Transcripts For CNBC Closing Bell 20140505

Talking about asia and general and when you look at the tenyear and wonder whats eating at it, that would be one of the real reasons why we havent seen it do better. Also watching these stories today. Why did the target ceo have target on his back . A weekend board meeting, a sudden departure that takes effect immediately, so why now . Target stock is down about 3 today on that news. Many are asking is another shoe about to drop in that story . They will be reporting earnings on the 21st and i know expectations are not very high. Thats true. Also have some very special guests coming up offer the bell. Robert benmosche will join us and then in his first of it v appearance since facebook acquired his Virtual Reality company, and controversial investor bill ackman will be here, a first on cnbc event from the conference where hell be revealing his big idea for investors, and then hell tell our audience what that idea is. Plus, well get his reaction to the news about target given his experience with jc penney. And were getting all of these headlines out of that conference. Its where a lot of the Top Fund Managers get together and single out a stock pick, bill, but the performance, typically, laszlo borini sending this around from last year, so very interesting to hear what he has to say, bill ackman, that is. Dow up 18 points,. 1 after a negative open. The dow was down 135 points at the low this morning. Wow. Its come back. And the nasdaq, up onethird of 1 . Been a lagyard and the s p 500, the broad market index, up three to 1884. A big group in todays closing bell exchange. Steve liesman, youre senior economics reporter and John Rutledge, kim forest and Peter Anderson from Congress Asset management and tom birchette and, of course, our own rick santelli. Steve liesman, you get to go first. Is there renewed optimism about the economy that this could boost this market right now . I keep hearing 4 gdp all of a sudden. I came in this morning and do what i always do on monday after a friday jobs report and look what economists did their growth forecast, and it looks like 4 is the new 3, bill. At least 4 of the nine guys that i looked at this morning have a 4 handle on secondquarter growth with a big question, is this a bounce back or just a depressed number in the First Quarter or a sign that were ratcheting up to a new level . A bunch of data came in stronger than expected and let me draw you one of my famous air charts. January, february, march and now april, doing even better than that, and i dont mean to say its off the charts but everything showing a sequential increase from the Winter Weather woes. This is important for people trying to wrap their heads around, for example, what Interest Rates are doing. Just for the Second Quarter. How much how sustained is this . I looked at that question, and what i saw was a lot of guys sticking to 3 after the 4 , so they are not ratcheting back down to the 2. 25 weve seep. The optimism is out there. Doesnt make it a reality. Just tells you about where people think growth is going. Negative 0. 1 and in the First Quarter, 4 , so youre still averaging 2. We need to do a lot better to get to a 3 handle for the whole year. Speaking of 3 , why arent we at 3 on the tenyear, rick santelli, if the expectation is for 4 on the economy, right . Because everything steve is saying is back to the future. I can point you to quarters weve already had 4 . Think 2012, and when you have zero in the First Quarter, even if you have 5 in the Second Quarter, you have 2. 5, and i find it so fascinating that we have so much good and bad that many like to only cons trite on the good. I think you need to talk about both and what am i referring, to january, february and march, the First Quarter, april, may, june is the Second Quarter. Were onethird basically through the Second Quarter and everybody is already talking 4 to 4. 5 gdp and it really goes to explain that, you know, if all you have is cobblers on tv, everything is going to need a new pair of shoes and the reason were not at 3 is because we dont have a 3 economy, but its not a horrible economy, because as the charts show a year ago we were at 160 and in july of 2012 we were at 140 so were better than we were there then and thats why the curve, in my opinion, is flattening because Crisis Management is crazy so the short end is refuting the fab and the long end is refuting steve. Trying to take it too personally. Steve gets a refute, rick, or is that later . I wanted to ask John Rutledge for his view amid all of this. How sustained do you think markets are telling us the growth year is going to be . I think its extraordinary that people are surprised that it warmed up in may, you know. Weve seen summers before. Its going to be warm all the way through the summer, folks. It doesnt mean the economy is growing. I believe the economy is growing some, a little bit in europe, a little bit in japan and not enough to get excited about and the reason the tenyear is down is because putin is back. Our old friend the soviet union is here again. They wont be so easy to deal with this time because they are run but an uber capitalist who has everyone in the world on their knees. I read a commentary today, peter, that said that if there were no ukraine crisis right now, that the tenyear would be at 3 right now. Do you buy that . Oh, come on thats crazy. Im just telling you what i read, rick. There could possibly be a chance that it would be at 3 , but i dont think growth i think thats a little head toe say that growth is going to be at the 4 level. Im looking for more like 2 to 3 , and with regards to the treasury, sure, were going to have pressure on the treasury, but, remember, our friend, janet yellen is out there saying we wont put much pressure on Interest Rates for two years. You know, one of the things im dying to talk about is this merger and acquisition activity thats out there. We can speculate on the growth and where treasuries are going to be, but lets talk about some hard data that were seeing right now from the First Quarter going into the Second Quarter. That is, companies, Smart Companies are buying others companies. They are not financial buyers. They are strategic buyers, and i think thats a very, very strong indication that there is the risk owe reward spectrum right now thats tilted more towards the reward for us and thats what were focusing on. Thats a big part of the optimism thats out there. It plays to your argument. Plays to the whole capx part of the equipment, as the price of existing plant and equipment goes up as its purchased, it begins to pay to break new ground on Greenfield Investment so thats a big part of the outlook. And you have to remember that in a first year mba class, people are looking at buy versus rent or lease, right, so you can rest assured that the cfos out there in the Big Companies they are really on top of these things, and when they make a decision to buy its greater than a first or secondyear mba student and would i say thats a very bullish indicator. Kim, go ahead, i was wondering what you would make of this because others would take the other side of this and say actually its going to be corporate Balance Sheet where leverage enters the cycle now that weve seen a collapse in volatility in these markets and a sense that rates will stay low. What do you think, kim . Im looking at the biggest announced merger so far, or at least potential merger, the foizer astrazeneca and that is all about tax rate, nothing to do with growth, purely a financial below the operating line move, and, you know, a lot of these mergers really are either for a company to buy revenues and kind of mask lower organic growth, or do Something Like these lower tax or buy into a lower tax area, so i agree with most people allergen is not in that. Thats to eviscerate the company, lets kill r d, still a financial machination, not like a classic growth kind of story acquisitions. Yeah. Thats a great point. And we own allergen, too. Where do you stand on this theme . We do think the Capacity Utilization is hitting the level where youll see a pickup in capx. Look at energy doing well and industrials are doing very well. Its very nichelike cycle companies. Can you talk more of peters view on this, this is a sign of Companies Expressing optimism in the economy instead of companies desperate for growth . Optimism won but uncertainty starting to dissipate from all the reforms we had in washington last year, the debt ceiling, the sequester debate. All that is dissipating so the returns is not changing much but the uncertainty around it is changing and thats leading to a pickup in cni lending and demand as well that we saw in the numbers today so were very much in that camp. Im not picking on you, todd, but ive been hearing any moment that cap d. A. X is going to pick up and they will put that cash to work for several months and stove liesman, its not happening unless you consider the mergers and acquisitions going on. Youre wrong. Youve heard that story for several years now. I mean, thats really been the story, and it hasnt happened, youre absolutely right. I think wed be mistaken if we were looking for a big pop. What im talking about is a somewhat modest step change from a 2. 25 to a 2. 75, maybe a 3 economy that would run for the better part of this year, not bringing us to a 3 average level unless they end up revising the firstquarter number, bill, but youre right to be skeptical about that, but i think whats happened is essentially an addition by subtraction, that we talk about the headwinds going away. Doesnt seem to be reasons to hold back. What about housing . What about housing, housing, housing . Housing is housing. We cant have a great economy without housing and we cant really have a good jobs market if housing isnt reflecting it. I dont care what the payroll headlines say. You can, rick. Housing and capx are forecast to look very much the same 1q to 2q. Minus 5 to plus 13, 14 and 15. Those are some of the numbers out there. So you are right, rick, so if that doesnt happen, if Housing Investment doesnt rebound, if capx investment doesnt rebound all these numbers are out the window. All right. Theres a story linking both of those stories together. Quickly, john. Its financial reform. Dodd frank has killed small banks. The lenders to Small Businesses and jobs, and big banks are lending like crazy to hedge funds and m a. But they are not trading much. They have to keep the price up. Thanks, guys. Weve got to go. Always fun. Thank you, everybody, for joining us today to talk about this. We have some breaking news now from a big oil bear. Kate kelly has details from that investment conference. Reporter im here having come out of speaking with cjoh schreiber, the ceo of point state capital an alumni fund that work for him, a huge bear on u. S. Oil. He believes a wash in supply, market hasnt realized it due to complacency, but we wont see what hits us until the later part of this year. In the meantime, he says, you should potentially be long brent crude, which the european counterpart to wti and long at left two refinery stocks, specifically mentioned valero and marathon, buying cheaper prices, ie, wti prices and selling them at brent prices, bill and kelly, which is obviously a very good trade so they are positioned to benefit in a from what he sees extremely bearish conditions due to bottlenext of supply at the gulf coast. Is that a change in view tore him, though, or a position that hes had this bearishness on oil . Its an interesting question, kelly. I dont think Zach Schreiber has ever done one of these investment conferences, a lowprofile guy so we dont know about his position. He gave the impression that this is something hes used to doing and his mentor druckenmiller advised. He still thinks the sly end issues in the u. S. Will keep us far end lower. This goes back to something that warren puff fet and Charlie Munger were discussing with charlie, asked charlie whether hes opposed to exporting natural oil and gas in this economy and they basically have the view deplete others first before the u. S. A lot of information to process. Got about 45 minutes to go before the close here at dow. Up about 20 point, the nasdaq 11 and s p 3. The dow needs a gain of 67 to hit an alltime high today, well see. A lineup of heavy hitters heading your way. Billionaire activist bill ackman on deck. A lot to talk about with his joint bid with valiant to buy aller again and his kiss and makeup with rival carl icahn and wait until you hear his take on whats really going on at target which just axed its ceo this morning. Also coming up agriceo Bob Benmosche speaking with me in the next hour, the insurance giant posting results right after the bell and well hear from the company ceo before he speaks to analysts say. And happy Cinco De Mayo, may the 5th be with you, ceo of Constellation Brands, the wine and beermaker behind corona, sits down with us fresh from ringing the closing bell. Shares have been soaring over the past year, quadrupling in the past two years. How they plan on keeping the good times rolling when we come back. Stay tuned. Tdd 18003452550 there are Trading Opportunities tdd 18003452550 just waiting to be found. Tdd 18003452550 at schwab, were here to help tdd 18003452550 bring what inspires you tdd 18003452550 out there. In here. Tdd 18003452550 out there, tdd 18003452550 there are stocks on the move. Tdd 18003452550 in here, streetsmart edge has tdd 18003452550 chart pattern recognition tdd 18003452550 which shows you which ones are bullish or bearish. Tdd 18003452550 now, earn 300 commissionfree online trades. Tdd 18003452550 call 18886486021 tdd 18003452550 or go to schwab. Com trading to learn how. 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Now you sigh the dow is up 23, but that really doesnt tell the whole story because this morning lots of selling following a huge selloff in europe this morning. When the markets opened here, the dow was down 135 points. So weve had a comeback now of about 157 points today. All the same, the big financials lagging after jpmorgans announcement after the close on friday, that its trading revenue will be down 20 this quarter. A look at todays big movers now. Reporter kelly, lets kick it off with target. That stock is lower on news that the ceo was ousted at ceo. He was replaced on an interim basis by the cfo John Mulligan. Shareholders ctw investment calling on them to separate the retail and chairman roles. Target down 3. 5 on the session. Its been a tough day for the financials. Late friday jpmorgan said its market revenue tore the Second Quarter will be down 20 . Jpmorgan down 2. 5 . Goldman sachs, another financial loser this, after a major proxy Advisory Firm recommended shareholders vote against goldmans executive compensation plan. Goldman sachs currently trading down 1. 5 . On the flip side, lets talk about b. E. Ore space, stock moving higher after the maker of airplane seats and overhead compartment bids. Jeffrey says the company is worth up to 107 a share. That stock is spiking up more than 10 and lets end up on chipotle, very appropriate for the Cinco De Mayo day. Raymond james upgrading the stock. Chipotle getting a bump up of 2. 5 . Im pretty excited, guys, and i had my margarita in celebration. I was going to say. No, go ahead. Thank you, sheila. Were chuckling because were staring at two very large buckets, bill, filled with beer and other products. Today is may 5th, also known as Cinco De Mayo. If youre planning on celebrating this unofficial early kickoff to summer you may find yourself indulging in one of these many products produced by Constellation Brands. Company did beat earnings estimates. Hard to argue against the stock price and what its done in the last couple of years, gone from 20 po 80 and sales are forecast this summer to go even higher from here. Joining us exclusive is bob ryder, the cfo of Constellation Brands who will be ringing the closing bell later on today. Weve got the modello and corona. Modello gets a lot of the credit with the acquisition you made, right in. The acquisition happened about a year ago, bill, and really a changing point for the company, right . We began to consolidate the beer business. We always own a piece of corona in the u. S. And now we own the brands outright and in three years time well be manufacturing all our own products so it really was a stellar event for constellation. Right now you actually face a shortage of capacity to meet demand in the beer space in this country. Not a shortage. Were stretched. Were operating a very high production capacity, and as we speak, right, were building and doubling the size of our brewery. Bill, you said it starting off. Our beer sales are on fire. The consumers just love our brands. Why . Not just your brands. Why are beer sales doing what they are doing, wine sales are also very strong . A good place to be, very happy ceo. Whats happening is we operate at the higher end. We tend to be more expensive wines out in the universe and the highest end, and those categories in beverage and alcohol are growing. That cant possibly be the case. I know you have about 100 brands, referring to some of your more niche, truly high end beer and wines and a lot of what you make fall on the more affordable size for the coronas and mark west and pinot noirs and that kind of thing. Our beer is generally 30 a case. Thats at the very high end of the beer universe. In wine we have much more dispersion of products, right, and are still at the higher end than our competitors, and as you look at the products in wine, the more expensive wines are selling better than the less expensive wines. Most of the profits come from say, 6 a bott toll to say, 12 a bott toll, okay. The higher end wines are north of 15 a bott toll and the wine category in general its growing about 6 a year, right, very good. The beer categories are only growing 1 . Last year our beer business grew 1 . Why dont you pay a dividend. As well as youre doing, the average yield in your industry, in your group, is over 2 . You guys pay nothing. Why not . Fantastic question. You must have talked to some of our investors before this interview, because were actually looking at paying a dividend but the focus right now is to pay down debt. To buy these brands permanently, we doubled our debt load and were at a level of around 5. Weve said to our investors when we get to below four times ebitda dividend ratio, it will happen probably in a year and a half. Ebitda is a measure of earnings. Ratio down to five. Spoken like a real ceo. Worried about the leverage. Im worried about l. A. Times. What happens to the corona as the price of drinking one gets more expensive . I think this is more valuable than this. How much of an impact do you see . What do people do if they cant afford a lime, put a lemon in it . Corona and corona light go great with limes and great without lies. If you dont like your corona light without a lime we have plenty of other products, youll see in the buckets, including the Fastest Growing among our Fastest Growing modello speciale, and i think it will be the number two imported beer in the United States. Edging out . A green competitor. This is growing at 20 . Wow. Exactly. Bob, good to see you. I know they are anxious to get you upstairs so you can ring the closing bell. And well blame you for the mariarchi band coming up a little later. Our apologies ahead. May the 5th be with you. You can steal that at any time. I like that. 35 minutes left. The dow up 19 points, a big comeback from the huge selloff this morning and still 40 points away from an alltime high. Billionaire investor is here to talk about his bold bid for allergen and the makeup with carl icahn and more from the conference. Also ahead, they call them the triple threat, a handful of companies that have beaten street expectations on earnings and revenue and they have given positive guidance. Seema mody has the list that you need to know about coming up next. Stay tuned. About speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can maker gamers happy, you can make anybody happy. Dewhos got twond rhooves and just got ae. Claim status update from geico . This guy, thats who. Sfx bing. And i just got a. Oh no, thats mom. Sorry. Claim status updates. Just a tap away on the geico app. Woman welcome to learning. Spanish in the car. C on. Passenger youve got to be kidding me. Driver this is good. Woman vamanos. Driver passenger vamanos. Woman gracias. Driver passenger gracias. Passenger trece horas en el carro sin parar y no traes musica. Driver mira entra y comprame unas papitas. Vo get up to 795 miles per tank in the tdi clean diesel. The volkswagen passat. Recipient of the j. D. Power appeal award, two years in a row. Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. We had no desire and never will go to war with cocacola but we did think the program was a success. Who else in america who is a ceo wants to be remembered as a teacher. I like it. Shareholders having power, very important part of the system. Some of them are going to be poorly run and activism can be a correction. Halfway through the final hour. Dow up 19, the swing today quite wide. Recovering as we head to the close and tomorrow is turnaround tuesday and so people are just front running it. Mondays lately have seen a lot of Short Covering leading to a pretty strong tuesday. And well see if that continues, yes. They are called triple threats, stocks that have beaten analyst estimates, earnings, revenue and guidance. All three of those. Who is in this exclusive group and how the stock performs . Seem seema mody with the list we need to know about. Does pay to be on the triple threat list. 90 of companies that have made the list in the Fourth Quarter have outperformed the s p 500 since reporting earnings. Now, Nine Companies have made the list so far, this quarter, and take a look at netflix making its third consecutive appearance on the list, thanks to a jump in subscribers and Strong Demand for its original series. Lam Research Also made the list and shares up 7 since it reported and not all the names on the list are winners. Adobe systems while beating expectations, analysts have been voicing concern over heightened competition in the cloud space. Adobe down 9 since it reported q1 earnings. Valuation concerning is the reason f5 networks which has been on the list in two of the past three quarters has underperformed since reporting q1 earnings. Investors are becoming more selective regardless of a terrific quarter. If there are overlying concerns regarding competition, expect a readjustment in valuation. Big name after the bell, American International Group Expected to post a First Quarter gain of 1. 07 on revenue of 9. 63 billion and were seeing shares up half a percent. Back over to you. Thank you very much. Heading to the close of 30 minutes left in the trading session. The dow is up about 25 points. Once again we need a gain of 67 to hit an alltime high. Dont know if thats going to happen today. But anything is possible. Anything can happen. Hope springs eternal. Billionaire investor activist investor bill ackman is coming up. Lots to discuss. His bid for botoxmaker allergen was just unveiled at his own conference in new york city having to do with the u. S. Housing market and what to do with your money. Dont touch that remote. Well be right back. Honestly, the offseason isnt really off for me. Ive got a lot to do. Thats why i got my surface. Its great for watching game film and drawing up plays. Its got onenote, so i can stay on top of my todo list, which has been absolutely absurd since the big game. With skype, its just really easy to stay in touch with the kids i work with. Alright, russell you are good to go alright, fellas. Alright, russ. Back to work welcome back, plus signs. Not great ones, but weve got plus signs today for the do you industrials, nasdaq and s p waiting for earnings from aig and earnings season for the most part has been decent, not great. In the Corporate News that weve had since friday, berk shy saw its profit down. We heard from jpmorgan about trading revenue. This could be their worst first half since the financial crisis. Bob pisani in terms of trading revenue has been on the floor of the nyse. We started out down 150 point and the financials have been a laggard, as least the big one. What has turned the markets around . Take a look at the tenyear. Stocks moved up earlier and as bond yield started to move up and as we hit yields hit the highs, stocks hit their high for the day. The ten year became sort of a proxy for global risk at this point. Take a look at the dow industrials and you can see the same situation here. They moved up and as the bobbed yields moved up and also a same chart pattern overall. Dow has been held back a little bit because of the weakness in financials and specifically because of jpmorgan and goldman sachs, talking about trading revenues and down 20 this quarter. The First Quarter weakness its spilling over into the Second Quarter for some of these financials. Many of the big ones depended on trading revenue, particularly goldman sachs. Real estate, the owner of caldwell banker and century 21, look at that down. Fewer transactions than expected. Cited tight inventory which led to higher home prices and that depressed things and might have higher rates as well. Speaking of real estate. Did you see what happened with the home building, etfs early on. He said singlefamily housing is overrated. He made a big case saying that rentals are a much better deal. Bottom line, he said short the xhb. Guys, back to you. Thank you, weve also got a market flash. Sheila, whats going on . Were talking about bill ackman speaking at the isn conference in new york. Hes also talking housing saying specifically fannie and freddie are trying to save the Housing Market and said they have guaranteed business models, likes the business because of very low Liquidity Risk and add federal you believe in the u. S. Housing market long term you should own them. Weve seen freddie move right now, up 2. 5 on this news. Freddie is up and fannie is not. Someone get dick bove on the line. These are battleground names. Bill ackman. Not shied from battleground stocks. Wouldnt expect him to pick a gray something very much in the news these days. Unbelievable. Should have been worthless to some extent as shareholders of this company and well be asking coming up in a few minutes. Bill ackman will be joining closing bell momentarily. Dow up 20 points. Need a gain of 67 to hit an alltime high. Aig earnings due up after the bell. Even before talking with the analysts, dont miss a moment of that. And also ahead. Twitter insiders can start selling their 480 million collective shares of the social blogger tomorrow. Were going to run through the history books and tell you how other social media stocks have fared when their socalled lockup periods expire. See if it may hold for twitter tomorrow. Keep it here. Stay tuned. Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Aflac, aflac, aflac [ both sigh ] ugh you told me he was good, dude. Yeah he stinks at golf. But he was great at getting my claim paid fast. How fast . Mine got paid in 4 days. Wow. Thats awesome. Is that legal . Big fat no. [ male announcer ] find out how fast aflac can pay you at aflac. Com. How much money do you think youll need when you retire . Then we gave each person a ribbon to show how many years that amount might last. I was trying to, like, pull it a little further. [ woman ] got me to 70 years old. Im going to have to rethink this thing. Its hard to imagine how much well need for a retirement that could last 30 years or more. So maybe we need to approach things differently, if we want to be ready for a longer retirement. Heres a look at where we stand on the dow. Almost not so much the turnaround today, bill, but the lack of volatility that were seeing in the markets and volatility in particular is the opposite of what a lot of people expected, along with rates going higher. We saw that selloff in california backs and went sideways. Could get volatility tomorrow. The restrictions to this point have prevented twitter insiders from selling their shares. Those restrictions lift tomorrow. Now the stock has been losing ground lately and hit a high after the ipo of 74. Today its around 39 but still above its initial Public Offering price and the big question is how will twitter fare when this insider lockup expired . Morgan brennan joins us with more. Reporter 480 million more twitter shares will become available for sale, four times the number currently trading on the nyse, but twitter has been very vocal that its biggest shareholders have no plan to sell, holding at least 50 of outstanding shares, so among them ceo dick costello, cofounders Evan Williams and jack dempsey, so we looked at 11 other social stocks big lockup expiration since 2011. On average prices finished up 2 so the equivalent of day, just under 2 the day of and down again just under a percent the day after. Take facebooks first big lockup expiration in 2012, stocks jumped over 6 the day before and fell 6 the day off and fell another 4 the day after. Similar pattern for linkedin in november of 2011 which both of those, by the way, saw a number of insiders sell, but when many insiders stay put, its a different story. Yelp, for example, fell over 4 on expiration, but then surged over 22 the next day. So analysts telling me that insiders staying put should help ease the pressure and at least where the expiration is concerned. Well see what happens. Thank you, morgan. Meantime, feels like the market is waiting for something, right . Bill ackman momentarily hell be finished here, but meantime the dow is up 20 points as we head to the close with about 17 minutes left. Right after the close aig will post its quarterly results. Ceo Bob Benmosche joins us. And have you heard billionaire activist bill ackman will be coming up here discussing his bold bid for botoxmaker allergen and a lot more. Dont go anywhere. mother vo when i was pregnant. I got lots of advice, but i needed information i could trust. Unitedhealthcares innovative, Simple Program helps moms stay on track with their doctors to get the right care and guidance. anncr vo thats health in numbers. Unitedhealthcare. What is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Welcome back. As we head towards the close, about 14 minutes left, the dow up 15 point. We need a gain of 67 here. Not happening. Yeah, probably not, but lets ask anthony. Unless freddie mac when in the dow, then we might. If only it gained 10,000 , then maybe it could get us there. Lets ask anthony chance and john buffington. Can we talk about the macro, nothing seems to be moving the need. Jobs report friday and nothing really budged. What were seeing is a gradual improvement in the economy after the winter freeze but we dont know the exact reaction function of the Federal Reserve and thats the up certainty and the big dilemma youre seeing in the bond market. After fridays report, lots of Analyst Reports coming out thinking that maybe 4 is the gdp for the Second Quarter. Where are you . I think that this is a possibility. Im look for something in the neighborhood of 3 to 3. 5 and 4 , again, 17 trillion economy, half a percent, in either direction is not something that one has to be shocked about is whether does it matter, john . Where do you see opportunity, equities at alltime highs and everybody seemed to have been on the other side of that heading into this year. Well, valuations, i think, are still attractive when you think of where Interest Rates are. Stocks today are trading i know 17 times, on the s p as expense fand our portfolios are trading about 15 times earnings, yielding about 2. 5 , so there is opportunity out there in value stocks, and the nice thing weve been seeing is that value has gotten some interest while some of the growth and momentum names have come down. I do like the market and the way its behaving. Yes, we cant expect to make 25 , 30 every year but to be up a couple percent isnt bad. Is it a gift to have the longterm treasury yield down where it is right now. 2. 5 yield, what are you getting on a fiveyear treasury, tenyear treasury . Dividends are very attractive at this level. Why more and hortheme are pushing for them. We asked constellation, one of the top questions hes getting from investors. Get the debt down and then they can think about paying a dividend. The market is not Rewarding Companies for that kind of behavior, saying go ahead and leverage up. Guys, significant right there. Well come back with the closing countdown here in just a moment and then after the bell. Bob benmosche on insurance giant. Results due out at the top of the hour, and the ceo of oculus in his First Business interview since being acquired by facebook. A lot coming up. Keep it right here. Youre watching cnbc, first in business worldwide. If you cant plan and recharge along the way. The European Commission is using cloud to make this possible. Creating a single charging and Billing Network across 28 countries. So drivers can travel as far as they want to go and when they want to go. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. A short word thats a tall order. Up your game. Up the ante. And if you stumble, you get back up. Up isnt easy, and we ought to know. Were in the business of up. Everyday delta flies a quarter of Million People while investing billions improving everything from booking to baggage claim. Were raising the bar on flying and tomorrow we will up it yet again. Became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Welcome back. About eight minutes left in the trading session. This is todays chart, and really all the action for the Dow Jones Industrial average was the first thing this morning. Some disappointing Economic Data from asia overnight sent shares of european markets down sharply this morning, and it sent our market down sharply on the open. The dow at low of the day this morning was down 135 points, but it snapped right back, and weve been really going essentially sideways since that time. As i mentioned we needed a gain of 67 points to hit an alltime high. See if we can do that tomorrow. Push that there. Now we wait for earnings from aig. Bob benmosche will be joining kelly in the next hour to detail those numbers. Lots to talk about with him. Has a finger on the pulse of the economy, the financial sector, Interest Rates, fed policy and all those important issues right now facing his industry and that stock is up about twothirds of a percent going into the trade here. Freddie mac popped a little while ago. Bill ackman will be joining us, the billionaire activist conference and his idea right now is in housing, and freddie mac specifically moved higher. Its up 5 all of a sudden on those acman comments. Well be getting him to clarify that and his feeling about that coming up a little bit later. Anthony chan and John Buckingham are still with me. Do you see an appreciable pickup . Been hit and miss in the First Quarter so far . This decline in Mortgage Rates has occurred for a million reasons and is going to help the Housing Market. We know that theres pentup demand and that the labor market is improving. All of these factors will be positive cat lifts. We should see that in the second half of the year. Home builders have suffered. Youre going to jump in. Youre a classic value player. Is that where you see volume. 3. 4 yield and great Balance Sheet. I think there is opportunity in housing, but you do need to be selective. Go with the largest players that have been able to acquire land on the cheap over the last, you know, four or five years and mdc is a great name and Balance Sheets are super important, especially in that space as we saw what happened in the housing bubble with builders with leverage on their debt Balance Sheet, didnt make it and those that didnt make it were able to buy up the carcasses of those that died. Financial should go higher, stuck at 260 on the tenyear. Youre not seeing the yield curve that we should see as the year progresses, but once we see that yield curve steepening financials will come through. Do you include aig in that group . What do you think well hear from Bob Benmosche on that front . Should benefit, absolutely. Overnight the asian economy, weve got that the disappointing pmi report there. Took the wind out of sails of the european markets and initially our markets as well. Should we be worried about the asian economy right now . If you track everything going on in season, every time theres significant weakness they come out with something else. The thing that they are doing now is trying to weaken the currency. I think that there will be more to come and by the way, that pmi that came out overnight for china was weak but not disastrously weak and a National Euro statistic number was not all that week. This was the euro number. Moving forward they will come out with more things to stabilize growth in china. Do you look overseas for value, john . We look around the world and invest in adrs here in the u. S. , but theres opportunity abroad and names like novartis and royal dutch so there is opportunity out there but we do also have companies that get impacted by china so commodity plays, energy, you know, copper, gold, minerals, things that will get hit by what happens in china so we truly live in a global world, but can you invest here in the u. S. And get global exposure. Commodities very strong, a lot of talk about the droughts in different parts of the world. El nino is coming our way this year, and gold is starting to perk up a little bit here. That would suggest an inflation number thats going to grow down the road. Do you see inflation picking up here . Well, bill, if you listen to the rhetoric of the Federal Reserve they do want to spark the flames of inflation a little bit because right now inflation is running below the target of 2 . The big error could be that they actually go too much in the other direction, especially because the Federal Reserve is betting on the fact that theres a lot more slack in the labor market than most people think. If that happens, we get a little bit of inflation. Wont be hyper inflation but certainly that can explain some of that, and as for commodities its been mostly a weather phenomenon. It doesnt matter what causes it, and prices are going up, they go up, right . They go up, but, again, food and energy tend to be temporary factors. Want to be broadbased. Do you remember try to play the commodities and seize volume in companies that would benefit from Higher Commodity Prices . Absolutely. I mentioned energy earlier. A name like enco in the drilling space, 6 dividend yield, freeport copper and gold, and there are many opportunities, i think, to play the mining space, such as caterpillar, things that can benefit as the picks and shovels, if you will, in that area so abshewitt lotulelei. As an Equity Investor you can play the commodities market and even gold exposure so theres opportunities in copper and commodities. I just like to play them via the equities. Large cap versus small cap, the russell 2000 was very, very strong in the last year. Its lately been pulling back here. Do you look to small caps at all as a good play . Are they liquid enough for you . Were an allcap manager and if you know al frank through the years, a lot of small caps in our portfolio, but over the last half decade weve migrated towards larger caps because small caps did really well, you know, during the last decade. Large caps, of course, you know, since 2000 and 2001 they went sort of nowhere so theres more opportunity in my mind large caps relative to small caps and theres relative safety and higher dividend yields in largecap companies. Were actually outweighing midcaps because we think a lot of m a activity will take place in the midcap stocks so we think they are relatively more attractive. As long as Interest Rates stay down here. Thats true. A positive catalyst for merger and acquisitis and acqui far i dont think youre hearing anything from any central bank out there that they are in a rush to raise rates very quickly. Look what apple did with their bond offering. Amazing you can issue debt at such microscopic levels relatively speaking and buy back stock thats yielding such a high level so opportunities with low rates. Getting ready for the close. Constellation brands ringing the bell. Look at that stock, quadrupled in two years. Sure thats not on your value stock. Why are beer and wine sales doing what they are doing because would you buy a distiller or winemaker right now, do you think . Certainly not after its gone up 300 , 400 , and the consumertype companies have done pretty well, at least in that area, so if youre looking for consumers stocks, id focus more on the retailers, like target got beat up today. Might be a name to take a look at. Thank you, both. Good to see you. The economy, as we go out here, going out with pretty decent gains considering the selloff we had first thing this morning as a result of that pmi report in china overnight. A lot to company, Earnings Report from aig in just a moment and bill ackman will be joining us on a first on cnbc interview, his thoughts on freddie mac, allergen and much more. Stick around. Ill see you tomorrow, kelly. Thank you, bill. Welcome to closing bell. Im kelly evans here on this monday. Take a look at how were finishing the day across wall street. It looks like weve got some green arrows across the board, dow adding 18 points, the s p 3. 5 and the nasdaq 50014 an response to europe, chinas economy, and all of those losses were shaken off. Financial lagging today, the likes of jpm after reporting its trading revenues will be down for the Second Quarter but apple kissing that 600 mark for the First Time Since october 2012. Let send it over to our very own scott wapner who is sitting with bill ackman at the conference thats been taking all day today in new york city. Scott, ackman already making headlines here with regard to the u. S. Housing markets, fannie and freddie. Take it away. Thank you so much. Bill ackman just wrapped up his presentation and walked over here just from the stage to talk about what he said on that stage in the room next to him here. Thank for having me. Fannie and freddie, the plan you laid out. Positions in both of these names and you have had for some time. What you said on this stage is that you think we should reform fannie and freddie rather than wind them down. Why do you think thats the plan . If you want to preserve the 30year fixed rate table, we dont believe theres an alternative to fannie and freddie. Private Market Solutions that have been talked about are not feasible. It would require raising upwards, you know, of 500 billion of new capital for a bunch of startup enterprises. We dont think thats feasible. Issues with fannie and freddie. We think they lost their way beginning, in the early 90s. Started the fixed income arbitrage business, socalled investment polls of which required a lot of Liquidity Risk and really abused their government implied government backing, and what we want to do is restore them to the way they were which was a business of simply guaranteeing interest and principal payments on mortgagebacked securities, and that business is a low risk bisque as long as they stay away from subprime and alt prime and if they go back to the core business and safe business of guaranteeing mortgages for middle class american and get out of fixed income arbitrage business and Capital Requirements are raised, we think about five fold, youll have an entity that will not require any governmentbacked stock and we can continue to have the lowest cost Mortgage Market in the world. They are making money hand over fist. Those of you, hedge Fund Managers who have gotten into these stocks a while back have made a lot of money off of these trades. Been some of the best trades for you as well as others. The only problem is the government has an entirely different plans, whether its senators crepo or johnson or corker. What makes it think they are even going to listen to your idea . Its a trial blown and at the end of the day the government has to do what makes sense and whats practical. Two alternatives. Can you have an express italy government guaranteed Mortgage Market which would be at an enormous amount of cost, which would require 5 trillion of additional debt, added to our National Debt or you can have a true private sector solution which would be a recapitalized fannie and freddie and sharing our thesis and the facts and some analysis behind it that the power of just the facts will drive people to make the right decision. You head to washington figuretively and literally and start speaking with senators with what your plan is and why it would be a viable alternative to theirs. Really 110 slides. We lay out our thoughts. We put some real faction on the ground. One of the things thats not well understood that this business is a natural owe gonely. Fannie and freddie have enormous scale which is why they can charge low guarantee fees and run a safe business. In order for private Sector Solutions to start, you need to earn an adequate return on capital and these ent miss tis wont have scale when they launch. It will take them a century to get up to the capital or get up to the size of a fannie or freddie. No economies of scale or dont have the track record or system. Really not a practical solution. We do think theres a lot to be said. In some ways we are winding down fannie and freddie. Were wining down the old version of fannie and freddie, the fannie and freddie that got in trouble and creating a new one though in this case we think the brand names are very valuable. Wouldnt want to go away from the fannie and freddie brand names because that makes their mortgagebacked securities popular in china and around the world, paper that people think of lam like government paper. Lets talk about valiant and allergen. Remains a lot of criticism about the way that youre able to build your stake in allergen knowing that a bid was going to be coming. You know exactly what im talking about. Youve heard the criticism yourself and youve been asked about it. Mario bobelli, very wellknown investor was on squawk box and said the following. What ackman did is a tactic that needs more exposure so that it doesnt happen again. Its not fair. People say it was legal frontrunning for illegal insider trading. Who is being helped and who, if anyone, is being harmed . Everyone we make as a shareholder activist we have a plan so canadian pacific, we had Hunter Harrison in our pocket, agreed to come in and be the next ceo of our company. Bought 14 of the company from people we dont know we had harrison and disclosed our stake in the 13d and announced he was our candidate and the stock went 60 to 173 a share, didnt go overnight but it got there over time and the person who sold to us between 46 and 60, yes, perhaps they would have wanted to though we had Hunter Harrison in our pocket but if an activist shareholder cant build a stake in advance of advancing their plan there wont be any shareholder activism. Allergen in particular, lets look at the shareholder. Only bought 9. 7 of the stock so 93. 7 of the shareholders got 100 of the valuation for us working with valiant to put in a proposal for the company. The stock was 116. 63, today its 168. I have to believe the shareholders are very happy and got a lot of calls from shareholders who are very happy. Im sure the shareholders are happy and anybody who has been in the stock is happy. The stock we bought between 0 and 9 of the company, we pushed the market price up over that period of time so a bunch of shorter term investors got a better price than they would had had we not been involved. Valiant had tried to acquire the company over the previous 18 months. By partnering with us we increased the chance of a merger happening that otherwise wouldnt happen. Unfortunately, a lot of examples of mergers in Corporate America that dont happen because of social issues and this is a case where economically this is the right thing to do, a much better company, a Much Stronger Company that will, you know, be more competitive globally as a result of this merger transaction and we catalyze that to happen. We did that well within the confines of the rules. The rules say, look, in some sense almost every investment we make we are trading on our own material nonpublic information which is our strategy for what we intend to do, and thats why stock prices tend to rise the day after we take our stake. Sure. We had to tell the market in advance what we were going to do, the stock price would move up and wed never get an opportunity to get paid for our own idea. I would just suggest what we here and what the critics would say is that, yes, but what is legal and whats okay by the rules doesnt necessarily mean its right, and the rules some people are lobbying to change directly because of this transaction. My question is who is harmed, right . Every shareholder in allergen got a higher price, 93 got a much higher price and the benefit of a transaction that never would have happened. I dont know that anyone would have been harmed. Maybe its just that you got it too good. If Everyone Wants us to do poorly in order for everyone else to do good is not a good environment. I think longterm shareholder activists is a very good strategy. It helps the big institutions who are required to be passive. Were not successful unless the majority of other hair holders agree with what we have in mind and the reason for Value Creation in allergen is with our partnership with valiant we were able to catalyze a transaction that otherwise wouldnt happen. Do you think the law will be changed . No. You dont think the ftc will do anything . No, i dont think so. In order for this to be against the law, there has to be a theft of intellectual property. There has valiant we would have had to stolen the information, if you will, from valiant. In this case valiant consistent with their fiduciary duty decided to share with us and partner with us in this transaction to increase the chances of a transaction happening. You made a filing today, essentially cautioning allergen about speaking another deal, that it in no way be as good as whats on the table here. Thats not actually what we did. Thats part of what the story is. Youre trying to tell them how to market the deal so that its accepted, correct . We own allergen stock, we dont own valiant stock. Our goal is at the end of the day get the highest value for our investors. We believe that the valiant allergen transaction is a very valuable transaction, and we think the current share price of valiant does not reflect the deal because theres a lot of perceived uncertainty in the market. We made a couple of point. One of the points we made is we said, look, even though this deal is a 38 premium, thats based on where valiant trades today. Once the transaction signed we think the deal will be valued on what the combined company does and achieves. Jpmorgan analysts has a price target of over 200 a share if the transaction happens so thats the proper comparison. Thats the first point we make. Second point we make is we think that allergen should sit down with valiant. The ceo of valiant has said i might be prepared to make a little more if allergen sits down with me right now and negotiates a deal and allergen, i think consistent with its fiduciary duty is out talking to its other potential acquirers. Word is already leaking out in the market of various players who might be competitive here who said to their shareholders they will not bid for the company and as more combination partners say they are not interested in allergen and puts allergen in a stronger and stronger negotiating position. Want to make the best deal with valiant, sit down with valuant as soon as possible. Speaking about two people sitting down and speaking eye to eye. You reached out to carl icahn of all people to try and fix your relationship, whatever you want to call it. I dont know if i call it to fix the relationship. Call it to forgive him, as i say. Sure, had you to pick up the phone and make the phone call. What led to you do that after what happened on this network . The answer is i life is a long game. Youve got to respect a guy that late on in his career hes still probably the most active shareholder activist in the country. Hes created an enormous amount of wealth as an investor. Hes got a great track record, and hes frankly a charming guy. Now i did not like the way he conducted himself in my little discussion. Thats far from how you described him to me. Thats right. January of 2013. Just a longterm guy and frankly said some nice things about me on your networks and i called him and thanked him and just decided to move on and agree to disagree on herbal life and actually maybe we get to know each other a little bit and i can explain to him why hes wrong. Will you do an investment together down the road, do you think . Its possible. Youre open to that. As carl said to me we share a lot of similar thinking on issues of Corporate Governance in america, and it makes sense for us to be partners as opposed to enemies. My last question about herbalife. Just recently had a webcast a few days ago. Yes. What herbalife responded to and called it misleading propaganda. There are now reports that the s. E. C. Is investigating collusion among hedge funds regarding the initial investment into herbalife. Sure. Did you leak information to anybody before you unveiled that . Absolutely not. The problem with our strategy is that we have to build a position quietly before people know what we have in mind. We were build begun our herbalife short position up until the morning of making our presentation. Im not aware that there were any leaks. The target ceo, my last question, the target ceo is out today. You have experience with target and rea little . N general. Yes. Whats your reaction to that . Look, i thing Gregg Steinhafel is a good person. Got to know him and did not agree with elements of their strategy. Interestingly we wanted them to sell their credit card business, felt it was a business better managed by a credit card institution. Ironically its the credit card business that ultimately cost him probably his job because of the privacy and data and other issues. Hes a first class person. Hell land on his feet, and, you know, target is a Great Company and i think they will be very, very successful. Youd hire him to run a Retail Company you were involved in in. Probably not going to ever get involved in another Retail Company. Its a very tough business. Looking for a very capable manager he would be a good person to call. Thanks for calling us first on cnbc. Thanks for having me. Bill ackman, the founder and ceo of persing square. Well have reaction from our panel to this. After the break, aig is out with its earnings and shola breaks down the numbers for us. Sheilla . Reporter basically flat after hours after aig reported a mixed quarter, shares 121 a share beating expectations of 1. 01 a share. Earnings down from last year and significantly lower than the 9 billion plus number that analysts chocked up for it. I will point out that firstquarter book value is up about 6 . Mixed quarter for aig and beating on the bottom line when it comes to net premiums earned. Bob benmosche saying it reflects a strong operating income. Kelly, i know youll speak to him personally coming up very soon. Yes, inside, sheila. Thank you very much. Coming up next, reaction to all the news you just heard in that interview with activist investor bill ackman. Well be speaking with aig ceo Bob Benmosche and what is it like to deal with Facebook Ceo Mark Zuckerberg, more on the 2 billion oculus acquisition. You wont believe how much California Chrome cost its owners, less than a new car and what is the horse worth now. Well speak with California Chromes owner later on the closing bell. Well be right back. Honestly, the offseason isnt really off for me. Ive got a lot to do. Thats why i got my surface. Its great for watching game film and drawing up plays. Its got onenote, so i can stay on top of my todo list, which has been absolutely absurd since the big game. With skype, its just really easy to stay in touch with the kids i work with. Alright, russell you are good to go alright, fellas. Alright, russ. Back to work man we know when parents and teachers work together. Woman our schools get stronger. Man as superintendent of public education, thats been Tom Torlaksons approach. Woman torlakson has supported legislation to guarantee spending decisions about our education tax dollars are made by parents, teachers and the local community. And not by sacramento politicians. And we need to keep that legislation on track. Man so tell Tom Torlakson to keep fighting for local control of School Funding decisions. Welcome back. Let get straight to reaction to that bill ackman interview with the panel. Joining me is jim lacamp, danny huse, our very on dom chu and Kayla Tausche and joined by fast money tom brady brian kelly. Great to see all of you. Look, bill ackman is now vehemently wading into this discussion saying that fannie and freddie have to stay in this economy, have to support the u. S. Housing market, kayla. I mean, we saw reaction to freddie as that presentation was taking place towards the end of the trading session, but it suddenly looks like the reform bill that was supposed to get rid of these two isnt going anywhere and now the coalition is to support these names. It being a Midterm Election year the suspicion that nothing will happen until any direction until 2017 once the dust settles in congress. If you look at what the banks are doing, they are actually going ahead and making a bet that fannie and freddie will not be around or hedging that possibility. They are going ahead and underwriting mortgages. I dont agree with what bill ackman said saying the 30year mortgage is such a fixture in the American Economy it would get wound down if fannie and freddie got wound down. The banks are still underwriting it, only writing Higher Quality mortgages in order to do that. This is a case that people make when they want to keep fannie and freddie intact. Look, if this goes away, people disagree with this, it means the end of 20 and 30year fixed rate mortgages and the end of lowincome homeownership and home prices for everybody will fall because suddenly the composition of demand is shifting. Im curious how you guys view this whole thing, you know, from a top level portfolio point of view. What happens right now as it looks like the pendulum is swinging the other way . Who want want to own a business like that thats funded by endless amounts of taxpayer dollars which got us into a whole lot of trouble in the first place. The reason theres not any other big players around is it was driven out of business because fannie and freddie can lose as much money as they want and still get the taxpayer dollar bailouts. If they dont wind them down, they need to tell us what the structure is. If its going to be another taxpayer boondoggle, we need to get rid of them. There was momentum towards doing that and now it seems like its not there and the issue becomes one of fannie and freddie being too big to replace, the journal just put it, you can never get private companies to the zero and capital levels of fannie and freddie in enough time to avoid Collateral Damage to the Housing Market. We got ourselves into this mess to begin with. Even the own regulator last week came out and said unless they had an additional 190 billion, they could fail again in another downturn, you know, but everybody hangs on, these hedge fund big guys, last word and markets move on things and made a great bet and so did a lot of other investors. I cant see how every boring, boring business is going to give you the outside returns that Hedge Fund Guys do. A royalty on every homeowner in america put it. He has a way with words and im surprised hes potentially wading back into another washington battleground. Again, bill ackman is charming and charismatic and very smart. Had a pretty decent track record so far this year. Taken his hits in the past and what i find interesting about this. Take it to a more rack row level. Earlier at the conference you had Jeffrey Dunlop talking very much about the Housing Market, how hes shorting singlefamily housing, thinking its overvalued and overrated. Whether or not the 30year fixed rate mortgages are going to be as important Going Forward if Jeffrey Dunlop is right about the longterm demographics, younger people not wanting to buy homes, whether the rental economy is here to stay for at least the next foreseeable five or ten years from now, thats really key so whether or not fannie or freddie will be successful, maybe he can turn it around, maybe he cant and certainly he and a lot of other shareholders, hedge funds in particular. And people are having a hard time getting mortgages. Lending standards have gone way up. If you have 770 on your cred score you can get a loan and you put money down. Not like this is a really welloperating machine right now. The Housing Market has problems. Even if you do have the credit score and do qualify for the mortgage, you could still lose out to an a allcash buyer which is whats happening left and right. I think the economy is changing in such a way that the rental economy is huge. Lower credit score consumers cant get the mortgages and banks are really only servicing the high quality mortgages. Yes. And thats a trend that sticks around. B. K. , go ahead. So, i mean, listen to the signal that bill ackman is sending. Hes invested in fannie and freddie because its the private market cant earn a return on it so it has to be governmentsupported. Thats not a market thats fantastic for investing in in terms of housing. What does that signal give to everybody else . It says you know what, if you loan money for 30 years its a bad business. Who wants to be in that. If you take that marginal i think what hes saying is just that the business of actually being fannie and freddie and using their brand name to underwrite these mortgages, to package them, to keep the market functioning effectively as is, thats a different thing than talking about the rate exposure, for example. What he said was the rate of return could not be earned that was sufficient to bring a private market buyer in. Therefore, it has to be subsidized by a government buyer. My point being is if you cant loan money at 30 years and make a reasonable rate of return, thats not a Good Business to be in and i dont want to be in housing, so what does the individual investor do, go with bill ackman and buy fannie mae. Thanks so much for joining us and sticking around, and also, please, everybody. Catch brian kelly coming up with the rest of the fast money crew at 5 00 pl. Im sure they will have much more on this. Meantime, bill ackman mentioned this is a well saying he wouldnt get tangled with the retailer. Target shares clumping. Courtney reagan has been following this one for us all day. What can you tell us at this hour . Targets former ceo sent a letter to the board resigning saying its time for new leadership. The s. E. C. Filing suggests severance which means steinhafel was ousted. Cfo John Mulligan has stepped up as interim ceo. Target has had a long history of selecting internal candidates for the top job. Wall street wants an outsider this time and it appears that is the retailers plan. His exit isnt entirely unexpected by the timing is, at least according to every analyst note out on the news. The data breach has been a huge black eye and the last Earnings Release and subsequent updates suggest that data breach effect is mostly in the rear view mirror. Analysts think its only part of the reason and the extension into canada has been quite disappointing, to say the least. Sales in traffic have deteriorated across the company and target was later than it should have been to commercial and mobile commerce costing it valuable market share. It does seem to be the consensus that change is needed at the top. Though who target hires will be a critical choice. Kelly . It certainly will, court. Thank you for now. Appreciate it. Did Facebook Ceo Mark Zuckerberg consult the companys board before buying Gaming Company oculus or did he seal the deal on his own . Next up oculus ceo tell us how it all went down since the deal was first approved and aig ceo bob benmoschy is here to break down the insurance giants earnings. He hasnt even spoken to analysts yet. Shares are moving down after hours. Dont miss this important interview. Well be right back. Huh, 15 minutes could save you 15 or more on car insurance. Everybody knows that. Well, did you know that game show hosts should only host game shows . Samantha, do you take kevin as your lawfully wedded husband. Or would you rather have a new caaaaaar say hello to the seasons hottest convertible. Ohhh. And say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15 or more. Welcome back. Its a company hot in the headlines fresh off its 2 billion acquisition by social media giant facebook. Oculus vr is a tech company aiming to bring Virtual Reality to the masses. Can it be done, and here with us exclusively in his First Business interview is the ceo of oculus vr. Welcome. Thank you. I would half expect you to be wearing the giant glasses. Not yet. Not Walking Around wearing them yet and havent shipped the consumer version yet but coming soon. What exactly do you aim to accomplish, that everybody is Walking Around with a pair of these glasses on all the time or Something Different . What is your vision for this company . It will start out as a stationery experience. Were giving you a completely new vision, were replacing what your eyes normally see in the real world versus the Virtual World and in doing that we want to keep you sitting down, at least in the beginning. You can see the potential here for gaming. Absolutely. Seems to be the first kind of place to take this. Why was facebook interested in this, in your company . So as weve been developing Virtual Reality, started a little less than two years, moved very quickly, and what we really thought is it would all be about gaming. Definitely thought it would be a big part of the content and the experience will be oriened around gaming. The technology at the very root of it, the 3d engine that youre looking around inside is the gaming engine, but the ultimate kind of experience, the experience that gets to the widest audience were now believing really is in facetoface communications, it will be a very social oriented platform, as mark and some of our scientists have said, the most social platform of all time because youll look at people and believe they are right in front of them and talk to them. A way for people to do that in 3d already and what were doing, and obviously the point is to take whats maybe kind of a skype experience and make it more real. Thats one of the applications, and thats one of the applications that connects the most people. If we talk about getting a billion people in pr, its a billion people communicating or not necessarily playing the game or games. How did you get to the 2 billion figure and did it involve chocolatecovered strawberry . A great dinner at marks house, for sure. Whats dinner like at marks house . Very good. I mean, he has a beautiful place, a fairly humble place, many people imagine a huge mansion, not like that at you will, a really nice comfortable place, casual and comfortable and sit down with the founders and mark and chris cox who just got recently promoted to cpo and several of the other guys and we talked about the vision, where we wanted to go, what they saw. They were very excited about the platform and what they also had in mind of where Virtual Reality was and we thought to do this right and do this as big as we wanted to go, to connect to a billion people, facebook was out there and mark has gotten excited about this personally which is what compelled us to really do the partnership, his commitment and engagement. Is it true he kept you up all night and true that after an experience like that did you have any sellers remorse . I think we joke that had we were hallucinating at the end and werent completely sure what we just did. I mean, it moved very fast. It was a significant deal, over 2 billion in three and a half days to go from, you know, a handshake and kind of an agreement, a verbal agreement, to all of the paperwork is signed and the deal is pretty much done and its just waiting for approval. Thats incredible. Thats very fast. I dont know how many times its ever happened, but i cant say enough good things about the facebook team. Their legal team. We locked ourselves on the facebook legal team floor. They i assume they will use our model to to do this more Going Forward because it really worked well. We felt very comfortable. Everything was taken care of. We had our own set of rooms, legal had their own set of rooms and we were able to blast through it and we didnt sleep much. It was less than a handful of hours over a few days. It was intense. Last question. Are you making money . Were all going to do well out of this. It is a startup and still have ownership. We didnt completely dilute ourselves with investment, but the point of it wasnt to go out and, you know, get a return and make money. The point was to do whats best for vr, and my commitment to that as the ceo and the Management Team largely, i revested 100 of my equity and thats something that very rarely happens so when this deal goes through im not getting a huge return out of my equity. I still have to continue to work for quite a while. Thank you for sharing this with us. Thanks so much. Best of luck. Well be watching maybe through some of the goggles. Hopefully. Appreciate it. Dont miss our exclusive interview with Bob Benmosche. Hell discuss those results and react to the Federal Reserves influenclusion of aig. Also, he was ridiculed for buying an allegedly worthless horse several years ago but that horse produced this weekends Kentucky Derby winner. Hear from California Chromes winner who is laughing all the way to the Winners Circle and, yes, to the bank as well. That coming up. Ways welcome back. We did ecoout a positive day to start the day in stocks. Sheila is following what stocks were hot and which were not today. Sheila . Lets start with hot and a Company Called tableau software. The Data Analysis maker added 1,800 new customers. The company is currently up more than 3. 5 . Anadarco petroleum, higher up more than 1. 5 , and timely aig posting a 27 fall in quarterly profits, hurt by higher catastrophe losses in Casualty Insurance basis. Did beat street forecasts. Revenue coming in below expectations and aig right now down more than 1. 5 . Kell . All right, sheila, thank you very much. For more on aigs firstquarter results joined exclusively by robert benmosche, president and ceo. Great to see you again. Thanks. Revenues jump out again, shy of what the analysts were expecting. Whats going on in the First Quarter . First of all were premiums and then we have deposits and revenues. Keep in mind that our second largest market outside the United States is in fact japan, and so we get a tremendous amount of premiums and fees coming out of japan with the pressure on the yen and looking at the exchange for the dollar. Our premiums are actually growing on the property and casualty side but you dont see it because of the dollar. The japanese yen has been incredibly weak, especially during that period that you mentioned. Talking about the rest of the business then, how would you describe things where are you seeing the most opportunity, and, look, low Interest Rates continue to some extent to be the achilles heel of the industry, do they not . It is, but keep in mind that what were being more disciplined about, and we have to be, is you cant afford to lose a little money on underwriting and make it up in investments, so that is over, that gain for Insurance Companies so were mindful of risk selection, the value of what were putting on our books and not just worrying about top line growth. Weve got to be very cautious about risk selection. By the way, this is the long run and weve come through a lot and we want to make sure that not only are our reserves strong for today, that we dont create a problem for the future. Weve got to take care of the future generation as well so were being very careful of risk selection and confident well have the right combined ratios as we move into the future. Do you think some of your competitors are being so prudent . I wont comment on my competitors. If standards are changing across the industry that will by definition put pressure on you guys to follow suit, wont, it or is it too soon to say that thats happening . We sat down as a Management Group and board and said this is the time to contest our volume and we need to ensure that over time we do better. If youre short sight the or cut a corner and not worry about some of the risks youre taking on now, you can get yourself in trouble down the road and we dont want to do that. We want a very steady heres where we go as a company. I notice your effective tax rate on after tax and operating economic is 31. 7 in the quarter, is that right . Thats correct. How do you stay competitive in this Global Economy with a 31. 7 Corporate Tax rate, and i bring this up, as you know, because of whats happening in the pharma sector and tech space where theres so many deals and investigations, if you will, meant at lowering tax rates to rates much lower. I think its a doubleedged sword for us, and its a complicated question you asked me because we have a deferred tax asset. So what would have been the tax rate had we paid taxes and we do pay taxes for the Holding Company but in the end we dont pay that tax rate annual. Now were living within the bounds. However, on the net basis you see the taxes come back in. When is this going to happen . Well, it happens every quarter. Look at our net earnings versus the operating earnings. Taxes come out and then they come back in, but overtime, youre right. I think overtime we need to think about our Corporate Tax structure and think about all of our tax structures for individuals and such and, therefore, that has to change, but for now i think we can still be competitive. And what happens as a guy like Warren Buffett says hes moving aggressively into the commercial space and into your bread and butter. Hes poached some employees from aig, are you concerned that youre going to lose shares to berkshire . Well, let me tell you, we do business with 97 of the fortune 500 in america. We do business with 90 of the fortune 500 globally, and so we continue to do well with our clients, still have very good Client Retention and very good premium retention so this is about continuing to build this company, because ill tell you why all these Companies Stay with aig during the crisis, and, you know, its about aig and it really isnt. Its about the people of aig, so when companies do business with us, they need to do business with the people who understand risk, Risk Management claims, how you support the claims process and so forth. Its not about just price. Its not only about being a big name. Its about do you have the people that can sit down and give us the level of service and understanding. Thats why they told me they are staying with us, and with all the Big Companies were still willing to grow business. You have severed some relationships on the reinsurance side with berkshire, have you not . I think that we have, but its not only berkshire. Were looking at reinsurance, bonds are far more competitive than ever before. Thats putting pressure on all the reinsurers and the pick on Warren Buffett and the people that were taken, i think, look, thats the world of competition. We lose people to our competitors every day. We hire from our competitors every day. Its a competitive which is, but in the end, if you look at what we are in our footprint that we have today at aig, im pretty confident well be able to compete. Steady as she goes and a last question here. As we move into the middle of thee, the Global Economy, the u. S. Economy, do you see signs of a an acceleration or not . I see caution. I see the things are growing very slowly, but i dont think people have that confidence that says, hey, you know what . We can now take a bet and invest. If you invest youll see a little less earnings, and people have to start getting back to not being afraid of earnings. Invest in the future and be comfortable that the landscape, regulatorywise in particular for our business is going to be supportive of that. Bob benmosche, great to see you today. Really appreciate you coming by. And coming by plenty to celebrate. Cinco de mayo and you may need to celebrate and California Chrome winning in louisville. The ration to riches story from owner eve cochrane directly. Well be right back. At t Business Experts can help keep it running. Seamlessly. So you can get back to what you love. When everyone and everything works together, business just sings. Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the allnew sleep number classic series. Designed to let couples sleep together in individualized comfort. Starting at just 699. 99 for a queen mattress. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. Find your sleep number setting only at a sleep number store. Know better sleep with sleep number. Famed scientist Stephen Hawking warns fiction could become a reality and thats burning of the cnbc hot list. Its allen waffler. Sky net is selfaway. One of our major poolz has been a writeup in the independent piece. Steven hawking warned Artificial Intelligence might be our greatest event in Human History and might end us because weve connothing to prepare for it either morally or legally or any of that jazz. People have been real scared about that. 63,000 people read that story. Right now the big polar force is an eatiev feature done by our very own jeff cox looking at inflows and how vanguard is actually creeping up the charts and threatening to take away the top spot and finally weve got another story, 800,000, the difference between what an average College Graduate makes versus a high school gradiate. Done by the San Francisco fed and they even took into account graduate degrees. They are trying to say its still worthy. The Kentucky Derby is racing for history. Since 1947 only seven horses have won the triple crown, affirmed being the last horse to accomplish the feat. California chromes owner is here to talk about his shot at history and how much that might be worth. Thats next. Earned, usaa Auto Insurance s is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. announcer scottrade knows our and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. Peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Angua. Welcome back. California bred, California Chrome was the winner of the run for the roses. The horse was a 10,000 breeding invest. But garnered multimillion dollar purchase offers and that was before winning the derby. Winning the triple crown can dw dwarf those figures. Great to see you and congratulations. Thank you very much. Its a pleasure being here. This is a big deal and a lot of people this horse, the story that you have and the symbols when this horse won you said you had a dream he was going to win the Kentucky Derby. What is your intuition telling you happens next. Well, yeah, we always thought he had the potential ever since we saw him. We actually campaigned this horse with art sherman to go to kentucky. And we knew he had the heart. Hes got the breeding even those hes a california bred. Hes got fantastic breeding on his mother and fathers side. We knew he was going to do something big. We didnt know exactly how big. You know, after winning four races in a row and winning the Kentucky Derby, thats pretty big. Its interesting not more people saw that potential with an 8,000 investment, dom, at the time. Whats interesting to me, this investment is 10,000 overall for the breeding investment. You got a horse that did overall so well. They have done great before in longer races. What does he have in the tank thats going to get him through this triple round possibly . I believe this horse, he has the heart. He loves to run. He loves the competition and he just you know, just keeping him sound and keeping him on the right path, i honestly believe this horse will believe a triple crown winner. You know, he should handle that real easy. Steve, i have got three horses in fort worth. You can have them all for free if you can do Something Like that with those horses. What is the secret . You know what, our secret honestly is art sherman our trainer. Hes got a very small barn, 15 horses including California Chrome. Hes very patient with these horses and he gives these horses each horse individually what they need. He knows every one of his horses and he doesnt have a huge barn which is great. Hes old school, patient. He takes his time. Hes always said ill let this horse tell me when hes ready to go. And we ran him in the derby simply because this horse needed another race and he was ready to go. We were already in the Kentucky Derby and when we won the other derby, that was icing on the cake for us. Yeah. We knew this horse we knew where we wanted him to go. We proved to the world this horse is just as good as any horse out there right now. I believe hes the best 3yearold in the United States right now. That 6 million our you got im sure will be dwarfed by others to come. Congratulations. Well be watching in a couple weeks. Thank you. Thanks for having me. Absolutely. Up next, well look back at today and look ahead to tomorrow. Final thoughts and dont miss closing bell tomorrow. Well get a visit from tv members duck dynasty. They have another business they are launching. Well be right back. With the technology of cloud, we changed all that. I can sing something into my device. Up to the cloud it goes. Back down it comes sounding better. We break down the walls of creation, and we give music creation for the masses. Who would have thought masterthree cheese lasagna would go with chocolate cake and ceviche . The same guy who thought that small caps and bond funds would go with a merging markets. Its a masterpiece. Thanks. Clearly you are type e. You made it phil. Welcome home. Now whats our strategy with the fondue . Diversifying your portfolio . E trade gives you the tools and resources to get it right. Are you type e . In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Today is monday today, we greet you. Treat you. Care for you. Today, you can come to Cleveland Clinic for anything, everything or just to get that thing checked out. Big, small, and yes, the best heart care in the nation. Its here everyday, for everyone. Thats the power the power, thats the power of today. Cleveland clinic. Call today, for an appointment today. Welcome back. Team time for final thoughts. Im watching financials. Its really not a healthy rally. Driven by one data point and entire market isnt participating. The debate on housing, short in the Housing Market. I would love to see how housing does over the next few months. Bill miller still happy along. Come place sency is rearing its ugly head again. It is extraordinary. At the time during the European Crisis everyone was saying can you believe spain borrowing at 4 . And look, if defensive areas are leading the market and you have a ten year treasury at 2. 6 the market suggests that risk taking is not called for here. Unless its on california cruising. Right. Chrome. Chrome. I know. But hes cruising now. Do not invest in horses, kelly. Ill go in half with you on the next. Done. Melissa lee, what is on tap . When we talk about chinese internet ipo all you think about is alibaba. Theres another one coming sooner that you need to know about. Is it wabo . No. Well hand it over to you guys. Stay tuned to find out. Fast money starts right now. Im melissa lee. Our traders are pete, karen, guy. Apple shares closing above 600 shares. Tonights story was inspired by jim cramer. This group has been a house of paint. And you