Joining us on, erica coogan, richard bernstein, joe hyder, jonathan brodsky, Kenny Polcari from oneil securities. Welcome to all of you. Kenny, you tweeted out you think these markets are confused. About what . Theyre confused over what janet said last week. Confused over this mornings pmi which showed 55. 5 which is still a very good number but theyre talking about it as if its real negative. Jumping right on that china story which certainly was a little negative, but notice what asia did. Asia all traded up overnight. Europe was under a little pressure in the china story before we opened. We were strong preopening and then we tested right at the highs. We failed. The news came out about pmi. We tested at 1,840, found support, bounced back. Were definitely in this trading range. Dont forget, and you said it already, were into the last week of the quarter. Asset managers would love to see it stay up here. They dont want to see it have a selloff this week. So for now its confused. Which way do we go . I think it will continue to churn and move higher as we go into the end of the week. Erica, the bulls had to be heartened by the markets reaction to the much lower than expected figure out of china last night. The Chinese Market rallied, the european figures were okay and then the u. S. Number was all right this morning. What about some of the geopolitical headlines that sent us lower, especially earlier in the session today. Whats an investor to do amid this risk, this longterm risk hanging over the market . I think the comment on confusion was perfect. The market is very confused, and so its just making sure that when you think about your portfolio, youre thinking for the long term. I know thats said time and time again but its so true. So in addition to looking longterm, you might find some opportunities though i would probably ease into areas in the emerging markets where youre seeing some of the effects of the geopolitical risk. Anything youre picking up here in terms of investments . Anything you think looks cheap and are being opportunistic now . I would say emerging markets definitely, but i would again ease into it. I wouldnt be putting big sums of money in there, but a dollar cost averaging plan is great. Rich bernstein, youre the super bull on this panel but thats a longterm forecast. Weve been highlighting the nasdaq lagging this market, hasnt acting well at all. The biotechs are the highlight of that. Does that worry you about the overall market when you have such an important sector not doing so well right now . Well, actually, bill, oddly enough, you know, history shows very clearly the time to be a growth oriented investor is when profits growth is weakening because when profits growth weakens, market become very darwinistic. They become survival of the fittest and Growth Stocks are the stocks that are supposed to be relatively economically insensitive. What it says to me that the fact that these high flying momentum stocks are rolling over says theres more choices for people to actually invest in. In other words, you can be more of a comparative shopper. What you found is value has been outperforming growth. Thats exactly what should be going on if profitability is getting stronger. The problem with growth investing is not what stocks to buy, its always knowing when to sell. You know, who is a growth investor that sold all those high flyers last week as opposed to today . I think people are starting to realize theres more choices. Rich, what is this moment telling but the market more broadly. In other words, from the perspective of the investor who maybe exposed from the general s p 500, what does this information mean . I think if youre just in an S P Index Fund, youre at a huge disadvantage. Youre loaded up with multinationals with exposure to the emerging markets where the economies are under considerable pressure and youre probably although not the momentum stocks youve been talking about, but a pretty fair representation of momentum stocks which are in trouble. Thats always the problem with indexing is its a very trend oriented strategy, and i think right now people who are just in S P Index Fund are probably feeling a little of that pressure. Joe, kenny feel that is once we get past the end of this month, the end of this quarter, begin a new quarter, thats when the market starts to really feel the heat to the downside. Do you agree . No i dont agree. I think the fundamentals there continue to be strong for the markets. Obviously we have geopolitical risk right now going on in the ukraine. To a large extent, thats going to have a paling effect on the market, but we believe the markets will continue to remain strong and although obviously all Investment Advisers want to see the quarter remain strong, i dont think they alone are holding this market up. Joe, do you agree with rich about the s p 500 or do you see a way to play this by honing in on some of these value names, for example . What would you list as areas of opportunity . One, i agree with erica that i think theres some opportunities, although you need to be careful in going into the emerging markets, but i think that there is opportunity in the emerging markets. As well as in u. S. Equities we believe in a broad based diversified investment portfolio. Jonathan, we havent forgotten about you. In fact, you feel like were in a period where youre going to have to be a pretty adept stock picker this year, right . Well, we think after last year with the indexes doing so well its really an opportune time for individual stock pickers. As value buyers we are seeing lots of opportunities not only in the u. S. Markets but around the world as well. Some panelists have talked about the opportunities in emerging markets. While we see Economic Risks and macro Economic Risks, you see a lot of valuations that are at trough levels. As were looking for value opportunities trading below net asset value, we see opportunities here, and yet we also see really interesting opportunities in some of the countries that have some headline risks as well. Yeah. Stay there, everybody. We want to get more to the breaking news that came out in this last half hour or so. More on the verdict in those five former madoff employees in lower manhattan. Scott cohen with more details. The verdict is a sweeping verdict for the prosecution and against the five former lieutenants of Bernie Madoff. All found guilty on all the counts they faced. Its a very quick verdict in a trial that spanned more than five months, but these employees all charged with conspiring to falsify records, to defraud clients in a massive scheme that according to the prosecution went back decades. They are daniel bonventre, he had been a top madoff lieutenant for many, many years. And annette bonjourno. She claimed she did not know, was not educated in the ways of the securities industry and so she didnt realize what she was doing was illegal. Jody krupy was an Accounting Supervisor for the firm and said she was duped by Bernie Madoff along with everyone else. And then george per reds aez ane ohara that developed the Computer Software that were used to falsify the records. They wanted to be paid in diamonds instead of cash because they were getting nervous about what was going on. In addition to the sweeping counts of conspiracy and fraud on the part of all five of these clients, there are a number of counts of tax evasion, tax fraud for many of the individuals. These clients convicted on all of those counts and we now have word from andy fritsche, who was the attorney refresh me, for daniel bon ven tri. We are disappointed and will appeal. The list of victims now include these five employees. He was the forn for daniel bonventre. We expect to get a statement from preet bharara. This is the first criminal trial in the Bernie Madoff ponzi scream which broke more than five years ago. Madoff serving a 1350year sentence at a federal prison in north carolina. Thank you very much. I think everybody would agree that, Kenny Polcari, this story, the madoff story, did not help Investor Confidence at a time when the financial crisis was starting to run rampant around this country as well. Right. It absolutely tore at Investor Confidence at that time. Dont forget, that was just when everything was rolling over, when the world was coming to an end. The Financial System globally was really coming to the brink and throw that on top of it and it goes right to the heart of it. That was a very, very difficult time for everybody and certainly i think this is probably, you know, welcome news for a lot of the victims. Rich, for a lot of people who are talking through what might get individual investors more involved with this market, there have been a couple important headwinds. Theres just the memory of the financial crisis. Bernie madoff being a high profile example. High frequency trading being another reason a lot of people have had difficulty coming to terms with whats happening and how safe equities are. On all three fronts weve had some progress lately. Does that suggest there might be a change in mentality for the retail guy who otherwise might be on the sidelines . Well, im not sure its necessarily those particular issues, but certainly people have short memories and they forget what happened five years ago or whatever. But i think youre right. The data shows that individual investors are coming back into the stock market. That doesnt mean its this great contrary signal that everybody likes to talk about. Rather, thats very normal in a midcycle environment. You know, the early cycle is always the best time to invest but nobody wants to. Theyre under their desk in the fetal position. The midcycle they begin to come back into the equity market. Its the late cycle when they think theres nothing else other than equities, thats when you have to worry. Thank you, folks, all for joining us. We want to go back to scott cohn. Now you have that comment from preet baja rar. Its a lengthy comment who points out there were in addition to these five employees convicted, there were nine who pleaded guilty before hand. He points out and this is a point of some controversy. He said the trial established the fraud began at least as far back as the early 1970s. Thats what his former ceo testified, for decades before it came to light. These defendants played an Important Role in carrying out the charade, propping it up, and concealing it from regulators. Bernie madoff himself has said to me that the fraud did not begin until the early 1990s following the longterm Capital Management crisis, the asia financial crisis and the like. Others have said, including the trustee, irving picard, that it began much earlier. This trial may have established that Bernie Madoff was carrying out his fraud not just for years but for decades. Scott, thanks very much. Let us know if any more developments come along on this important story. Speaking of important stories, back to the markets we go. We have about 45 minutes left in the trading session here. The dow was up 80 points on the open this morning. At the low we were down 87. Sort of the middle of the range right now, down 40 points, but the nasdaq is what were keeping an eye on. Coming up, well hear from one strategist who sees some red flags but also some hidden gems. Jim paulsen will give us some of his topics. Is the fed planning to keep Interest Rates incredibly low even after key targets are met . Well talk about why Janet Yellens answer continues to produce more questions. Cisco saying it will offer Cloud Computing services and take on amazon. Some here say this will help the beaten down stock. Keep it here. Youre watching cnbc, first in business worldwide. Stamps. Com is the best. I dont have to leave my desk and get up and go to the post office anymore. [ male announcer ] 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. And youll see just how much it has to offer, especially if youre thinking of moving an old 401 k to a fidelity ira. It gives you a wide range of investment options. And the free help you need to make sure your investments fit your goals and what youre really investing for. Tap into the full power of your fidelity green line. Call today and well make it easy to move that old 401 k to a fidelity rollover ira. Welcome back. Janet yellen holding her first News Conference last week. That day the attention was about her confusing remark on when the taper would end and Interest Rates would rise prompting a stock market selloff but now many watchers are pointing to her answer from our own Steve Liesmans question about where rates may go after the feds economic benchmarks are met as the key information. Here is a refresher. I think it does suggest a shallower glide path, and what the committee is expressing here i would say is its forecast of what will be appropriate some years from now in the sense of meeting our objectives. The stance of policy that will be appropriate to accomplish that wont be easier or involve somewhat lower than would be normal shortterm Interest Rates. The shallower glide path. Thats the phrase that lingers for everybody. Joining us, the man himself, steve liesman, also here to weigh in on this, matt tucker, head of fixed income strategy at blackrock and jeff cox the finance editor at cnbc. Com who wrote a column on this that got a lot of tension on cnbc. Com. Steve, it falls to janet yellen to gradually ease us into this lack of easy money right now and that is the beginning of the process with this statement she made to you about the shallow glad path, right . Thats a piece of it, and i think youre right. She will if things go according to plan be the fed chair who engineers the first fed rate hike since 2006, bill. Thats how long its been since you have had to report that information. So theyre giving us information i think its well to remember, you know, take a step back and forget these extraordinary times we live in. If a fed had come through and said, you know what . We think at the end of this process were going to end up lower than where we think we should be, markets in those situations would take that as the most extreme and dovish signal they have ever heard from the federal reserve. Of course, were all inure to that kind of speak but at the time it came out and then when janet yellen answered and i thought that was a very, very dovish statement that i believe was overlooked by the market. By the way, Jon Hilsenrath writing the normal rate for rates might now be lower than it used to be which brings me to my question. This is ultimately when the fed tries to raise rates going to be a test of theory versus practice. If you are in the market right now do you bet that the fed is right about the shallow glide path or do you listen to some of the guys at ubs who say they think the fed women have to raise rates perhaps more than they otherwise should have to achieve the same policy effect in the past . Well, i think thats exactly the right question. I think where you have to start is do you believe the feds expectations for growth . Theyre projecting at the end of 2016 to have 3 gdp growth, 5. 5 unemployment, but inflation of under 2 . So if you believe and youre that optimistic, then you may believe the feds projection for rates, but we all have to keep in mind this is not preset, right . Matt, can i interrupt you because i think what yellen is saying that if you believe our forecast for growth, dont believe our longrun outlook for rates. All of which are extremely risky propositions. Jap absolutely, i agree. Both a bet on it and her statement of trying to do it, jeff, i agree with you. I asked her explicitly, if you get to 5. 4 in unemployment, if you get to the 2 inflation target, does that mean you will not be at your 4 long run fed funds. She said one word, yes. Everybody wants concrete answers. We hate uncertainty, but theyre making it up as much as we are. Youre hitting it right on the head. I liken the fed to a 55 de soto and they have their wheels stuck in the mud. Theyre trying to find a coherent policy wile theyre trying to sell you two different visions. One vision is that, hey, thanks to us, weve recovered and, you know, but things are going well so maybe at some point in the future we can normalize things, but were nowhere near that point yet so were going to go another year, another two years, maybe longer before we actually do normalized Interest Rates. So what you have is a very confused market. Theyre saying whats going on . The guys from blackrock i quoted in my story think yellen was right the first time when they made they think the market was right in taking her comments in being at least a little less dovish. Thats why i asked because you know better than anyone the extent to which investors have piled into floating rate debt and some of the other securities that are geared toward higher rates. The market is reacting that way but what the fed and some people close to the fed are trying to tell everybody is, dont be so quick to assume that path that weve seen in the past will be as applicable this time around. Yeah, i think thats right. If you look at the investor flows, a lot of money has gone to short duration funds, especially floating rate debt over the last couple years. Thats debt that does well when the fed is actually in the market. What were seeing investors come out of is more intermediate rates, three to seven years, because thats the debt this actually starts to get repriced today because thats where actually the market is repricing these new fed expectations. Were seeing them go to the edges. I want to be really short or really long. I just dont want to be in the middle. Steve, were going to get a lot of fed speak this week. It will be interesting to see what other fed governors and Bank President s say, how close they are in their language to janet yellen at this point. I was actually surprised, and were going to have Charles Plosser on tomorrow. I was surprised both he and Richard Fisher signed onto that statement. For me that one line about not being at normal rates if the economy is normal sort of stood out. I was surprised to see them sign on. I think theres some questions. I agree with what jeff is saying to a point. Jeff, i think the fed has done a remarkable job at guiding the market through 14. Theres a big question about what happens in 15. I think janet yellen stumbled a little bit, but so did bernanke in june, and its going to take a couple iterations for them to get the communications right and i think it was a very big deal when they changed the 6. 5 Unemployment Rate target because it was a very big deal when they implemented it. This was new ground and this was something Charlie Evans was adamant about and he had pushed for this for a couple years for them to do the 6. 5 and and they dumped it for uncertain chalanguage. We dont know what that new language means. It depends is basically the answer. Its going to be fascinating when they try to exit. Thanks for now, guys. We have about 35 minutes left to go before the close. The dow off 25 points. The s p is off 9. And the nasdaq is off 52, bill. Once again small caps and biotech, theyre leading the selloff today. The second day in a row the biotechs have been routed. Well hear from somebody who says the down tourn by these two former high flying market lead he is should have you concerned. Cisco shares also down around 4 this year making it one of the worst dow performers in 2014. Should you stay away from cisco or is there value to be unlocked . Well have a stock brawl when we come right back. Des reliable it Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. [ male announcer ] youre watching one of the biggest Financial Services companies in the country at work. Hey. Thanks for coming over. Hey. [ male announcer ] how did it come to be . Yours . Ah. Not anymore. Its a very short story. Come on in. [ male announcer ] by meeting you more than halfway. Its how edward jones makes sense of investing. [ male announcer ] by meeting you more than halfway. Time to take care of business with century links Global Broadband network and cloud infrastructure. We constantly evolve to meet your needs every day of the week. Welcome back. Stocks lower across the board this afternoon, although trying to make a bit of a comeback here. Its the that is dak thats really underperforming. Seema mody whats behind that move . The biotext are the real culpri culprits falling for the second consecutive session. It began the plunge on friday when a lawmaker sent a letter to gilead sciences. Alexion pharmaceuticals whose only approved drug costs 400,000 a year, bio gen and cell gene selling off. Tesla, netflix, and priceline, all those momentum names moving lower. Herbalife moving higher. Schlumberger higher as well. The Oil Field Services provider says it expects First Quarter earnings to be much higher than a year ago and well end with cisco systems. The company will spend 1 billion the next two years to enter the Cloud Computing market. Kelly and bill, back to you. Thanks. Is cisco a buy now that theyre making a push into the Cloud Computing space . Well lets talk about it. Here to make the bullish case, chad morgan. To make the case for the bears, its ross gerber. Gentlemen, good to see you. Chad, you see value in cisco right now, dont you . Without a doubt there is value, bill, but it isnt all shine and rainbows. They have competitive issues particularly on their switching side as well as the emerging markets were quite soft in the last quarter, but lets go through the numbers on the value side. Market cap, 110 billion. They have 30 billion of cash per share on the balance sheet. So youre looking at a stock trading at 21 or 22 a share with 6 per share. Earnings 2. Were looking a at company thats dirt cheap. If theyre able to straighten their Business Activities out and you start to see revenues grow again, this would bode well for the stock. Our price target is roughly about 25 a share. The dividend is about 3. 5 , and the growth trajectory on the dividend is roughly 15 yearoveryear. I mean, look, ross, better late than never, right . Those are all true things and thats exactly why you dont want to own the stock. Some stocks stay a value for decades like cisco has been. So, you know, the issue is how are they going to grow their revenue in an incredibly pet tiff space, number one. And number two, leadership hasnt done anything bold or exciting. Theyre getting into Cloud Computing today in this w . Theyre so behind the ball constantly. The stocks will stay values for a long time. The question is how will they grow their profits by 15 or 20 a year with their Current Business strategy and i dont think thats possible. Ross, whats the value relative to the cash flows cisco will throw off here . Its cheap relative to cash flows but i think the issue is if cash flows arent growing, people pay for growth in the stock market and they clearly dont want these Old Tech Companies of the 90s. Hold on a second. At 6. 5 ebitda, we are looking at a company that can buy themselves back in a decade. Even if valuations dont grow at double digit but grow at gdp growth trajectory and dont dissibt grate, then this company is a buy. But thats not how you make money in the stock market is by hoping over a decade. You buy stocks but this is also about cisco specifically not necessarily ross, with regard to cisco specifically here, is there not value to be had . F forget the Broader Market. Its like dating. If theres a lot of people that are values like microsoft or apple or intel, theres a whole list of Tech Companies that have values. But look at what qualcomm did recently hold on a second. Changing ceos and theyre trying to find growth. Microsoft was at 22 a share at the same valuation several years back, okay, and now its close to 40 a share. Thats how you find value, by Picking Companies that are somewhat troubled in transition and they straighten out the transitional period they got straightened out because they got a new ceo. They had to make changes in the way theyre doing business. Thats what cisco has to do if they want the stock to get moving. Chad, you said the phrase, if they figure things out or if they straighten things out. Thats a big if nowne, isnt it . As im saying this, theyre generating operating income of 13 billion on an enterprise value of 80 billion. Thats xing out cash on their balance sheet. They are highly profitable. Were not looking at a company that has a multiple thats 50 or 80 times pe multiple with a lot of debt and a lot of leverage. This is a highly liquid company that has been able to demonstrate consistent cash flow growth and consistent profitability over a decade. And whats happened to the stock over a decade . Nothing. So why would it change . Theyre going to still be profitable but theyre not growing and theyre in a shrinking business we have to break it up for now but well check in in a decade. Lets all agree to be here. Ill be here. I promise. Thanks, chad. Good stuff. The market has turned around. The dow positive for the second time today. Last time it was positive was on the open this morning, then it fell out of bed. Were up 17 points, but, again, its the nasdaq that is the glaring minus sign today down almost 40 points right now on the index. Not to mention that broad market gauge, the s p 500 still is off four points this hour. The u. S. Has been stepping up its sanctions against russia after its annexation of crimea. How much are those sanctions hurting russian president Vladimir Putin . Does he even care . Rocket zell ek will weigh in on this next. Secret emails between steve jobs and former google Ceo Eric Schmidt show they conspired to keep hightech salaries low. We have details of this outrageous story coming up later on the closing bell. [ chainsaw whirring ] humans sometimes life trips us up. Sometimes we trip ourselves up. And although the mistakes may seem to just keep coming at you, so do the solutions. Like multipolicy discounts from Liberty Mutual insurance. Save up to 10 just for combining your auto and home insurance. Call Liberty Mutual insurance at. [ thump ] to speak with an Insurance Expert and ask about all the personalized savings available for when you get married, move into a new house, or add a car to your policy. Personalized coverage and savings. All the things humans need to make our world a little less imperfect. Call. And ask about all the ways you could save. Liberty mutual insurance. Responsibility. Whats your policy . President obama, as you may know, is in europe for that Nuclear Security some miummit, l eyes remain on russia. John harwood has the latest on the crisis in ukraine. John . Reporter the president just wrapped up a meeting with his allies among Major Industrial countri countries. At the meeting the president urged those allies to at least temporarily suspend russia from the g8. Remember, the g8 is supposed to meet in russia this summer. Theyre exploring alternative arrangements there. Meanwhile, the senate is taking up later today sanctions that would give additional leeway for the administration to add sanctions on russia which the administration hopes will impose a cost. He also wants european allies to invoke tougher sanctions than they have so far, but everybody is acknowledging the limits of what this pressure could do because ukraine itself ordered its troops out of crimea under threat from russian soldiers, a sign that nobody expects russias seizure of crimea to be reversed any time soon. Thank you. With us from the globalization for Higher Education conference in dallas, we are joined by robert zelek, the former president of the world bank. It is great to see you. Welcome back, bob. Glad to be with you. First of all, should the u. S. Have known better in this case with regard to putins intentions and what do you think his ultimate intentions are . Well, i think putin has fundamentally changed terms of the post cold war settlement my invading another country. The question is where we go and what do we do now. And the question always comes up every time there is discussion about economic sanctions, do they work . How far do you take them . What is your answer to that when were talking about what has been a member of the g8 to this point . Well, the sanctions so far from the u. S. And europe are primarily signaling, but theyre not going to fundamentally change russian behavior. Sanctions that really targeted the Banking System the same way that u. S. Sanctions went after iran, that could have a significant effect. The Energy Sector could have a significant effect. But that really requires a huge shift about pushing russia away from the World Economy as opposed to in it. But frankly, i think a lot of focus has to be on ukraine, not just russia. Over the past 25 years the people of ukraine have been very frustrated with their political class, and so the next step is really for putin would be whether he moves on the rest of ukraine, and that depends on whether ukrainians get their own political act together. The u. S. And europe can help with that. Second, they have a big economic problem ahead of them. So if were serious about trying to stop russia and thwart putin, wed have to help ukrainians if they face tough economic decisions. Thei mf can play a role, the world bank with play a role, the congress is playing a role. Europeans would have to play a role. The third one is while i dont think the u. S. Would be willing to fight for ukrainians, that if the ukrainians say theyre willing to stand up for themselves, well, then we should be able and be willing to arm them. And then its coming out of these nato meetings you will have a lot of concerns about the Baltic States, poland, other countries that have a large number of russians since putin partly justified this based on russian population. So the whole nato defense of its members of which ukraine is not one but the Baltic States and poland are, that will have to be a strong message coming out of this week in europe. Does the u. S. Need to send troops to that region . Well, i think that in the past with the Baltic States, while theyre part of the nato article 5 security guarantee and for example we sent some f16s around there, i think we have to actually assess given how quickly russia moved in crimea whether we do need to have some station troops or other operations in the baltic countries to assure their security. Thats what a nato guarantee means, and if the United States word is going to be taken seriously, this is actually how you deter action. So im not forecasting it, but i was just in europe all last week, and i can assure you the baltic countries are nervous. Lowla poland is nervous. Thats where president obama will have to show some backbone. Something putin has dangled over europe is withdrawing or withholding natural gas supplies which they supply a third of what europe consumes right now. Whats the response for europe to that . Is that enough to keep them from being as forthcoming with more sanctions than they would otherwise be . Is that an effective weapon for Vladimir Putin right now . Well, its a twoway street. If you look at russias gdp, about a third of russias gdp is from the Energy Sector, investment in the Energy Sector. About half of its growth last year. It needs more Energy Sector investment. So on the one hand, while it would undoubtedly be a big stress point for europe, that youre getting to the spring, some countries have more alternatives of sources, and i think over time this signals the need for countries in europe to diversify their sources. So i dont see the europeans ready to take that step, and i think one of the challenges president obama will have is that germany will be a leader in this. So far chancellor merkel has said some strong statements but you see that the initial steps on the part of the europeans are very modest. Thats why i think a lot of focus has to be not on this sanction, that sanction, which are not going to be significant at this stage but what are we going to do for ukraine to help them politically, help them economically and ultimately if they want to defend themselves, make sure they have the means to do so . That is how you deal with someone like putin, not small sanctions. And finally, to what extent would you draw parallels, especially if u. S. Sanctions tighten further to russia with regard to iran which of course now is seeing some softening of the global of its position i guess we should say in todays World Politics . Well, the types of sanctions that would affect iran and that could affect russia and the Banking System for various reasons is a very big step, and i dont think youre going to see people take that without additional russian action because it would really push russia out of the Economic System as pushinged iran out and theres not a lot of economic interest but people are concerned about what this means for the future position of russia at other points. So i dont foresee that unless, unless putin takes additional military action. Then you could have some of these bolder economic steps. By the way, just out, no surprise really, the g7 leaders have just said they will suspend participation in the g8 until russia changes course. Do you think Vladimir Putin even cares about membership in the g8 right now . No, and i think it probably just gives him a boost politically. Frankly, i think russia was brought into the g8 under president yeltsin by president clinton as a way of trying to lure them in the area. Frankly, i dont think they should be in anyway. So these are the type of small signaling moves that people expend a lot of Political Energy on, but if youre going to do the serious economic sanctions as we talked about, everybody has to be ready to pay a big price. Again, i start with are we willing to pay the price to help the ukrainians . Thats what this is all about. Robert zoellick, always good to see you. Thank you for joining us today. Appreciate it. Glad to be with you. And as we head towards the close here with 15 minutes to go, the dow is trying to hang onto a small positive gain but the s p remains off by 5 and the nasdaq by 41. And its been an ugly day for some of this years best performing stocks and even for some highflying sectors. Is this a warning for the overall market . Well look at that just ahead. And a heartbreaking day for the families of the missing malaysian airliner. The Prime Minister of malaysia making a shocking statement t. T the details on this story when we come right back. I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry, but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. So our business can be on at ts network for 175 a month . Yup. All 5 of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line, anytime, for 15 a month. Low dues, great terms. Lets close new at t mobile share value plans our best value plans ever for business. Impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. With investment information, risks, fees and expenses phone your account is already paid in full. Oh, well in that case, back to vacation mode. Boots and pants and boots and pants and boots and pants and boots and pants and boots and pants. Voiceenabled bill pay. Just a tap away on the geico app. Huh, 15 minutes could save you 15 or more on car insurance. Yup, Everybody Knows that. Well, did you know that some owls arent that wise. Dont forget about im having brunch with meagan tomorrow. Who . Seriously, you met her like three times. Who . Geico. Welcome back. Malaysias Prime Minister says new data suggests the missing flight 370 did, indeed, crash somewhere in the southern indian ocean. Keir simmons has the latest details of this emotional day and the search. Reporter hey, kelly and bill. Disbelief among many families staying at this hotel as they listened to the Prime Ministers statement who said analysis of the data suggested, as he said, that the plane was in a remote location far from any possible landing sites and then went on to say it is, therefore, with deep sadness and regret i must inform you that according to this new data flight 370 ended in the southern indian ocean. In beijing there were incredibly disturbing scenes as families grief just poured out. One Family Member taken away on a stretcher. It was so incredibly emotion krall. Meanwhile, here we watched a small group of relatives listen to the Prime Ministers statement on the television here. The father of a 29yearold just looking absolutely stony faced. His wife in tears, and then he didnt speak english very well. So one relative had to lean in and translate and explain what had happened and he just got up and walked away. Guys . Yeah, tough times as that search continues there. Thanks, keir simmons. Heading to the close with ten minutes left in the trading session. Were going to go out flat for the dow. The s p still lower. The nasdaq led lower by technology and biotech. Lawmakers in arizona are trying to reverse a ban on direct auto sales. That would help a company like tesla. The local congressman leading the charge was on the show friday. Coming up, well hear from the president of the arizona automobile Dealers Association on why he says this lawmaker is dead wrong. Stay with us. Y ] make it happen with fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Seven minutes left in the market day. The dow struggling to remain positive here while the nasdaq really continues lower down. Another 1 today, led lower by technology and biotech and the s p lower as well. Joining me now is jeremy hill from affinity Investment Advisers. I have had three people in the last hour say they feel like these markets are confused. I was always brought up to believe that the market always knows whats going on. We just have to figure out what the market message is. What do you think is going on . Maybe the market is always confused. Very good. 2014 might be the year where you really want to use a high. Howered rifle instead of a shotgun approach. We all want to predict whether the market is going up or down but its nuance. Its complicated right now. Its a stock pickers market. Its a stock pickers market. Lets look at some of the sectors performing well. Airlines up 20 yeartodate. Home furnishing down 16 yeartodate. The market is in a wait and see mode. Do you go for those sectors that are performing well or look to some of the laggards . Value investing over the long term is a more successful strategy. Right now im not sure you want to pick a falling knife thats falling as well as like biotech. Thats right. I think some of what we call football stocks have done quite a bit of damage in the last couple days. Id stay away from that. I think one asset thats probably still cheap is volatility. You expect more volatility down the road then . Well, i would say that if you were to look at the vix as a way to hedge your portfolio, i think thats an attractive asset class right now even as its ratcheted up in price in recent days. All right. Jeremy, good to see you. Appreciate your thoughts on todays market action. Well take a break, come back with the closing countdown as we head to the close. And after the bell, wells Capital Managements jim paulsen says hes concerned about this market but he does see some under the radar opportunities. 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Down almost 3 as that sector continues to see selling, and bob, thats been the story today. I dont think we should be complacent about the fact that the big leadership groups, biotech, gold stocks weak today. Some of the semiconductors a little weak. I dont think we should be complacent about it, but if you look at the Broader Market reaction, the dow is basically flat. The s p is a little weaker because of the Health Care Part of this whole thing and nasdaq got hit on the momentum names. I dont think we should be complacent but i also dont think by and large were not seeing any signs of the Broader Markets breaking down. I made much of it earlier but there were three different people in three different parts of this hour that said they think the markets are confused right now. This is the right reaction. If youre concerned about rates going up, if youre concerned that china is weakening, the data still isnt good on china, we dont know where the ukraine thing is going, it would make sense the market leaders would be affected first. I would be more concerned if he saw big industrials starting to sell off on a consistent basis, big material names starting to sell off consistently, but were still not seeing that right now. The bears would argue its the momentum guys that will move first. Thats why we pay attention. Thats why theyre market leaders. Skroop than thanks, bob. Were going out with minor declines to the major averages except for the nasdaq which is now even going lower for the day down almost 50 points led lower by tech and biotechnology. What to make of it coming up now on the second hour of the closing bell with kelly evans and company. Ill see you tomorrow, kelly. Thank you bill. Welcome to the closing bell. Im kelly evans at the New York Stock Exchange. Its been an up and down day. Lets take a look at how were finishing up on wall street as we enter the final week of trade for this First Quarter with the dow off 25 points. Double that for the nasdaq. Its off 50 or 1. 2 . The s p 500 giving up 9 points to 1,857. 1,878 is the closing high there. So were about 20 points south of that. Now lets get right to it with todays panel. Joining me kevin roos, Kayla Tausche and dom chu and dan greenhouse and also fast money contributor guy aidamadami. It its great to see all of you. How serious is this selloff in biotech . If you look technically, we traded down to 232 in the ibb. Basically the same levels we made in the beginning of february and bounced. Big volume day there. So maybe in the short term at least you have a tradeable bottom, but i said it a couple weeks ago. I sort of got on the Goldman Sachs analyst. Turns out maybe they were early by a week but they got the move right overall. I remember that, you did jump on him. When im wrong, im wrong. Mea culpa, you know what im saying . You had a great call on twitter but well come back to that in a second. Dom, what are you hearing about whether its biotech, the market more broadly . It turns out that the traders im talking to are saying its very specific towards certain parts of the market. S in not a broadbased selloff by any means. With guy, he spoke with the ibb, with that one this thing traded down towards a semi important technical level. The chart watchers look for patterns in movements and charts. They say when it hits a certain level it may bounce. Was the 100day moving average. If you look at a chart and you look at that average, it did bounce off there and we closed off the lows, so this may be, again may be, one where its just some profit taking from certain parts of the market and not just across the board. It sounds like what guy just said about a tradeable bottom has some basis in the chart activity. If we tried to hone in on the fundamentals, is it gilead, is it the sense that pricing is fundamentally going to change, or, frankly s biotech part of a carry trade in this market thats being unwound . Clearly this is a sector of the market and a small one at that that has been driven higher, exceedingly so. Up 65 last year, doubling the s p 500 returns and over the last twoplus years the sector has just completely outstripped the rest of the market for a number of reasons. Whats important for investors more generally to remember is that biotech stocks are not the market. They are roughly speaking 18 of the s p 500, pharma is a much larger part of the stock market. Theres a chart of the ibb against the spy. Its left it in the dust. With respect to the Health Care Sector in particular, its just 18 of one of ten sectors in the s p 500. This is not, to doms point, some Broader Market selloff. Pharma is more important to the market overall, to health care specifically, thats merck, johnson johnson. This is not some everybody watch out the whole market is crashing moment. Kayla, about the same size in this market are the financials. If you want to talk about perhaps a positive story to offset some of the weakness were seeing here, could you point to the activity we saw last week. Right. And certainly the financials were on a tear last week. They held up pretty well today, and i think the issue with todays market was that you had a lot of these momentum stocks pulling back and when you see some of these outsized moves in either direction, people generally get a little fearful and they think the entire market is selling off. A lot of defensive names, Consumer Staples were okay, health care more broadly was not as bad as it was earlier in the day. You a lot of sectors bouncing back. Financials actually is a place people are putting money even though analysts have started coming out saying maybe the results were going to get on wednesday wont be as good as we expected, but even so people are feeling comfortable. We upgraded the Financial Sector today. I think kay will should we take that as a contrarian side . No, i would say this is why the market reversed. Very good. Okay. Got it. This is an area that a lot of investors are looking at as providing some level of upside potential even as the market overall seems to be there are two issues. On one hand, people expect the financials will do better once rates start going up, not when the fed raises rates, but actually when yields start to go higher because thats where they make their money. But the other issue is the buybacks. They are not going to be able to buy as much stock back as they had been in previous years even though they are getting healthier. Thats something the you know what i like about this discussion right now . Were talking about things that separate certain stocks and certain sectors from other stocks and other sectors which means that fundamentals, doing your homework, all of the stock picking matters again. Thats how you know the market is at least getting to healthy. We see high correlation during periods typically of panic. Kevin, whats the West Coast View on all this . So much of your work of the conversation lately has focused on the runup frankly in income, earnings in some of the valuations of these companies. We entered 2014, things do look a little more choppy. When youre looking at private company valuations, the whatsapp whatsapps, i think when you look at the public valuations of some of these Tech Companies, theyre not trading that far above their multiples. Theyre not were not seeing the kind of explosion we saw in 1999, so i think people here are cautiously optimistic that something is different this time. That said, there are a lot of people saying this feels a little bit like a bubble. Kevin, i was talking to a few underwriters today on various ipos. I said what would be the metric that would start to make you get worried about the ipo market right now . They said when investors stop doing their homework and want in without reading the s1. Thats bhand in 1999. They said investors are still coming to meetings with an incredible amount of preparation behind them and having very specific models with specific valuations that somehow get them to those numbers but theyre not just willynilly and saying whatever it goes to, i want it at that. Im wondering if you have been talking to people on wall street about how theyre viewing the ipo valuations and how theyre actually measuring it. There are a lot fewer ipos than there were in 1999. In 1999 anything with a pulse was going public. Now i think you see a little bit more caution and reserve on the part of investors and that raises the question, can it be a bubble if everyone is saying its a bubble . Let me just add real quick before we get out of this topic, i think kevin hit an important point which is basically in 1999 we forget how easily anybody could get an ipo. The simpsons famously had a dotcom stock handing out toilet paper that was shares in the stock. That is not today. At the same time, im not making any declarative statement here, when you talk about companies priced on eyeballs or valuation in relation to revenues and not earnings, that at a minimum has to raise eyebrows. Its biotech and we talked about this with robert frank on friday, if you wanted to draw parallels it would seem more akin to what was happening in by yes tech and there were a number of names that have doubled and have fallen. Kevin, i dont know to what extent people out there are talking about those parallels but when you start to see the breakdown in biotechs, i think thats why it does raise peoples hackles because they say is this some kind of bellwether for the market more broadly the way tech may have been during the peak and collapse of the last cycle. Youre seeing now the early part of the capital cycle. We do have these outlier unicorn billion dollar companies, but the medium stage crunch were see something a mark that investors dont want to just keep throwing capital at companies that arent making any revenue. I think youre seeing a big emphasis today on getting away from those bogus metrics and actually companies that are making money and not just accumulating users. Kevin, here is a question for you. From a cultural aspect, we knew what it was like back in the mid to late 1990s about how bankers approached their deals, how venture capitalists approached the way they wanted to invest in these companies, how far are we away from those levels again . Is it substantial . Can we say we are definitely different now than we were back then or are we kind of ascending towards that level of euphoria all over again . Again, i think its the difference between Public Companies and private companies. In 1999 we had the four horsemen, these investment banks that were bringing all these Companies Public at a staggering rate. Many times a day there was a new every day there was a new tech ipo. Thats no longer the case. The pipeline has become much nay narrower for companies to go public. That means if there is a crash in valuations, it wont necessarily ripple out to the Public Markets the way it did in 2000. First, the irrational exuberance speech was december 1996. Oh. Things went on for several more years. And second of all, we cant get out of the segment before pitching the guys book. Young money absolutely. Kevin will stay with us for the whole show. Guy, i wanted to bring this back to your call on twitter. Having just heard what kevin was saying about valuations, you were cautious on twitter. Its certainly come down from the recent highs. How do you value it from here . The last time we talked about it was early february. We said and the request he to me was where do you think twitter will be in six months. I said really i dont know but i think this is whats going to happen. I said i think well trade up to 58 on the bounce and sell off to the high 40s and if you look, thats pretty much exactly whats happened. It traded 58 and change mid february. Now we printed 47. 50, 48 today. Now it gets interesting again for a trade. You know, you talk investing and thats great, im all for investing but i look at the world much differently. Our show is sort of focused on trading. Thats where my head is at. In terms of opportunity, once again on the long side i think twitter sets up sort of interesting here for a buying trade. All right. Another little pivot for now. Guy, thanks for joining us. Thank you. Be sure to stick around and catch guy and the rest of the fast money crew coming up at 5 00 p. M. And straight ahead here, a big selloff at the nasdaq today. The small cap russell is not doing so great either. Up next, James Paulsen from Wells Capital investment on how you should play the markets right now. Secret emails revealed eric schmidt and steve jobs making the two companies sound like colluders rather than xet tifs at least when it comes to hiring. Youre watching cnbc, first in business worldwide. The russell 2000 was trading near its all time high before dropping nearly 1 . Seema mody has been tracking the small caps and has more on what it could mean for markets overall. Thats right, kelly. Here is why traders watch the russell 2000. The index many times serves as a leading indicator. Experts are betting the russ sel headed lower. After the 26 run, barry nab from Barclays Says small cap names have become too expensive. He points out a majority of the small cap names make most of their money right here at home and have already priced in a u. S. Economic recovery leaving no more room to run. Now, the russell 2000 stocks with high u. S. Exposure including hawaiian holdings, cap stone turbine, all of which have a market cap below 1 billion. While the fundamental and technical experts tend to not agree when it comes to the russell 2000, mkm partners also cautious saying its trading in overbought territory 41 over its 200week moving average. The last time the russell traded this high was right before the dotcom bubble burst. Food for thought. All kinds of caps got whacked over at the nasdaq today. Sheila dharmarajan keeping an eye on all of it for us and joins us now. Its been definitely an interesting day here at the nasdaq. The good news is that we did see some buying towards the end of the session so we closed off session lows but it was an ugly day. The Overall Index down almost 2 today. 90 of nasdaq 100 stocks at one point were in the red. Of course, we did reach that all important 50day moving average. A very technically important level traders watch for. Everyone i have talked to has called out two themes. First of all, the selloff in b biotech. The index down as much as 7 . Its interesting because we definitely do seem to be seeing a divergence when it comes to technically trading the stock versus fundamentals. Analysts are saying they think its good buys. Nonetheless, investors getting a little worried perhaps about frothiness in the sector and pulling out. The second thing weve heard a lot about early is high flying momentum names, tesla, priceline, netflix all taking a dip today. In the last segment there was a lot of debate on what all of this means for the overall market. Its too early to tell. Its own been one day. If you look big picture, they are still up big time. Here is the thing though, traders are telling me its still a sign of concern. You never like to see names or sectors like biotech, some of these high flying names that have been leading the market start to sell off. Well continue to watch closely going forward. Sheila, great stuff. Thank you very much. My next guest says get used to the volatility because its not going away anytime soon. Hes jim paulsen, chief investment strategist at wells Capital Management. Theyve got about 360 billion in assets under management. Jim, first of all, it is great to see you today. And, look, what do you make to sheilas point just now of the selloff in biotech . How serious is it for people watching the market more broadly . Thanks for having me on, kelly. You know, i really think this selloff we have going at the moment is mostly due with the second failure at the 1880 level in the last month on the s p 500. I mean, friday we breached it to new highs or thursday and then pulled back again late in the day and have followed through today on that. I think that leads a lot of the traders selling on second failure within 30 days. I agree with sheilas comments that fundamentally i still think theres a lot to like here and my best guess is within the next few weeks were going to get the first clean perhaps payroll number for this year in terms of not so weather distorted, and i think were going to find out that the economic momentum is there and its probably better than people think, and i think thats going to eventually win out and push us to new highs above 1900. I still think we might reach 2000 sometime this year. Sometime this year. So to be clear, are you bullish, are you bearish . I understand the answer to some extent is it depends. Yeah. Would it be more helpful to be specifically about some areas you see opportunities specifically here . I said since year end, i think this is going to be a frustratingly volatile, flat year. Weve already went down in the early part of the year on weak economic momentum. Weve recovered now. I think were going to maybe hit 2,000, but i also think we might have a second half selloff, kelly, that brings us back about where we started the year. Its going to be a really frustrating year to time all that. My if im going to id offer a couple things. One is id stay a little more cyclical in the early part of the year. I think right now good news is good news for the stock market. And i think were going to get more good news for a while which is going to drive the equities higher but also Interest Rates. Ultimately before the year is out, i think good news is going to become bad news. We might have our first overheat crisis of the recovery causing some correction later this year, but from higher levels. So right now i really like the cyclicality parts, the material stocks, the industrials, financials, technology here. I think the emerging markets offer a good buy, and that will be i think resolved this year whether we bottomed outside in the emerging world or not. I think we have. And then maybe move more defensive as the year progresses, kelly. If the s p lets say rises up towards 1950 and bond yields back up to 3. 5 on the tenyear, id move for defensive. You mentioned emerging markets. Thats a theme we heard at the beginning of last hour as well. A lot of people seem to be seeing value there even though, a, i dont know why we lump them all together at this point. Theyre such disparate markets. The news flow generally isnt great whether you want to name turkey, thailand, venezuela. Where in emerging markets here are you putting money to work . Well, i still think a diversified bet across the region is not too bad. Thee em buy i still think is okay. If you have some deeper expertise, you can start to delineate a little bit. I just think that with china, with the twoyear slow down in the emerging world, i think theyre bottoming out and i dont think the longterm leadership in the emerging market is over. Even at a 7 rate they will be growing twice as fast as the developed world and now their valuations are at discounts. I think its a great entry point for those who havent been in or find themselves to be underweighted. All the same, speaking about china specifically, dont you get concerned when you hear officials saying theyre going to focus on quality over quantity . Thats about as close as you get to an acknowledgment that growth is going to be disappointing here. Yeah. I think that, you know, in this country we got the fed saying theyre focusing on raising rates. I think in both cases i think that the emerging world is bottoming out. I dont think china necessarily is going to continue to be the poster child for the emerging market story. I think it will fall out of its leadership status, and i dont know if i want to bet on when that occurs and who takes over. I still think a safer way to go is to bet on the regions excess growth rate at a now discount valuation rather than take a specific bet away from china or somewhere else. Final question, an interesting theory out there is this argument from jeff frankel over at harvard that perhaps if the European Central bank needs to start doing some sort of qe program, that it could buy u. S. Treasuries because there arent really euro bonds, at least to that scale. What do you make of that argument . For everyone who has been calling for higher Interest Rates here, do they need to keep these potential developments in mind . I like that. The fed can sell them directly to the ecb, i guess. I think that the ecb is going to stay easy over the next several years. I dont know if they will go to fullscale qe like we have done here in the United States or theyve done in japan, but i do think theyre going to lag way behind the u. S. Cycle in terms of their Monetary Policy there. And maybe that will maybe that will work out fairly well with the fed sopping up reserves as well about the same time the ecbs going to be a buyer. The fed is going to need a buyer and maybe that will be the result. I wouldnt want to be buying the tenyear treasury right now, however, because i think were going to go higher, maybe as high as 4 or close to that before the year is out. Jim, great to have your perspective. Appreciate it. Thanks. Have a good one. They may have been the ultimate frenemies, eric schmidt and steve jobs publicly battled time and again. But some uncovered emails reveal they may have partnered up on some questionable practices. And the Brooklyn Nets have an eye on first place but the russian owner of the team is looking to move the company that owns the team to his native land. What do you think . How should the nets symbolize soon they will be a russian team . Tweet us and well share your best thoughts later in the show. [ bagpipes play ] make it happen with fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. [ male announcer ] help brazil reduce its overall reliance on foreign imports with the launch of the countrys largest petrochemical operation. When emerson takes up the challenge, its never been done before simply becomes consider it solved. Emerson. Lets start here with seema mody and a quick market flash. Check out sonic the fast food chain. The company posting better than expected Second Quarter earnings. Same store sales ridesing 1. 4 . The stock higher in after hours trade by 6. 3 . Back to you, kelly. A nice pop there. Thanks. Did steve jobs and eric schmidt at google collude together to stem the free market for Silicon Valley workers . Josh lipton joins us with details on this incredible story. It started with apple and google but we have obtained Court Documents showing this alleged tech wage conspiracy could expand to include microsoft, oracle, ibm, and comcast, the parent of cnbc, among others. A Class Action Lawsuit brought by attorneys representing 64,000 tech workers in Silicon Valley alleges that tech titans conspired to depress compensation by agreeing not to solicit each others employees between 2005 and 2009 in violation of both federal and state antitrust laws. A lawyer close to the case telling us they are seeking 9 billion in damages. Now one prominent Silicon Valley executive is distancing herself from this controversy. Cnbc has learned that Facebooks Sheryl Sandberg filed a declaration with the court on friday of last week that pinned the scheme specifically on two google executives. Sandberg saying she was contacted by the google executives who, quote, expressed concern about what was described as the perceived rate at which facebook could hire employees from google. Sandberg refused to cooperate with googles offer for a nonpoaching agreement and a clear rebuke to its rifle. Te apple in Court Documents saying between 2005 and 2009 its hiring of tech workers jumped 50 and wages also rose. No sign of conspiracy there apple is saying. Back to you. Thank you. For more, jim edwards joins us from Business Insider along with the panel. Jim, what do you make of it . The stuff is absolutely outrageous. Technically its a sort of textbook illegal move. Earlier this year for comparison two japanese executives in the Automobile Industry went to federal prison for fixing prices in the auto parts industry. In principal what steve jobs, sergey brin, and eric schmidt were doing was exactly the same thing. They were conspiring to keep wages down to fix the prices of peoples salaries. Sure. Hat tip to pando daily, they uncovered a lot of the emails. This is really now coming to a head though. And i guess the question becomes, dom, how much what do you do for people who should have been compensated to some extent by much, much more in the past as this comes to light . First of all, you have to figure out whether or not there was the hardest part about any kind of a case thats going to happen here is trying to quantify what the damages actually were. I mean, can you even set a market for these wages if you didnt have that collusion to begin with and do you gauge it by maybe cost of living increases . Is it just the sector overall that happens . There are so many unknowns here. First of all, this is going to be one of the hardest, hardest things to be able to try to build a case around. But its pretty incriminating, kevin, dont you think . Its very incriminating. Its classic cartel behavior. Whats so shocking is this has been going on for a number of years. We dont think of tech employees as being underpaid but in this case it appears that they were sort of left in the cold by these executive decisions were not going to poach people from your company, youre not going to poach people from our company. That sounds fine and good until you actually get to the level of the employees where theyre missing out on their wages. Meg whitman in one of the emails seems to indicate the hit to ebays margins for the degree of compensation potentially awarded to some of the workers. Full disclosure, i dont know all that much about this case but i would ask a quick question to everybody here. These are people with jobs, correct . And are there not other companies that they could have gone to besides google . Right but whats most interesting to me is, okay, one of these emails between eric schmidt and some of his deputies described a call that he had with meg whitman and he said this was a rough call with a good friend. Okay. Ebay and google were familiar with each other at the time but the nebulous of the companies that the agreement supposedly actually included when you think about it, nvidia, think about even our Parent Company comcast is listed, ibm, this spans really far and wide, and this is not just people playing in their backyards in Silicon Valley which is interesting and especially since eric schmidt in one of the emails says, guys, lets discuss this orally so we dont leave a paper trail. It seems quite clear, dan were not talking about eric schmidt here. Were talking about the people kevin, go ahead. Were talking about the Software Engineer who is making 100,000 a year and in an open market might be making 50 more than that. We are not talking about all millionaires and billionaires here. Kevin, im with you. I agree these people can be overpaid. Someone on the panel needs to take defense for the multibillion yars. But its hard to figure out im not sure you do. Everyone cant be poached by another company. Jim, what do you think . There isnt a defense here. The hypocrisy is breathtaking. They talk about free markets and competition and innovation all the time but in private meg whitmans email to eric schmidt describes competing for workers as, quote, unfair. Thats how they really regard competition. Thats the level of hick pock ra si. Hypocrisy is one thing. Nobody is condoning cartellike behavior, but is there maybe a case to be made that sometimes it is in everybodys best interests if there isnt an arms race, isnt some escalation, isnt some come on. The basis of capitalism is an arms race. Quick last word, jim. The basis of a free market is you have an arms race. Thats the basis of capitalism, right . Well leave it there. Thank you, guys. Jim, thank you. Thank you. The tesla war rages on. Up next, the head of an auto Dealers Group in arizona speaking out on blocking the electric carmaker from making direct sales in the state. Getting in a groove. Growth is gratifying. Goal is to grow. Gotta get greater growth. Growth . Growth. I just talked to ups. Theyve got a lot of great ideas. Like smart pick ups. Theyll only show up when you print a label and its automatic. We save time and money. Time . Money . Time and money. Awesome. Awesome awesome awesome awesome awesome awesome awesome all awesome i love logistics. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. 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So on friday Arizona State representative Warren Peterson told us why hes pushing to reverse the states ban on direct auto sales. That would give tesla, for example, the opportunity to sell direct to consumers. Take a listen. Here is the reality. People in arizona are buying tesla cars. There are 600 or so tesla cars on the road. Its not a huge impact. Its not going to rock the boat. They can both exist at the same time. Its just the consumer is going to make that choice. So, no, its certainly not the end of the world for dealers and the reality is arizonans are already buying teslas outside of the state and then just bringing them here. So here now to react in an exclusive is bobby sparrow, the president of the arizona automobile Dealers Association which represents more than 260 dealers across the state. Bobbi, its great to have you here. Why would that be the end of the world for your dealers . You know there, is nothing new here. Hes absolutely right, what is the problem . They are buying them. We have 413 across the state, their number. I think this is specialized legislation and a carve out by a company that doesnt want to play by the rules. Bobbi, are you pro free markets . Absolutely. And so are my dealers. They compete every day in a free market. I think that we have really turned this argument around to the wrong way. Let me tell you why. The factory, tesla, is really a vertical monopoly. Youre not able to go out there and freely try to get the purchase of a price, services, repair, financing. What youre doing is just naming one price. That even hurts insurance companies. They cant even shop different repair facilities and dealerships. You have one price. That is not a free market. Thats a vertical monopoly and thats what theyre asking for. Your argument is if we let tesla and all these others sell direct what that means is if i need a repair to my tesla, i will no longer be able to shop around for the best price, i will to pay whatever tesla charges and that might be a lot . Exactly. And not only the repairs but financing, service, and the cost of a vehicle. What is a tesla, 93,000 . You dont think that the majority of the people want to try to haggle for that price . Let me tell you where this really gets interesting. Weve had 10 to 12 manufacturers go out in the last couple years and fisker was one that was here in town. We had a dealer that had it. What happened with that was they left town and took away their 800 number. Off consumer left for a vehicle, no manufacturer, our dealers took care of them. They even bought them back. So, you know, at the end of the day there is a lot to consider. It isnt just, you know, exactly what the price of the car is. Its who ends up taking care of them . Suzuki did the same thing. They went across the ocean. We just had a recall on them. Ironically by were venting tesla potentially from having more locations or being able to service these cars, youre not even giving them the chance to really be a bigger player in this space. They do have a Service Center here and we havent kept them from having a Service Center here. What were saying is when you go into that Service Center, youre going to have one price and what youre going to pay because theres no competition. We have not kept them from having Service Centers so thats an incorrect statement. The next generation of tesla cars is going to be one or the generation after that is going to be one thats more mass market, that would be much more affordable. Thats a key part of teslas growth strategy. One reason by the way they want to locate a big factory in your state as one of the finalists as one of the contenders for that factory. Its not going to be a luxury car company forever. Yeah, and theres two items there. Youre right, they are going to go more mainstream and they even told us in a private meeting that when they go more mainstream, they want to use a dealer network, even took names from the different groups on who they could contact later on. So they want a carve out for now. When they want to go more mainstream they want to use a dealer network. Lets talk about the battery if they want to use the dealer network, thats a win win for you guys. Absolutely but in the meantime they want a carveout until they want to conform. We dont know if its a pr ploy or what theyre doing. Lets talk about the battery factory. They even talked and they testified in the legislative session, theres no correlation. This is going to be a huge battery factory and its going to be producing batteries for, you know, all of the manufacturers. We have ten manufacturers that are doing ev cars right now. Those batteries are going to everyone. This isnt a tesla battery factory. This is just batteries for sure and it may go beyond just cars. These batteries may power households more generally. Thats why tesla wants to create such a big presence and make such a big investment. So just to be clear, what the dealers in your state are saying is that these protections need to remain in place because otherwise consumers will have to pay too much to get their car serviced. Well, thats one point, and also who is there at the end of the day . Who is going to invest in the community . You know, i think at the end of the day were saying all of it. Its all included. This is nothing new. This is old. We have been there, we have done that. Thats why none of the other manufacturers jumped on this train and rode it at the legislature because they all tried to, it didnt work, and were back here once again with somebody new that wants to reinvent the wheel. It doesnt work. Consumers dont like it. Manufacturers go out of business, you know, like i said 10 or 12 the last couple years. The dealers are some Third Generation in our state. They are involved in the communities and theyre going to stay that way. Bobbi, thank you for joining us and fleshing out the case. We really appreciate your time. Thank you. And everyone will be watching this legislation very closely. Now, the old adage is its better to own than rent. Could that change in the future . You have to see some of the new amenities developers are lining up for the rental market. And it pays to be a media mogul. The eyepopping pay package drawing new attention and whats really bareathtaking, the bount they take home if they lost their jobs. Stay tuned for this story. Well be right back. Big savings on car insurance, its a bit like asking if they want a big hat. scuse me. Or a big steak. Or big hair. I think we have our answer. Geico. Fifteen minutes could save you fifteen percent or more on car insurance. A 401 k is the most sound way to go. Lets talk asset allocation. Sure. You seem knowledgeable, professional. Would you trust me as your Financial Advisor . I would. I would indeed. Well, lets be clear here. Im actually a dj. [ dance music plays ] [laughs] no way i have no Financial Experience at all. That really is you . If theyre not a cfp pro, you just dont know. Find a certified Financial Planner professional whos thoroughly vetted at letsmakeaplan. Org. Cfp work with the highest standard. Cnbc turns 25 this year and were looking forward to the next 25 years in different areas of business. Diana olick has been peering into her crystal ball to see what the future of real estate might look like and she joins us now. Youre looking at the rental market. Thats right. Since the height of the housing boom we have seen the Home Ownership rate go from 69 to 65 . There are now 5 million more Single Family rental homes than there were just six years ago. Weve called it renter nation and it has developers rushing to raise more rentals for now and for the future. In an older neighborhood in the heart of the nations capital, a new way of living is rising. Retail and rentals wrapped around each other offering a work life core within a larger urban setting. We looked at it holistically in terms of more of a campus, an overall experience. Stephanie williams is vp of Business Development for bossuto management which was 125 communities across the east coast. Her companys focus is on choice because both Young Millennials and down sizing baby boomers demand it now. Renting allows for flexibility. Again, we have a demographic that is used to being able to wake up and change their mind. Renting allows to you do that. The housing crash turned millions of homeowners into renters, some by choice, some by foreclosure. While Home Ownership is engrained in americas fiber, as we live longer, we will likely own for less time. Everything about america has become faster and more mobile except our ability to move. And so i think the real change is just going to be that folks are going to be much more comfortable buying and then renting. It used to be that was a oneway door. As soon as you started buying, you would never rent a place again. The stigma attached to renting is gone. As rental demand rises, developers are increasingly competing for the top customers. With all the bells and whistles and even the rooftop doggy playgrounds. Concierge, potentially like people come in and clean your place. They will make your bed, make you food. Epers company rad pad is a mobile marketplace. One of the big things that will happen is you will be able to do the entire transaction all through your phone. Now, whats interesting is we posted a piece on cnbc. Com about the dream of Home Ownership in america, and there was a lot of arguments. It got a lot of traction. People arguing for and against. The one thing they all agreed on was that negative stigma attached to rentership, its really gone. Kelly . Diana, thats whats so fascinating. Do you own or rent . I own but i rented for a long time. Probably until i was about 30 because of i wanted to be mobile and i wanted to be able to go from city to city in my career so i was a late homeowner. But now that Home Ownership, that was still like an important decision for you, right . Like an important point in our life . Only because i wanted to decorate. Im the housing girl and i wanted to decorate. You have kids and you want them to have a place where they can go to school and get a part of the community. Thats what really is the trigger for Home Ownership but, again, its when we have that time where we have kids its getting shorter and shorter because were having kids later and living longer. We will own for some time but its going to be a shorter period of time in the middle. All right. You have to jump are we wrapping here . Okay. Diana, apology. Getting confused there. Stay right there. I want to get some thoughts here from the panel now on this. Diana, its interesting because renting was sort of a trade that a lot of people predicted but some cities didnt predict it at the right time. Im thinking about my hometown of atlanta, overdeveloped with some of this rental housing thats still empty, even five years after the crisis. Do you think the pendulum is going to stay swinging in this direction or do you think its going to take a while to fill some of that inventory and then maybe it will come back in a few years . You know, i talk to a lot of investors who are really focused on atlanta right now because atlanta was one of the late comers in the market to the distressed housing and that is that their foreclosures came later than, say, las vegas and phoenix. So now you have investors pouring into atlanta to buy these foreclosed homes and turn them into singlefamily rentals. I say to them every day, is this a shortterm trade and they say no. There is great demand right now for people to rent these homes because either theyre not going to be able to repair their credit in time to buy again or they simply dont want to. They dont want to have that heavy burden of Home Ownership, especially in a tighter credit environment. All right. Diana, thanks very much. I know we already see it firsthand a lot. Now, its good to be king, especially if youre running a media content company. The golden parachute packages of media ceos are generating new headlines. That story when we come right back. But way too many arent. Why . Because selling their funds makes them more money. Which makes you wonder. Isnt that a conflict . Search proprietary mutual funds. Yikes then go to e trade. Weve got over 8,000 mutual funds and not one of them has our name on it. Were in the business of finding the right investments for you. E trade. Less for us, more for you. The funds prospectus contains its investment objectives, risks, charges, expenses and other Important Information and should be read and considered carefully before investing. For a current prospectus visit www. Etrade. Com mutualfunds. We still run into problems. Thats why Liberty Mutual insurance offers accident forgiveness if you qualify, and new car replacement, standard with our auto policies. So call Liberty Mutual at. Today. And if you switch, you could save up to 423. Liberty mutual insurance. Responsibility. Whats your policy . Welcome back. Ceos for most companies are wellpaid. In media companies, its better than wellpaid. And sometimes even better when theyre forced to leave their companies. Morgan joins us now with astonishing numbers. Heres one number for you. 25 million. Thats the median pay of ceos at the top 15 traditional media companies. Thats 10 million more than the median at the 200 largest s p companies. Some more numbers. Of the 15 highestpaid ceos last year, onethird were in media. Less moonves made the most. Rounding out the top five, zaslav, maffei, iger and dauman. Goldman sachs Lloyd Blankfein made just over 13 million. Exxon mobils rex tillerson, about 27 million. That doesnt include the golden parachutes. Rob marcus getting attention for his severance, if the deal with comcast goes through. Especially since he only started in january. But weve seen even bigger. Tom freston got 100 million after nine months of ceo. And theres parachutes totalling more than get this 250 million and 230 million respectively. So, this has been a real hot topic. Just last week, at a disney shareholder meeting, two of the five resolutions, focusing on executive pay. Not surprisingly, both fell in favor. And disney and others arguing that pay is inline with the industry. And thats inline with stock performance. Back to you. A fascinating issue. Gets into the dual class ownership. We have breaking ipo news. Box will list on the New York Stock Exchange as a 250 million ipo. The underwriters are morgan stanley, Credit Suisse and jpmorgan. Well come back with details in a second. Were going to get final thoughts from our panel. Stick around. Thats coming up after this quick break. [ male announcer ] this man has an Accomplished Research and Analytical Group at his disposal. But even more impressive is how he puts it to work for his clients. Morning. Morning. Thanks for meeting so early. Oh, its not a big deal at all. Come on in. [ male announcer ] its how edward jones makes sense of investing. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. 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Know better sleep with sleep number. Welcome back. As you just heard, this company, if youre not familiar, does a lot of storage. Its Cloud Storage. Is this hot because the cloud is hot . Or is box the next wave of companies. This is a company that offers you storage from anywhere. People want to be able to access their documents. Whats interesting is dropbox, a competitor, and similarly named, as been a popular or an earlier mover in this space. Box is seen as wanting to raise capital, so it can block and tackle against a bigger competitor. We talk about Cloud Storage or Cloud Computing in general, we know its hot, especially on the heels of cisco saying their going to improve their storage. I say Software Storage is king. Kevin ruse, what do you say . Whats interesting about the box ipo, theyve been locked in a battle with dropbox. Dropbox was a consumerfocused Cloud Computing company. Box was the business oriented company. And then, dropbox moved into the enterprise. Theyre competing against each other. I think box is smart to tap the markets now. Theyre not profitable. And they dont expect to be profitable anytime soon. Dan is loading up. Im reading the line to jump off of what kevin said. Their number one risk is we have a history of cumulative losses. And we dont expect to be profitable in the foreseeable future. Similar language was in twitters one, too. You have to be clear about what youre investing in. Youre investing in hope. With the case of box or dropbox, youre investing in hope, dan. But its built on something thats a valuable service for a ton of people, right . We know theres this need to store things. Theyre going to store them in the cloud. Is that not something thats going to be extremely valuable over time . This is not an indictment over the crowd computing or service. Drop box and box are huge. Everybody, more or less, knows what they are. Its separate from whether the company is quality and whether the stock is quality. We dont know valuation yet. I want to know foreseeable future. And i want to know if they get acquired by somebody else. Thats true. Thank you, guys. Kevin, thanks very much. Thank you. For joining us from across the country. Fast money coming up in a few seconds. Whats on tap . So much to talk about the apple comcast potential deal. Maybe the stock that will be impacted is netflix. The traders will give you their take. And also, their momentum stock shopping list. Very good. Over to you guys. Thanks, kel. Fast money starts right now. Live from the Nasdaq Market site in new york city. We start with the market alert. Is this the pullback weve been waiting for . The nasdaq taking a hit today. But the momentum names that are getting hurt the most. And for a variety of sectors. Solarcity, fireeye, tesla, and priceline. Is this the pullback where you pull the trigger and get in on some of the highflying stocks. Our traders, tim seymour, brian kelly, Karen Finerman and guy adami. We saw a pullback in the nasdaq. Itre