Transcripts For CNBC Closing Bell 20140527

Good Economic Data out this morning. Often when you get a new high you tend more often than not to get a high the second trading day and it looks like we could be doing that for the s p. 1910, 1900 was the new record closing high which is bringing up a different kind of conversation. Inflation, suddenly. Were talking about that. Were talking about the dreaded iwith the word and implications potentially farreaching from the fed to your investments. If the people were going to talk to are right, two top names, David Rosenberg and ian shepherdson, both of them coming up on the program. Yeah. Ive got some anecdotal evidence of inflation and im sure everybody out there does as well. Also, is this video holding up a 3 billion deal between apple and beats . Remember dr. Dre now infamously bragging on that video that he was becoming the first hiphop billionaire, but now reports say that this video could be why that deal has been dragging on, and we dont have anything. Well speak to the reporter and another apple insider about whats really going on with that and see are they going to buy beats or not right now . I know. As that all plays out lets take stock of where we are heading into the final hour today. The dow up 63 points, not Much Movement after president obamas remarks about afghanistan just moments ago. The s p 500 meanwhile adding nine and the nasdaq up 38, 4224 and if you want a change in sentiment, not giving money back to investors and that story up on cnbc. Com. We have with us monica from seven call at all, john manly from wells fargo funds is here at the big board and so is kenny pull cary and our own Rick Santelli in chicago. Kenny p. , the markets continuing higher here. Is it dragging you kicking and screaming along . It is a little bit. New highs beget new highs. Broke through 1900 and now there is nothing above, no resistance at the moment so the path of least resistance is higher. The news continues to kind of be improving. Macro data is better. Geopolitical data is better, right, elections out of europe, ukraine has not turned into the disaster with a russian invasion that people have been talking about and, therefore, if the buyers really want them, let them come and pay for it so the sellers are being very selective in terms of price and buyers are reaching. Yeah, you know, you make a good point. Come through the weekend with potentially some marketfriendly outcomes for now, if you want to call it that and monica, we get brighter reports on consumer attitudes. What do you make of the Consumer Confidence numbers . Its interesting because consumers are confident but it makes me wonder if they should be because at this point wages are still flat. Right. And overwhelmingly they are dipping into credit to fund their lifestyles so is that a good situation for the economy . Is that a good situation for consumers . I really dont think so. I thought Consumer Credit was still lagging to some extent. Autos or Student Loans, but generally speaking, monica, correct me if im wrong, were not looking at the kind of cred creditfunded spending we were during the last boom. Lines of credit original nation was near 400 billion in 2006 but today its 90 billion but youre seeing a 20 rise from last year so youre still seeing a consumer not saving very much, not seeing an appreciation in wages but is spending and they are, as you mentioned, spending on school and that student debt will be something that will continue to be a drag on the young generation for the future economy, so, again, this confidence, im not sure if they really should be as confident as these numbers suggest. Mark, you think this were at an infliction point right now in this tugofwar thats existed between stocks and bonds. What do you mean . Yeah, i think if you look at what equity markets are doing, its looking at the data in realtime, as equities often do looking at the Glass Half Full knowing that firstquarter gdp will be revised negative. It feels better across with some of the data that came out today. Equity markets are going up on that news and the bond market is more prove it to me. Technical reasons on why the tenyear Interest Rate may be lower than anticipated but i think they are saying show me a Second Quarter gdp, a better job number, consistent jobs number above 200,000. Which side are you on . Well know in early july, to see who is right, equity or bond market. Which side are you on . Im on the equity side, but i think what this market has shown this year, it hasnt really mattered where youve been. Youve earned probably 3 to 4 , 5 , equities across the globe. Unless you were in the 30year long bond. Bonds are doing well. Al real assets are doing well so a multiasset diversified portfolio has done well this year, and despite the volatility and some of the political unrest, 3 to 4 , not bad. Richter, its interesting. Right now were having this discussion about maybe some signs of inflation, down the road, better data, et cetera. The bond market isnt moving. Does it matter, rick, does the tenyear still matter, or is it quite obvious that it matters because we just heard that the 30year mortgage has dipped back below 4 . I think the 30year mortgage could go to 2. 5 and i still dont think it will create the kind of housing numbers that we really would like to see this many years after a crisis and a recession, and in terms of what Interest Rates are telling us, you know, we were talking about credit, and youre exactly right, kelly. The kind of credit we would like to see people get they cant really qualify, but any type of credit that you can put a sub in front of like auto loans or have the government put the heavy thumb on like Student Loans or mortgagetype loans, thats whats moving because theres a subsidy factor there. The whole economy, for the most part, is subsidized. How many stories did you weread the Balance Sheets of the Central Banks is something used more often. To me thats code we cant figure out how to create growth but we kind of like playing around with this stuff because stocks are at record highs and i think well see this dynamic continue until one of the Central Banks cant hold it all together and i think were actually still a ways away from that. John manly, second year in a row at least that we didnt see the old adage sell in may and go away. Had a pretty good month, alltime highs on the s p right now. What do you think that means going into the summer months now . I think the money is still coming in. The fed is still accommodative. Cant stay that way forever but they wont have to. At some point in time the consumer starts to pick up a load. Dont think of it as a 5yearold recovery. Think of three lost years, 2009, 2010 and 2011 were lost. Start the cycle from 2012 and its fairly normal. Gradually getting better. Consumer credit numbers were too strong in 2006. How much higher does it go before you get sweaty palms . As long as the fed will stay accommodative. That includes tapering. They can actually raise rates a few times. As long as the fed remains accommodative and wants to help the economy and as long as earnings come through im still positive were nowhere near a valuation problem yet. Kenny, i know that weve talked in the past about the skepticism you still hold about the economy, but today does it look at least like the signs are pointing towards a more sustainable outcome here for the u. S. Economy than we might have thought back in the deep winter freeze monies of january and feb . I think it does and weve seen that over the last couple of months with the macro data reception with the exception of a couple of outliers. Most of it, in fact, has been improving, not as fast as we want to see but it has been improving which is kind of setting that tone so now that were making new highs, theres nothing above us in terms of resistance. The vix is at multiyear lows suggesting that even throw months out that investors are expecting only a 3 or 3. 5 volatility factor. I was going to say now, kenny, you guys need people to trade this market. Right, right. Look at citi group, the cfo at a conference, more on the fixed income side of things well be down 20 , 25 . Right. Monica, youre in real estate. How are you in real estate and why . Were in realies estate and thats a very region specific play, have i active in texas which is seeing a ton of low unemployment and new population. What are you buying . So were in aa lot of housing and new Housing Development down there, and thats because theres a onemonth supply in texas when it needs to be a ninemonth supply. Are you literally buying homes . Is that what youre doing . Weve been buying land and doing the development and the building of homes, and, again, its because theres a onemonth supply and needs to be a ninemonth supply to satisfy the number of people that are moving in down there. Whats the Unemployment Rate in texas . Its about a percent lower than national, and if you look at all of the Fastest Growing city charts youll see a lot of those dots land right deep into the heart of texas. Why do you ask, rick . Well, because i think that its a fertile landscape for business, so i see a much healthier Housing Market. I wish on the National Level some of the politicians would take note of whats going on in texas instead of i think they take note. And people come in for a multiyear tax credit where they will eventually, you know, have to raise their taxes. Those commercials from new york, i love watching them, but my question is if lowering taxes is such a great thing to get people to come in, why did you ever have to raise them . Why shouldnt they be lower all the time . Doesnt make any sense to me. Yeah, especially, mark, when you have an economy at this point, the deficit generally, and we dont ever talk about this, but its been shrinking rapidly here. I mean, the need to say increase taxes actually is diminishing as the cycle progresses. Yeah, but, i would agree with rick. We wont see tax rates going down any time soon. The deficit i think is shrinking which is i mean, kind of three steps to the problem. We need to get back to 3 growth, need to get deficit neutral and as far as tackling the big issue, longterm debt, another conversation for another day, a much harder conversation, but at least were making progress on the first two steps towards dealing with some of the issues that are the heart of ricks question. Do you have a reference for what the fix would be for that situation . I mean, again, just in a nutshell . I think its a combination of everything. I mean, we have the biggest, broadest, most innovative economy xht world and apparently we have a whole bunch of energy we didnt have before and thats part of the answer and you have to look at some sort of benefit cuts, particularly social security, a system that was made for people to pass away a few years after they work and now people are living 30 years which is fantastic but you need to revise that. I think the oldest woman in america just a long enough time horizon in order to implement it. The solutions are here but just need the decisionmakers. 115th birthday, did you see that . Lives outside of chicago to her. Happy birthday. Thank you all, folks. Have a good day. Hope we all live to be 115. Maybe its something in that chicago water. Its the food coloring they put in it st. Paddys day. Up 67 points heading towards the close. The dow is about 40 point from an alltime high and the s p, any positive close today is a new alltime high once again. Well see what happens. So expect inflation to heat up. This is who noted economist David Rosenberg is forecasting, but how much will prices rise and how fast . Well talk about the inflation threat that he sees, along with jim bianco, coming up. Bianco, c. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Fame, makes a man take things over fame, lets him loose, hard to swallow fame, puts you there where things are hollow the evolution of luxury continues. The next generation 2015 escalade. Fame markets are actually moving higher as we head into the last half hour of trading here. The dow up 75 points. We were up 84 at the peak this morning when europe was still oh. The s p though, any positive close is a new alltime high again, and were up ten points. At moment best performer, the nasdaq, up 1 or 42 points right now. Dominic chu has more on whats moving the market. Hey, dom. Kelly, bill. Hillshire brands responding to pilgrims pride 6. 4 billion or 45 a share bid by saying its going to review the offer thoroughly but Still Believes in its own 4. 3 billion offer to buy Pinnacle Foods so heres where all three are trading. Hillshire is up about 22 above that 45 bid price. American express is moving higher on some bullish comments for morgan stanley. Revenue growth is accelerating for amex and currently up towards special highs. Aeropostale is up on news that it secured a 150 million credit facility. Up 16 after a rough week last week, and were going to end with ibm falling on reports that china will no longer use its servers in the big country, at least for the big banks. Big blue you can see they are trading down threequarters of 1 . Kelly, bill, back over to you guys. Dornlgs thanks very much. Meanwhile, tivo reporting net income of 8. 1 million of the First Quarter of 2014 reversing a 10. 3 million loss in the First Quarter of last year and that was helped in part by a rise in subscribers and paid tv providers. Yet the companys stock has been underperforming the market down for the year while the s p, as we know, has been in the black. What does it say about tivos longterm prospect . In a first on cnbc interview joined by tivos ceo tom rogers and we have to point out, as we always do, former head of nbc cable and the man responsible for a lot of us being here at sneefnl cnbc and one of the founders of the network. Welcome back. Youre constantly having to reinvent tivo. Its such a transformational technology. Youve been there how many years now . 15 since we shipped the first tivo. And youre still moving along here. The stock bumps along. Why has this been such a slog for you . Youre the deal master. Whats going on with tivo . Well, you know, we not only reinvented tivo along the way, but as we like to say we are reinventing television all over again as tivo did the first time. Theres nobody who doesnt understand how tivoing something doesnt fit into the scheme of how they watch television today, but we knew that that alone was not going to drive the company, and so our notion now is how do you make television, believe it or not, somebody who has the common heritage and cable who will understand this, how do you make television as good as music because today people can get any piece of music out there down to a single device that follows them from the cloud, and they get their personalized play list just the way they want t. Television hasnt had that yet, and thats what we do today. Were about bringing all aspects of television, cable channels. Not alone in that, tom. You guys brought it first with the with the receiver that you can pause live television. You can record live television, you know, all those things there, but now youve got tremendous competition from very big fish out there. You know, did we are alone in providing that in the retail world, and we are the leaders in providing that in terms of the number of Cable Companies that we now do that for. And yet youre still only a 1. 4 billion stock. Well, im not sure everyone has gotten it, because we were losing close to 100 million ebitdawise a few years ago. Today were looking at making over 100 million ebitdawise this year. Massive transformation of the company, and in so doing one of the things that on this Network People have said over and over again, over the Top Television netflix, streaming services, were going to kill cable. That was the enemy of cable and a couple weeks ago we said were bringing netflix into the cable mode making it possible for it to be one of the options along with cnbc that people can get to with one box, one remote and one search, one user experience, and when i mean get it to be what music, is being able to have everything together in one place. You know, google tv, apple tv, roqueu, all these devices that bring a piece of television that you need multiple ways of getting things. We either only ones out there in the Retail Market of putting it all together like in the music world. Whether its a google device thats so cheap or some of the others that have better name Brand Recognition or whatever the reason have really made significant inroads, and now it sounds like you guys are almost reliant on cable to be that differentiating factor, that people care enough about having cable that they will pay out for tivo as opposed to going with one. Many alternatives out there. People already have cable, cable and satellite today are in 90 million homes. Its changing quickly, especially with the younger groups. Yes and no. Yes, people in dorms who dont have access to Cable Television are going to find ways to watch television on their laptop, plenty of evidence that once people get that first apartment or first home they get the Big Television set, and we arent an alternative to cable. Were a way to make cable better, and we we made a bet a long time ago that its the combination of traditional tv and broadbanddelivered tv put together thats the future of television. We still believe that. The evidence becomes clearer and clearer. Thats going to be the proposition that wins, and we now have 4. 5 million subscribers and had our best quarter of driving mso subs in the companys history which is really an indication that have. Always great to see you. Great to be back. Glad you stop here at the big board. Great to have a reunion with you. The ceo of tivo joining us here at the new york stock exchange. Really appreciate it. Were heading into the close now. About 40 minutes to go and were sitting with the dow up 37 points, again the s p at 1911 is right there. The nasdaq having a strong day as well, the strongest of the three, in fact. On alltime high watch for the big board. When we come back bob pisani wraps up whats driving this market higher. Look at the various sectors. Home prices are up but new data suggests they are rising more slowly. How much of a concern is that . Our housing guru diana olick is coming up later in the show with a look. A look. [ male announcer ] great rates for great rides. Geico motorcycle, see how much you could save. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. The s p any positive close, record territory, where we are right now. Even so, bob pisani joins us right now. Weve had thats headlines now, but as the journal points out its a sideways market, not a lot of volume and every time we bring that up everyone gets hysterical and whats really going on . I said last week, this was the year of the chop. Traders getting chopped up by ten points, and there was no clear trend established so what they have done is they have flattened their positions out. They are not as long as they used to be, not quite as sure as they used to be and what happens when everybody does that the market moves against them. For four days in a row the s p has been up. Not done that since april and now were getting everybody dragged in so the volume isnt heavy right now and i think thats part of the problem. All year people cannot figure out how to make money. That was the only time we got a clear trend and only in those particular groups. I said it when i got back from my sabbatical three years ago. I think volume is a head fake. I think this is the new normal. The volume that we had back in the day was so much higher. That was the anomaly. This is the new normal. One major problem is exchangetraded funds because many are out there now and with an Exchange Traded fund you can trade the fund without trading the underlying stocks that are in it, if you buy the spdr, you can trade that instrument but the underlying stocks dont trade at the same time. You trade a unit trust. As a result a lot of people trade these etfs back and forth and while you still get volume in the etf itself, you dont get volume in the underlying stocks so in the past if i wanted a lot of coverage in the s p i might have had to buy the most representative s p 100 stocks. Now i buy an exchangetraded fund. Why do you keep talking about etfs, its killing our business. This is a fascinating point. Want to make sure i follow. Even if it pushes the price level around, for example. Yes. Because you can never have one deviate from the other for a long period of time unless theres a panic or crisis, its not reflected in the general daily Trading Volume the old way. When you buy an spy, you have an organization that creates these redeems and creates the stock itself and they have to pie and sell the underlying shares to create that share in the spy, but if i sell it or buy it there is no trading going on in the underlying shares. Youre simply trading the stock itself and that creates less volume overall. I think etfs are wonderful vehicles, im not arguing against them, but i think they definitely had some influence on the volumes that are out there. As you know, the reason we spend so much time talking about this, everyone looks to the gauges as tells of whats going to happen with the market. I get it. And the question is reliability. I just think its not the indicator it used to be. Now the big question who is right, stocks or bonds . Are we seeing growth or not at this point . I think were definitely seeing growth. Very heartened by the housing data. Existing home sales, new home sales, and now the case shiller home price numbers show a little uptick. Remember the argument has been housing is somehow sliding backwards a bit. Those numbers that weve got in the last three days indicate it may not be robust, certainly not sliding back. Weve got lower Mortgage Rates, prices have moved up a little bit, according to case shiller, i think thats very good news for housing overall and that gives me a lot of heart. I agree. The economic deity has been very, very choppy and hard to interpret. The bond market reflects that. The vix, we talk about this all the time, is another vehicle. I dont think quite reflects the fear or levels of concern out there because there are many different ways that you can buy protection now outside of what the vix represents which is going long or buying puts and calls on the s p 500 so a lot of other ways to do that these days and the vix would not necessarily reflect that. What would the near fear gauge be . Hard to look at. Have to look at some etfs longs and shorts, for example, other kinds of options, weekly options and monthly options in in the vix. Youre looking at very specific kind of option. We need like a bob pisani board, you know, that you can show us these. There would be a way i think to create a broader fear index out there. Actually thats a brilliant idea, and a bob pisani board. I think there would be a synthetic way to create a broader more accurate fear gauge. Lets do it. You got it. I love it. Seriously. Im going to call some volatility desks. A new indicator is born. You watched it first here. Thanks for the idea. See you later. Heading towards the close. 30 minutes left here and were just off the highs now with the dow up 70 points, the s p in record territory right now. The hayt head of the European Central bank wore egabout low inflation. Should we be worried about too much inflation on this side of the pond . Well pick the brains of two leading economists coming up next. Dominic chu tells us what is driving the surge and how long it can last for everybodys dividend play . Cannot miss that, coming up. S t. Were moving our company to new york state. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Become the next business to discover the new new york. In a we believe outshining the competition tomorrow requires 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. Markets are higher today to start off the week after the long holiday weekend. Dow up 65 point, europe and asia were also higher overnight. Overnight and in the morning session which sort of set the stage for us. The dow is up 65. The s p up in record territory with a gain of ten points. Nasdaq up 1 and the dow transports, by the way, record territory which economically speaking is pretty good. And the russell is up almost 4 over the last four trading sessions. Up again today. Thats good news. Amid all of this economists insist inflation hasnt been an issue despite higher food and Energy Prices lately but the producer and Consumer Price indexes are rising a little bit more than in the recent past. More analysis on where we may be headed where were headed inflation wise. David, are we destined for much higher inflation, especially given the easy money policy weve seen from the fed for five years now . Well, i think one of the reasons why were seeing inflation going up and why we will continue to see inflation going up is it because this is a deliberate policy by the Federal Reserve and other Central Banks as well to bring inflation moderately higher so i would have to say the data are actually telling me right now that their policies are actually starting to work in that record. This time last year the inflation rate is sitting at 1. 1 . At the end of 2003 inflation signature at 1. 5 and today its sitting 259 , and my sense is over the next not just several months or quarters but next several years moderately higher inflation is going to be in your future. Okay. Jim, you dont have to try too hard these days to knit together a story about inflation just generally rebounding from the record lows. You would think the bond market would be super sensitive to it but it didnt seem to care. Why . I think they did start with the bond market and it will be the next big story, that at a minimum deflation is done with. It went from a 6 yield to 3 yield. Everybody was positioning for it and already short it and thats why the bond market i think is having a hard time selling off or yields going higher at this point because everybody has been waiting for it to happen for a year, and its just been so slow to evolve that youre starting to see them being forced back into the market which is why yields have been falling for most of the year. David, do you think that the fed is behind the inflation curve . Thats often the charge against them, that they start to raise rates well after they should have given whatever is going on with inflation at that point. When we had a preemptive fed that was aiming towards the holy grail of price stability, you know, 10, 20, 30 years ago, yeah, would i say that they are probably behind the curve, but lets make no mistake. This is a fed that wants inflation to go up. Which is remarkable. Not talking crazy inflation like the 1970s, but ben bernanke told us at the last press conference that his big concern is inflation was too low. In the old days it used to be inflation concern was too high. Now its too low so this is not being behind the curve. This is exactly what they want to see. Well, the world changes the fed is responding to different incentives, and whats interesting about all of this, again, are we setting up for more of a problem, a reset, i dont know what you want to call it, in the bond market, six to nine months down the road. Will people show up and not be buyers one day . The fed is the dominant player in the bond market. The fed has changed the game in the bond market. I saw Steve Liesman on with his toolbox and showing all the tools that the fed has and the takeaway is the fed doesnt know how they will do it yet. They will figure it out when they have, to and the bond market is going to have some growing pays as they sort out how to use the new toolbox along the way but right now the big growing pain that the bond market has is theres no more sellers. Everybody has sold, past tense, has sold the market already, and thats why its been very hard for it to go down for most of the year. Jim, we talk about bonds and how they dont seem to be worried about inflation. What about gold . A, is it still an inflation indicator and, b, if it is, why is it sitting in a threemonth low right now . Gold is a lot of things, one is that its an inflation indicator, it vacillates on global tensions and also vacillat vacillates, i know if you dont understand the gold market, indian jewelry market, had an election and modi won and hes going to change the rules as far as importing gold and thats had something to do with it as well. A lot of facets go into the gold market. I wouldnt read this as being one about the economy or about inflation with the big drop today. And david, just a question to go back to inflation and whether or not it can generally rise from here. If were seeing increases in food and energy and even rents to some extent, arent those more likely to act as a tax on consumers and undermining inflation growth down the road . Well, that question becomes what will happen with the labor market. We just came off three consecutive months of 200,000 plus on nonfarm payrolls, my sense looking at the claims data is well have four months in a row of 200,000 plus, and, kelly, we havent seen Something Like that for all of the talk of the economy and no question that firstquarter gdp was moribund, four months of 200,000 plus on payrolls has not happened since the beginning of 2006, so my sense is that the labor market is tightening more than people think. Wages are a lagging indicator. They will accelerate to help cover for the rising inflati inflationary budget. Not food and energy. Take a look at core Service Sector inflation. 60 of the spending probably is services. Yeah. Core services are running at a 3 annual rate just over the past three months, and to me thats the real kicker, and, remember, these are very labor sensitive sectors at the same time. David, youre someone in the past who has been concerned about the economy, seeing it headed down and back up and its fascinating as a result to follow it with you. Really appreciate your insight as well. Thanks, guys. 20 moments to go and the dow is up almost 71 points, right about 71. The nasdaq is adding 41 and ten for the s p. And we mentioned utility stocks, have been pretty good this year. Dominic chu takes a look at whats been driving the gains. That will be in our special sectornomics report. Find out if its too late to get in on that action. And tom joys gives us his reaction to the Michael Lewis book saying the stock market is rigged. Well be right back after this. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Welcome back. Profitable, utility, one of the best performing sectors this year. Dominic chu has a special report on whats behind the utility surge. Dom . Not sexy but they are important. These Companies Make up just a paltry 3 of the broader largecap index. Now, so far this year, they are the best performing sector, up 10. 9 and investors like utilities because they are considered defensive. Less subject to the ups and downs of the overall economy and cyclical tie. You get paid to wait. Now, Edge Asset Management manages over 26 billion in assets with income generation as a core part of their strategy. President joe kuhnive says theres a number of attractive qualities for these utility stocks. Utilities have shown steady growth in earnings per share even with a lowgrowth environment for the overall economy. Second, many have steady growth in their Dividend Payments as well. They are picking stocks with meaningful dividends and grow that dividend overtime. More neutral on the secretary overover all at these levels but does find have in certain individual stocks like Sempra Energy for one. They have had substantial growth. Sempra is up 20 and Wisconsin Energy is up 9 so far this year. Both stocks are outpacing the sector and the broader s p 500 so you can find outperform overs even with the sector with a more neutral outlook. So far today weve told you the bull case and bear case for utilities and told you where the biggest yields and and where the biggest growth is and now its up to investors to see if there is theres a case for growing utilities. Thank you, dom. See you later. By the way, looking forward to this tomorrow. A new survey shows Many Americans are afraid of going broke in retirement but heres the rub. They are not willing to curtail their current spending in order to save more for that future retirement. Were going to talk to the man behind that survey coming up tomorrow right here on closing bell. Do not miss that. Thats going to be every time we talk about this issue, how underfunded retirement plans are, theres a lot of attention. People know that this could be the next big crisis. Dont talk to me about it right now. Im busy living my life. 14 minutes left. Moving higher. The dow is up 75 points. Were only 30, 35 points away from an alltime high on the industrial average on a closing basis that was set three weeks ago today. S p is in record territory, up nine, ten points right now. Median ceo pay topping 10 million for the first time last year. Is it time to pull in the reins in the pros will weigh in on ceo pay in the next hour of the show. 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Cisco up graded at Deutsche Bank from buy to hold and apple getting its mojo back, back above 620 a share, excitement over the iphone 6, feeling optimism and google shares up 2 on the day, but smallcap stocks, also a focal point for investors. Youre seeing the russell 2000. The smallcap index up about 1 on the day and up 4 over the past one week. Of course, this is an index that houses many domestically oriented names. The index was in correction territory earlier this year, but now staging a comeback. Bill and kell . Yeah, thats a big bounce for the russell. Thank you, seema. Well talk to you a little bit later. As we head to the close, joining us to talk about this, mark rich peterson and robert frost. Welcome back. Is this a market expecting growth or are they still playing defense sniffle. Its a little bit of both. As were talking now about s p 2000 as opposed to s p 1800. We have great earnings. The greatest story never told is that earnings excluding financials is the best since the Fourth Quarter of 2011. 6. 14 in the First Quarter of 2014. Financials very strong, consistent earnings growth. Cash on a Balance Sheet and a combination is still the name of the game and the fed the fed hike rates is going to be happening later than sooner. Robert . Yeah, i mean, capital utilization right now is at normal levels and when we look at cash on Balance Sheets, alltime highs, corporate profits are substantial. Still not quite what they were but still substantial. Those things are the very things that people who doubt this market will point out as reasons that corporate profits arent sustainable. Companies have too much cash and will spend it in ways. Not hiring anyone. They are paying dividends. Poem have looked for a reason since 2010 to doubt this rally and the fact is the market has come back 170 from the bottom and yet, look at all the money sitting in cash right now. If we could get private investors to believe in this market rally and believe that the economy is strengthening, albeit not quite what we expect but its still improvement. Remember, the worse the correction the lower the rebound coming back, but we expect that eventually as investors buy into, it it should lead to a nice second leg up on this rally . This year, or you just mean for the next couple of years . What weve been expecting and telling our clients, over the next few months it will be slow, but we expect once we get through the very lackluster numbers from the First Quarter, we think that by september and october market is really going to take off. Speaking of which, you guys at s p, you still have a target of 2000 on s p by the end of the year. Target out at 1950. Youll have to revive that at some point . Ill leave that to the Investment Policy Committee to make that call. As my colleague has said, you know, well have to see the recovery housing, see more job hiring and all factors have to come into play to have a more sustainable leg up on the rally. 4 for the year. Were going to see a strong single digit, you know, growth of 2014, maybe total return, approaching 2014. Even though as the journal highlights, its unusual were that sideways this far into the year. That doesnt worry you at all . I think, again, growth and looking at the Second Quarter numbers, probably up to over 10 by the Fourth Quarter. Were going to take a break. As we come to the closing countdown for this tuesday. After the bell, Sam Shepherdson and why hes sounding the alarm on inflation. What its a bigger problem than what the fed is ready for and what it means for your investment. Thats all coming up after the bell. Bell. Problem isnt likely to go away. On its own. So its time we do something about it. And theres help. Premarin vaginal cream. 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The s p is up half a percent, but, again, thats alltime high territory, still above 1900. We closed above that for the first time last week. Nasdaq is the better performer with a gain of 1. 1 , but the bigger gainer once again, as seema mody was pointing out, the russell 2000 as it bounced off that level of a couple weeks ago when it was down 10 from its most recent highs in correction territory, as we say. Up 1. 3 today. How about the tenyear you ask. Well, its bumped up a little bit in terms of the yield. Were at 2. 51 but today we learn that Mortgage Rates had the 30 years fixed mortgage now is below 4 for the First Time Since last october, so were still watching the Housing Market and the home price data was pretty good today, so housing is showing some signs of recovery here, but weve still got a lot of houses under water. We do. We go back a year. All everybody talked about was how house prices were accelerating at such a point that they would become unaffordable again and wed be in a bubble and weve seen a little bit Slower Growth in that sector. Maybe thats a good thing. When you take into account the fact that banks really are still not lend, the amount that you do have to put down and the credit score that you have to have its substantial, the fact that anybody can buy a house in this market is pretty surprising and a lot of people are buying multitenant which doesnt show up in those numbers. Youre the real estate expert. Prices are not falling down as dramatically and better existing and new home sales we got last week. But are Mortgage Rates falling because demand has not been all that great . Sales have been farrelly good. My wife has been an agent for 30 years in philadelphia. The problem is theres not enough inventory. Thats a major problem. The paradigm two weeks ago was housing is falling down, but i think the data in the last three days indicates its not falling down. Definitely may not be roaring, but its not falling down. Housing stocks are reflecting that today, and data today i thought was very encouraging. And the Housing Market, young demographics that need to get out of student debt problem. So many young people have so much debt when they get their first job and trying to pay off their debt rather than save for a down payment on a home. Home builders dont have the inventory and not building new homes so demand is not there so they are sort of stuck now, too. As weve weeded through all the foreclosures weve had to look at new home builders, and they simply dont have the inventory to keep up with the demand, so like i said, its a good thing, supply and demand, not a bad thing. Well leave it here as the glass is half full. Thank you, guy. Thanks for joining us today. Were going out with decent gains for a tuesday. The s p up 11 points. Will it close at a new alltime high and some of the other secondary averages doing good as well. Kelly evans with a stellar panel today. See you tomorrow. Kelly. Thank you, bill. Hi, everybody, and rubble to closing bell. Im kelly evans, and you guessed it. Its another record close today for the s p 500. Take a look at how were finishing the day across wall street. A pretty good session for all the major averages. Dow adding 70 points here at the end. Just under half a percent. The nasdaq, the strongest performer again of 1. 2 or more than 50 points there at the bell and the s p 500, finally thats the one we just set a record close at 1900 on friday. Today, 1911. Up 6 10 of 1 . Joining me now to help make sense of it all is todays panel. David seymour from cowan and company and michael yosikami, our very own kate kelly and our contributor friend Anthony Scaramucci and it looks like history is bearing itself out because quite commonly when you get one record close its followed by another. I guess the question is how much further can we go from here . It can grind. It can grind higher. Low volume and grind high through the summer could occur. I think the chase will happen come september when you have the pickup in hedge funds. They will actually go out and try to find performance so they are underperforming right now but riffly 2, and i think that, you know, again, we could see the low volumes sort of grind higher through the entire summer. Im starting to hear about the chase. I feel like more and more people are saying we just heard it in bills markets and dave miller has been talking about the risk of a meltup out there. I saw the same report and had the same reaction. Its very interesting, lost ground needs to be regained here, but if you take a look at a b of a report, speculators, hedge funds and other spec la trif traders got out of their s p long positions at the fastest pace in two years and they are net short and what im hearing from those i talked to a lot are expecting a big correction in july or august, may grind a lot for a while. Had this conversation quite a bit, and the next connection doesnt materialize. Were tracking over 1,200 funds and kate is on to something. They are on a net short basis. If you look across the spectrum of funds which is why the grind higher could lead to a meltup, because what these guys do is reverse course in a hurry to try to catch up with the market, and they are definitely more on the cautious looking for a correction side right now. Michael yosikami, where does that leave a lot of guys that are looking at the market with every record high saying i already missed the move. Theres behavior starting to occur with small investors, more individual investors, that when the market does drop down, even if it drops down 2 , 3 , 4 , you see people buying into this market because they dont want to move that next they want to move the next move up so what youre starting to see is some support on the buy side when the market goes down. Thats why im not of the belief youre going to see a huge correction down because i think there are people waiting to buy who felt like they missed the move. No question. Just add to that as well. I mean, look at the Options Market. The Options Market is not pricing in a big downside move. Thats true. Its not pricing in a big upside move. Look at skew and say skew blows out when people get fearful. Its moved higher and moved higher because upside calls are not in demand right now. Nobody wants them because they are basically saying not putting their money where the mouth is. Dont think the market has a lot more upside. And i dont mean to recycle another thing we talked about a lot. Take a look at the vix, people think its abnormally low and looking for more volatility very, very soon. The vix seems to be potentially out of step with what investors are thinking so its a very tenuous time and its been seeing all year and another thing weve been seeing its going to be a volatile year, especially for 2014. Joining us is fast money trader tim seymour. What do you think . Weve been batting this around, sort of the skeptical view from the fej hundreds. Sounds like the retail audience is getting a little bit more interested here, but do you think that this volatility this summer is is finally going to reemerge . Hedge funds, long short guys are paid to be on both sides of the market, and its been a its been a bad place to be to be a longshort manager. Youre not competing with the s p. More or less gone up without any major pullbacks. Pulled back no more than 5 but i do think that the rotation that weve seen is something that continues and if you play some of these moves say back into transports, into industrials and cyclicals i think you get rewarded and looking at the commodity space, quietly you also have industrial metals. Nickel is up near 20,000 and copper 10 off the lows so these are places that you can start to look and i think they are telling you something about the global economy. Ive said all along that i dont think the world is that bad of a place. Well, i think were getting philosophical now. I dont know if you called the discussion last hour, great to chat last hour about inflation. Do you have a view on this one way or the other . Do you see whats happening in the stock and bond market as sending different signals . Help us all make sense of it all. I think theres a false signal being sent by the bond market right now but its just hard to see how inflation is not going to creep back in the system. I think that really if you look at whats happening with the equity markets in large part, obviously its been driven by whats happened with the Federal Reserve. Unless we have some significant indicators to suggest inflation is here and the fed is saying all were concerned about is weakness right now. Thats all we hear coming out of europe right now, its going to further fund equity rises. Now, is that going to change one day . Cycles change. When is it going to happen . Ive been waiting for it to happen for a year and a half. Still hasnt happened and one day its going to change and i think its going to change quickly, not gradually. Going to be surprising news. Speaking of inflation, im curious what you are thinking of the ecb and whats going to happen on june 5. Im hearing a lot of chatter about that. David tepper at anthonys conference made a huge point about how the ecb needed to do further easing and it may even be too late. Look at the reaction today in the markets. Even over the weekend European Central bank is having its version of jackson hole while elections are talking about the breakup risks across the eurozone and europe exits bid because the central bank will come in. I think its unlikely that the euro will break up. This is going to become a political crisis. Theres even on the table, kelly, possible quantitative easing in a different than in addition to easing Interest Rates. It will be interesting to see what happens here, but my guess is after elections are over the bank will get lax in terms of its Monetary Policy which augers for a higher market. Just for one sector. An earnings alert. One of the big names in Cloud Computing has been part of that selloff of late and out with quarterly results, dominic chu has the numbers. What can you tell us . Work day like you said, a cloudbased provider of Employment Solutions so think hr solutions, think Financial Management and time cards tracking. Workday is moving higher in after hours. Well call it 5 or 6 on about 170,000 shares of volume. Firstquarter revenues came in above street forecasts. It was a 160 million versus 152 million in terms of the revenues. Also the loss was smaller than expected, a lot of 13 cents a share. Also provided Second Quarter guidance on revenues that came in as better than expectations see revenue coming in at Current Quarter at 173 and 178 million. That beats the average analyst expectation of about 172 million so, again, work day shares. You can see they are on the rise about 5 in the after hours on a relatively thin trade so far but, still, 195,000 shares and the stock is up about 5 , kelly. Back over to you guys. Dom, thanks very much. Again, they have been caught in the broader selloff. Were reminded right now they dont have earnings. All that said, how does workday fit into the cloud and into the kind of tech thesis that you guys have right now . Well, i mean, look, first of all, the plug, a nice tech conference. Well get a lot more information coming out of Conference Tomorrow and thursday, but, look, the reality within tech is right now what youre seeing is a real bifurcation. Youre seeing a massive change in the Way Investors are looking at technology. They are looking at user growth, and they are looking at revenue growth, right . Revenue growth has picked up a little bit but user growth already outstripped it, especially the internet names and user growth is actually declining, people are looking at this space in a very different way right now. Walking away from it, you mean . I dont think walking away from t. User growth needs to pick up for this space to actually move forward. Because in the meantime it seems like everyone is just buying apple instead. They are buying apple. Let me comment on workday. Workday is ten minutes away from our Corporate Office and the sentiment around workday is very, very positive, as you probably know, as most of the viewers probably know. Its basically a people soft former employee company, and i think workday is really positioning itself well for the whole outsourced hr boon thats happening. In terms of apple, the stock that Everybody Loves to hate. One thing i would say about apple is apple is not really a technology company. I mean, people think that it is. Its not. Its essentially a retailing company. When you hear stuff about home office or home automation through the cloud or you see other items that they are coming up with, perhaps inside the car, they are going to be Game Changers for apple. You dont think that makes them a tech company. We can call them a tech company, but, you know, i write a column on cnbc, commentary on cnbc, and whenever i say apple is a tech company i get hammered by 100 people that say its dead. Theres no innovation. I dont know what else there is to innovate. The reality is basically apple is looking for new markets to sell existing products and go into the upgrade cycle and seem to be doing a pretty good job doing it. In terms of trading tech stocks, an interesting story by our colleague this afternoon so they made news after having a rough april. Down 9 after saying well return 2 billion to investors. Dont want to be asset gatherers and the subtext is you need to remain nimble in these markets and in this case they got hurt on the long and short side of technology. However, investors complained, and they are actually going to not give the money back, at least not right now. And they did okay in may. And the idea was lets not lock in our losses and i think it bespeaks the notion that maybe there are further gains and further upside. So true. Tim, quick last word before we let you go. What are you watching tomorrow . The m a activity today continues very interesting. The hillshire farms, pinnacle, pilgrims brings a lot of people into the fray. Well talk about a lot of situations where there could be other targets out there on fast money and this is the theme that continues to drive markets higher. Great point. Seeing the financials give a bit on that as well. Thanks, tim. Thank you. Catch tim seymour coming up with that discussion and the rest of the fast money crew at 5 00 p. M. They will be speaking with exclusive mark andriesen about whats coming out of Silicon Valley next. Dont miss that. Now, sounding the alarm on inflation. Price increases may be relatively tame right now, but coming up well hear from another person who says investors shouldnt be ignoring increasing signs of inflation indicators. Also, is the market rigged against ordinary investors because of highspeed trading as Michael Lewis claims in his book flash boys. Knight capital chairman and ceo tom joys is here to weigh in and the median pay of ceos Large Public Companies has topped 10 million for the first type. Some say thats obscene and others say its proof that pay for performance is working. Well debate that one when we come back. Come back. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Become the next business to discover the new new york. You need to see this. Show em the curve. Do you know what this means . The greater the curvature, the bigger the difference. [scifi tractor beam sound]. Sucked me right in. Its beautiful. Gotta admit one thing. Cant beat the view. Introducing the worlds first curved Ultra High Definition Television from samsung. Welcome back. We start here with a news alert on one of the wall street workers prosecuted on the financial crisis. Mary thompson has the details. Reporter former Goldman Sachs Vice President from a piece toure will not appeal the case against him. Last summer he was found guilty on six of seven counts linked to securities fraud that was linked to Mortgage Securities deals that were done back during the financial or during the financial crisis. In a state he said, well, my lawyers have advised me theres strong grounds to appeal. I prefer to move forward with my education and close this difficult chapter in my life. Hes currently a phd chapter at the university of chicago in economics. He was ordered to pay 825,000 in fines and penalties and according to people close to this situation he has done so, so, again, faprice tourre not to appeal the s. E. C. Case against him on which he was found guilty on six of seven counts. Three words that have rocked the financial world, High Frequency trading, a hot topic among wall streeter and Retail Investors alike and the topic of Michael Lewiss book in which he claims the stock market is rigged. Former ceo tom joyce is joining us now. Welcome. Thanks a lot. Our bob pisani is here as well following this whole story for us. Tom, first of all, you left knight last year, in the meantime this book from Michael Lewis has come out where he says the u. S. Stock market is rigged. Is he right . No. He couldnt be further from the truth. In point of fact, hes dead wrong. Let me ask you a question. Who is rigging the market . Is the s. E. C. Rigging it . I doubt it. It duncan hes accusing the High Frequency trading if firms more like a Knight Capital of frontrunning and skimming from their clients so over a period of time sophisticated players are paying millions more than they otherwise would have to. Is he wrong about that . Wrong about a couple of things. Knight Capital Group was never High Frequency trading. We did merge with somebody which is why i left that. Firm was the High Frequency trading firm and id prefer not to have anything to do with them. Having said that, the Retail Investor should have no concerns at all about High Frequency traders. High frequency traders, assuming they are not doing anything nefarious like frontrunning or doing anything illegal, they have a different time horizon than anybody else. Let me bring bob pisani into this conversation. How does this ring with your experience . Look, you talked to the git guys here every night and day. What i thought was interesting is your comment is you elected to leave and we all knew that about the deal that came down with knight, but you said you elected to have nothing to do with them. Why did you decide not to have anything to do with them . Thats a more complicated question. I didnt like their Business Model at all and one of the reasons they needed a partner like knight is they werent doing very well so thats a much more complicated question but to the point of it, hfts, if they are doing things according to the rules of the trade, should not concern anybody. Yeah. Let me ask you a followup on the Technology Issue because nooigsing knight was almost brought down by a technology glitch, Famous Technology glitch that occurred. The s. E. C. Is considering mandating uniform standards including the exchanges and firms like knight that would require uniform testing standards. They are considering implementing this under the title regsei. Do you support the s. E. C. To have uniform testing standards . Do you think that would help reduce the possibility of the glitches like the one that happened to knight . I dont think theres anything wrong with it in the least. Uniform testing standards apply across the industry will make sure everyone is on the same page. I think in general that is a worthy thing to pursue. Lets take lets take the word rigged off the table. Thats a very loaded word. Indeed. Its obviously a word that in my view really is not accurate. Its flat out wrong. Its an irresponsible word. Well call it that. So lets use another word. Do you think regardless if the rules allow it. Do you think its fair that those with a computer edge, a high speed edge, have the opportunity to actually skim off the top. Not that its rigged, but do you think thats fair. Im not saying whether its allowed. We know its allowed. Is it fair in your view . In addition to making markets, what they are saying they are doing. Front running. Wait, wait, way. Maybe some people do front run liquidity, and i can tell you what, if anybody is front running anything they are breaking the law. And if you front run swiftly or if you front run slowly you are breaking the law, and those people should be prosecuted. All right. Lets not use the word i cant get too twist ed abot some people who get their phds in applied mathematics or physics and instead of pursuing a job at boeing or google they decide to apply their skills to the stock market. How could you find any fault in that . Because if it results in someone having an edge. A lack of fairness. Right. Thats what it results in, and just because its allowed. Just because they have the degree and someone else doesnt and its not a rigged market lets say, shouldnt that be something that is the slapped down by the feds . The broader question i think this is kind of a funny a funny argument. 1925 when some rich guy put a telegraph machine in his office instead of having a runner going down to the corner, was that illegal . You know, when they had this isnt 1925 though. Timeout. Hang on. Finish your thought. When they had specialists on the floor of exchange in a much more vibrant market because my specialist did more my floor broker did more business, he was standing closer to the specialist, was there something wrong with that . People have always had an edge. Theres a scale issue. If have you computers and technology you can you cant have fairness in an unfair world and it doesnt exist. How can it be unfair if they are playing by the rules . I have stock for sale at a quarter, right, and some buyer comes in and tries to take that stock at a quarter and a system detects that im coming in to take that stock and they take it ahead of me, thats fair . I think thats ridiculous. Thats front running. Thats what it is. But what youre saying is theres a difference between legal and fair, right . Tom, dont you think thats the case . I think its pretty bold of us to decide who is fair and who isnt fair. Why should your judgment on who is fair be any more valid than somebody elses judgment on who is fair . All right. Its all about whether people are playing by the rules. Sure, if somebody gets faster access to quotes and faster fills that might be more attr t attractive, is that fair to people who arent getting that . T. J. Is making the point that life has been unfair since the beginning of the market and 50 years after were all dead its also going to be unfair. Wait, thats not the point. Trying to make the system fair we have to accept that there are going to be people in the system that have edges, no question about that. Let me ask you that question. Thats interesting. Hfts is a broadly used term, right . Multiple participants within hft. Who are the good, the bad and ugly, can you break that down for me because it would be good to know that. I would love to know who the bad are and lets eradicate them. Im quite sure if i go out on a limb and start naming names i would have a whole bunch of attorneys calling me. Which side of the equation is it . What Participant Group is the part thats bad . Or thats acting in a way that were saying the word unfair . I think all of them who are serious about being in the market should be registered as market makers. Thats one of the things when we were at knight we had proposed for years, and it really never got any uptake in washington but start by registering them as marketmakers. I think that would go a long way. What is it about the Current System you would like to see changed . You just mentioned there putting more responsibility on High Frequency traders as marketmakers, maybe requiring them to leave quotes in place for longer periods. What would you change about the Current System if you were the king of the world . I would probably do two things pretty quickly. I would have a Pilot Program and change the tick size. I think a lot of people will admit if theres only a penny at risk then a lot of people will be involved but if the tick size is a nickel theres more p l risk and you might shake people out and id also have a pilot and get rid of the make or take rules. Ie, make or take prices and get paid for posting and you have to pay for liquidity. If you inherited a firm before your time there really standardized the whole flow idea, that was the something that was the underping of knight in its earlier years and your philosophy is at this point that thats not the right model, correct . I didnt say payment flows are bad. Make or taker is a cousin of payment or payment flow. Its not a brother or sister. Payment for order flow is terrific. You have to remember whats its financed. Go ongy felts website, free charting and free access to research and free this and free that and paying 10 a trade. It has its place in the marketplace. I they we should do some pilots and discern whether or not make or take makes sense anymore or whether these penny spreads are too tight. Hang on. We pretty much have to go, out of time. Really appreciate you giving us a sense of where you see fairness and unfairness in the markets and just wanted to end it by simply asking you the question, you know, for most investors out there, do they need to be worried about the current structure of the stock market or not . Not in the least. Retail investor has never been better served. Prices are tighter for them. The surety of executions have never been better and been in dozens if not hundreds of Academic Studies that buttress that. The Retail Investor has it as good or better than they have ever had it. Please come back. Come back again. Thanks. Thank you so much, bob. Really appreciate it. Wow. Food prices on the rise, but inflation as a whole has been pretty tame. My next guest is saying thats not going to last much longer. Hes painting a pretty drastic inflation picture. That straight ahead. Also, home prices rising for the first time in five months. But its not all good on the housing front. Diana olick has the details a little bit later on closing bell. Bell. Today is tuesday 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. In a we believe outshining the competition tomorrow requires 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. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Welcome back. Fed chair janet yellen emphasizing that the u. S. Is at greater risks for low inflation rather than high inflation. My next guest says theres economic factors beginning to creep in that could push the inflation rate higher much sooner that be expected. Joining me now is the she have economist at pantheon macro economics i believe from london. Thanks so much for being with us. Had a similar discussion with Dave Rosenberg last hour but you feel perhaps more stronger that inflation is coming. What do you mean by that and why . Well, i dont want to sound too alarmist, but my problem is really the market is very complacent, and to some extent so is the fed. What weve got is a combination of things, an unwind of of very favorable technical factors like the big slowdown in Prescription Drug prices which is over. Weve got some incipient pressure on wages which i think is going to intensify over the course of the pushing of the rent component of the cpi which is 40 of the index. Weve got a bit of upward pressure coming on things like car prices and clothing prices and maybe some upper momentum soon in Health Services as well which has been slowing and i dont think thats sustainable and weve also got for the first time in a long time what looks like a bit of upward pressure or attempted upward pressure in margins which is a very new and striking development. When i put all those things together i dont get a horrible inflation picture by any stretch of the imagination but i do get a picture not quite as good and boring as into the as the consensus. But let me let me be michael yoash cam . Complacent is what you led with, and im hearing that many of the people, that many of the analysts, many of the strategists that are concerned about inflation cite as the first issue complacency. Hang on a second. Your mike actually fell off, so can i paraphrase for you. Yes. Ian, let me ask about this complacency. Why dont people believe it if there are signs that this is happening . Well, because none of it is in the current inflation numbers. Its all lurking in the corner and right now the market is sort of marching towards that corner with its eyes closed and thats what makes me nervous. Well turn that corner and maybe in three or six months time well say, wow, didnt see that coming, and the risk is kind of broad, and thats whats interesting, you know. This is a few Different Things all coming together at the same time, you know. Margins, rages, rents, Prescription Drugs, clothing, a lot of things. Just a quick question on global wages. I mean, do you see a lot of wage pressure, collective Bargaining Agreement being resized and things like that. Tell us where you see the wages going up, if at all. A great point, anthony. Yeah. Its not happening yet, but what we can see in particular i would urge you to look at survey of small business, small companies, micro companies, were asked whether they are able to fill the job positions they have open and increasingly they are saying no, we cant. Cant get the right people and thats become quite a big problem and it tends to be a leading indicator of where wages are going, not because of any great sort of unionbased collective Bargaining Agreements like we used to see 30, 40 years ago, but just because hundreds of thousands of very Small Businesses are finding it very hard to get the people they need and they will have to pay more for them and thats why i think in the very same survey were seeing attempt at pushing up Profit Margins which is something we havent seen before the financial crash back in 08. A real infliction point given how the rally has played out over the last four years. Is the fed looking at the right measures here . I mean, when i look at the Unemployment Rate, and theres something called the nonaccelerated rate of inflation, right, they look at 5. 5 as being sort of that equilibrium where the fed can actually, you know, can have stimulus and really wont be that crisis of massive inflation. Im being told by some people that i have talked to that that 5. 5 number is old school and it should be looking like more of a 7 number which is above that and now were past it. Im not saying we have massive inflation right now, but is is there a chance that inflation creeps up a lot quicker and it really ramps up and the fed isnt quick enough to react. Thats the part that real scares me. Yeah, yeah. The easy way for that to happen is if the labor market turns out to be as tight as more nervous people think and instead of wages growing at 2 as they have for last four years and suddenly they are growing at 3. 5 , 4 and what will happen well see a quick acceleration in rents because the rental market is extremely tight and landlords are desperate to raise rents but the customers havent got any money. If you put money into those peoples pockets through wage raises landlords will take it out very quickly and thats part of the cpi inflation and we could see a really quick turnaround and thats what makes me nervous about it. Im calling for the rent is too darn high party but that might be a new york thing. Sounds like thats nowhere in sight. Really good to get your perspective this evening and i will say given the preponderance of people talking about this, the fact that the bond market hasnt moved itself is such a story. Apple hasnt closed a deal for beats audio yet but buyers of the tech giant stock dont care. Apple stock on the move on our hot list next, also ceo pay hitting a new milestone. Median salary over 10 million. Is that a signal that ceo pay is out of control, or is pay for performance really working . The panel tackling that question in a bit on closing bell. N c a bike that honored those who serve our country. And geico gave me that opportunity. Now naturally, we wanted it to be powerful, innovative and we built this bike as a tribute to those who are serving, those who have served and their families. And i think we nailed it. Geico. Proudly serving the military for over 75 years. Welcome back. Last hour we were talking about the fact that apple still hasnt closed the deal to purchase beats audio. The stock is on the move though, and its moving up the cnbc. Com hot list. Joining us with the hot list is cnbc. Com managing editor ale len wastler. Diana olick took a look at housing prices as she does quite often and this one, the top 1 of housing is on fire. Sales have gone up 21 . The other 99 , down 7. 6 , so sort of a good news, bad news thing from diana. Thats got reader interest and also the apple story. We have a feature by our markets editor looking at apple stock and its got its mojo back, she says. Momo. Since they announced their earnings, and people are thinking that the investment thats made in research is about to pay off, so people are diving into that story as well. My number three ties right back to the guests that you just had on, a feature by jeff cox looking at deflation as the great hoax going on amongst central bankers right now and that inflation is really about to take hold, so common theme going on for today exactly. Heard it both hours of this program. Allen, thank you. Take care, kelly. Good to see you. Again, go back to the housing point or go back to apple. You were writing about apple, michael yosikami. Does it have anything to do with the beats deal not going through or other factors . Headline that rumor that had apple will be releasing something related to apple tv as well as oh, the ft platform for life kind of thing. Exactly. And i think apple, too, is a stock thats been so hated and zone so unloved for so long that any positive news at this point, i think the pendulum is just swinging the other way. I dont know. I dont know that its so unloved. So many people hold it. I think in the last year or two just because i hold it just because i hold it doesnt mean they love it. You should talk to people who hold apple stock. Man, it was at 700, now its not. I hate it. Its looking horrible. Whats it at, 625, Something Like that . Exactly. So to talk about where it was down in the 3s i could understand theage risch but frankly a nice rebound. Thats not how apple s. People expect it to go up 100 a year forever and when it got to 700, a guest i saw on cnbc and put a price target on immediately that it would hit 700 at 1100 so after a while it becomes a greater fools game. When you think about apple, you think about steve jocks, the innovation there. Yeah. Everything was so cutting edge. Incredible to watch. Not really, not really. Whats the real Technological Advancement . In a word, if you could. In a word. Yeah. Maybe five. Apple is an innovative retailer, an innovative in terms of putting together products that they can launch for a long period of time. Thats what tim cook does. That was the whole concern when the book about tim cook came out. Are they in a new and less lustrous generation where steve jobs work will never be recreated and this is the new normal . Tim cook hanging in there for now. Ceo pay making headlines. For the First Time Ever the median pay of ceos topped 10 million, and some are saying pay for performance is working. Companies are making more money, stock prices are higher, but not everyone agrees. Well have that coming up. Plus, home prices higher, but not a lot higher in march. Is that a red flag for the Housing Market, or will these falling Interest Rates help to spark a resurgence . Diana olick will break it down for all of us. For all of us. vo watching. Waiting. For that moment, where right place meets right time. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. Welcome back. Ceo pay is on the rise again according to a new study and Mary Thompson has a look at who is getting what and theres eyepopping number. Reporter as the stock market goes, so, too, does ceo pay. Stock market rose 30 in 2013 and with half of ceo paid tied to Stock Performance it should come as no surprise that the median pay rose 8. 8 to a record 10. 5 million. Thats up from 9. 6 million in median pay that they earned in 2012. It also marks the fourth straight annual increase in ceo pay, and has put their pay at 257 times that of the average weekly workers pay. The pay gap expanding significantly over the last five years. Back in 2009 it stood at 181 times the average weekly workers pay. Now, the study looked at the pay of ceos on the job for more than two years at 337 s p 500 companies that filed their proxies by april 30th. The ceo of the oil and gas firm nabors industry was the highest paid, pulling down 68 million followed by cbs les moonves at over 65 million. Freeport mcmoran was number three at 55. 3 million and trip advisor steven coffer, a newcomer to the list, earned 39 million last year. Most of it because of a large stock option grant. Despite these high numbers, shareholders do continue to support these pay levels. Only 2. 5 of the firms in the russell 3000 saw shareholders reject the executive pay plans on a vote. If companys bottom lines are lower and stock prices are higher, are the ceo salaries justified if you believe in the pay performance kind of a model. Ed tor and cofounder of the Corporate Library joins us again and doesnt think so. Good to see you. My company name changed. Gmi ratings. Gmi ratings. Yeah. We stand corrected. Okay. Look, last time you were on we were talking about whether corporate boards were doing enough to rein in executive pay. Why by these numbers, would this suggest theres still a problem out there . Yeah. I think theres still a problem on it. I always say youve got to look at ceo pay like any other Asset Allocation made by the board of directors in terms of return on investment. The return on investment of these pay plans still continues to be very, very poor. Can you do better on a tbill. Yeah, the companies are doing better and the pay and the ceos are doing better and are those things connected . Now the panel is coming at you. I have a question for you. Okay. Is there a maximum pay this a ceo in your view should have . And i know its going to be its got to be commensurate with the performan performance, et cetera, et cetera, is there a cap . This is a ben jerrys thing where the ceo pay cant be more than seven times the lowest paid employee . If a stock capitalization goes up 50 billion, is there a cap on that pay . Have you ever heard anybody complain about bill gates pay, of course not. You can make all the money in the world if you make all the money in the world. Im just not sure that these people that were talking about earning that kind of money. So my question is there a cap. No. Theres not a cap, so, in other words, if youre paid based on stock incentive and the companys stock goes up 50 , should your pay go up 50 . No, your stock your the pay should be based on your outperforming the peer group and not on the total market. A lot of options grant, 77 are attributable to the market as a whole. Is that what we want to pay the market for. The shareholders approving the pay packages as they tend to do, how are we to understand that . Warren buffett who said on our air not so long ago he thought it was really rude or like really poor form to vote against a compensation committees decision. Yeah, warren buffett. Even he was shy to oppose a pay acage. Do you think thats a prevailing attitude, and how does that change . Yeah. Well, of course, he was talking about board of directors. Once he got off the board of cocacola he was willing to abstain from that pay plan at cocacola, and as a result they made some changes in it. We have seen a lot of Companies Make changes before it goes to a vote because they knew that iss was going to recommend against, it so i think there have been some improvements. And chipotle is one example where weve seen people take a stand and say that pay is too high. There has been more empowerment, at least awareness for some of these hair shoulder groups in the last couple of years, and the main way it seems like this issue has receded from the headlines is because of stock price performance. Yeah. Do we know how much buybacks might be contributing or is that a fair way for these executives to be getting a raise . You want to provide incentives for them to grow the company in terms of their products, in terms of their market share and all of that, and you want some kind of Sustainable Growth and not tricks that can be that can support total shareholder return type incentives or earnings per share type incentives. And thats measurable by peer performance . I think that thats a good way to go. Im very open minded about it. Companies should be allowed to determine what their own goals are, but they shouldnt be allowed to change them and one of the most important discoveries in a Current Study is that, surprise, the more companies change their performance goals, the worse their performance is. In other words, what they like to do is shoot the arrow at the wall and draw the target around it. Do you think that is good fodder for Shareholder Activism, anthony to my left has written about the importance of Shareholder Activism and how its the new trend in Hedge Fund Investing and catching a lot of attention in the general public, too, because activists tend to improve Stock Performance. Do you see this becoming a problem for some of the people . I certainly do. There was a press conference recently in new york where one comptroller said hed focus on the pay gap particularly in the fast food sector which hats sharpest disparity between the ceo and, of course, the average worker. I think that there are a lot of political points and more investment points to be made. We saw already what happened to the mcdonalds share herald meeting just this year on the back of this. Quickly, you are making a distinction between the innovators and owners like the bill gateses and the caretakers of 100yearold Companies Like cocacola, is that fair . It is fair and the best bang for the buckaroo teenly that we see on pay plans do come from founders. Nell, thank you. Thank you. Good to see you. Say that again, nell. Want to hear that see you. Can you say that again . We want to hear that one more time. What does it mean when home prices are up everywhere except, are you ready for this one, new york city. And tomorrow on closing bell, like mark twayne reports of blackberries may be exaggerated. The mobile companys Ceo John Chen joins us. 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. 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That means some of the deals factored into these prices were made as long ago as last november. That said, prices in the top 20 markets up 12. 4 . But you can see here that those annual gains are beginning to come down. Go local, and even some of the hot markets are losing steam. Take san francisco. Prices up nearly 21 year over year and its the biggest monthly gainer as well. You still see that line thats beginning to platen out. Same for phoenix which saw huge price jumps, bidding up the bottom prices there. Still up but flat lining. The issue is simple. Investors are moving out and mortgage dependent home buyers are moving in. The prices are higher because of a lack of supply, not because people can afford these gains. This is why the 1 in housing is soaring and the 99 is falling. If you want more on that, you have to see my story online and interview with the ceo on realty check. Kelly. Thats a tease, diana. Up next, we look at the day that was. Well preview the day ahead as well. Share your thoughts as well on twitter. Closing bell is the way to reach us. Well be right back. With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Humans. Even when we cross our ts and dot our is, we still run into problems. Thats why Liberty Mutual insurance offers accident forgiveness with our auto policies. If you qualify, your rates wont go up due to your first accident. Because making mistakes is only human, and so are we. We also offer new car replacement, so if you total your new car, well give you the money for a new one. Call Liberty Mutual insurance at. 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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. We just closed at new record high at s p 500. 1911. The question is what to do in these markets. David. I think if i wouldnt be a buy right now. I would wait until september. Thats when i start putting money to work. Do you agree, michael . Dont agree. I would be a selective buyer. Its going to be a trading range. If we get any kind of meaningful move down, start buying. Kate . These guys both make sense. The folks are looking to a big down side risk in july or august. I think if youre in, maybe stay in. Everybody i know is predicting volatility and saying watch the picks and watch the russell. Its just been up 4 in the last four sexssions. Im not going to hes going to disagree with me. I think all of these guys short is going to cause the market to creep up and have to chase the market. I think shes got some of the best insight. What youre saying is youre taking the other side. Those hedge funds are going to get caught of getting let up on twitter. Im actually very bullish right now and i think the ecb and fed and bank of japan are in tilt, easing mode. Youre bullish . I am. Because remember what temperatu tepper said. If they dont well have another conversation here. Ill say its going to get rocky. For now, guys, thank you. Great show. Appreciate it. Fast money is coming up. Mandy is in for melissa today. B wh whats on top . Melissa is out in Silicon Valley. Shes going to be talking with mark and the ceos of fireeye and its going to be a huge show and of course, we have got the trade as well. Its going to be starting right now. Jam packed. Ill let you get to it. Fast money starts right now. We live in the Nasdaq Market inside new yorks time squares. Live in Silicon Valley. And has an exclusive interview with marc andreekken. Let me introduce our traders tonight. We have ti