Transcripts For CNBC Power Lunch 20120524

another big story, those guys, the new york yankees. are they up for sale? lots of questions this afternoon. and we promise lots of answers. meanwhile, the first question goes to kayla, who has been covering the facebook saga since the announcement earlier this year this it would go public. right now the question, kayla, is are they literally going to switch from nasdaq to the nyse? >> well, tyler, the nice thing is they have no deadline, but nasdaq is making an aggressive push to keep the facebook business. sources tell cnbc the company making dozens of calls in recent days to stem fallout including an executive visit to morgan stanley. now, the moves come in response to other news that facebook is considering switching its listing to the new york stock exchange. sources say the option remains open after earlier overtures from nyse, but nyse maintains that no discussions are ongoing regarding that switch. but even if it's not a real option right now, perhaps the point of getting nasdaq to come to the table and take responsibility for the trading issues in the deal as well as responsibility for solving them has worked based on the news we're getting today. but even though one finger is pointed at nasdaq, the other is still pointed firmly in the direction of morgan stanley, which led the deal. morgan stanley sending out a note of brokers of ms smith brnny would look to rectify execution price with price adjustments expected on a large portion of them. the largest trades will be fixed first according to this memo obtained by cnbc, and the rest will be fixed as quickly as possible. tyler, an eventful first week for facebook as a public company, no doubt. >> you can say that again, kayla. now to silicon valley where some very smart people are getting tarnished by this whole ipo process. jane wells with more on what some of the best and brightest are saying now in the valley. jane. >> well, tyler, you know, if you want to know what silicon valley thinks, there's only one place to go. you go to buck's at woodside where we ask tech ceos and other senior executives about the impact of the facebook ipo on other potential ipos there. here's what they had to say. we do not have the sound. i'll tell you what they had to say, tyler. they're basically saying there are so many companies there right now that have such great potential, we talked to ceos calling facebook an anomaly but they're saying companies are going to learn to be smarter about where they price and getting their revenue models out there. but they really also say there's just a lot of different technologies, cloud, big data, those sorts of things, which are making money. and therefore in their opinions it's not a bubble. however, to a person, tyler, they were saying they were surprised at how poorly shares performed. back to you. >> i think jane there's a lot of company in that. >> go ahead, sue. >> thanks, ty. goldman sachs meeting with shareholders today. and shares of goldman sachs down more than 25% in the last year. the s&p meanwhile is pretty much flat during that same period of time, as you can see right now from that chart. our coverage of the shareholder spring rolls on with mary thompson at the meeting live in jersey city for us. hi, mary. >> hey, sue. there were no disruptions or surprises at the two-hour meeting where all the directors were re-elected and all of the shareholder proposals failed. now, outside a small group of protesters were kept just about a block away. inside the meeting, the tone was civil and measured. ceo lloyd blankfein answering questions on volcker, europe and pay. even joking with nun who asked if he wanted to hire her following her detailed question about the banks structured product business. blankfein saying he didn't think he could outbid her boss. on a more serious note, he said more worries about europe, the u.s. budget difficulties, political impasse in washington as well as concerns about china's growth all dampening enthusiasm and client activity. blankfein deferred to james sharl when asked what the firm did after learning rival jpmorgan's multi-billion trading losses. he told the crowd that goldman is constantly reviewing its risk controls. blankfein also commenting on pending regulation saying there are good elements and some am b am bigties. >> thank you very much, mary. goldman sachs is now tweeting. it may be another step on the long road to improving public relations. tweet number one was pretty simple, we are now live on twitter in parentheses, finally, at the g.s. annual meeting. follow us here for updates on our work, our research and our people. breaking news from rick santelli in chicago. another bond auction. seven years this time around. let's see how they did. hi, rick. >> yes. the tombstone $99 billion in supply, $29 billion 7-years. bid-to-cover 2.83. this auction 2.80. ten auction indirects 40% this auction, 42.7. directs 14%, ten auction average this auction 15.7. what's note worthy is dealers only took 41% of this auction. that's a good thing especially when you look at the much higher percentage on instruments like two-year notes. the yield 1.203% pretty much right in the middle of the final wi market which i read around 120 and a half bid. this was a b minus. mostly average. i like the way it was tight on pricing in terms of where the wi was. sue, back to you. >> thank you very much, rick. the health and profits of the banking system are front and center in washington today. the fdic breaking down q-1 profits for banks and for thrifts. eamon javers is here. eamon, profits are up, but that does not translate necessarily to an increase in lending this time around. >> yeah. that's right, sue. and that could be politically dicey for the banking sector here in washington. but you're right, the fdic is out with its quarterly banking report. let me run you through the numbers and explain exactly what they mean starting with the loan balances. loan balances of banks declined by $56.3 billion. that's the first time in several quarters there has been a decline in loan balances. but insured institutions earned $35.3 billion. that means profits are pretty healthy. and in 2012 the first quarter a $6.6 billion improvement over 2011. so that is a healthy number as well. the fdic cautioned not to make too much out of this loan balance decline. take a listen. >> the overall decline in loan balances is disappointing after we saw three quarters of growth last year. but separating the components gives us somewhat more perspective on the change. and we would suggest that we should exercise caution in drawing conclusions from just a quarter's worth of data. >> so, tyler, is it a data point or the beginning of a trend? banking bringing back their lending. obviously that's got implications for the economic recovery going forward. we're going to have to wait for next quarter's numbers to really know the answer, tyler. >> eamon, thank you very much. jeff kilburg back with us as he has been all week. jeff, how are you playing financials right now? >> well, mary thompson did a great job talking about goldman sachs. they're really making an effort. they are certainly trying to have more disclosure, but i think the muppet story, when they talk from clients, i think there's still collateral damage there. i like playing blackrock. it's amazing. a couple years back trying to emulate like goldman and now trying to be like blackrock. goldman started to say blackrock from top to bottom they really play the game right. also, i like wells fargo. they're really poised properly for this housing uptick. you have to be patient in that stock, but also if you're kind of adverse to the large bank multinational exposure, i like the kre, that's the regional bank etf. and i like the etf play here because it gives you that diversification. >> kre, blackrock and wells fargo. we'll be back with you in a bit. i'm standing up taller trying to stay with you there, buddy. >> absolutely. >> durable goods orders up but not as much as expected. unemployment claims down very slightly. our senior economics reporter, steve liesman, here with the insight. you're more my size. i can look at you eye-to-eye. >> here's the problem. the jobs number was positive, tyler, but it raises questions about what's happening with business investment which has now disappointed for two months straight. first initial claims 370. that's down 2,000. the four-week moving average coming down 6,000 to 376,000. continuing claims also declining, that's for the prior week. that data is a week late. these numbers are consistent with trend-like job growth in the 170,000 to 180,000 range, which is pretty much what's being forecast right now. but the durable goods report doesn't suggest robust growth. certainly not confidence on the part of business. transportation down. motor vehicles up, computers down. and business investment down for a second month in a row. now, some economists like john of rdq on "squawk box" this morning doesn't believe the numbers and thinks the ism numbers are doing a better job of capturing strength in manufacturing. others share the other opinion saying, you know, this has been a decline in business investment overall. with this data in, just coming in macro economic advisors gdp tracking around 2.5 for the second quarter. not bad but lowered. still better, tyler, than the 1.8% forecast for the first quarter. >> fantastic. you're going to come back in about half hour's time. you're going to worship at the lava lamp here and give us some of the results of your conversation earlier today with bill dudley, the president of new york fed, about the politics -- >> how politics effects the fed as well as the criticism. some interesting comments. >> 1:35 eastern today. we'll be back with steve then. meanwhile, sue. >> we're focusing on hewlett packard right now. let's take a look at how the stock is performing after the company beat estimates and announced it would cut some 27,000 jobs. >> we're at the beginning. i'd say we're probably 10% to 15% of the way there. we've laid a lot of pipe, we've laid a lot of ground work. we have a clear focus strategy for the company. we have a clear focus strategy for each of our operating groups. and now we have to execute. we are introducing a tablet for back-to-school, windows 8 tablet. we have not decided on the smartphone strategy. we've decided on a tablet strategy. and you're right, we've got work to do there and it's on the agenda. >> and they may have some new competition. let's bring in jon fortt. you have news on another tablet that may be coming to market soon. >> i do, sue. looks like google has a 7-inch tablet that's circulating inside the googleplex in mountain view. it appears to be just about ready for launch. a convenient time to do that would be in just about a month. google io starts at the ends of june. that's their developer conference. last year they gave away samsung tablets. this is going to be aimed at the amazon kindle fire around $200. so what you end up is this challenging the fire, maybe the nook a bit too. if you weren't going to buy an ipad anyway and you were going to compete down there at the lower end, you've now got more choices. not sure this will hurt apple, necessarily. but this is big especially considering that google's acquisition of motorola mobility just closed. >> all right. thank you very much, jon. dow chemical among the top gainers of the day. let's take a look at the shares of that company as we switch. there's hewlett packard up 52 cents at $21.60. that's a 2.47% gain. now to dow chemical up 83 cents at $31.35. that company scoring a big win in an arbitration ruling against kuwait's state-run chemical company. the ruling said that kuwait wrongly canceled a plastics joint venture back in 2008 and awarded dow chemical $2.16 billion -- yes, billion. couple key retailers reporting today. one on the very high end. one not so much. but still a bellwether. shares of tiffany right now down $4.87. almost 8%. $56.94. costco moving the other way up 1.3% at $84.46. courtney reagan's got both ends covered. >> tyler, analysts are actually classifyi ining costco's latest earnings the profit boosted more income like stronger dollar and more favorable tax rate than sales. membership fees rose 9.2% over the quarter. costco's decelerating same store sale trend doesn't stop at retailers, gas pumps causing some concern. a troubling outlook for tiffany. the luxury retailer beating expectations for its latest earnings but issuing a weaker than expected forecast and negative comps in the americas and europe on a gap basis. now, tiffany can't blame the european debt crisis alone because europe only represents 11% of total sales. u.s. a little less than half. manhattan flagship fell 4% for the quarter. >> courtney, thank you very much. let's go to brian shactman for a market flash. >> real quick look at aig, tyler. thank you very much. we have citi group winning an auction for $1.6 billion in assets out of maiden lane 3 portfolio. a stock in that pop from negative now up more than 1%. back to you. >> thanks, brian. are the new york yankees for sale? no steinbrenner? whoa! darren rovell has the update turning heads all over the world of sports. and a big day for the dodge dart. man, i remember the dart. phil lebeau is live at the factory as the first of the cars roll off the line. plus, hear what one of the biggest ceos in europe thinks of the crisis. first though, five big winners on this rainy thursday afternoon in new york city. city. we have product x and we have product y. we are going to start with product x. the only thing i'll let you know is that it is an, affordable product. oh, i like that. let's move on to product y, which is a far more expensive product. whoaaa. i don't care for that at all. yuck. you picked x and it was geico car insurance and y was the competitor. is that something you would pay for year after year? i, i like soda a lot but for a change of pace... los angeles dodgers fetching a record price at sale last month $2 billion. are the yankees now trying to beat that number? darren rovell is here live. they've always been rooifivals, darren. >> i don't know in this case, tyler, if that's actually the case. the "new york daily news" reporting rumors the yankees could be for sale. sources telling cnbc immediately that wasn't accurate. hall steinbrenner said this statement is pure fiction. the yankees are not for sale. i expect the yankees will be in my family for many years to come. randy levine telling me there's no action with any banks at all. the team doesn't have any debt and is not looking to sell. as richard of "new york times" pointed out, the multigenerational steinbrenner trust almost preclude them from selling the team. yankees denied selling the yes network. no one can confirm this for me either. and the yankees can only get more valuable by the way thanks to a new collective bargaining agreement that encourages the team to get below a certain threshold on their payroll to reset luxury taxes they have to pay. one more thing this just in, major league baseball issuing a statement saying major league baseball's received no indications from any representatives of the flan keys or anyone else that the team is for sale. the reason they do this, because when you put out a story like this, it always gets very sensitive. sue. >> indeed it does, darren. thanks a million. >> well, chrysler is wrapping up production on the dodge dart. yes, the dodge dart, which tyler remembers very well, phil lebeau. and you just spoke with chrysler's ceo. and he's in belvedere, illinois. but he's talking not only the dodge but also europe. >> yeah. we've got some breaking news from our discussion just a few minutes ago. he is here in belvedere beginning production of the dodge dart, but just a few minutes ago he indicated to us that next month when chrysler has a chance, it will increase -- or when fiat has a chance, it will increase its ownership stake in chrysler boosting it to roughly 61%, that's a 3% increase. back to the dart, now, this is key to rebuilding chrysler's car sales. long a problem for the company in the united states. the dart will start at just under $16,000. and given the competitive nature of the compact market, he knows they won't have long before the competition comes after them. >> i won't doubt in the next 12 months we'll have somebody coming into the market chasing our tail. it's that simple. >> spending half of his time in europe, he also has some opinions about what's happening over with the european union and with greece. he says greece should stay in the eu. and he says it's important for the eu to act quickly to preserve its integrity. >> i've been worried as i have been for a while about the way and the speed in which the european union -- i've also been -- i think austerity is a wonderful thing. >> and one last thing from sergio, we were talking with him -- with regard to his situation in europe. and sergio said to us, and this is a quote, tyler, everybody's got to stop -- it's back to you. >> let's talk auto stocks with jeff kilburg. what's your pick in this sector? >> instead of chrysler, i like ford here. yeah, they got that iconic logo back from the bank, essentially. seeing nearly 2% bump today in the stock. also i like tata. the emerging market. big motor company in india. if you're looking for the emerging market plays see the nice retracement. back to you, ty. >> tata, jeff. coming up, the man who revolutionized the way we dressed. also ahead, diana olick down at the docks. >> that's right, tyler. ships like this one have seen their fair share of combat, right? but will the budget battle finally sink them? we'll tell you coming up next on "power lunch." tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly. tdd# 1-800-345-2550 i can also bounce my ideas off their trading specialists - tdd# 1-800-345-2550 on the phone or face-to-face. tdd# 1-800-345-2550 and i can trade wherever i want, whenever i want. tdd# 1-800-345-2550 tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language. tdd# 1-800-345-2550 hey... a breakout on a head and shoulders bottom! tdd# 1-800-345-2550 that's what i'm talking about. tdd# 1-800-345-2550 open an account and trade up tdd# 1-800-345-2550 to 6 months commission-free. tdd# 1-800-345-2550 call 1-800-540-0098 tdd# 1-800-345-2550 and start trading today. and somebody asks me a question about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful. i'm hardly using gas, but it's there when i need it. anybody that thinks that this car doesn't have solid performance, hasn't driven it. there's no other car like this on the road. ♪ there's no other car like this are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. as you know it's fleet week here in new york. and in our beautiful new york harbor there are some magnificent ships that we've all been admiring as we work our way down from our englewood cliffs headquarters down to here at the new york stock exchange. i'm joined by two american soldiers that we really appreciate your service, gentlemen. thank you very much. i'm joined by lieutenant russ ferguson. you're from north carolina. >> yes, ma'am. >> thank you so much for what you do for our country. and you are lieutenant commander walkford from california. beautiful part of the world. are you enjoying new york? >> absolutely. >> it's been a wonderful experience. new york has rolled out the red carpet for us. >> as we should. >> it's been a wonderful 24 hours so far. we don't know how we're going to top this for the next five days. >> you never know in new york. thanks gentlemen, very much. so diana olick road into the harbor on one of those ships. she joins us pier side. diana, over to you. >> that's right. as the wars wind down, washington is under incredible pressure to lower the deficit. threats of draconian cuts are looming. the administration already planned $487 billion in defense cuts, but the budget battle could accelerate that especially for the navy. at the huntington eng l shipyard, the uss gerald ford has been under construction for the past four years. delivery is expected in 2015. >> our ships take so long to build. an aircraft carrier seven years, submarine six years, maybe a little less. the timelines are long. >> they employ nearly 38,000 workers at its four shipyards, 21,000 of them here at newport news. they plan to hire 74 more, about 20% of them veterans. >> we have no choice but to go hire the folks, train them, make them shipbuilders, which really makes an argument that says, you've invested the money in the work force in the ships -- >> the trouble is not here. it's back in washington, the budget. the administration's 2012 budget calls for 55 ships over the next five years, the 2013 budget knocked that down to 41 ships. the navy is getting smaller. >> we were around 380,000 people in 2000 and down to about 320,000 people today. so in today's austere budget environment, we can have the right number of people but have enough money to buy weapons systems and new platforms and ships. we're in an era where designing ships and aircraft be able to operate with fewer people on board them. >> and that of course means building fewer ships that can be run by fewer sailors, back to you guys. >> thank you very much, diana. as we continue here on "power lunch," what the harvard crowd was saying while sheryl sandberg of facebook gave her speech yesterday. and we'll hit the nymex coming up as the metals markets close. we have a bounce in gold, but will it hold? we're back in two and a half minutes time. [ engine turns over ] [ male announcer ] we began with the rx. [ tires squeal ] then we turned the page, creating the rx hybrid. ♪ now we've turned the page again with the all-new rx f sport. ♪ this is the next chapter for the rx and the next chapter for lexus. see your lexus dealer. but proven technologies allow natural gas producers to supply affordable, cleaner energy, while protecting our environment. across america, these technologies protect air - by monitoring air quality and reducing emissions... ...protect water - through conservation and self-contained recycling systems... ... and protect land - by reducing our footprint and respecting wildlife. america's natural gas... domestic, abundant, clean energy to power our lives... that's smarter power today. metals markets closing right now. gold in particular has had a little bit of a bounce. sharon epperson is tracking the action from the nymex. we really didn't get too much news out of the eu summit, so what are they trading on, sharon? >> they're trading on currency still, sue. there doesn't seem to be a lot of conviction in this bounce in gold though it does look like we're going to close up about $8 or so just under $1560 an ounce. and we will break what had been a three-day slide in gold prices. we've seen a very strong correlation between gold and the euro. nearly the highest level we've seen in about a month's time. and as the euro stabilized earlier this morning, we did get that high in the gold market around $1577 an ounce. but prices have given up those gains. and that is as the euro has fallen and as the dollar has strengthened. the safe haven, the flight to safety now seems to be more toward the dollar than the gold market. and that is what we're seeing in the trade. we're also of course keeping our eye on what is happening in terms of other metals. and silver has been tracking gold pretty closely. silver getting a nice pop as well. but, again, across the metals market we're seeing some of those gains going up as the euro has weakened here. back to you. >> okay. thank you very much, sharon. bob pisani's working the phones right next to me here. keep going. i'll keep talking. >> sorry, hold on. i walk on the floor, we drop. >> 47 points. >> i'm a negative leading indicator. i don't have a lot here. just a little blip here in the middle of the day. i think what's important so far about the week is it's been a horrible month, but we stabilized this week. the s&p is up 1.6%. the bull scenario, i'm not sure i buy into it, but our economy is getting better and europe is going to stabilize. the greeks are going to stay in the euro. a lot of people play this contrarian play that the greeks will do it. we didn't get anything out of the eu. nonetheless i think there's optimism about this idea. we have a couple sectors strong today. airlines terrific day. jpmorgan had an immensely bullish comment out about the effect much lower airline jet fuel costs for them. they're going to do really well this year. there's no slack in demand. and facebook has stabilized. who would have thought facebook would be a boring stock? it's $32 for days now. >> you got to wonder whether or not that stabilization is linked to rumors they're going to exchange it. >> well, whatever, we can speculate on it. the fact is it was 160 million shares on monday. and i think it did 70 million yesterday? it's been dropping dramatically. and the volatility in the volume going down, we're not talking about weird price swings in the stock anymore. >> morgan stanley is going to do a call with its brokers at 4:00 p.m. eastern time to talk about the facebook ipo. >> that will be an interesting one to listen in on for sure. >> uh-huh. we'll watch morgan stanley stock to see what happens with that too. thanks, bob. to the nasdaq now. jackie deangelis is there. she's following the big movers. >> hey, sue. the nasdaq generally under pressure, but some bright spots today. look at shares of hewlett packard. of course reporting after the close yesterday. second quarter profit beating expectation. a little low on the third quarter guidance. full year guidance beating the street. announcing also 27,000 people will be laid off. that's part of the restructuring plan. the stock now up nearly 2% although it opened higher repairing some of those gains. also want to look at rim shares. another exit in the management strategy there. we are seeing the london-based global head of sales, he has left the company. the stock down about 3.2%. and also another bright spot is pandora today. popping about 14%. this company also reported after the close yesterday. a loss of 9 cents. that was half of what the street was expecting. revenues exceeded expectations. the full year guidance, they boosted it. again, seeing a nice pop in pandora shares. back to you. >> thank you very much, jackie. we had another auction today. $29 billion in 7-year notes up for auction. rick santelli's been analyzing it for us. how's the market reacting to it, ricky? >> you know, sue, if you look at intraday chart of 7-years, not reacting very much. it was basically a slightly above average auction. it's the last one of the week. and i think forces in the marketplace are focused in other areas. some of the weaker numbers in europe, and a big story that many believe is one of the reasons stocks are down a bit, even the euro may be down a bit, and that is china is having issues with loan demand. not a news story, but lots of articles being written. this could be the ninth day in a row the 10-year closes under 1.80 as you see. and the euro, beyond the weakness, after it rebounded from a 4:00 in the morning test, very close to 1.25, which by the way on an intraday basis was a fresh low trade going all the way back to june two years ago, back to you, tyler. >> all right. rick, thank you very much. let's spend a little time first on the facebook fallout. let's look at the chart right now. there you see it. it is at $32.36. roughly where it's been for the past couple of days up 37 cents today. since trading began on friday, that company's worth has declined by 15%. the big question on facebook is will the listing switch from the nasdaq after the opening debacle and move to the nyse? executives at nasdaq are making an aggressive push to stop the bleeding. the campaign includes calls to bankers, financial sponsors and companies considering the listing on the nasdaq. sources at the nasdaq say they are "concerned" about the possibility facebook would leave. fidelity investment says it's working with thousands of brokerage clients impacted by trading issues involving facebook shares. now, despite the troubles the facebook ipo is still making some people rather wealthy. look at our latest wealth tracker in realtime. that's the inside circle at facebook. you can see the numbers. still quite healthy. mr. zuckerberg now worth a mere $16 billion. the number's down, but still, you know, he can afford to out. >> yeah, i think he can, ty. you may know by now that facebook's chief operating officer spoke at harvard's business school yesterday. we were able to talk to one student who was actually there. michael shrader was nice enough to play in "power lunch"'s three questions. >> one of the key lessons sheryl talked about today is the importance of getting on a rocket ship f. you see a company doing well, going places, don't worry as much about public perception or maybe the seat on that rocket ship, simply get on board and look for the exciting trip to come. for most students, that's an important point. i think you see an interesting shift over the past couple years as wall street struggles have really had a ripple effect across the campus. at the same time, you see harvard put a renowned new emphasis on entrepreneurship. so i think you're seeing a shift of people slowly from wall street to the west coast, but i'm not sure how sustained that will be. it will be interesting to see if wall street does continue its recent rebound if that trend continues going forward. i think every student's dream to this day is to at some point become a mark zuckerberg or follow down that path. i think a lot of them are pursuing in different angles. some people taking a leap immediately looking to start their own companies and others looking to head to the west coast to work for companies like facebook to get exposure to how those great companies work in hopes that it some day potentially they can start their own. >> well, let's hope those future ipos go a little more smoothly than this one did. keep your eye on him because he has got a bright future ahead of him, i think, ty. over to you. >> absolutely. i put money with him. >> me too. >> every word from the federal reserve here for signs that the central banks might be ready to step in and prop up the markets. there are of course both policy and politics involved in any such move. steve liesman, as promised back with us. and he had a big exclusive interview. you got some insight, steve, into what the fed is thinking. >> yeah. into both the politics and policy. what you'll hear when you hear this next section with our interview with bill dudley, the cost of additional policy measures as well as some of the politics of it. >> well, i think there's two sort of sets of cost. to extent we expand our balance sheet or we sell short data treasury securities and buy long data treasury securities. we have more risk in terms of our portfolio -- interest rate risk in terms of our portfolio. the second issue of course is if we expand our balance sheet, we can create anxiety among some people that this might actually sew the seeds for future inflation. i don't think expansion of the balance sheet in any way compromises the fed's ability to keep inflation in-check over the longer term. doesn't matter what i think. if people in the market think expansion of the balance sheet could cause future inflation, we have to take those expectations into consideration as a potential cost of such a policy. >> there's an election coming up, as you may know. some people theorize this is something that could stay the fed's hand. that the fed would not want to conduct policy or major policy in the midst of a big election campaign. how do you respond to that? >> i completely disagree with that. i think if you look at the historical record, the fed does what the fed is supposed to do to try to achieve its dual objectives. apolitical to the election cycle and i would completely expect us to be that way this year. >> same question though about the political climate. the fed has been unusually the bud of a lot of criticism. ron paul wants to end the fed. some people say it's been acting to decrease the value of the dollar, made things worse for savers. how do you respond to that? >> we've had a very tough economic environment. monetary policy is unusual setting. interest rates are low, for good reason, we're trying hard to generate economic recovery. the sooner we can get an economic recovery, the sooner we can normalize interest rates. what the events of the last four or five years have been extraordinary. and we've done things in usual in response. i think we've done what's completely consistent with our dual mandate hanging around the inflation site. let's look at the actual record. inflation on the personal consumption expenditure, which is the indicator we target, is running roughly 2% on a year over year basis. if you look at longer term enflags expectations, they haven't budged at all. they're very much contained. i think our track record on inflation has been very good. >> so, tyler, this was a piece of the bigger story here. dudley has been one of the leading doves on the board and now he's talking we maybe don't need to do much more. when they start talking about costs and emphasize that in some of their rhetoric, that tells you they're not on board with doing more. so it sounds to me if the current forecast remains what it is, if europe doesn't fall apart worse than it already has, ultimately the fed's going to be content -- or at least dudley is at this point and probably the fed, twist end. >> i will buy the idea they will do what they think they need to do, the election cycle be dang. but i hear the criticism out there coming largely from politicians but not exclusively so and that may stay their hand a little bit or color how aggressively they might move. >> i think that's accurate. despite what bill dudley was saying, i think the case has to be clearer and less assailable for them to take action. even if that's not a conscious decision on their part. >> thank you, steve. sue. >> guys, coming up on "power lunch," we're going to go inside the world of j. crew's mickey drexler. profile on the king of retail who's driving the brand of success when ty and i come back. on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? ♪ ♪ ♪ [ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. coming up on "street signs," we are all over the greece story. should they stay in the euro? will they stay? the bond king, bill gross, will join us to talk about -- is aol back from the dead? the stock quietly surging. actually at two-year highs. we'll debate, more room to run or running out of steam? and lady gaga, the facebook killer? the pop icon creating a social home for her little monsters. lot to do, tyler. back to you. >> thank you very much, mr. sullivan. retail staging a bit of a comeback this year. the sector outperforming the broader market up more than 15%. david faber joins me now with one major retail success story. there's nobody, frankly, in american business right now who interests me more than mickey drexler. >> really? >> honest to god truth. i think he's a magician. >> that's great. tonight you can watch it at 10:00. of course it's not a public company anymore. but mickey drexler is the man you may know. he put khakis on the map, a retail legend who's led companies from the gap to ann tailor, now the ceo of j. crew, drexler has built that brand into a multibillion dollar power house. analysts call him the king of retail. a king by the way who impressed another fashion royal, anna winter. >> can we change the name of sweatshirts and sweat pants? >> you can walk the floor with mickey at j. crew and he knows every single piece of clothing on the floor. >> reporter: anna winter, editor and chief of vogue, considered one of fashion's most influential voices marvels at drexler's hands-on style. >> you see lots of ceos terribly talented and brilliant at what they do, but they're definitely removed. there's nothing removed about mickey drexler. >> i don't want to get emotional, but i love this shirt. >> j. crew is a force to be reckoned with. anyone who would tell you anything different is insane. >> he does get very emotional about a lot of things. j. crew's fashion credibility by the way growing. so are its numbers. the company has more than 300 stores, 4,000 employees. it uses 1,278 different colors, by the way. take a look inside the fashion force. you got to watch 10:00 tonight. the man, j. crew and the man who dressed america. again, 10:00 p.m. >> i know you get emotional. where do they come up with the names for those? what are the names for the colors are amazing? >> they do. a lot of colors, styles, we have a brief interview with one of the ladies who comes up with a lot of the puns in the catalog. we're talking the catalog, 40 million printed annually. >> they come every week it seems. all right, david, thank you very much. >> back to you, sue. >> and i anticipate every single one of them, ty. let's bring in jeff kilburg. go shopping with me. what are the best plays in retail, jeff? >> sue, definitely looking forward to david faber's piece tonight on j. crew. he is the rock star. we'll see if he has the moves like jagger. but i'm looking at pvh. i like my etfs, and there's an etf because they have tommy, calvin klein, a nice bump in the stock up nearly 7% today. so we are seeing this continual movement in the space. pvh. back to you. >> thanks a million, jeff. coming up as we continue on "power lunch," are the yankees for sale? heaven forbid. but the rumors are flying that the steinbrenners who bought the bronx bombers for $8.8 million in 1973 are actually considering putting it on the block. we'll get the rundown on that coming up next. [ male announcer ] we began with the rx. ♪ then we turned the page, creating the rx hybrid. ♪ now we've turned the page again with the all-new rx f sport. ♪ this is the next chapter for the rx. this is the next chapter for lexus. this is the pursuit of perfection. [ male announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha! time for our daily power rundown. we've got cnbc.com net-net senior editor john carney and darren rovell. first up, henry blodget explains how you can level the playing field in ipos. here's his idea. >> the ipo process is unfair to begin with. there's a good case to be made that if the idea is that we're going to level the playing field that there should be no road shoe. i think the idea that the playing field will ever be level is ludicrous. >> get rid of the road show, john carney. yes or no? >> i don't think we need to get rid of the road show. we need to make them public. we have internet video. there's no reason these things can't be seen by everyone. it requires legal changes because right now there are restrictions on being able to record these road shows because that counts as printed materials and it has to be approved by the s.e.c. get rid of those restrictions but everybody see what's in the road show and you've done away with the problem. >> i think we're just talking about this right now because the underwriters cut during the road show and only told investors -- >> during the road show -- >> they only told clients, not investors, and that's a problem. that's why we're talking about it. >> i guess that's the bell. that means we've got to move on to the next one. that would be hal steinbrenner denying a story in the "new york daily news" that the yankees are for sale. would a sale be a smart move especially after the dodgers were sold for more than $2 billion and the yankees are getting old. >> they have a new collective bargaining agreement. there's nothing now that's going to change those finances. i think the yankees don't need to sell and they're not going to sell. >> need to sell? should they sell? >> i have to say buying sports teams is the new cool thing for hedge funds that everybody's been talking about it. you had einhorn, the guggenheim partners, this is what people want to do. it's a steady stream of income -- >> but do you wait until we find out if guggenheim and the dodgers are successful before you get in? >> then it's too late. the price goes up. you have to be daring. in a zero interest rate environment, people are looking for yield and sports teams give them yield. >> don't most earn a loss annually? >> yes. for the most part. tv network that's another story. yankees do run at a loss. they lose $40 million to $60 million a year. >> on annual revenue, but they make it up in the increase on the value of the franchise over time. >> correct. >> interesting thing. finally, los angeles is the first major u.s. city to ban plastic bags at supermarkets. banning them. banning the plastic bags. san francisco did this, should or will other cities follow suit? you're fired up about this, darren. >> i'm passionate about this. if you're going to get rid of the bottles for the water and put them in plastic bags, this is selective reasoning. just because they're at the end and you see them, why don't you just do other things -- >> hard to replace bottles. what is the alternative? animal skins? >> i don't know. what's the alternative when i have a tomato sauce can and put it in paper and it drops out -- >> let me tell you what really bothers me about this is it hurts the small guy. the big grocery stores can afford to do whatever the government tells them to do. >> that's true. >> the small shops, there's a reason why they give you plastic bags in the corner deli. they're going to get hurt by not allowing people to do it. so the small shops, means a lot will close down in poorer neighborhoods. >> but california has said in states that had it they've said nobody's gone out of business as a result of this. >> of course they say that. i do have to say it increases. it makes them less profitable. >> the gong has sounded there. we're going to bag the discussion. kayla tausche with some breaking news. >> yeah, tyler, it's just the beginning of the tally for losses associated with facebook trades coming in. i just got off the phone with a source who noticed that citadel investment group run by ken griffin is calling significant losses over the facebook trades. coming out saying they would lose roughly $30 million to $35 million on the trade and i'm told citadel's losses will be in that range as well. these losses i'm told came as actors on behalf of clients like e-trade and t.d.ameritrade. never really invited to get in on this deal and basically what happened is citadel held their promise to transact on behalf of clients. citadel would hold the trade as they waited for nasdaq's word on execution. as far as these damages, guys, the deadline was monday night for firms like citadel, like knight capital to submit their estimates of these losses. you have to think nasdaq is running up its own tally as well. back to you. >> thank you, kayla. we'll watch that throughout the day. coming up at 2:00 p.m. eastern time, pimco's bill gross on drachma-geden. will greece leave the euro. we look at that on "street signs." ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ an airline has planes... and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world. and then decided that wasn't enough. sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. [ male announcer ] marriott hotels & resorts knows it's better for xerox to automate their global invoice process so they can focus on serving their customers. with xerox, you're ready for real business. well, the afternoon session's going to be very interesting because we are just off the low of the trading session. we're down 61 points on the dow jones industrial average. the nasdaq is lower by 25. and the s&p is down by about 6.75 points. a bit of a bounce though in comex gold and west texas intermediate crude. you may have noticed most of the men on cnbc today are wearing special ties, red, white and blue, stars and stripes, that's because of a very special reason as we remember our dear friend and departed colleague, mark haines, correct, ty? >> that's exactly right. somewhere he's smiling as he looks down at these guys wearing these ties that he so popularized. >> absolutely. it's the one-year anniversary of his passing and we do very much miss him. let's turn back to the markets for just a quick moment here on gold. gold seems to have stopped a little bit of t

Related Keywords

New York ,United States ,Englewood ,North Carolina ,Blackrock ,Texas ,China ,Illinois ,California ,Washington ,District Of Columbia ,London ,City Of ,United Kingdom ,San Francisco ,Newport ,India ,Los Angeles ,Mountain View ,Kuwait ,Greece ,Chicago ,America ,Greeks ,American ,John Carney ,Sharon Epperson ,Randy Levine ,Ron Paul ,Ken Griffin ,Lloyd Blankfein ,Jackie Deangelis ,Courtney Reagan ,Chrysler Ceo ,Russ Ferguson ,Bob Pisani ,Gerald Ford ,Tommy Calvin Klein ,David Faber ,Henry Blodget ,Facebook Ipo ,Huntington Eng ,Rick Santelli ,Hal Steinbrenner ,Michael Shrader ,Mary Thompson ,Sheryl Sandberg ,Hall Steinbrenner ,Phil Lebeau ,Mickey Drexler ,