Transcripts For CNBC Power Lunch 20100121

focus, we have 4, 5, 6% declines in the material names as well. look at the drop there. the important thing that's going on here, sue, that china gdp is another add-on effect, figuring out what effect that will have when the chinese start raising interest rates. >> that's one of the major factors in today's trading session, let's talk more about what's going on in this market. we have all of our experts lined up to talk about the markets. rick santelli, i'll go to you, if i could. we've seen some interesting action as traders look for safety given what's going on in the stock market. and also in the dollar, and also in china. make sense of it all, if you could. >> i don't think you're going to get any good answers in the markets, because markets by their very nature measure making money. i think making money will get impacted negative by some of the ideas the president put forth. however, i think in the end, where he wouldn't to go isn't a bad place, i believe that many think taxpayer money shouldn't be the underpinnings of leverage and trading, though many believe it should exist. create separated companies don't create balance sheets of bank. however, here's the other side. people are very mad that it's a very punitive. negative speech, that they believe the government caused the lion to eat the ray meat and maybe this isn't the best time to implement something that will not be job friendly, more of a process than an eye detect. >> vince farrell what the president is proposing would no versus addressed the risk taking, the fact that they had exposure and risk and leverage on their balance sheet that would not fall under the umbrella that the president is proposing. >> right. and what also was not clear is if goldman sachs separates itself from being a commercial bank, can they borrow from a commercial bank? so i don't think this is well thought out at all. my take is the government is staying there are institutions we will protect, the others you want to get bill, you want to fail, we're going to let you fail, you're now on your own and we'll try to restrict the activity. if you go off on your own, you're never going to get help from the government again. >> how realize tick is that? how do you then make them -- the ability to fail be there if they've got operations in the uk, operations in europe, operations overseas. how do you unwind that, denis? >> and maybe we're actually maybe underestimating this reform. maybe it would dismantle all but the biggest banks. >> i think there's a contradiction here. the government wants to prop up the banks and make them profitable to get their money back, but at the same time they're dismantling them. the government is long 8 billion shares of citigroup. >> and now we're taxing them. >> tanking on the news that the -- >> sharon? >> when you're talking about commodities on a global scale, this really comes into play. yes, the obama administration wants to crack down on the banks, but a lot of 9 trader say eventually in they want to do certain times of trading they'll find other places to do it. as one trader told me, it looks like the banks are saying you can't trade, well, we'll just sell everything. that's the immediate reaction as traders try to figure out what this means. >> you mentioned goldman sachs and the possibility they will no long earl be a commercial bank. do you think they will get out of these kinds of restrictions? >> i think they have to. they'll stop being a commercial bank, but the implication that was made effect tiff, is the big banks overseas will come and take all the action. unless jpmorgan and jamie dimon, pretty smart guy at the top, he says i have a brand-new glass-steagall and will simply have to tear this puppy apart. >> is there any reason for me to today as a long-term holder and own bank stocks until i know how the regulatory fog is going to clear? and doesn't this all suggest that any of these big banks, unless they do a transformer deal and morph again, that they're not going to be as profitable as we thought they were going to be, so why own them? >> no, i was a saider of goldman sachs on the opening, and would be into the regional banks, because the regional banks do this and doing very well. it's apparent they're healing themselves, and if you're a manager, you have to investment in financials somewhere. >> mike they're down over 1% in a largely tech stork kind of universe. >> yeah, but the nasdaq is trimming its losses a bit, but still all about the number two, because the nasdaq is down more than 2% in two days, and that's its worst two-day losing streak in about two months, but it will be a lot worse here if not for a handful of really positive earnings stories. there has been absolutely no pullback, for example, in shares of ebay. the company beat the street, put out some decent guidance, starbucks was trading at a new intraday high. pa anywhera is at a new high, and vince was just talking about the rijen banks weiss at fifth >> tyler asked a very important question i think, vince, might be interesting to hear your comments. how many long-term investors are in the market? it seems the gyrations are all trader based, everything seems to be a trade and nobody is looking -- they're looking at the news at the moment and trading right there. >> you're absolutely right. take a look at the percent of electronic, which by definition is almost fast-term trading, but that creates an opportunity for a long-temple trader. we haven't had a 10% correction since the rally started last march, and so% corrections are normal rule of them. this is a great excuse to have a correction, but i wouldn't get too upset. >> the president keeping say we want to keep it from happening again. can you really regulate against armageddon? >> sue, you can't regulate morality or against armageddon. those are two basic rules. >> let's get the fallout from some of these new rules. john harwood joins us along with ayman jabbers from politico. i'm sorry if i missed this, maybe all you inside the beltway guys knew for months and months that the obama add mrgts was going to proposed banning big banks from trading on their own accounts. i hadn't heard that, or was this a sudden belated at the same time? which is it? >> this was a sudden belated attempt that the white house described today on a conference call for reporters as a long-term thing they've been thinking about. what you say was a very feisty president. he's spoiling for a fight. >> he's dying for it. >> he said if think lobbyists want a fight, i'm ready. in the wake of this massachusetts election, the president needs somebody to fight against, to show his political base that he's doing what they sent him to washington to do. so there are a lot of politics involved here, of course, but there's a lot of policy as well. they're saying what we're doing is trying to separate out some of these risky activities that helped to cause the financial armageddon in the first place, and also because we're seeing some of these banks taking advantage of this safety net, they call it, to make propretear trades and huge profits. >> john, can they be done just with the s.e.c. and fdic bureaucracy, or does it have to be done with congressional thor asian some. >> what's been moving through the house has permissive regulation, saying regulators can take extents to limit risk. what the administration is doing is saying, whether or not it's feld out in the financial regulation legislation, which has not moved through the senate yet, here's how we're going to use that authority and here's how we're going to reg lay. i agree with eamon on the politics, and that politics has all the more reason for the administration to push because of the massachusetts results. on the other hand, paul volcker has been the head of the president's economic recovery advisory board since the beginning of the administration, and voelker has been talking about this for months. the reason you saw the president describe this as "the voelker rule" is he thinks paul volcker is a wing man with pretty good credibility to say this is responsible, even if wall street doesn't like it, it's a responsible step to take. >> but voelker had been a bit of a voice in the wilderness and had not been regarded as part of the white house inner sickle on this and other things. he had kind of been exiled, true? >> he has been heading this board, and maybe the fact that the administration stood with him today and inare unveiled this and suggests he's not quite as much in the wilderness as people thought. >> these guys in the white house are nothing if not smart pollsters. they must have some polls data that tells them this resonates with the voting population as a whole, and now today we also get this amazing ruling out of the supreme court that says that corporations -- can you say goldman sachs?" are not going to be free in the 2010 elections to put their own advertising behind candidates. tyler, just to respond to that point, i think the white house interpretation, the democratic interpretation of some of what's happening in massachusetts and around the country, and it's not just limited to massachusetts, is that it's not necessarily left have right, it's big/small. average person feeling like large institutions, washington, government, but also wall street and corporations are getting benefits at their experience and not serving their interests, so i think to the extent the administration says we're going after size, bigness, they think that will resonate. >> all right. gentlemen, thank you very much. appreciate it. we're going to cover it throughout the next two hours and the reaction to it. there are some people who feel we should bring back glass-steagall, that that will take care of the problems. we will speak to maria cant well in the next horry, she is sponsoring a bill,i first interview since she introduced the bill. and goldman sachs, the regional banks railroads are were in the heart of the earnings season. also this hour, the fed making a killing on its aig contracts. goldman reports blowout reports, so who is the better investor? we'll talk about that. we'll get the annualist bus ahead of google's results. and "fast money" halftime report. with the dow just off the lows, still done 181 points, 1.75%, with all the major banks suffering percentage losses of between 5% and 7% right now. what are you doing...? calling chase sapphire, seeing if we have enough points to stay longer. now? you don't have enough time... and you have to push all those buttons... no buttons, someone answers every time. yeah, right... bet you a massage... yeah, ok. hi, julie... i have a question about my points. hi, what button do i press for a massage? hello? new chase sapphire... you call. we answer. no waiting. just press right here... go to chase.com/sapphire. chase what matters. as if on cue, vince farrell, the earnings coming out today have been not insignificantly about banks led by the biggest one of them all, goldman sachs today what did you see that you liked or didn't like? earlier you said you recall selling out of goldman sachs. >> what they did earn is blockbuster, but you really have to adjust that number, tyler, for normal compensation. they didn't accrues any normal compensation because of the controversy, so you have to scale it down. still if you adjusted for that, better than expected, still a as it was, the quarter was well over 30%, but that's without the bonus accrual. so the company just is a money machine. they do everything very well, but what is the environment they're going to be allowed to do it in tomorrow as opposed to yesterday? >> i would have to say this reaction that you're saying in the stock today has more to do with the regulatory fog than with an earnings report, which by any standard was pretty good. $8.20 in eps, compared with an estimate of 5.20, and loss in the year-ago period. as we move into some other names like fifth third, what we bebe gan to see is some lessening of some of the credit worries. >> that's very important. not only were the earnings better than expected, you see non-performing is going down, you see reserves necessary to be put aside for potential losses. so all of a sudden you're starting to get a bit shift in these regional banks where we were fearing because they were a bit more exposed to real estate losses that perhaps it would be an ongoing thing, and their capital ratios are just terrific. and once again the chart tells the story. here is a company up on a day when all of the dow stocks are down, up on a day when the big goldmans, jpmorgans, morgan stanley is down because of difference of the business. they would be less affected by any of the obama changes. pnc, eps of 90 cents a share, beating estimates, risen a beat as well. let's look very quickly as some of the financials in focus. 30% of the financials have reported so far this earnings season. 61% have beaten eps, 35% have missed. however, in the revenue area it's more of a 50/50 split there. . revenue growth for all of the others in the s&p, just 5%, if you sweat out the financials, it is zero%. mr. farrell? good to be with you. sue, back to you. >> thank you very much, ty. david faber joins us with more perspective on the sell-off we're seeing david, we did see the sell-off pick -- and whether or not go private again, even though they say they're not going to do that. remember, they are -- so much uncertainly -- the statement that we've gotten from the white house, sue, i talked to a couple banks, and really very difficult to fully understand from their perspective what it is that they're proposing and don't forget, of course, it's got to go through the legislative process. but specific, for example, to this proposal that a bank would not be able to own a hedge fund, for example, jpmorgan owns a very large hedge fund. that it would be profiting from, in the case of a hy-bridge or many other asset units, it's clients' money, not the bank's money. that's not the case with a private equity. they are investing their own capital in that. so you might, if this were to become law, see the banks have to divest themselves of the private equity operations, but normally you get a proposal like this after they bring in a lot of the guys who run these places and discuss it with them. that didn't happen this time. >> no, because many people feel it's in reaction to the loss in massachusetts and the administration and mr. obama's advisers feel they can capitalize on the outrage that has concerned bonuses and large bank profitability. if you put that aside, how net net do we think this will affect the profitability. the street is voting with these feet and saying they won't be as profitable, therefore not as good an investment. is that an overreaction, do you think? >> i don't know i think the not knowing is enough for someone to say i don't want to own it right now. compensation was somewhat stunning in and of itself, but i spoke to a couple hedge fund managers saying i can't touch the sector, because i have no idea what washington will do. that's what's going on here, we simply don't know what impact that will have on the profitable of the banks. >> i believe i heard representative kanjorski say this, saying we can fix anything so that the most horrible things don't happen. that's setting the bar awfully low, right? i mean, if that's your goal. >> that's your vote of confident. >> that make me goes, what in the world? it sounds like they're making it up as they're going along. >> they are. how do you define proprietary trading? >> how do you define risk? what is too much? what is too little? >> when there was a little more trust between washington and wall street, you might have actually had something that came out that had already been at least discussed or vetted or gone over with some of these people who are trying to figure out. >> my head hurts. i gist want to go back to covering koenen or jay leno. >> other tiger woods. those were the days. >> goldman sachs getting ready to put up on his -- blowing away estimates. at the same time, the fed sitting on billions in paper profits from the aig contracts that got everybody so upset. who is the better investor? lloyd blankfein or ben bernanke? >> the dow is once against testing its lows. 10,396, the leaders to the down side, the financial stocks, and also some of the material stocks. gold is off $10. copper and siller are also off sharply. back in a moment. tdd# 1-800-345-2550 investors got lost in the shuffle. tdd# 1-800-345-2550 investment firms forgot whose money it is. tdd# 1-800-345-2550 enough is enough. tdd# 1-800-345-2550 it's time investors got what they deserve. tdd# 1-800-345-2550 real help that's there when you need it. tdd# 1-800-345-2550 pricing that leaves you with something to actually invest. tdd# 1-800-345-2550 at schwab, we offer a lot more help for a lot less money. tdd# 1-800-345-2550 because at schwab... tdd# 1-800-345-2550 investors rule. tdd# 1-800-345-2550 are you ready to rule? at the end of the day in sitka, alaska, everyone awaits the return of the fishing boats. ♪ their safe arrival is highly anticipated, ♪ as is something else. a shipment of natural sea salt from cargill, essential for preserving the catch. we deliver the salt on precise schedules... and ship it efficiently all along the alaskan coast; saving the fishermen money, and their catch. this is how cargill works with customers. i'm mary thompson. when the president was speaking about these proposals on bank reform, goldman sachs was also holding its analyst comments. we want to bring to your attention a couple colts made by david vinier on these calls. earlier he did say rolling back glass-steagall would be impractical, then on a call that just concluded he noted proprietary trading as well as private equity did not cause the financial crisis. he didn't want to comment specifically on the president's proposals and how the firm might react, because they hadn't seen the proposals yesterday. as far as proprietary trading he said on any given year it would be around 10% of total rfb, but a number that fluctuates from year to year. when asked whether goldman would consider not -- or reversing its bank holding status in light of the proposals made by the president, he said that is not something that goldman is considering at this time. sue, back to you. >> thank you very much, mary. that must be a fascinating conversation call, and she'll bring you more headlines as they become available. meantime the controversy has focused on whether the fed paid to which to the bank but is the fed ending up better? steve liesman joins me on whether ben bernanke might have beaden mr. blankfein. >> critics argue that they paid to have on the derivatives, the so-called back-door bailout, then tried to limit the disclosure. amid that controversy, almost unnoticed is that the portfolio of the maiden lane three fed partnership which has the aig says has likely generated billions more in paper profits for the central bank. fed officials contacted by cnbc decline to comment on the value of the portfolio, but said they expect to be paid back every dime and that the aig portfolio will show a profit. many derivatives say bernanke may have -- just yesterday warren buffett praised his prowess. >> he's got a great hedge fund. he ought to ask for 2 and 20. because he has they 5% assets and no cost on the liability side. he should have negotiated a better deal. >> warning, this is not the entire portfolio. this is what happened to one asset, 2005 subprim mortgages constitute about 30%, prices are up about 10% from where the fed bought in. that doesn't count the cash kicked off, but overall the fed receives high-grade assets and backed securities, essentially the top of the capital structure of these complicated derivatives. they kick off cash and have risen in value. that's the controversy. most people missed the other side of it, it got the underlying securities at something like 50 cents on the dollar between the rise in prices and the cash kicked off the fed has so far made out pretty well. >> steve, let's talk more -- >> ain't that great? i mean, come on. we're so mad at the fed, we're investigating -- >> does this quell some of the outroar on capitol hill? i doubt it. >> what i would like in the discussion is, say, well, we gave myoto aig, yes, we got back assets in return. let's have the argument about the fed's activities in that context of the actual facts that were out there. 100 cents on the dollar, 50 cents on the underlying security. that's a debate we should have. >> let's have that with henny sender, with "the financial times." it is an intriguing notion that mr. bernanke is a better trader or manager of assets. where do you -- weigh in on this, if you would. >> i think the amusing thing is how many people are saying that aig is the big loser, that this was a sweetheart deal that the fed cut with aig and the fed has so much more up side than aig. of course, the deal was cut at a time when everyone thought the world was coming to an end, and there was no up side. >> we should provide people those details, the fact is when this thing gets paid off. when the fed gets paid off, two thirds of the up side goes to the fed, only one third to aig. >> exactly. if anyone is being criticized now, it's liddy for cutting this sweetheart deal with the fed. >> steve, you mentioned these are obviously paper products. over what kind of time period will we see the extraction of these gains? >> go to what warren buffett said, the cost of the funds is almost zero. they can sell these out over time. they are illiquid, the profits are on paper. as henny pointed out in her article a couple days, it could pretty much crash the market. >> bernanke isn't bound by mark to market regulations, so blankfein and goldman, the profits they made, that was trading with their clients' moan and their own account. and the fed is trading with taxpayer money, of course they were the only ones who would buy the aig stuff when the night was darkest, henny. >> and these assets reflect a e rereflation. >> one more small point, denis, the fed necessarily comes in at the bottom in the sense that some people argue they make the bottom. when they come in, it's the bottom. you could say there was another bottom, which was the complete fear on the part of all the private sector to lend to aig and the fed prevented a worse bottom, did you it does sort of -- bernanke has an advantage. >> how does it influence the discussions on the hill? we may have the vote on mr. bernanke tomorrow. does it sideline some of the criticisms out there or not? >> franly i don't think congress gets any of this. i don't think they understand the deal. i've said this before right here, i think this is a scandal and so far they have failed to find that set of facts. >> henny, the last word. >> i think that the maiden lane 3, which we've talked about is a great victory for the fed. however, maiden lane 2, and the original maiden lane to bear stearns aren't such terrific good news. >> right, the people got hurt who were the investors. >> which ultimately should. >> i just want to point out, when bankers are trading with their own money, might they even be more careful and more careful about risk manage than when they're trading with client money? >> interesting point. >> i think we're cracking down on the wrong part of the animal here. >> henny, thank you very much. >> my pleasure, as always. >> appreciate it. straight ahead, google shares up more than 100% in the last user. today's time to back that up. earnings after the bell. what's the trade for google before they report and after? we have a task force to get you ready. >> and at 12:45 eastern, it should be a very interesting session of the "fast money" halftime report, melissa? >> we do have a lot. you know about the sell-off in the financials, do you hold your nose and buy in the face of the uncertainty? we have all the way toss play straight ahead on the hafertime report.  welcome back, everyone. we're about halfway through the trading day. in the headlines at this hour, president obama, as you probably have been hearing, unveiling a plan to limit the size of the nation's biggest banks and their risk-taking activities. southwest flying against the head winds of a recession and volatile fuel prices. the nation's largest discount carrier making money in the fourth quarter, topping wall street estimates. staying with transport stocks union pacific reporting a small quarterly profit, but the nation's biggest railroad still beat the street. let's go over to mr. nesto. >> i've got to show you this first chart here. look at the disparity between the regional and the financials. this on a stay when the regional bank index is hitting a new 52-week high. you cannot be more in your face when the biggest banks in the world are taking it heart and this index surging to those levels. if you look inside of it, i show 42 out of 50 members trading higher, it's up 11% already year to date, and you're seeing a five to ten-point percent gains in any number of these members. denis, over to you. google is set to report hours from now. investors are listening closely to what the internet giant says about pushing the mobile space. acquisition plans and of course google's china challenge. joining us, jim goldman, also scott kessler of standard & poor's and heath terry. scott, i'll start with you, we all like to look at google as a tech teller of things to come, yet it's an advertising and consumer stock. what do you hope to get on the inside of the state of the consumer. >> it's 97% of its revenue mix is derived from online advertising, so obviously it's going to tell us a lot about the strength of the economy, but frankly for q4 how strong the holiday shopping season was online. we think ebay results indicated they were probably pretty good. >> what do you make of this, heath. can we take from the results and from the strength of e-tailing over the holiday season their results will be strong? >> sure. it fuels a lot of the growth we have seen in e-commerce. ebay and paypal benefited, but it's the resurgence you're seeing across all of advertising that will make this a good quarter. >> jim, counter-punch it for us, will you? what's the possible down side? even droid, their hottest new product, they bought that from outside. what have they done lately for me? >> a great question. i think a lot of companies did you the downturn looked at google as a value proposition, learned a lot from a new strategic platform, if you will, and now that they have more money to spend, that accelerates going frar, but denis, you have a good point. the android mobile operating system now available on all the operating -- mobile is a big deal, but losing that relationship with iphone and apple likely with a possibly deal with microsoft. that doesn't bode well if the future is all about mobile. >> just one quick question about an announcement youtube made that it will have a paid rental model for movies on the youtube website. is google changing its business model or expanding? >> i don't necessarily if you'll see a change, but clearly they've been evolving the business mod model, julia. what they've been focusing is on is not just growth, but profitability. they highlighted that very strong her in the middle of last year, and we expect that to be the driver. >> unfortunately we have to leave it there, but heath terry, scott kessler, and jim goldman, thanks for joining us. a special edition of "street signs" jim cramer joins erin, as they go in-depth on "breaking the banks." and what this might mean for the economy at 2:00. still ahead, it is bonus season, bonus-bashing season as well. should the banks shell out big bucks or is that simply a very bad idea in a year where the government has had to bail out a lot of the banks? irmgts up next the "fast money" "fast money" halftime report. we'll be back with you at the top of the hour. with fidelity, you can take your trading around the world, because now you can trade u.s. and foreign stocks online, in 12 markets, 24 hours a day, all from the same account, and settle in u.s. dollars or the local currency. plus, we'll guide you with international research and realtime quotes, so you can diversify your portfolio, wherever -- whenever. and we'll be on call around the clock, while you trade around the globe. fidelity investments. turn here. what are you doing...? calling chase sapphire, seeing if we have enough points to stay longer. now? you don't have enough time... and you have to push all those buttons... no buttons, someone answers every time. yeah, right... bet you a massage... yeah, ok. hi, julie... i have a question about my points. hi, what button do i press for a massage? hello? new chase sapphire... you call. we answer. no waiting. just press right here... go to chase.com/sapphire. chase what matters. welcome to the "fast money" halftime report. we're getting to the heart of the action. stocks sliding as financials fall apart. where can you profit and protect in today's tape? let's get to the word on the street right now. the negotiator guy adami, john najarian and scott redler. dr. j, i've been noticing an explosion of the volume, turnover in these financial stocks. have you noticed an explosion in the volatility of these stocks as well? >> you bet. you nailed it, melissa, and i'm not surprised, because you know this stuff inside out. volatility is a big thing. we talk about the tell being an unusually bearish or whatever. certainty it's been that in particular for jpmorgan. they've traded 66 million shares today for. morgan stanley trading about 35 millions versus 14 million. goldman stacks triple normal as well. they got down to that september 2nd low, which was 150.14, broke through that, and then exploded back above it as soon as the president finished his speech. >> yeah, i'm going to stay with you. dr. jay, let's say you're like your brought pete, you didn't use the opportunity when they were down, with the volume at this time of these stocks exploding, is it too late? >> yes, it's too late to buy into that volatility right now. you could still protect yourself by buys one put and selling a put underneath it, but if you're buying insurance, it's like waiting until the hurricanes hits florida. >> guy, you've been all over this trade and the likes of wells faro and jpmorgan should be shorts. what do you do at this point? you've been right on this all the way up and all the way down. >> i think the best defense is a good offense. i would push here. i think you're now i think shorts are in a position of strength where they've been playing defense. i think. he brings up a big point, volatility is too much but i think you could be stepping on the accelerator. there's nothing to indicate to me there will be a meaning much bounce. i don't think you're going to see it. i think now rallies will be sold into and i think shorts could be aggressive here. >> let's get to the chart of the day, because this exemplifies what we've been talking about, scott, you've been watching -- here your focus is gs? >> yes, and i agree with both these guys, now is not the time to get your insurance. you needed to read the signs as they poor technical indicators have added up. right now, you can press on the short side, the bears are getting a bit aggressive. with goldman sachs we have a macrobearish, the neckline has been pierced about 160, even in with the coordination of the 200, it pushes through, stops out, comes back up, there's a bit of a retracement, but like guy said, if it doesn't more than a decent-size bounce off the lows, you can short that rally, and i think the measured move is about 130 to $135 a share. >> eugene, wall street does not likes taxes or uncertainty. here we have a double whammy, a combination trouble for the stock market. what do you do here? do you swallow in and buy in thinks these are levels that we could go more to the down side, but in a year, in two years these stocks will be higher? >> this is where fundamental investors have an issue. we have a $200 price targets for goldman and they had good earnings. even though i hear technically it could go down, i think you guy goldman here. >> let's get the intraday trade as well. gary kaminsky, who is on the fast line, what are you do? are you shorting any of these names? >> hey, melissa, all i can say is wow, i field a bill like bill murray in "groundhog day" but it's about the overall stocks with good numbers, the winners of last year which continue to be the source of funds. if i owned goldman sachs, i'd be concerned about three things. one, will this new cost any ratio structure, will tra that have an impact in terms of people wanting to leave the firm? two, will the multiple that these things trade at, which if you go back and look observe last decade, there are times when the investment banks trade at high multiples. >> i'm go iing interrupt you. you're introducing fundamental analysis where there's no rational, all we know is they're going to come in here, impose restrictions th restrictions that could change the face of wall street. how do you value stocks in light of that? there that's the point. the point is, are you, if you're going to own goldman sachs, are you going to be comfortable owning it at the same projected multiple, price earnings multip multiple, when you're not certain what the business model will be. >> stay away is your bottom line? >> if i owned the stock, i'd want to know. >> if you were a fund manager, would you sell? >> i would not want to own goldman sachs until i one stand what the new rules of the road are. >> got it. >> one other point, there's another, in terms of the short term action in the stock, a lot of employees own a lot of stock. some of the stock will come free. they'll be able to sell the stock. if you work there and get more stock, my guess is you're going to want to sell stock you get to take some off the table. >> time to take your position. watching google, after the bell here. talking to scully at jeffries and said google can knock the cover off the ball. we're entering a seasonally weak period for stocks and the industry trades down 5% lower is what he's looking at. what do the charts tell you. >> the complex of the market has changed. the uptrend has been broke on the s&ps. google broke its 50-day. uncertainty with china. even if it's a good report in google, tonight, people will sell into that. i wouldn't be positioning long into that. if you don't have a position, if you do have a position, you haven't sold calls or hedged it, you better do that before the report. >> dr. j., you're watching the conference call tonight at 5:00 p.m. eastern. what do you expect? how do you think the stock is going to trade tomorrow? >> key word is china. we're going to be watching for how many times that comes up and exactly what their exit strategy is, if there's an exit strategy. i don't think there will be, but i agree with the sko,scott i th stock will be vulnerable, after the call. >> heavy activity in the ag name. >> yeah, potash, broad point pounded the table and soleil slammed the door on them. the market's been very weak. the name continues to see active buying of at and out of the money calls. watch this going forward. ags made an adjustment to the downside. you're getting in at a cheaper price. i wouldn't buy options naked here. >> got to take a pause on "the halftime report." after-hours act on google, american express, amd and monitoring the conference call by google to bring you the latest developments and the trade live. should we bring back glassman steagall? senator cantwell thinks so. she's sponsoring a bill to bring back glassman steagall. halftime after this. strong earnings, fueled market gains last year. judging from the ho-hum reaction to goldman's blowout, how do you stay ahead in a tired market. trades firing on all cylinders. after-hours action rolls on with the biggest names on of the street. we break down the charts to give you the real-time trade into obama's not done with the banks. new limits that could change the very nature of wall street. we trade winners and losers on america's post-market show tonight. welcome back to the "fast money halftime report." time for "power lunch" trade to go. negotiator, taking a look at company formerly known as american bearic. >> love the glasses. nobody rings at bell at the top or the bottom. guess what? american bearic did when they bought hedges in december. look at their chart a gold chart that was the high. now with american you have market risk, company risk, organization risk, all kinds of risk. don't know if it's worth a short but it trades down to 34.5. >> yesterday you were looking at gold, 1060. >> 1065 is where india got in. that's probably where it has to hold. with the dollar continuing to rally, 1065 might be a speed bump. >> time to call the close. let go around the horn. buy or sell into the sell-off, scott? >> you've got to be short into the close. if you haven't sold, look for any bounce and sell longs. >> eugene. >> sell on the close. i didn't like the jobless numbers. >> dr. j.? >> i think you sell into the close, and hope that you get something n. good in the after-hours of google. >> i'm scared but everything thinks freeport mack ma ran is going straight up. it hasn't. we'll tell you the level it has to close above to the uptrend to be intact. >> that does it for us at halftime. watching the s&p 500, we tick below 1115 and negative for the year. tonight on "fast money," breaking down what obama's proposed new limits could mean for banks and which companies could benefit. >> we have the sell-off covered top to bottom. whether or not you should bring back glassman steagall, would that solve the problems in the financial industry. still to come on "power lunch" -- >> "power lunch" goes one-on-one with maria cantwell. she says her bill will protect your dollars from wall street's risky schemes. the bond us in backlash continues. goldman sachs set to pay out $16.232 billion. should the company give the cash to charities, shareholders, save for a rainy day. apple at it again. first the ipod, then the iphone. now comes the tablet. will it be the ultimate game changer for everything from reading to tv to video games? the inside scoop straight ahead. the second hour of "power lunch" starts right now. the second hour begins. if it's anything like the first, it is going to be a very busy hour with the dow down more than 200 points. i'm tyler mathisen. michelle caruso-cabrera is off. president obama's new bank regulatory proposals contributing to a stock sell-off. as i mentioned, right now the dow down more than 200 points, down about 2%, on a broad-based sell-off. financials leading the market lower on a day where all 30 of the dow stocks are lower. jpmorgan chase, bank of america, citigro citigroup, goldman sachs, big banks down sharply today. >> i'm sue herera. just how unnerved are the markets? take a look at the vix. it had a big jump, just after the president finished his address. now it is up 16%. we're up above the 21 mark on the vix. >> worried about complacency, guys. i'm dennis kneale. big winners today, regional banks surging on upbeat earnings news, comerica, fifth third bank, suntrust banks, rising to a slaughter. >> bob pisani at the new york stock exchange, bob? >> let's take a look at banks again, because what dennis brought up is very interesting, and there's a reason why the regional banks are doing well. on the big banks, huge volume. for example, bank of america, close to 300 million shares so far. normally it does 220 million shares. obviously on president obama's somewhat confusing proposals we don't have all of the details look at regional banks again. the reason they're doing so much better they had little in the way of the trading operations the type that president obama is proposing restriction. they wouldn't be affected by this. so there's the reason people are starting to switch money into regional banks. whats weak today? what's moving? take a look at exchanges. new york stock exchange, which has a stock, the nasdaq has a stock as well, they're trading. the concern limits on bank trading activity would limit trading activity in stocks as well as bonds. so some exchanges are weak as well. mike huckman? >> a look on the bright side of things yesterday the nasdaq was the biggest percentage loser of threatt major indexes. today it's the smallest percentage loser of threatt major indices. the reason, upgrades out of the likes of ebay up 7 357b9%. starbucks well off of its highs of the day now. panera up 6%. fifth third bank up 9%. strength that bob and dennis were talking about in the regional banks that trade at nasdaq. d zion up 6%. oracle got unconditionable approval of its deal to buy sun microsystems but down 1.5%. genzyme announced a six-month review on whether to approve a drug for a rare disease. google ahead of its earnings after the closing bell, down 1.2%. tyler, back over to you. >> mike huckman, thank you. president obama crack down on banks, proposing new limits on their size and activities. what he said earlier today. >> banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit, unrelated to serving their customers. >> senator can't well of washington state, her first interview since co-sponsoring a bill in disease to reinstate the glassman steagall act. welcome. good to have you with us. i wonder if you feel that what the president appears to be proposing today obviates the need to reinstate glassman steagall. >> well, i think the term for proprietary trading problematic. what exactly will be included in that? we know that when the smartest guys in the room cook up now ways of having dark markets, everybody in the economy suffers. and i think going back to glass-steagall is what the american team understand as a division between commercial banking and protecting the deposit and investment banking, which is risk taking. i think the american people want those things separate. >> senator, would that proposal, if your proposal goes through, would it affect an aig, which was one of the biggest problems in the financial meltdown? would aig fall under that pressure measure, or not? >> it would separate commercial banking from investment banking. so those practices of insurance would be separated. and so, what we're trying to do is not have the incredible market drive up of over the counter derivatives that weren't on exchanges and basically funneled with money that should be reserved and protected instead of being fuel for a dark market. >> the reason i ask the question those feel that glass-steagall was made for a time before insurance companies and other types of financial institutions changed their skin, if you will, and started to go into those areas that you just described. a bring back of glass-steagall might affect the banking system but not some of the or entities that got us into trouble in the first place they don't full under that umbrella. >> i think we started a slippery slope with some of the policies of the fed, even before the repeal of glass-steagall. i think that we have to come back to clear lines of making sure commercial banking is done in a risk-free environment and that those deposits are secure and separate the risk activity of the investment houses. so we have a lot of work to do to get money flowing again to small businesses. we have something like 83% increase in small business bankruptcies and all of the money is still going through large institutions into dark markets. >> but senator cantwell, i think that what sue's getting at, people are arguing restoring glass-steagall would not have prevented the financial crisis. >> oh, i think that you have to be specific about the details. but clearly, a line like glass-steagall is important and in making sure that federal regulators don't write loopholes into the statute that allow them to get around glass-seeing itle. >> it's dennis kneale. aren't you afraid, if we do this, we hobble u.s. banks and let foreign banks become larger and beat them to the punch? >> no, i'm concerned that the standard of the united states if it continues to be allowing dark market activity with reserves of u.s. deposits, that that kind of activity around the globe will funnel into an even larger implosion than what we saw in september of 2008. >> do we know for sure deposits went into the risky stuff? i thought the bank's own capital did. but there were rules with the elimination of glass-seeing it that stopped bank for using deposits -- >> no, it's the capitalization of them. >> senator cantwell, correct me if i'm wrong, but a lot of the companies that seem to precipitate this crisis, like bear stearns or became victims of it, like lehman, weren't sort of federally regulated banks and neither was morgan stanley nor was goldman sachs, in a major way at the tomb time the crisis at its worst. they weren't banking operations they were trading houses. so how does this -- how does this then do away with some of the problems that came -- and aig, as sue mentioned -- how does this do away with problems that created what we think are systemic risk? >> it isn't a solution in and of itself to the fact that you have an over-the-counter derivatives market, that is a dark market, not on exchanges and without transparency. but when you combine the commercial banking and investment banking you add fuel to that fire that is burning in the dark markets and it implodes to a much grarnd scale, as we saw with credit default swaps. they are related, but separate issues. and you need both. i think mr. volcker has spoken out saying you have to have the overaccounted derivative markets excluded from commercial banking. >> follow-up, you said -- i said i thought it was illegal, even now, under the rule to due oous depositor money for risky stuff. explain that to me. >> when you take commercial banking and merge it with investment banking, obviously a lot of money is flowing into the over-the-counter derivatives, my 0 objection is not enough is flowing into business investment, into manufacturing, into small business activities. people are making a ton of money creating something like a $50 billion derivative market, much of which is dark. so when you -- >> when invest they invest in private equity funds that are investing in company, that allow you to start companies there's a lot of growth multiplies that come from the risky activity. >> so there are rules what kind of margins you have to have to back that capital. when you use your overall capital as a company, because you've been enrich the by the commercial banks' deposits, then that allows you much more flexibility to play in the credit default swap market and the dark markets. so we have to stop both. the reason we need to stop both is because we need the commercial banks to be lending again to small businesses. we need them to be lending to main street. and we want the predictability there for wall street, for the future because we don't want to go back to september 8th again. what people don't realize we potentially could have the same kind of activity if we don't get more transparency. >> one issue that worries some people that i've talked to the only on wall street but in washington, the idea we're trying to regulate against another market event, whether that's as severe as the one we saw at '08 or not, can you regulate against armageddon? can you regulate against a market event. >> or will wall street and the other players involved in this simply fine another way around it? >> well, that's why transparency is the great antiseptiantisepti. if you have these things of exchanges and you have a regulatory structure where people prevent the man niplation from happening, everybody can make investments and we can go forward as an economy. as long as we perpetrate dark market there's will be uncertainty, and that is not good for trading and that is not good for the u.s. economy. >> senator cantwell, thank you for joining us today. president obama, as you saw here live on cnbc, wants to limit the trading operations of the banks. they are already limited. what specifically is he proposing, mr. liesman? >> back to the question that dennis asked of the senator, there are in fact limits out there for the -- that limit the relationship between the commercial bank and the investment bank and that is rule no more than 10% of a bank's capital can be loaned to any affiliate, no more than 20% in total can be loaned to all of the bank's affiliates. >> there are rules on what too do with deposits on the commercial side. >> rules that limit the access of the prop trading of the risk tad taking to the government guarantee. >> are deposits part of the capital of the bank? >> they form -- underlie the capital of the bank. the deposits come in, it's part of the guarantee that's otherwise there, is that deposits come in the capital structure. >> i think of them as a liability. >> they are a liability. but if something goes bad, there's recourse back to the government. what could happen is that number could go to zero. it could go -- they -- essent l essentially separating out the affiliate from the commercial bank itself. >> looking at restricts there are out there, do you think she'll be able to get 60 votes to pass this in the senate? >> i don't think so. i heard her saying, bringing back glass-steagall, it kind of ignores the reality of international banking today. there is some trading that must be done -- and i think the treasury understands that and the administration, because they told me they do this morning -- was that you cannot stop banks from trading on behalf of clients. it's part of the banking services that are done, part of the derivative contract. question is whether they can trade for their own account. i have my doubts about that, too. >> it's a completely different market it was when glass-steagall was constructed. it was constructed for a market that no longer exists. >> the rule here that limits capital, that is the glass-steagall of our delay. >> i don't see how imposing glass-steagall will free up small business loans. that was an interesting -- >> if you break up banks, they are less capital, they lend less. >> fun to watch. big businesses, you they they could play a bigger financial role in 2010 elections. they never needed to scream louder than right now. today the supreme court struck down limits on corporate political spending. hampton pearson is outside the high court with details. >> reporter: dennis, a 5-4 decision, the supreme court rule, corporations can spend as freely as they like to support or oppose candidates for president or the congress, and now from now on corporations, and for that matter, probably labor unions can open up treasuries, produce their own campaign ads, saying no sufficient government interest justifies limits on the political speech of nonprofit or for-profit corporations. strongly disagreeing, justice john paul stevens saying the court's ruling threatens to undermine the integrity of elected institutions around the nation. cap page finance reform advocates predict a flood of money in the midterm elections. roh now shareholder rights groups have to add limits on campaign spending to corporate governance agenda. >> individuals will have to now confront their corporations with shareholder resolutions and make sure that, if the corporation uses money for political purposes, they use it at the behest of the shareholders and not simply at the womens whims f those in management. >> refraction congressional members of congress, following part lines, mcconnell praising the ruling saying democracy depends on free speech not just for some but for all. schumer, the supreme court has just predetermined the winners of next november's elections corporate america. jul julia? >> this is a remarkable ruling. certainly good for all of the tv stations who are raking in all of the new money for ads about but is there a sense this is going to transform elections moving forward. >> reporter: the short answer is yes, but it will be interesting to see how congress, democrats in congress in particular, perhaps even the white house, try and scrub this ruling. the majority opinion in the case from justice kennedy ran 57 pages, to find some ways to perhaps tweak this thing so it won't have the -- but overall, it's a game changer. you don't think of the supreme court as, you know, a stimulus operation, but it is the full employment act for all of those who make the campaign commercials going forward. well said. >> hampton, thanks very much. $14 billion, $16 billion, $31 billion, compensation pools that morgan stanley, goldman, bank of america respectively. should t.a.r.p. receiving banks be dishing out huge bonuses this year, even if they've repaid t.a.r.p.? sparks will fly in our power grid debate. >> on wall street, a sell-off almost across the board including commodity markets. the dow off of its lows of date by four points. down 206 points on the trading session. oil is down 1.36. gold is down about $12. s&p is down 20 points. the nasdaq down 26. we are back in a moment. and the biggest dow loses topped by bank of america, after the president's move to restrict banking activities. it's down by more than a buck, at 1535. disney's lower, pfizer's lower, merck is lower as is intel. the dow down 216 points. the s&p is down 21. goldman sachs setting aside no money for bonuses in fourth quarter, after coming under fire for shelling out $16 billion in compensation last year. latest "the washington post"/abc poll shows 50% of americans favor limits on bonuses. the support is higher among democrats than republicans. but should t.a.r.p. recipients pay big bonuses? opposing views from mark walsh from left jab and employment lawyer john singer a partner at singer deutsche. i'll start with you if i could, john, a lot of the banks have paid back the t.a.r.p. should they not be free to pay back what they want in bonuses? if not, why not? >> they should be. if the administration's eternal quest to levy punitive measures against wall street and to regard wall street as a combined nefarious entity they're forgetting the fact wall street t.a.r.p. recipients including those who had to take money, b of a, and those that had t.a.r.p. money thrust upon them paid it back, in some cases with profits, they're no longer owned by the taxpayers. they're publicly-traded companies who can dole out bonuses commensurate with employment performance. >> they paid it back with interest. what do you think? >> they're free banks, they can do whatever they want. let me attack the main argument. their main argument is bonuses are necessary for retention. i ask now, where is the retention necessary? hedge funds are coatoast. no jobs in shanghai. no jobs in europe. they can't go to the bank of omaha and run the mortgage department and make this kind of money or run the yankees. the banks still retain -- still pay out huge amounts. i would argue if i was a shareholder of the banks to put the money in e ps and reward me as shareholder for the performance that they've done. this is a populist argument that may have some legs. >> give plea a break been do you think any of the banks, do you think a goldman sachs pays one dime more than they have to employees? compensation at goldman went down $4 billion to $16 billion in 2009. they're stingy with their money. why is this this any business of yours at all? we're not challenge you on how much you make. >> i said they're free to do whatever they want. i'm trying to strike down the main argument that they make. you contend that goldman sachs is stingy. $16 billion is down from a peak of $20 billion in bonus 2007 the year the most egregious risk taking was going on. what i'm suggesting is their main argument for why they have to do is specious. the argument that will bite them in the tail, i think, is real. >> getting into marge's argument, i not the primary argument of retention. it's you pay people on wall street historically because it's profitable. if a trader is up $200 million you pay that trader commensurate with performance. the same with bankers. if bankers garnered a lot of banking revenues in a year they should be paid commensurately with their performance. it's not just retention. >> do you yunderstand the outra main street from the taxpayer, you wouldn't be here, some of you wouldn't be standing if it wasn't for the taxpayer? >> i do understand the outrage. i do. i think that the numbers are staggering when you look at them. but at this point in time, these banks are no longer owned by the government. they're no longer owned by the taxpayers who have such an tip think by the banks. they voenl toanonly have to ans shaers. >> two things to point out. to forget the window that we just closed they are now owned by shareholder but they wouldn't be around if we hadn't provided them t.a.r.p. >> the entire system wouldn't be around. >> that's not true. only certain of the banks needed the money to survive. others had it tlouft upon them. they had to. jpmorgan, goldman sachs, morgan stanley, did not want the money. it was thrust upon them. the money created problems for them because they constraints on what to pay employees. >> you're arguing the government mandated them taking money? >> in certain cases, yes. >> your first argument, receipt tension idea is not the main argument and people who make $200 million profit should get a piece of that. how about people that lost $200 billion? don't have have a clawback? >> they lost their stock value, they lost plenty, they paid with careers. 2%, 3% of wall street employees blew this. yet we're punishing 100% of employees on wall street, aren't we? >> four managers of gm blew the corporation and all of the line workers are paying for it now. >> 98% laid off for two years, yeah, not the same. >> all employees of the corporation pay the price when management screws up. again they should do whatever they want. i'm not saying the government should be in this. i'm saying the populist argument that says guys that lost the money are not getting clawed back and paying $16 billion in bonuses down from $20 billion in 2007 is going to cause them problems. >> i'm so glad we settled it. thank you for joining us. we appreciate it. while the big banks are in sell-off mode, ugly, ugly, regionals are surging. one banking analyst's take on how to play that sector right now. ahead -- apple's supposed to debut the tablet. will the tablet be a game clanger on the scale of the ipod? stick around. stick around. we're back in a minute. welcome back to "power lunch." a couple things i'm tracking today a dozen large cap earnings reports coming out after the trade, talked about google, amd, american express and capital one, but none is performing better than sort of the $6 billion market cap that is affiliated computer systems, acs. check out the intraday performance on this stock. almost 3% high, 2.5% higher. what is go on with the stock here today? the stock is at an all-time high, trade more than 100% of average daily volume. people are buying this. recall that back in september, xerox announced its acquiring the company based on xerox's strong performance in the market today. that pushes the combined cash and stock price to 64. butting up against that. but to see people buying this and pushing this is an expectation it will deliver a strong number like its soon-to-be parent did. >> thank you, matt. the president making remarks moments ago about the supreme court ruling which we told you abo earlier lifting the limits on the amount of money that corporations can give in terms of campaign contributions. the president saying that the supreme court ruling stampedes green lights a stampede of special interest money. he also says that he will develop a, quote, forceful response to the court ruling. he says the ruling gives special interests, lobbyists, even more power and it also, in his opinion, is a victory for oil, wall street, banks, and health insurance companies. those are latest from the president right now. and he is going to work with congress to develop that forceful response to the ruling, according to a white house statement. i'm interested in how you craft a forceful response to a supreme court decision. >> well, unless you can find a way around the law that has just been laid down by the supreme court, make a law that complies with that decision, i don't know how you do it. obviously i'm not a great legal mind. >> what this does is effectively say that any corporation, any union, anybody can advertise as much as they want in support of a candidate. >> yes. >> it does not apparently involve contributions directly to the candidate's campaign. so if company x wants to say that candidate y should be the choice for senator, they can advertise as mump that's want under a free speech right. >> i worry about the white house attempt -- >> it's akin to a contribution because you are giving them free money. >> if you spend more them. no candidate would give up control of the spending to someone else. i worry this is going to become part of the anti-big business move right now that can hurt the markets and hurt the economy. now we're worried the big business is going to manipulate the debate. everybody has a chance for an equal voice. >> this is a new type of lobbying directly to americans and we'll have a really big impact the next election. >> good for media stocks. >> we're going to take a quick break. on the half hour or thereafter, we'll head back down to the floor of the big boards. get steve grasso's forecast for the day's market action. hasn't been good for the bulls. the transports, tracking them, several railroads reporting profits today. should investors get on board the train and the trucking stocks? we'll hear from a top analyst and phil lebeau has the big picture on airline earnings. "power lunch" returns after this. a down day on wall street, a significant within at that. off under 2% on the dow, 195 points. we were down 216 a short while ago. 10409.38. for more on market moves, to the floor of the new york stock exchange, steve grasso of stuart frankel is standing by. a difficult day. sell-off accelerating after the president's comments earlier. does it act sell rate to the downside from here or do you see some support technically for the market here? >> technically i was looking at 1121 level on the s&p. we're below that currently. so we've been taking our lead from washington. since they started talking about the bank tax and everything else on the firms on the bigger banks the market has been skittish. there's no need to rush back into the marketplace. i don't take it lightly. i've been a bull from 900, 910 in the s&p all the way up to these levels. i did think we were going to get to 1200. near term i have to turn bearish. i don't take it lightly but the market speaks for itself in everything that we've seen coming out of washington. the market doesn't like it. >> we've seen strength in the regional banks. how are you planning moves in the financials? >> the reege in banks stand to gain the most and feel as if this levels the playing field. i believe that it's a lose/lose situation for all of the banks, for all of the financials. they might have a knee-jerk reaction and rally in the face of it, but i think the regulation that we're going down -- i'm not one of the guys that believe we shouldn't have any regulation but we're pulling the wrong type of regulation and pulling the wrong type of rhetoric. what changed my mind jamie dimon's comments last week where he said he didn't find out about the bank tax until the american public found out about the bank tax, and that doesn't give me any hope. >> maybe the market is overreacting to the downside here. obama's bark often turns out to be far worse than the bite and maybe the regulations will be softened by the time they have any impact on the industry. >> i hope you're right. i think we're more apt to move sideways and lower versus that upshot and the vacuum that i've been calling for that vacuum back up to 1200 or those pre-lehman levels around 1235 mark. when scott brown was elected, we thought there would be some type of reverberation and they'd change the rhetoric, because what scott brown get elected how barney frank and john kerry can stand behind health care reform is beyond me. to have them vote 3-1 is a clear sign what the american people are looking for. i think that the market is showing that at this point. >> thank you, steve. >> thanks, guys. well the airline sector has something to celebrate, southwest and continental swinging to fourth quarter profits. phil lebeau with more. >> reporter: a couple of nice surprises. one was a surprise, the other was expected. keep this in mind, the fourth quart are the could turn out to be better than expected for the airline. first with continental. continental swinging to a surprise profit, 3 cents a share. 10 cents better than wall street expecting. . revenue $3 billion, just shy of what wall street was estimating but they'll take it. for southwest, it also beat the street. earning 10 cents a share, 3 cents above wall street's estimates. revenue slightly above estimates, 2.7 billion. how do these two airlines do it? how do they post decent numbers in the fourth quarter? a couple of things to keep in mind. both of them have been keeping their capacity limited. keeping a check in terms of how many planes they put up in the sky. they also are both optimist thank we're going to see business travel improve in the next year and that's one reason, when you take a look at what these reports might mean for the airline stocks, the airline index, it's pushing it higher. index that's up 90% this year. now there's a bit of a pullback today. you can see, a heck of a run since november. the analysts believe these stocks and this run has a ways to go. >> once incremental demand does finally return from business travelers coming back in, international travel picking up, as the economy improves, there's going to be a lot of leverage to the bottom line but that has not occurred yet. >> continental and southwest reporting better than expected numbers. beating the street. also earning a slight profit. back to you. >> transportation stocks, air, railroad, sea, having a rough go of it today. some of them did yesterday as well. our next guest says it's time to start buying on the dips. in today's smart money, lee classkow. good to see you. >> hi. >> you like the truckers or certain of the truckers and certain of the rails because you think it's a good bet on an expanding economy in 2010? >> absolutely. it's safe to say, as we ended 2009 that 2010 will be a better economy. expecting gdp growth, all it like 2%, 3% growth that growth should help a lot of the asset-intensive transportation companies, such as rails, they'll enjoy operational r leverage from the cost cutting they've been doing. some of the rails like unp, csx, they've posted decent numbers over the last two days. and it's railly being seen on what they're able to do on the cost side which is the impressive part, in terms of having kind of near-record margins, even in this difficult environment. >> so you like union pacific, csx and old deminion in the rail space. in the truck load companies your picks are? >> on the rails it's unp, csx, old dominion, a struck load carrier. truck load side we like knight, westerner, heartland. >> the stocks are down today but the d.j. transportation index up 19% over the last year. how much more room is there for stocks to grow? >> over last two days, csx is down 10%. for us, the sell-off on csx is yov done. some has to do with the fact they've painted a bearish picture when it comes to the coal franchise which is 30% of overall revenues. they moderated pure pricing outlook for 2010. but we like to remind investors are their pricing should be above rail inflation, therefore, it's positive. it's a good sign in this environment. >> all righty. thank you very much for joining us. thanks to phil lebeau for his report. coming up -- secretary of state hillary clinton says internet freedom is a foreign policy priority. new battlefront for human rights. this comes on the heels of google charging china with hacking user e-mail. should business kget tough withn it comes to the fastest growing market in the world. the now 190 points to the negative. s&p down sharply. the nasdaq is off sharply. gold is selling off. oil market's selling off. back in a moment with much more market coverage. in a speech on internet freedom, earlier today, secretary of state hillary clinton said the u.s. has asked china to look into recent cyberintrugss reported by doog. she also said this -- >> countries or individuals that engage in cyberattacks should face consequences and international condemnation. in an internet-connected world, an attack on one nation's networks can be an attack on all. >> joining me now is the internet law attorney and peter navarro, cnbc contribute somewhere author of "the coming china wars." secretary of state clinton said, basically, that we should take some action but how do you take action given the u.s. relationship with client na and the amount of our debt that they buy? there are our banker, basically. >> that is a very interesting question. and i was struck by the fact that secretary clinton brought up there should be consequences but did not enumerate what consequences would be. it is true, it's hard to insult your banker in public. so it remains to be seen how strong a stance the state department will take in regard to china and the cyberattacks. >> peter you were saying, this could lead to a trade war. you feel strongly that this should be declared as an act of war, correct? >> i do. sue, let's look at the facts here. first of all the american media, and clinton, is missing the bigger story here. everybody talks about google and censureship. this was a dangerous escalation of china's espionage into cyberspace. the fact, china hacks defense department's computers and the pentagon. fact, china has now hacked american business enterprises. they went after 30 other corporations, including dow, northrop grumman, juniper, after trade secrets and technology. are we going to trade with a country that basically is hacking our networks? these are covert acts of war. a sharp response, they need trade sanctions when they hack american enterprises. when they hack our defense department, that's serious. >> right. we'll take a break. breaking news. jim goldman in silicon valley. >> reporter: dennis, we have been talking about google and this hacking thing. microsoft now is confirming that a patch, a critical patch, security patch, is now available and will be automatically uploaded to computers running explorer and the responsible software for all of this automatically through windows update. if you don't have that capability, microsoft is recommending that you update your software immediately by going to a website, go to microsoft.com for further indications on what to do next. microsoft taking responsibility for this security breach. and now issuing a patch. there will be a conference call at 1:00 pacific time this afternoon to talk further about what the ramifications are, what the software is what the hole was, how it was created, how it was exploited, and again how you can protect yourself. but indeed, this is a significant problem and microsoft is now taking the steps to address it. guys? >> tyler, you had a question. >> jim, google and others were the target but microsoft is saying they were the enabler? >> reporter: well, yeah, indeed. google was the target of this. >> the vehicle. >> reporter: essentially, that's the case. once you use google and you go on to the web and using this software, whether it's running automatically on your computer, in the foreground or the background, there is an opening that people could exploit and that's how these chinese hackers were able to break through. >> thank you for the fix, microsoft. i wish you would have sent that patch two, three months ago. peter, a follow-up, you were pointing out china allegedly hacked google. >> allegedly? allegedly? >> they can hack those same companies, whether the companies are in china or not, peter. doesn't china's great wall of oppression crumble the more we engage the country and invest there and do business there? >> that's pretty funny, dennis. the argument of google was constructive engagement. we've got destructive engagement with client na. its a game changer and hi ruling changer when they go into american networks and data steal trade secrets. look at chinese trojans in there stealing your i didn't. you want to be friendly with them. >> so block it. >> let's letteric respond. what do you think about what peter's responding about the degree of the threat. >> what does google do? >> i have to agree with peter. the simple fact remains, what we have seen is that the chinese simply do not respect intellectual property rights and trade secrets pipe have to concur with peter in this regard. go into any chinese office building and find the chinese businesses are running pirated copies of microsoft software. it's simply a cultural difference with regard to trade secrets and intellectual property. they do not respect american intellectual property rights. >> clinton said nothing. she basically puffed up. ever since she's gotten in she's take ain't soft line to china, probably because we need their money to finance our deficits. this has gone too much. the pentagon and american businesses are at risk by economic attacks by the chinese through cyberspace. enough is enough. >> thank you. appreciate it. >> thank you. coming up next -- big banks taking, but small banks flying high. the dow jones industrial average off 19 points on the trading session. really hasn't been able to pare its losses considerably at all. microsoft off one and a third percent. >> reporter: big banks getting whacked, selling off sharply on president obama's plan to limit activities and size. regional banks are doing reasonably well, least you can see comerica doing well. are those stocks the smarter play? gerard cassidy is on the phone. and why would i want to be any bank until i know what the real regulatory picture is going to look like? >> that's a really good question. the regulatory changes nobody knows what the final outcome's going to be. it's going to take time before we get new legislation through the congress. the reason you want to own the regional banks we think they'll be less impacted by any regulatory regulation and the regional banks are where credit improvement's coming. >> you start to see it in even fifth third today, though they company's report, i can't remember the numbers, they said among other things the credit losses we losses were getting better in their business? >> that's correct. that's what it's all about. the credit losses are diminishing. going higher but at a slower pace. we expect, as the u.s. economy recovers in '10, credit losses will go away and we'll see banks reporting good profits. >> if you had to handicap how much of this current proposal by the administration would get through what would it be? most people do not think it will pass in its current form. however, it could have a chilling effect on most of the industry, could it not, even parts of the regionals, depending on what the final outcome is? >> we don't know what the outcome is. as you pointed out, in the form that has been proposed, i'd be very surprised if it passes in that form. what they want to do is try to take the high-risk trading areas away from commercial banks if they're using some sort of deposit insurance, maybe to fund that. that doesn't happen than often. the big problems are not with the big banks today. we're still having troubles in the credit area and certainly companies like fannie mae and freddie mac are causing bigger problems for the taxpayer. >> thank you for joining us by phone today. up next, the ipo revolutionized the -- the ipo -- the ipod. >> it did. >> revolutionized a lot of businesses. will the apple tablet be the same game changer for old media content? 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[ male announcer ] staples has low prices on everything you need for your office. staples. that was easy. apple holding a big convenient last week, expected to aunt veil the tablet computer. could it be a game changer for the way we consume media the same way the ipod revolutionized how people lisz tonight music? let's bring in the editor and chief of pc magazine. what is this going to do to the media business? >> they hope it's going to revive it, in particular the print media business. the way people consume content is changing and the apple tablet, if in fact that's what they introduce next week, could be a game changer. we've heard stories of apple going to publishers and talking about the device and opportunities. this device to me, looks like a giant ipod touch or maybe an iphone. it's going to be big, probably like ten-inch screen, multitouch capabilities the ability to download apps, the ability to watch movies and of course consume magazine-style content but in a whole new way with a lot more interactivity. >> lance, i wish we could ban this word game changer, i'm sick of it, but explain technically if i get a kindle versus apple tablet, are they incompatible or will all of the stuff be able to run on everything? >> kindle is different technology, uses e-ink technology. >> incompatible. >> not the same thing. >> great. look, you're going to be reading digital content on both devices. but you can't transfer it back and forth. apple really wants this to be a device that does a lot of different things. it sits between a laptop and your iphone. >> right. >> it's a device you use on the couch all the time. >> lance, unfortunately, we're going to have to leave it there. we're excited to see what apple does unveil. thank you for joining us. >> that does it for us on "power lunch." market's down under 200 points. >> a busy two hours until the market closes in new york. stay here to watch all of it. see you tomorrow back here. this is xwraekibreaking the. stocks are down, triple digits now, led by banks, america's biggest, down between 5% and 8%. from the white house a war cry. the president is ready to fight but is this ba lologna or a rea battle. ? jim krarm is here. >> no problem. >> taking time out. let's start with banks, leading the way lower. to break it down, mary thompson, talk about the new rules and bob pisani at big board to talk about the big sell-off. let's start with you, bob, in terms of the stock reaction. >> reporter: the important thing, we are getting volume. we haven't had much volume in the major exchanges really since november. we'll do pretty good amount of trading today. take a look at goldman sachs, the big issue is, what does this mean with restricts on proprietary trading? mike may year's a big analyst said, goldman indicated 10% of revenues were related purely to proprietary training and they may need to reconfigure under the stricter interpretation numbers may need to be reconfigured 10%. that's the implication for goldman sachs, that's mike mayo here. talk about other things moving. the regional banks throughout the day, storty's simple. i've talked to a number of traders that trade financials. it's a cleaner story with regional banks because most did not have near the proprietary trading operations, some don't have any, that the bigger banks do. remember the credit situation is improved for a lot of the banks. take a look, some of the exchanges, would there be less trading going on, perhaps, starting to see that all the big exchanges are being influenced as well. mary, how's the numbe

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