Transcripts For CNBC Closing Bell 20140826

Portfolio funds, and our own rick santelli. As mentioned, were seven points out from an alltime closing high on the Dow Jones Industrial average. Karen, whats it mean to you here . It means that we could definitely go higher. Its just a number, and everything is coming in better than expected, Economic Data, corporate earnings. So, i see us going higher for the rest of the year. Looks good. Everythings coming up roses. Michael pagino, do you agree . I would say those are all true, but for every one of those positives, theres a negative. You know, housing has slowed down, equity prices are not cheap, theyre fairly valued. So, values are harder to come by in the market. Youve got geopolitical risk that i think investors are largely ignoring at this point, its impact on economics, because everybodys been focused on the u. S. And the fed lately. And so, i think there are some negatives, but i would agree, as long as the moneys easy and corporate earnings and top line growth continue, then i think you do have some more up side here. Peter anderson joining us also from Congress Wealth management. Peter, are you seeing clients come out of the woodwork, people you havent heard from in years who suddenly now want to start buying stocks . Well, you know, weve been telling them all along that they shouldnt be on the sidelines. And thankfully, most of them have agreed. But absolutely. You know, i think you start to see these late adopters right now, and theyre saying, hey, the party, its twothirds over. Why am i on the sidelines still . And to those people that are on the sidelines, i still think theres a lot of fuel left in this market. Ive heard the prior comments, and i agree, but i also want to tell you that look at lower Interest Rates. I mean, the treasury market is still really low. And we have not thats the one thing that makes me a little bit concerned. I would like to see the treasury start inching up, because then i think wed have the perfect rally. The thing that bothers me is that treasury rates are signaling that we dont see inflation yet. And were going to see inflation, and thats going to be good for the equity markets, because equities will still have room to take off. Well, thats a longstanding debate, whether inflations good for equities. But sam stovall, this idea of a perfect rally, what are the ingredients and how many of them are we looking at here . Well, kelly, i think one of the important things is that were looking at very low Interest Rates, low inflationary environment, but more importantly, as michael had mentioned, that we are trading at relatively fair value right now based on current earnings estimates. Yet, an interesting thing is that the topdown or strategisteconomistdriven estimates are substantially higher than the bottomup estimates that s p capital iq is showing, and thats usually a rarity. Usually, the bottomup, the analystdriven, are much more optimistic. Yeah, exactly. So, we could be looking at something that surprises many. So, youre saying explain this for one second. Sorry, brian. Because usually, like you said, youd expect people when theyre building the bricks, stacking them all together, that adds up to more than the toplevel guys see. Why do you think its reversed right now . Whats that say to you . I think that says to me that maybe were having underestimation or not fully applying the kind of growth that is expected around the globe. Its expected were going to be seeing about 3. 5 gdp growth globally in 2015, and maybe were underestimating that growth here in the u. S. So, if you were to apply those kind of earnings, that would be looking at numbers that are close to 2,200, 2,300 on the s p 500, not the 2,100 number that the lower estimates point to. You know, rick santelli, were talking a lot about why the stock market is higher, and the points make sense, but i submit to you, sir, that a 2. 39 yield on the 10year is a pretty doggone good incentive to be somewhere other than bonds. Is the bond market actually leading the stock market here . Well, first of all, i think your first comment is way off course i love it. The total return of 10s and 30s is better than the stock market, or at least close on the 10s. Its a little over 8 total return when you take price appreciation and income stream, and its closer to 19 plus on a 30year bond. Now, i understand that maybe that party will end, but i think at this point that nothing is going to derail the equity markets until things actually either start to get better, because when things get better, boy, a lot of moving pieces for these Central Banks to deal with, but i think right now the proof and most of the longevity of this rally is in the hands of the european sector and mario draghi. He has eloquent words, and when it was asked whats the liqueli that makes this work, what are the ingredients . Id say one part central bank, one part ecb, one part bank of japan and maybe half a part the bank of england, but those ingredients wont be around forever. And you just made my mothers ghoul yosh as well. But let me follow up. I think its 35 of the s p 500 have a dividend yield above 4 . So, if yields keep going down, for whatever reason they are going down, doesnt that drive people into income wherever they can find it . Oh, sure, because everybody lives for the moment. Now, what happens if that dividend stock thats paying 3 , its value gets cut in half in a year or two, does that change the equation . Its a good question. Im probably not the one to answer it. Karen, do you have an answer . Yeah, i want to hear this one. The thing is, what rick said is that people keep living for the moment. I think clearly thats the biggest investor mistake thats been going on. You always want your bonds, you always want your wide diversification in bonds and stocks. Theyre your diversification, theyre your risk control. People arent making that mistake. Theyre just piling in and piling out of what they think is the best asset class of the moment. You always want bonds. Bonds are there so you could own equities. And thats been a clear mistake, and i think people have been missing a broad Global Expansion thats been going on, been very u. S. Focused. The u. S. Is a great place to be, but people are missing that broad Global Expansion thats going on. Now, wait a minute, two people now have talked about this expansion, you and sam. I dont see it either, kelly. I dont know what globe theyre looking at that makes three of us. Yeah, so, we im seeing it because the good the good u. S. Companies are already out there finding that growth. If you take a look at s p 500 companies, 50 of the sales come from outside the United States. How are they growing their earnings . How are they growing their Topline Revenue . Theyre out there. Theyre looking at these markets. There are a lot of markets that are coming in look when someone like starbucks goes overseas, of course, look, it has a lot of room to grow, but thats different than saying that Global Growth is strong and that thats going to be something that necessarily supports the performance of companies with global exposure if theyre not increasing their market share, in other words, if theyre just constant. Like burger king. Ones really big, ones really little. Yeah, exactly. So but global gdp is twice what it was ten years ago. Yep. So, even at 3. 5 growth, thats on a larger pie than we ever had. So, there is clearly growth out there. And the companies are finding it. Sam, can you just give us a sense, too, as to who might be best exposed here to this story . Well, i think, you know, basically, the question is what is the market doing . I think its anticipating the kind of growth. Were not seeing it right now, but the market is trying to anticipate six to nine months down the road. The prices tend to lead the fundamentals. And i think thats one reason why we are moving as aggressively as we are, not only based on the yield but also based on expectations that the economies will be improving and that we will be hitting more of the topdown kind of numbers as compared with the bottomup ones. All right. But as mentioned, as rick brought up, this is on expectations the European Central bank may be doing more quantitative easing, responding ultimately to slowing there. Supporting markets today, were hitting record levels intraday. See you guys. Thank you very much. With 52 minutes to go, whether, brian, we can go out at some of these record levels as well. The dows up 50 points off its session high, 17,127 is the level there. 17,138 is the closing high. All right, 17,138 is the number, then, we are watching, kelly. Plus, billionaire investor Mario Gabelli is here to tell us where he thinks the s p goes from 2,000, and youre going to want to hear his latest value stock picks. Also ahead, investors saying its time to short these markets because stocks and bonds are headed for major potholes dug by the fed. Yes, bill elken stein will be here to state his case. And later on, did billionaire Warren Buffett open up the flood gates to more tax inversion deals . Did he back the burger king buyout of tim hortons . The president s come out against these deals. Buffett is an ally. Does this make way for other companies to make similar deals . That and more ahead, if you can believe it. Cute little guy, huh . This guy could take down your entire company. Stay with me. On thursday a hamster video goes online. On friday it goes viral a network choking phenomenon. Why do you care . Hes on the same cloud as your business. The more hits he gets, the slower your business may get. Do you want to share your cloud with a hamster . Today theres a new way to work. And its made with ibm. We are just 16 points away from another closing high for the dow. As kelly said, 17,138 is your record high number. The s p, by the way, which is at 2,001, is already at a record closing high, kelly. Yeah, and a lot of names in the green today. Our Morgan Brennan covering the big movers for us. Hi, morgan. Hi, kelly. We begin with best buy, moving lower after posting a secondquarter revenue shortfall. The Consumer Electronics retailer also warned that sales would continue to decline for the rest of the year as people continue to increasingly shop online. Meanwhile, tim hortons continued to rise as burger king finalized its bid for the canadian doughnut chain. This as Warren Buffett backed the deal with a 3 billion investment. But Sanderson Farms fell as the poultry producer produced, well, less poultry than expected. And we end with ann inc. , moving higher on news that ann taylor reportedly hired jpmorgan to explore a possible sale of the company. Brian and kelly, back to you. All right, morgan. Thank you very much. Well, 2014, the year may bring 2014 on the s p 500. In fact, were up just 5 in the past three months. But will these levels also bring some caution and some selling, kelly . Yeah, you might think that a dow and s p at record highs would push a famous short fund manager to get back into the short selling game, but its still not enough for our next guest. Joining us now in a cnbc exclusive is bill fleckenstein, president of fleckenstein capital, on the cnbc news line. Bill, welcome. So, this is the question. You know, were at alltime highs. Does that make you itch here to finally short the market or no . No. I mean, i dont think its debatable that stocks are expensive, but you could make the argument theyve been expensive all year. The bond market is i think drastically mispriced, and as a consequence, so is the equity market. And that mispricing is a direct consequence of the policies of the fed and the other Central Banks, which are really the problems. The fed is the problem. Its not the solution. It created a bubble in 99. The response to that bust was the real estate bubble. The response to the real estate bubble is the misallocation of capital that is going on in stocks and bonds. But if youre going to make money as a short seller, as a dedicated short seller, like i did in the past and i intend to do again when the time is right, you really need a certain backdrop to allow the fundamentals to matter. And quite frankly, even though the fed has been reducing the amount of money its printing, its still printing enough money that, apparently, the stock market continues to go up. So, the right things arent in place for me to want to get short, even if the market was going to make an alltime high tomorrow. Hey, bill, its brian sullivan. When do you think, then, the time will be right for you to go back in . Whats going to come together and you will say, this is the time, right now. Oh, boy. Well, if i knew the answer to that question, id have more money than buffett. But i suspect theres going to have to be some sort of a quasi revolt or reaction in the fixed income markets of the world. You know, we like i look at the treasury market and it makes no sense to me, given our policies, but when i look at the jgb market yielding 50 basis points with a japanese intentions of having 2 inflation and a weak currency, that makes no sense. And i can go around to the swiss or the brits. These bond markets all make no sense. And i think they are going to have to sort of say theyve had it with these qe programs. Now, i dont know thats going to play out that way. Thats one idea. Thats what started to happen earlier this year, and i thought it might be time, but it never played out, which is why i never bothered to get short or finish raising the capital limit. I dont disagree with you about some of the things youve said about the u. S. Bond market, but let me follow up with this, then, bill. If i look at say spanish 10years right now yielding 2. 18 , theyre yielding much less than that in some other countries with seemingly worse economic and fiscal issues than the United States. So, my question is, are we then the least out of whack market in the world . And then ostensibly the best looking . Well, you know, yeah. I mean, i think the yields on european debt is even stupider than ours or, said differently, the risks are higher. On the other hand, because of the constraints or the quasi constraints in europe, theyve had to do more work on reducing their budget deficits. Weve basically monetized ours. So, yes, theyre maybe not as goofy as ours, but that doesnt mean anything. Thats like standing thats like we had a discussion in 2000, march of 2000, when we were debating internet stocks and you said, well, those are 500 times earnings, this is only 80, so its not so bad. You were still going to lose your ask if you owned them. So, its relative stuff. It doesnt change the fact that theyre all mispriced thats true, but you know they call shorting jgbs the widowmaker, right . 20 years this has been going on. Correct. So, if thats the only catalyst is that the only catalyst you see out there . No, no. The bond markets get repriced at a more rational level and that forces stock markets to price that . Is that the only way you think that the current trade ends . No, im not saying the only way. I was just giving you a reference of this is where problems the japanese in the past didnt say we aim to destroy our currency and create 2 inflation. Here, take 40 basis points for a 10year piece of paper. They didnt say that. Now theyre saying that, so its worth paying attention. We may find out the economy is weaker than we think as the fed tries to stop qe. And listen, the possibility of the stock market crash in the nottoodistant future is far higher than most people think because of the fed policies that are now slowing it down and all of the modernday financial things sorry, financial changes with algos and things like that. Im not saying it will happen. Im just saying you have to be mindful of the fact that it could, if Something Like that started to happen. That would be obviously something you would want to react to. Indeed. Well leave it there now, bill. Appreciate your perspective this hour. Bill fleckenstein, president of fleckenstein capital, brian. Thank you very much, kelly. As we go to break, lets give you an update on the markets. Minutes before the bell, the Dow Jones Industrial average is up 48 points to 17,124, 12 points or so off its closing high. The s p 500 also up about 0. 2 . And once again, the nasdaq outperforming, up 0. 4 , kelly. All right. Coming up, is the middle class back or is it being left behind . That was a huge topic on the show yesterday, and were going to follow up on that in just a few moments. And up next, did billionaire Warren Buffett inadvertently give his blessing to tax inversion deals by backing burger kings takeover of tim hortons . The pros go to town on that one right after the break. From 2000 to 2011, on average 17 manufacturers a day shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. 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Keeping a close eye here to see if the dow can close at another record high, having hit it intraday earlier today, but after we started out the strong session, we have definitely been pairing into the close here. Actually, things got pretty quiet after europe closed around 11 30. The s p, though, we should mention, any positive close will be the record high but the first close for the s p above the 2,000 mark. Good day to fill in. Kelly, thank you very much. Im going to leave with a batting average of 1,000. Call it a combo meal tax deal. Burger king and tim hortons perhaps a match made in burger and doughnut heaven. Shares of both have been surging. So, what are the details of this tax inversion . Just how much is burger king slicing from its tax bill . Sara eisen has the details. Hi, sara. Hi, kelly. On average, American Companies pay almost 40 in Corporate Tax rates while canadian Companies Pay roughly 26 . So, we did a little digging to find out what each company here paid last year. According to 2013 annual reports, burger king paid an effective tax rate of 27. 5 . Tim hortons paid 26. 8 . So, you may wonder, why the deal . Well, both Companies Ceos went on media and analyst calls to stress the fact that it is not a taxdriven move. But heres the thing, the inversion may ultimately free up undistributed foreign earnings, which could be repatriated then without triggering u. S. Taxes. If you look at the effective tax rate from last year, they are both roughly 27 . Over time, the statutory rate for burger king should move toward 35 , and then the statutory rate in ontarios 26. 5 . So, its more of a longterm tax saving. In the near term, it wouldnt matter that much, but longer term, yes, they should. Reporter certainly an advantage longer term, while others see it as more of a growth play for both brands. With regard to having a breakfasttype product, i think that having tim hortons expertise in the breakfast space will allow burger king to finally have a more effective breakfast offering against the likes of mcdonalds, Dunkin Donuts and starbucks. So, the question remains, is it a growth play or a tax dodge . And guys, the answer may ultimately be a little bit of both. All right, thank you very much, sara eisen. So, now that this deal does have Warren Buffetts blessing, is he helping burger king finance the acquisition . Well, he is, but will it open up the flood gates for more inversion deals, kelly . Well, lets ask david marcus, here on the floor joining us from the deal. David, welcome. Thanks. Is this a tax inversion or not . Well, its clearly a tax inversion in that, you know, when the deal closes, burger king will be a foreign corporation, will no longer be a United States corporation, you know, which is what we mean when we use the term inversion in this context, is a u. S. Company combining with a Foreign Company in such a way that the combined company is then incorporated overseas. Well, thats just like relocating a corporate headquarters. Thats not an inversion. Well, yes, because you are a Foreign Company, and so youre subject to a different tax regime in canada or ireland or the uk than you would be as a u. S. Corporation, you know, incorporated in one of the 50 states. How much do you think theyre going to save on taxes, and how material does it have to be for that to be a primary motivation for doing this deal . Well, i think its not so much as in many of these transactions, what the companys going to save on taxes initially. I think you have to think about this in terms of Corporate Planning and looking at where the Companies Revenue is growing. The big issue is the issue of trapped cash, which is cash thats in overseas subsidiaries. Bringing that cash back to the United States is expensive. You have to pay taxes on that as a u. S. Corporation. But burger king Going Forward will not have that problem. It will not be a u. S. Corporation, and therefore, it wont have to repatriate that cash thats in foreign subsidiaries. And thats a big issue for burger king. 40 of the companys revenues and profits come from outside the u. S. And canada. David, whats your take . Youre talking to people all day long with these kinds of deals. I mean, we know the mood of some in the media, perhaps, on both sides. What do the dealmakers think . Is this like a pot of gold they suddenly mysteriously found and now everybody wants to try to dip their hands in, or did they know about it and the opportunities simply werent there . These transactions have been possible for many, many years. And you know, until about 18 months ago, you saw some of them, and at various points enough of them that the tax laws were changed to try and tighten up the possibility of moving overseas. But its really been this year, especially in the pharma and biotech space, where youve seen a lot of these deals. And some of that is probably companies, greater comfort, with reincorporating overseas. Some of it is the dynamics of the biotech and pharma space, and some of it is that, you know, as the problem of trapped cash becomes ever greater, theres more pressure on companies to engage in these sorts of transactions. So, why do you think it is Warren Buffett has basically said, this isnt about a tax inversion, this is about burger king wanting to buy tim hortons and not wanting the canadians to block it, which they are known to do with some, and i think they called it a taste of canada on the radio today. Those are some of the doughnut holes. How much of this is about doing an acquisition of an important Canadian Company without canada wanting to get upset over block it . Certainly, thats an issue. In various transactions, you know, the acquirer may structure the deal to appease regulators, you know, in a variety of ways, whether its, you know, keeping important assets going, you know, or even, you know, reincorporating somewhere. David, quickly, in your view, if this deal had been done, but they incorporated in burger kings hometown of miami, florida, would we be talking about it at all . I think we might be talking about it, but probably not to the extent where were talking about it now, certainly. I think thats a great point. What i find so interesting about this is that you have people, you have lawmakers in the u. S. Suggesting that americans should boycott burger king, and canadians suggesting that canadians should boycott tim hortons because of it. Yes, and looking at the u. S. Congresss response to inversions has been a little distressing, because theyre clearly legal under the u. S. Tax code. Theres no question about that. If you think the tax code should be changed or the irs regs on inversion should be changed, thats a legitimate debate to have, but i dont think you can fault companies for acting, you know, within the letter and the spirit of the law in doing these transactions. David marcus, thank you this afternoon. Joining us from the deal on that burger King Tim Hortons deal. And that merger activity could be why were looking at indexes again trading at alltime highs with half an hour to go. Well see whether the dow can close at a record. Tech m a is up more than 50 year over year. So, if the dow made it to a new closing record today, it would be a fitting way for Duncan Niederauer to end his run as ceo of the nyse. Hell ring the closing bell and stop by our set before heading off the floor one last time. Plus, legendary investor Mario Gabelli chiming in on markets and whether gravity might be setting in come september. 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The dow is up now only about 35 points, brian, and the s p 500 actually looks like it could dip back below the 2,000 mark, which if it closes above here, will be doing so for the first time. Yeah, big moment there. All right, so, will history be made there at the New York Stock Exchange . Bob pisanis been in the middle of all the action. Actually, to kellys point, bob, is there any reason weve kind of faded here in the last few minutes . No. The volume is very much on the light side, and im not surprised. Theres not a lot of conviction either way. We just tend to keep melting up on the low Interest Rate scenario. But look, folks, were probably just shy of a record high. 17,138 i think on the dow is what we need for the record. So, were just shy of that here. Theres the major indices. We had some record highs, but the dow transports is not there. So, those of you who like dow 30, getting confirmation, not a record high on the dow transports. Dow leaders for this year, really a diverse group. Kudos to intel, really. Thats an amazing run for them. But very diverse here. Look at merck, microsoft, caterpillar. So, weve get a tech, a pharmaceutical, an industrial, and even on the other end, ges down. Thats an industrial. Pfizer is down, a pharmaceutical. Very kind of odd pairings this year in terms of leadership and those that are lagging. How about the why and the what of the stock market . Every day, 25 times a day, why, bob, does the stock market keep going up . Well, i can show you the reasons that are given. The number one reason is the continuing low Interest Rate environment combined with low commodity prices, the improving economy, the earnings that we get. Yes, its costcutting, but earnings are earnings, and the u. S. Is still the best place to put money. Now, how about the opposite . The what . What could derail the rally . Heres the two things. I have said this for a month. A sudden rise in Interest Rates will kill the markets. I even stick my neck out, 2. 4 to 3. 5 . What would cause Something Like that . Well, suddenly, the economic numbers got really good really fast, suddenly, the fed started changing its outlook, Something Like that, that would lead to a rapid rise in rates. How about a significant profit margin deterioration . Theres the flip side of earnings. Maybe earnings dont go down, but suddenly, the input costs go up dramatically. So, maybe commodity costs suddenly rise unexpectedly, inputs go up, suddenly, your profit market deterioration. Guys, were at record high Profit Margins. Thats a major reason why the stock market is up. If those record Profit Margins suddenly deteriorated quickly, that also would be a major problem for the markets. Guys, back to you. All right, bob pisani. Bob, pleasure. Okay. So, just about 24 minutes left before the closing bell on this tuesday. The Dow Jones Industrial average losing a little bit of steam, still up nicely, up 39 points to 17,115, but s p 2,000, kelly, is what its all about. And art cashin mentioning, too, weve had the orders on the close flip from the buy side to the sell side in the last few minutes, and thats, as you see the impact there across markets, coming off the highs, well off the highs of the session. Up next, is the middle class better off today compared to before the financial crisis . This topic sparking a fierce debate on closing bell yesterday. Shark tanks kevin oleary and wall street veteran david darst will go at it when we come right back. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back. A reminder, the s p hugging the 2,000 mark. Its trying to close above for the first time today. The Dow Jones Industrial average has to close at 17,138 or more in order to do the same, brian. Were currently about 25 points off that level. And 20 years ago, the s p was at about 450. Not a bad return. Yeah, crazy all right, yesterday on the show, one of our guests and this gets back to the point about market performance. Diane barnic was making the case that the american middle class is making a comeback here and thats starting to support the market. Heres what she had to say. One of the things that were finally seeing from the 2008 crisis until today, lo and behold, we are finally seeing the recovery of the middle class. We are finally seeing a lot of Discretionary Spending coming into individual households, right . Were finally seeing Household Wealth increase, and a large part of that is because were seeing households, the house data improve. So, i think over time, its taken quite a long time for that middle class to finally get better. But now the datas convincingly improving. All right, with us now is shark tanks own kevin oleary, who, by the way, is coming back at the top of the hour as part of kellys panel, and independent Investment Adviser david darst. Kevin, listen, i understand dianes points, i like to be optimistic. The reality is that Median Household Income hasnt changed much. In fact, most families are making less on a real basis than they were seven, eight years ago. Do you believe the middle class is really coming back . No. Not at all. Im not sure which planet she was talking about. Certainly not america. You went to sleep in 2007 and just woke up today, your house has not appreciated materially, youve had no earnings increase whatsoever, no bank will loan you anything, and if youre one of the 60 million americans in a Small Business in the middle class, the government is your enemy, not your friend. You are buried in regulation. No, no, no, no, no. Theres no good news here at all. David darst, do you agree . I do agree emphatically and wholeheartedly. Four reasons relate to the income statement and three reasons relate to the Balance Sheet. The income statement the jobs that have been created are low wage and parttime jobs. Secondly, you have not had the average Hourly Earnings increase. Theyre up only 2 . They should be up much more at this stage of the cycle. Number three, consumption. They havent had the money to spend. Consumption hasnt been there. And number four, oil at 93 is still high. You need cheap energy for an economy to grow. The three Balance Sheet reasons. One was just cited. House prices are starting to slip a little bit again now. Number two is the debt has basically been piled on top of debt. We have not gotten that. And very, very importantly, consumer net worth has increased. Household net worth, by 25 trillion. 21 trillion of it has been financial assets. Only 3 trillion has been in house prices, which is where mainstream america has most of their net worth. Hang on david, ive got to push back on david darst just for a second, buddy. I love you, but i will say this. I wont say push back. You mention Higher Energy prices, and we all drive, right . But at the same time, almost every job gain in america over the last decade has come on a net basis from texas and from the oil and gas industry. Midlynn, texas, now has the highest Median Income in the United States, more than Beverly Hills or greenwich, connecticut, or whatever it might be. Midland is number one, so there is an upside to High Energy Prices as well. Ive got no problem with that, brian. Its a great point. And america is producing more energy and im behind all of that. However, the amount that we spend on energy for an economy to grow, you need oil to be in the 60, 70 range, not 93. So, i agree weve expanded production, but prices have stayed elevated, partly for geopolitical reasons. Let me just float this, everything youve said is the case for the last couple of years, but heres one and it was interesting, Morgan Stanley in writing about Something Else mentioned as well this point today. They said middle income consumers leading late summer spending, that in fact, its middleincome consumers catching up in 2014 and seemingly having a better growth rate for the next 3060 days. Im not saying anything said here isnt the case. Im just wondering whether on the back of a better job market of late, were starting to now see this improvement filter down through the middle class. I look at it a different way. In every other recovery weve had in the past 25 years coming out of a recession, weve been able to quickly snap back to 5 to 6 gdp growth. It didnt happen in this recovery, and the only difference i think that has been between those recoveries and this one is this incredibly heavy government regulation on Small Business, where the majority of jobs in america are created. I dont care what state you go to kevin, i dont want to cut you off here. I just want to explain to people whats going on, what theyre looking at on their screens. Dunken niederauer, this is his last day at the stock exchange. Hes ringing the closing bell in 15 minutes and just got a standing ovation from the guys on the floor here. Hes signing the hulk fist, brian. Thats what he was holding right there. Yeah, hes going to be come on joining closing bell in the program after he rings the closing bell. I love that hulk fist he was signing. Kind of looks like olearys mitts. Have you seen Kevin Olearys hands . Just pick up a pile of money and throw it at somebody. Or beat up on regulators. Lets not be totally negative here, okay . More than half of americans do have a 401 k plan. A lot of teachers, janitors, whatever, they invest in their state pension plans. I understand that very few people actively participate in stocks nowadays, meaning day trade, et cetera, but a rising stock market, while not benefiting incomes per se, does help. Its better than a declining stock market. I want to be with you. I want to be with you on this, but the numbers dont support that optimism. Heres why. If you look at the average persons net worth, close to 200,000 is held in their home. The average portfolio size in americas around 20,000. It just doesnt matter. Thats the problem. Look, asset depreciation has been absolutely fantastic. All of this Financial Engineering and low rates have benefited those who own stocks and im appreciative, but it hasnt helped us get out of this recession or brought back the middle class. Okay, fine, but ill to say the middle class is in better shape, you must be a politician. Im not, believe me, i am not. But i will say this, you referenced housing. Maybe weve been sold a bill of goods for housing for years. The american dream, right . Ask any homeowner after a number of years, very few have actually made any money in their home, ever. Ever. So, maybe were comparing the wrong Asset Classes. By the way david darst . The average American Home size is up 40 in the past 30 years. Brian and kelly, the market can still lift from here, because there are some warning lights flashing, and those warning lights are valuations are quite stretched on a longterm basis, okay . You want to look at that. And bullishness is now 46 to 23 bears. The latest American Association of individual investors poll. And the peak in 2007 was only 51 bullish. Bullish on the market but bearish on the middle class . Bullish on the market. I think the middle class the fed has basically been trying to hold things together until the middle class can come back, and a 7yearold child knows the middle class will not come back without structural reform, leadership and confidence. Thats a lot for a 7yearold yes. But i take your point. Weve got some sophisticated ones around here. Thank you both, david darst, kevin oleary. Ill see you in about ten. Well, in about 13 minutes, weve got the closing bell, kelly, and the dow is at well, i said about. About 12, about 13. Go ahead. Im just going to annoy the director by leaning to see the s p 500. Its at 2,001. I dont know if theres a space odyssey to come, but hey, if we finish at 2,000, it will be a recordhigh close. It could call for some merrymaking here on set in about 12 minutes. Uhoh. Still to come, legendary Value Investor Mario Gabelli, also from the New York Stock Exchange, ceo dunken niederauer with their takes on these markets and their records and whether september will be a messy month. This is needeer ye eniederauern the floor. That is all ahead. Cute little guy, huh . This guy could take down your entire company. Stay with me. On thursday a hamster video goes online. On friday it goes viral a network choking phenomenon. Why do you care . Hes on the same cloud as your business. The more hits he gets, the slower your business may get. Do you want to share your cloud with a hamster . Today theres a new way to work. And its made with ibm. Over 20 million kids everyday in oulack access to healthy food. For the first time American Kids are slated to live a shorter life span than their parents. Its a problem that we can turn around and change. Revolution foods is a company we started to provide access to healthy, affordable, kidinspired, chefcrafted food. We looked at what are the aspects of food that will help set up kids for success . Making sure foods are made with high Quality Ingredients and prepared fresh everyday. Our collaboration with citi has helped us really accelerate the expansion of our business in terms of how many communities we can serve. Working with citi has also helped to fuel our innovation process and the speed at which we can bring new products into the grocery stores. We are employing 1,000 people across 27 urban areas and today, serve over 1 million meals a week. Until every kid has built those lifelong eating habits, well keep working. All right, there you go, the Dow Jones Industrial average up 38 points. The s p, though, is what weve got our collective eyes on. It says 2,000 exactly. Well see if we can get a record close here with about 8 1 2 minutes left. Joining us, Brian Jacobson from wells fargo advantage funds. Brian, we in the media are simple folk, and we like large, round numbers, right . They make for large, flashy headlines. S p 2,000, well see if we can get it. Does it matter . You know, its kind of like new years. Does that really matter . Its kind of like an arbitrary date and this is an arbitrary number, but its a Good Opportunity to reflect on how did we get here . Think about 666 on the s p 500 in 2009. Its been a long march to this point and i think its just a return to normal. I think valuations and Earnings Growth are pretty normal, and so, this is justified. But brian, if this is normal, i mean, nobody expected this. Nobody expected this back at nose levels. Thats not entirely true. Back in december of 2012, we put out a note saying we had 2,000 fine, maybe by 2012. Well, all the way back in 2012, we said wed be back at 2,000 in 2014, and thats where we are. It doesnt take herculean assumptions to get you to next years earnings per share, 125 on the s p 500. Slap a 16 multiple on it, thats pretty normal. Well, you know, some would say that earnings arent normal because they are artificially propped up. Weve heard that for a long time, brian. Do you disagree with that thesis, that the fed is literally behind everything, and when that jennianga locblock co, they fall . Thats an overly sim listic way of thinking, this is all due to the fed, because weve had strong Economic Growth, strong Earnings Growth. No, it hasnt been the Economic Growth we want, but its the Economic Growth we have, and its been enough to put earnings per share at record levels. So, i think that if you consider where Consumer Confidence is today, what we just recently saw, and if you think about what the outlook is with low Interest Rate environment, theres really no reason why we shouldnt expect earnings to continue to rise at about 5 to 7 over the next few years. Quick question on the stronger dollar. I hear people talking already about that being a potential hurdle here, could deflate corporate profits, could cause lower import prices, et cetera. Should the stronger dollar be a worry . No, i really dont think so, because mainly, a lot of corporations are very good at hedging their dollar exposure, and even though the dollars stronger, it is by no stretch of the imagination strong, based on historical con text. My bigger concern is the higher oil prices. I think Higher Energy and inpurt costs are more of a headwind to Profit Growth than the dollar is, mainly because of how nimble corporations are in managing that dollar exposure. Brian jacobson, were going to leave it there, but thank you very much. We appreciate your time. Youre going to be coming back as well, apparently. He had so much fun, hes going to stick around. Were coming right back with the closing count down with the two brians. Then, after the bell, the s p 2,000 level is getting a lot of headlines on main street. Will it get main Street Investors jumping in, though . And if so, is that a good sign or not . That and more coming up after the closing bell. Stay with us. [ dog barks ] [ male announcer ] imagine the cars we drive. Being able to see so clearly. To respond so intelligently and so quickly, they can help protect us from a world of unseen danger. Its the stuff of science fiction. Minus the fiction. And it is mercedesbenz. Today. See your authorized dealer for exceptional offers through mercedesbenz financial services. See your [b ll rings]ealer for exceptional offers time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. It gets a little bit crazy, honestly, with a couple minutes before the close. The s p 500 is up two points, and normally we wouldnt care, except for the fact that its almost exactly 2,000. Its 2,000. 55. Dow had a record close, probably not going to happen, but an s p certainly might have its first close ever above 2,000. Wow. Kind of interesting there. All right, so, lets move on, if we can here. Now time for the i guess were going to do more on the closing bell. There we go. The Dow Jones Industrial average, monster. What are we looking at . Keurig, apples up. The closing countdown and bob pisani and Brian Jacobson, who i apparently tried to chase off earlier with an early tease. Well see bri, brian, on stree signs, guests dont get to stick around for two segments. This is a much more sophisticated program. What are you advising clients to do with an s p up 200 since the market low of 2009 . Well, put it into perspective how much it dropped to get there. This has just been a big return to normal. Im encouraging people to not get too defensive at this point. I have to be honest, though, i prefer stocks in europe just from a valuation perspective, and i think that the European Central bank, their targeted longterm refinancing operation is going to do a lot to take the banks in europe from being a drag on growth to being a contributor to growth. So, i think there is more opportunity there. But i think that in the u. S. , still look at Information Technology and industrials. So, its actually my favorite areas. Brian, it hasnt worked before with the ltro in europe. They did one a couple years ago. Yeah. Guys, let me jump in for one second here. As i noted to brian earlier, we love round numbers, but we may not get one. Somebody out there in trader land just hit a sell order, perhaps, because were at 1,999. 89. I feel like, you remember the price is right with that alpine climber guy, and he would go up and yodel and if you went too far, hed go over . I feel like we were maybe sort of that way, bob pisani. Youve been down there for every major milestone of the last 10, 20 years. Do you think where does 2,000 on a close rank to you, bob . Oh, i think 2,000 is very important. Look, when we were 1,000, it was a long, long time ago, much more than a decade ago. And so, while it may not be technically important, its psychologically and emotionally important. Im not that concerned about the fact that we didnt close over 2,000. The trend is still definitely on the up side. Yeah. Were just going to kind of let the ambiance, the natural sound, as we say in the tv business, soak in here, because it is 4 00 and we are above 2,000. 2,013 now. You have a couple minutes, kelly evans, where this thing is going to settle down. Thank you, brian. And welcome to the closing bell, everybody. Im kelly evans. And a couple notable things to point out. First of all, it looks like were going to close here with the s p 500 at a record high and potentially, and it depends on how this shakes out, above or at the 2,000 mark for the first time. And as you just saw there, Duncan Niederauer ringing the closing bell, or should i say his mother doing the honors as he celebrates his last day at the New York Stock Exchange. What timing for that event, and he will be joining us shortly. Meanwhile, look at whats happened on wall street today. As mentioned, the s p 500, this is so emblematic, isnt it, closing at almost exactly the 2,000 mark. The Dow Jones Industrial average adding about 30 points there, fading from the stronger trading session we saw earlier in the day at an alltime intraday high. We didnt get an alltime closing high for the dow. 17,106, the nasdaq to 4,570. Joining me is todays panel. Our own sara eisen, cnbc contributor carol roth, shark tanks kevin oleary. With us is oneil securities and guy adami will be joining us as well. Kenny, youre on the floor. Describe the atmosphere. It was more muted than most would think, right . We closed at 2,000. Surely, its a record. Its not nearly creating the excitement that a lot of people might think, partly because were in the last week of august, a lot of low volume, people arent really around, and a lot of people kind of just expecting, weve been teasing with this level for the last week and a half, right . We tested it back off of yesterday, so yesterday we pierced it, today we closed right at it. Does everyone feel good, yes, but is it like celebratory . Not really. Its just kind of another round number at the moment. No news, carol. But weve got m a, weve got airline orders, weve got happy consumers, weve got the fed. What could possibly go wrong here, kelly . Everything i sense youre being everything seems great. You know, its fine for the short term. With the fed intervention, i imagine that were going to continue to see this. Youre going to see the market go up. You get a pullback, and then it continues to go up higher and its back and forth, and it continues its higher trajectory. I still worry about the mid to the longterm, because i do not understand, over the long term, i know kevin oleary might see big multiples and multiple expansion, but if youre going to have a 20 times multiple on the s p, you have to have the growth to sustain that. It was the kind of wages that we have and the economy kind of muddling along, i still dont understand long term how this is going to be sustainable. But for now, youve got the fed here, youve got the kevin . Federal reserves internationally as well. Are you a believer long term, kevin . Well, you may not like multiple expansion, but thats exactly whats happening every day as the s p goes 2,000 and beyond, because earnings arent going to be any better than 215. Lets at it that way. And were not seeing companies coming out after this last quarter saying we believe in, you know, fantastic growth in the back end. Youre kind of settling in on a number thats consensus. And so, every time the market goes beyond the 16 multiple, it was that, call it four months ago, its pure multiple expansion. And the reason thats happening, i think, is that look at me. I put money to work today. I could only make 4. 7 in lowrisk corporate credits or floating rate loans. Thats not enough. I want to make at least 6 , 7 , and i can get that in equities. I can get that in the s p between now and the end of the year. Whered you put money to work today, kevin . Im 50 50 balance guy, thats how i work, so im forced to put 50 of it today into fixed income. And the only thing i bought was corporate credits with duration less than 36 months and another big whack of floating rate loans from Largecap Companies that are offering me about 4. 6 . Im getting really bored, kelly. Thats all there is to buy the fixed income infrastructure. If you bought any treasuries today, youre going to lose money in the future. Sara . The environment where lack of news is good news for the markets. And it just keeps going up in this sort of low volume, low volatility kind of environment. What carols describing, the concerns about the federal reserve, the concerns about wages, the fact that theres been this wall of worry, thats whats characterized this entire bull market run. And clearly, those concerns are out there. Not everyone is on board. The Retail Investor, which i know well talk about, isnt fully on board. But if youre not, you are missing whats turned out to be a historic rally. I think with this level, weve now tripled, kenny, is that right, from the low that we had on the s p 500 in 2009 . Right, but if youre going to be go back and talk about the lows of 2009 to where we are today, we could certainly have that conversation, but thats not really fair, right . We have to talk about where we are now, where the markets going to go six months from now, a year from now, and why its going to go there. Well see next month, when people start getting back, europe gets back to work and people in this country get back to work and Asset Managers start to reassess, thirdquarter earnings are coming up in october, what are they going to look like . Are they going to be as strong as the Second Quarter . Then well see a little more volatility and retrenchment in the market, but as long as the fed and carol said it and kevin said it, as long as the fed continues to be here, it will be difficult for the market to pull back anything substantial. The interesting thing about the action today, kenny, to your point about Central Banks, is it comes as a lot of shops are talking about the European Central bank acting here to support its economy. As it not exactly a sign of fundamental strength. It is a sign, though, that the baton is maybe being passed from the u. S. To europe in that regard. And listen, the bank of japan over the weekend said the same thing. Theyre going to launch more stimulus. And so, therefore, the accommodation continues around the world. But there is news here in the u. S. I mean, Consumer Confidence hit the highest level today since 2007. Whether that actually matches up with Consumer Spending or retail sales remains to be seen. Consumers are getting more confident. Economic signals continue to be pretty good. Were looking at m a, 11 billion deal, not bad. Obviously, you can tear apart some of these issues and wonder why youre starting to see these deals. Are they cut purposes, are they to try to find growth in an otherwise tepid environment, but they are typically better signals, better Economic Data and deal activity. Is there anybody here who really thinks that the fed, not just the fed here, but the Central Banks around the world, that every single one of them acting at unprecedented levels, that were going to have absolutely nothing to pay for this, even if it works out here in the u. S. The funny thing is nobodys really thought that, right . Like, for years, people havent wanted to get involved because theyve looked at this and said this is crazy, it cant work. And i wonder if today its like, well, its working all right. Listen, no one really knows how its going to work because no one knows how were going to get out of this. This is unpress denned where we are. There is no history with this at all, therefore, the jurys still out whether or not this is going to work. I know same question go ahead, kevin . You can either buy equities and be comforted by the fact that all these governments, and you remember the s p has half its sales outside of america now. So, thats good news. Or the other option is you have beef jerky, bars of gold and a rifle and you go up to the hills and wait for it all to end. Choose one. Youre right. Thats the smith and wesson trade, reporting earnings after the bell today. There is a certain impetus towards, kevin, exactly that latter scenario that youre talking about. By the way, if you pursue plan b, youre not going to be happy even if plan a looks like its working out. And its not an eitheror, right . You can buy both. You can still have your bunker with the gold and the smith and wesson. Thats true. Carol, i know you guys have a bunker going, right . Absolutely. I have like three bunkers because we want to be diversified in our bunker strategy as well. Kevin. Go ahead. Sorry . Ultimately, these banks arent going anywhere for a while. And so, its really going to kind of be the status quo, right . The markets will march higher and any chance of a real pullback is probably muted. Its when they really all start to pull back is when youre going to have to reevaluate what the situation looks like. Yeah. Look for the latest pullback of what, 4 at most . 4 , and what was that . In scheme of things, what was that really . Nothing. I have a question, kenny, why do Interest Rates keep going lower as the stock market marches higher . We should ask kevin that answer. Im not really sure. Nobody and the reason i ask is because i know some of the answers, some of the reasons people point to. But it is an unusual breakdown in correlations, kevin. Wonder how closely youre watching the bond market. Well, i watch it every day. Im very covered on whats happening with the 10year, but im also aware that institutional clients, many which i deal with, particularly Insurance Companies and other Financial Institutions that have used derivatives have to buy the 10year, 40 , 50 index. They have no choice to offset this against other assets. The demand is insatiable for that, and if youre buying duration, the safest globally is still the u. S. 10year. So, i dont think its a good thing for investors to own, but if youre forced by mandate to do it, you have no choice. Right. Also, theres going to be a lot of talk about flows versus fundamentals, and people are looking for yield. One of the best performing Asset Classes this year is reits, Real Estate Investment trusts. People are going, and its incredible, right . This is the landscape 2014. If you told people what the economic environment was going to be, what the stock market was going to do, and then asked them to guess, you know, where the bond market would be, i dont think many people would have said that it would or could be lower at this point, but its flows, carol in fact, its domestic flows to some extent. Its momandpop evans buying u. S. Treasuries even as the feds buying fewer of them, i guess. It is. And looking at the different sectors, the one that also stands out to me is consumer staples. If you look at how well all of the other sectors have done, at least in the short term here and even year to date, and then you look at consumer staples, thats the one thats really dragging down all of them. And just a couple other points about the treasury. The people who are buying these assets, they include, for example, a lot of Financial Institutions. So, now they have to collateralize a lot of what theyre doing in the safest and most liquid collateral out there is u. S. Treasuries, for example. Simon hobbs making the point earlier a lot of people are buying parts of the bond and credit markets for the price appreciation and those pieces of paper, as opposed to the yield. So, to the extent that there are all these new players in the market, and even look at some of the Pension Funds or some of the, you know, Government Bond funds, which now by s. E. C. Mandates have to hold almost half of actual u. S. Government bonds as opposed to just 80 . Maybe thats where a lot of this debate is coming from and thats where the question i guess goes back to whether the signal from the bond market can be trusted with regard to the old formulas or rules of thumb that used to work. Im not necessarily sure today that you can trust those signals, right, for a number of the points that both sara and kevin made. I think if youre into equities, then you are watching what the equity market is doing, youre watching what multiples are, youre watching what the earnings are going to be to do and youre going to be comfortable with it or not, right . And i think ultimately, i think most strategists and economists are calling for a return to normalcy this year, between 8 and 10 , and were right there. Where are we today . Just over 8 , right . And so, weve got a couple of months and maybe some backandforth, but id suspect that the markets going to close right in and around here at end of the year with an 8 or 9 return. Youve also got that global qe trade working. And while we have the super low Interest Rates here, theyre even lower in germany right now. Theyre negative. In europe and in japan, the two major Central Banks that are looking to ramp things up here. So, that could be a reason why the treasury market keeps growling anyway. Interesting that the dollar is strengthening alongside u. S. Stocks right now. A lot of people say thats a bullish sign that the u. S. Is finally responding to better Economic Data and to better signs in Corporate America as well. I still think that theres a lot of worry out there and i still think there are people that are doing their diversification strategy. They dont want to lose out on whats going on. They know the fed intervention will push the market higher, at least in the short term, but they still want the downside protection. Well leave it there. Kenny, thank you. 2,000 for the s p 500 getting a lot of headlines and the attention of Retail Investors. Up next, well examine how the rise in the s p 500 is playing on main street and if that means more people will return to the investing fold. And from Retail Investing to highstakes investing, the legendary Mario Gabelli will join us just ahead. Were eager for his thoughts on this market. You are watching cnbc, first in business worldwide. Well, its taken 16 years for the s p 500 to grow by 1,000 points. Our susan lee is at cnbc Global Headquarters tracking that momentous jump. Hi, susan. Hi, there. It was a photo finish to cross above 2,000, but some hard yards to gain the last 1,000 points. Lets look at winners and losers, starting with the gainers over the last 16 years. And you can thank cocacola, monster energys making cocacola for an 83,000point jump in stock price. Keurig can thank, of course, kraft for its rise, 48,000 during the last 16 years or so. I want to highlight, of course, apple as part of the gainers. Apple back in 1998 only cost you 63 cents. Can you tihink of a better way o spend 63 cents . Up 16,000 . Lets look at losers. Over the last 16 years, its not surprising to see that names getting crushed in the Global Financial crisis, leading the declines, aig down 91 . Factor in a 1for20 reverse split for the insurer. Also, citi is down 79 . And xerox is down 68 as well. Despite the record close we have for the s p, it might surprise you that equities have actually underperformed the rest of the Asset Classes in the last 16 years. So, equities with this 1,000point charge since 1998, up 100 . But if you bought into west texas crude, for instance, youre up 447 during that time. And gold, not bad, 319 . And you also made some pretty good money in fixed income. Can you believe that yields back then were 557 basis points, kelly . I guess times have really changed, havent they . Yes, they have, susan. Thank you. And thats a reminder as to why the Energy Sector probably the best performer here, as weve made that climb. Thank you very much, susan. S p 2,000 may just be a number, but its a number that will generate a lot of headlines and the attention of people who otherwise may not have been ready to Pay Attention to stocks. Will Chris Johnson from Jk Investment Group and pat powell from powell financial group, welcome to you both. Chris, so, you know, does this start getting the market back on the list of the average joe . It does. Theres a giveandtake here, kelly. You know what, from the p perspective of those in the market, theyll use 2,000 or this round number as kind of that point, that mile marker that they pass. Take a look at their portfolios and maybe sell some of the winners. So, thats the bad side of round numbers. If you look at a chart of the s p 500 over the last 20 years, its hard to deny theres not resistance and support of round numbers. For the give here, those that are on the sidelines and have been sitting on the sidelines are going to kind of feel like the bull trains leaving the station and theyre going to want to get some money to work. I dont think youll see a huge rush of cash. A lot of concerns about Interest Rates, lack of volatility, et cetera, and were running into a seasonally weak period for the year. Pat, do you think thats going to be the mentality here, that the bull trains leaving the station . I dont think so. I think were 5 1 2 years into this bull market. I think investors need to be cautious. If you have a portfolio and you have stocks in that portfolio, you need to think about how to protect your capital. This is not the only alltime high weve ever seen. You know, back in 2007, people were yelling it was going to go through the roof, and we had a true top and then we got into 2008. So, i think people need to be cautious, particularly if you have a shorterterm time horizon. If youre a longterm investor like Warren Buffett, go for it. You dont have a thing to worry about. I want to bring in the panel here. Hey, kelly, can i piggyback quickly . Go ahead. I agree completely with pat right now. I think were in one of those situations where the market from a shortterm perspective, were going to see a better opportunity to get in. Remember, were still missing that 10 correction. Thats kind of ducked and weaved the market for the last couple of years. So, were not saying that everybody should be jumping in right now. Were selective buyers, and if we got that 10 pullback, wed certainly see valuation on the market at that point. I actually have anecdotes from today that support exactly what chris and pat are saying. The first thing is that you always hear when your cab drivers or drivers are asking you for stocks, that signifies some sort of a top. And i had my driver today say, hey, im thinking about investing, what should my strategy be . So, from an anecdotal standpoint, that kind of supports that people are starting to think about getting back in, the Retail Investor. But he was a longterm investor, so i gave him the advice to continue to invest, to do it consistently, and to have a diversified strategy. And i agree, over the long term, i think that investors should really have that horizon. Just be consistent about that. I wonder, pat, like you said, for people who should think about protecting maybe the gains that theyve seen, how do you do that, with bonds . Very simple. Well, no, start with your stock portfolio. If youve got some winners in there, you dont have to do a wholesale sell in here. What you want to do is go in and put some stop losses in. You have to be prepared to deal with the tax consequences of that, but you you dont trade. You just put the stock losses in. If things continue up, you move them up behind where they are and you just let it ride. But if things fall apart, youre not sitting there trying to decide in the middle of a correction, what the heck am i going to do . Chris, what do you tell your clients in the more the market goes up, and now were talking about this 200 number since the low, the fact that were at major market milestones, does that make us every time we go higher more vulnerable to a sharper correction . And what do you do in that case, because its been so risky to be in cash . Pat nailed it, first of all. Weve seen alltime highs a number of times in the past. So, an alltime high doesnt necessarily mean that the spring is getting coiled tighter in terms of that selloff. What it does do, though and think of it from a sentiment perspective. The old adage, when everybodys buying, its a great time to be selling. Pat just nailed it with the car driver. Remember, there are four cycles to a bull market. Theres a first one, where theres just absolute hatred or pessimism towards a market. Theres a second one, second stage where investors disbelieve. Weve seen that pass in 2010, 2011. Theres acceptance, which weve gone through in the last year. And then theres euphoria, and thats when investors cant feel like they can do wrong. I think were getting to that point, the scale is tipping there. People are looking pretty confident around here, i will say. Yeah, yeah. Really. Still get a lot its been called the most hated rally. And people have been so burned by the financial crisis in 2008. But in a way, that sort of helped, because theres been this wall of worry and the most hated rally. And doesnt that just perpetuate this rally even further . But it makes me wonder, pat, if you could quickly weigh in on this as well, if people are waiting for that correction to get involved, theyve been waiting for years for now. And is the risk that they just dont get involved . Well, heres the thing, we are not hardwired to get this right. We dont have a good investment gene. What you have to have is a plan. You have to decide if youre a shortterm investor or a longterm investor. The 401 k investor is the best investor out there. Every month hes adding through his payroll into an investment portfolio that has some kind of allocation to it. What you try to do is emulate that in your other investments, but you have to have a plan. If you dont, people who dont have a plan do one of two things. When something goes wrong, theyre either immobilized, they dont do a thing and just watch it all happen, or they start getting up in the middle of the night and they panic, and when do they sell . Almost always at the market bottom. So, youve got to have a plan. My greatest fear so true. Last word. My greatest fear these days is that we are turning a whole asset class, bonds, fixed income, into something nobody wants to own. Theres a whole generation of investors that simply listen to people talk about the only place to be now is in equities, and thats simply not true. When equities correct, as weve been detailing what, do you want them in oleary funds . No, i promote that as a strategy, and of course im talking oleary funds. I always talk my book. Who doesnt . But my point is very simple. I look at it this way. When the correction hits, the asset class youre going to love all over again, like the barbie you forgot was in your closet, is going to be your fixed income portfolio, because its not going to correct 20 . Thats not going to happen. Wait, how can you say its not going to correct 20 though . Because if you take the Duration Risk out of it, and you can now get 4. 7 at 36 months, it protects you against the concerns were all talking about in the equity market. Yes, youre not going to make 8 , but its better than zero in cash. [ everyone talking at once ] with all due respect, weve had a 30yearplus bull market in bonds, and now youre asking people to get into bonds. I understand the low duration i didnt say bonds. I didnt say bonds. If your clients are going to wait i said corporate credits. Three years for your duration to work out and work back no, no, listen you do need cash in the portfolio to have a proper balance. Heres why we dont agree. Im asking you to move up the Balance Sheet on the same companies youre in love with on equities and move into their fixed income, not bonds. Im not buying any Government Bonds. Those are treacherous and toxic. Im talking about simply moving up into corporate credits of 36month duration where you can make close to 5 when Interest Rates go up, youll be hit on corporates as well as treasuries. Kevin [ everyone talking at once ] we can continue this 36month duration going to take you three years for the duration to work through. You need to have some cash. How about 4. 5 in 90 days . Can you handle 90day duration . Thats a floating rate loan. Thank goodness youve met me today. Well, thank goodness ive met you. Ive been looking forward to it, despite the fact that you still dont have the bonds right. Chris and pat ive got them right, dont worry. Were glad to have met you guys this afternoon. Thanks, guys. We definitely have to continue this conversation as the s p rewrites the record books. We also want to get perspective from an investing legend. Up next, Mario Gabelli of the Economic Fund will give us his take on these historymaking numbers and also tell us where he still sees value in this market. Stay with us. The world has got, but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. 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[ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Welcome back. Well, one score and 1,000 points ago, there was no google or facebook to take the market by storm. Now as the s p 500 cracks history, making the 2,000point mark for the first time, susan lee takes a look at how some companies that woerent even around back then and those that were havent performed as well. Its hard to believe there is no facebook or google 1,000 points ago, but that was the case. 16 years ago we didnt have fb, we didnt have google on the stock markets. Well, today, google is the Third Largest listed company on the s p, and you see the stock price is up close to 1300 since going public about ten years ago. And two publicly traded offerings. So, you can trade google classa shares and c shares as well, but for reference point, this is the gain were seeing in the ashares for google. Facebook, fb, listed last year, up 84 since then. With the constant numbers were seeing for facebook, looks like an upward trajectory. And another dotcom name that i call a new kid on the block for the s p in this final 1,000point rally, twitter, some 98 since its ipo. But lets talk about the names that have been gone now from the market, beginning with sears. A hopeful name that people remember, know and love, renewed on 2012. Sprint as well. A lot of people moved. This was dumped from the s p after being acquired by softbank of japan. One more name removed from the s p 500 on december 2013, another retail name, jcpenney, it is up. Byebye to jc there. There you go, kelly, some new kids and some that have been knocked off. Susan, thank you for now. With these markets with record highs, is it still possible to find value in this market . Joining me in an cnbc exclusive with some best stock picks is Mario Gabelli. Welcome. Great to be here on a particularly important day. Thats exactly it. What do you make of s p here, the 2,000 level, closing for the first time . Well, you know, ive been here since my first visit to the floor is when i started in 1967 across the street, so that was, lucky to be 1,000 on the dow. And its just a number. But its supported by fundamentals. Earnings, corporations keeping their costs down. The multiple high Interest Rate psychology, but we will have, kelly, a lot of volatility in the world, and thats a terrific opportunity. What about when people say this is all the fed . Well, theres 5 trillion thats behind that statement, and that is not a bad statement. And that is that the goal of bernanke, and now Janet Yellens following is to try to bolster to the consumer sector, through the financial sector, through the dollar, and that has worked. So, at some point in time, that is going to be reduced, and then well see if we have the takeoff stage in the u. S. Economy. I think thats the nervousness that has people staying away from the market. You certainly understand the nervousness, but its probably the nervousness thats kept people out of this market. If you owned Berkshire Hathaway the last 35 years, at any point in time, there may have been reasons to sell it. In 1989, it was because he didnt understand dotcom, okay . The stock is probably 35,000. We have about Ten Companies listed on this floor that would be under our brand, and that is in the closing world. If you invested with us for that period of time, you did quite well. So, buying good businesses over a long period of time at a reasonable price is still a very good way to maintain assets. Particularly if a company has Pricing Power. Thats exactly what we want to ask you. Where do you see those companies today . Theres a lot. We have core competency from compounding knowledge of industries over an extended period of time. For example, i follow debald, a company that makes safes. Then they went to selfservice in 1968 or 9. We still have a large position in the company. The stock is 38 and we think that its in the beginning of a major turnaround. New management came in a year and a quarter ago, and can they pull it off . Can they take their capability and service and put it in software . If yes, we have a stock up 50 or 60 the next three years. Where else . Well, another latestage turnaround led by management is kemptore. Stocks around 25. My own sense is that theres about 90 million shares. Its another smallcap company. Selling an asset, will close in the next 60 days. Has a buttress on the stock and you can double your money in the next five years. You also mentioned weatherford. Oh, thats an oral service thats a bigger company. Theres about 750 million shares. The stocks 22. There we think the management is taking assets, putting them in a bucket, good assets, trying to grow them, buying back stock, reducing debt. Its been a slow start, kelly. And what happens is that we think halliburton will want to own them at a 50 plus premium from here. So, theres a lot of Companies Like this. What are included on this list that people are buying in other acquisition plays or as buyback plays. Neither one of those factors are something that long term are a good sign. In other words, its more of a gamble. Its more of a play. Turnover in the asset, our first huetual fund at 6 . We love them, we dont leave them. 16 Years Holding periods. So, over the next five years, even if there is no transaction, you win, its the same thing with michael roth at interpublic, an advertising agency. We started buying the stock at 6 when he became the ceo and now its 19. And if he doesnt do a deal, which he may do, the stock will be up 50 in the next three or four years. Thats 15 . That is not bad. Now, the market will go down, the market will go up. But for taxable accounts, its not what you make, its what you keep. So, longterm Capital Gains as opposed to buying and selling we run 50 billion, so we have a lot of companies around the world that we focus on. Two quick questions. I mean, i do want to ask you about the tax issue. We dont have time for that. But i definitely want to ask about the bond market and this debate we were just having, and its to whether people are safer in equity you know, are they being pushed into equities because theres no alternative, or are they in equities for the right reasons . Are equities safer today or are bonds safer . How many angels can we put on the head of a pin . The question is simple. You look at yourself, you look at the client. Is it a university . Is it an endowment, is it a union, is it a tax what are the returns theyre looking for and how much volatility do they want in those returns . From my point of view, im trying to preserve client wealth in a likely Rising Inflationary environment. How do i find companies with Pricing Power and unique characteristics, small, big, large, in an area in which we have some knowledge weve accumulated, like the fracking business is terrific. Its a gamechanger for the United States. Its a gamechanger for the world politics. And weatherford, for example, provides the veins and the pumps and the artificial lisp for that. So, this is a very good secular, and hopefully, a cyclical play on some of these companies. Weve got to go, but is burger king being unamerican here . No. Burger king is fantastic. And the ceo, just like you come in every day to excite and delight your viewers with information, burger king is doing what theyre supposed to do, that is make money for their shareholders. And together and adam smith said this 250 years ago together it creates an economy that is not centrally planned. So, theres a lot to be said about those dynamics. By the way, theres a unique twist on that one which we can go over another time in terms of creating an lp unit. Well, thats a tease. I love to do that. Mario gabelli, thank you so much this afternoon. As the s p 500 hits that 2,000 mark, how do the wealthy feel about it . It might not be as good as youd expect. Robert frank is going to give us some surprising details on sentiment, coming up. But first, New York Stock Exchange group ceo duncan ne niederauer stepping down after a celebrated career here and he will join us next. This is a burrito made with chocolate, soybeans, and apricots. What kind of chef comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. Watson turns big data into new ideas. And not just for food. Watson is working with doctors and bankers to help transform their industries. Today theres a new way to work. And its made with ibm. Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Welcome back. It is the end of an era. Hes served as ceo of an iconic organization for 70 years now. Any New York Stock Exchange. He just rang the bell half an hour ago. Duncan niederauer joining us exclusive with bob pisani and enjoying your retired life. As i just said to you, the first 30 minutes or so, its been pretty good so far. My mother would correct you if she heard what you just said, because she will point out that she rang the closing bell for her 90th birthday. Yes, she did. That was a great moment, by the way. Its her birthday today . 90th . Yes. I promised when she turned 85 she could do it on her 90th birthday if i still had the job, and i guess i made it by the skin of my teeth, so. You come in in 2007. I remember it well because it was a difficult time for the New York Stock Exchange, transitioning to a faster market, an electronic market. Still, parts of the floor was still under the slower system. It was a big challenge for you at that time. Can you just tell us what it was like to make that move . Because it caused a lot of issues at the time. Yeah, it really did, right . And if you and i remember, in 2007, not only was this set not here, not only did the floor look nothing like this, but the technology was almost at a runway. The hybrid market idea was being tested, but if were honest, it was failing, and we didnt know what was around the corner in 2008 at that point, right . So, we look back on that with a lot of pride, because it would have been easy to leave it the way it was and just say, it will work itself out. I didnt think it was going to work itself out. So, we went to work quickly to fix the technology, change the face of the floor, and its really changed the approach. And i think it worked out pretty well in the end. The other issue, of course, was the technology. Right. You con staently need to keep updating this technology to make sure its the best, it works. You had to put a substantial amount of money into the place just to move into the completely modern trading era. I think we thought we were in the 21st century and we really werent, and we had been left behind a little bit by the technological change, but the advantage i had with help from Larry Leibowitz and others was that you can go from behind to ahead because the pace of innovation is so fast now that if youre the last one to update your system and you do it properly, you can go from being pretty far in back in the pack to where you become the market leader, and i think thats what we were able to do. A lot of people have talked about the increased share, especially of tech ipos here at the New York Stock Exchange. 15 the year before you came, 54 last year, correct me if im wrong. What would you say your greatest achievement has been here . We certainly look back and think that was one of them. I thought the way we brought the company together, the way we brought the floor together as part of our family, but then the way we all collaborated to win more of those ipos, because i genuinely thought we were the better place for a lot of those companies. I thought we had the better market model. I thought we had the better global brand. I thought we had the media center that you and some of your peers in the industry bring here. And i thought this was just a much better branding platform for companies, and i think thats proving to be true. The flip side, of course, is whats your biggest regret from your now sevenyear tenure . I think if i had a doover, two things. One, i wish i had gotten here a little bit sooner, because i recognized from a distance what the problems were, and i genuinely think we could have gotten us back on the road to where we needed to be sooner, but ill never have that chance. The second regret is, i thought in my heart of hearts we would get the deal with the germans approved, and i thought the only two legitimate partners for this enterprise were deutsche buhriza or ice. And i probably cost the company a year trying to get a deal. I thought we could get that done in 2011, that the european regulators felt otherwise about. Lets try to spin this forward a little bit, and what you think might be happening. Theres a lot of concern that 40 to 50 of the volume is occurring off of the exchanges alternative Trading Systems, places like dart pools. What should happen to should we have a system where we drive more volume back to the exchanges and away from dart pools and other alternative Trading Systems . And what can we do to do that . Yeah, well, i think thats largely in the s. E. C. s hands, bob. Im going to kind of bow out of those conversations. I think its other peoples turn now to have a shot at the debate. I think we were an active participant in that dialogue. I think weve been pretty clear about what we thought should change. And its not about turning the Playing Field uneven in a different direction. Its just leveling the Playing Field and making it, you know, equally challenging for anybody, for everybody. But i think weve got to bring confidence back to the markets, and im confident that as i step out, i feel like were on the cusp of having action taken around a lot of the conversations that weve had. And the criticism thats coming up against the exchanges can i ask a question . Kevin, go ahead. Duncan, i want to ask you a question on behalf of the Younger Generation of investors who are watching this incredible institution, but i brought my 17yearold son with me to watch our panel work last month. His name is trevor. And he sat and watched it all, saw the closing bell, and then he asked me afterwards, and i put it in the context of his thinking he said to me, why do you need all these people . Why doesnt the computer do all this . Whats the point . And i think thats still a question that many people have about the nyse. Whats the answer . Yeah, and i think the answer to that ones pretty clear, kevin, and we worked hard on that, right . If you look at how many people are down here today, its several hundred instead of several thousand. So, i think weve already made the productivity enhancements. I think we already made the investment in technology. What i thought was happening here a decade or so ago is we were really resisting the onset of the technology. We were kind of pretending it wasnt really going to happen here. I think once we got here, we embraced it. We took it forward. But i always thought there was a place for human beings here. I think the combination of marketleading technology and people who could exercise judgment when necessary, if that was properly calibrated inside the market model, i always thought that was the best model. I thought it shouldnt be too manual, but at the same time, i dont think it needs to be 100 electronic, because we know it doesnt always work. And now its up to Thomas Farrell farley to take it from here. Im sure he will. What will you do . Whats the future for you . I had the pleasure to spend time with professional golfer steve stricker. Hes a good friend of mine, becoming good friends, and weve sponsored steve during my time at the nyse and we played together for an event for a special needs school that we helped get built, and steve and i talked about it, because hes stepping back, too. I think its about worklife balance. Hes a great role model for that, so were going to talk about spending more time at home, and when we work, be really, really good. In other words, well have to wait and see. Thank you. A historic day for so many reasons. And thank you for the partnership. We really appreciate it. And happy birthday to your mother. 90 wow, thats the real milestone. Dont tell the s p 500 we are in the dog days of summer. They cracked the 2,000 mark today. Well see what stories about that record cracked our hot list when we come right back. [ male announcer ] its one of the most Amazing Things we build and it doesnt even fly. We build it in classrooms and exhibit halls, mentoring tomorrows innovators. We build it raising roofs, preserving habitats and serving americas veterans. Every day, thousands of boeing volunteers help make their communities the best they can be. Building Something Better for all of us. [b ll rings] time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back. It is time for the cnbc. Com hot list with managing editor allen wastler. Was it all about s p 2,000 today . All about the markets. Ive got a threeway tie at the top. One, a piece from our futures now team looking at the strange dynamic thats been propelling the market up, which basically boils down to retailup. My number two is an interview with uer bull professor jeremy seigel. He was on fast money at halftime. Then balancing him out a piece by robert frank. I notice you have him coming out. Hes talking about the wealth i investor. They may be feeling pes mick, balancing out that bullish segment from mr. Wasler. Im thinking of the balance the cycle thing in the context of that sentiment indicator. Alan wasler, cnbc. Com manager editor. Our next segment tivo out earnings morroccan brennan will tell us how theyre faring after hours as well as covering big Market Movers on this big market day. Well be right back. You want to cut through the noise of an overwhelming amount of analysis. [ all talking ] you want the insights that will help you decide which ideas to execute and which to leave behind. You want your trades executed in one second or less, guaranteed, and routed with institutionalquality technology. Look no further. Open an account and find more of the expertise you need to be a better investor. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Go to comcastbusiness. Com checkyourspeed if we cant offer faster speeds or save you money well give you 150. Comcast business. Built for business. Welcome back, a historic day. Morgan brennan joins me to walk through the big Market Movers today. We begin with smith wesson getting hammered, the sales were below forecasts on weaker demands for gun Third Quarter and fouryear guidance also weak. Smith wesson is toews trading down 11 in after hours. Tivo out with results after the bell t. Dvr maker posted 8 cents a share. Revenue came in a bit shy. Third quarter guidance came in below forecast. The company did announce a new 350 million Share Buy Back plan. That stock is currently trading down in the after hours. Meanwhile in the religion lar session, orbits moved after American Airlines and usairways said they were pulling their Online Travel agency after they were unable to reach an agreement on a longterm contract. Kelly, back to you. Thats an interesting one. Earlier, we talked about the Retail Investor is paying attention to the record move. What about the wealthy . Up next. You think it might be popping champagne over s p 2,000 . Not so much. Robert frank has the surprising details when we come right back. . Really . Yeah, id like that. Who are you talking to . Well, we just heard from Financial Advisers how theyre repositioning the Retail Market at this time. How is the super wealthy feeling about the s p hitting the 2,000 mark. Robert frank . Theyre a little nervous and leery of stocks right here. The latest Spectrum Group shows it fell in august and basically remained at that level we saw in july, well below the january and june peaks. If you look at what theyre talking about, with stocks, theyre less likely to buy stocks pulling in their horns against all Asset Classes, when asked about water bothering them, its all that stuff in the middle east and in iraq and the ukraine. 49 cited overseas crises as the number one concern. Kelly, not a lot of bouillons here, not. Maybe a sign we will not go much higher, a wealthy conviction from healthy investors. I want to ask, how much are they going towards alternative investments in this kind of environment . Huge. Private equity is the flavor of the month with wealthy investors, theyre all putting a lot of money, all the new money seems to be going into private equity. Its the big hit. Dont those count, robert, the 38 million. What did they car sell for . Fiharrys. Theyre putting money into ferraris, too. The wealthier worry, carol the Retail Investor isnt necessarily involved. Companies are buying. Where does this leave us . I think hang on for the short term. Came i come up with your plan for the long term. Kevin oleary, were new that survey . I speak to a lot of wealthy people. Heres what they tell me. They dont care about returns, kelly. They want preservation of wealth. Thats what they worry about. Thanks for being here this afternoon on such a historic day, much more coming up on this topic on fast money in a few moments with melissa lee. With y2k, a lot of people are fretting they missed out on this market run. We have answers, stocks that have underperformed this market rally and are due for a little bit of catch up. All right. Over to you guys. All right. Thanks a lot. Fast money starts right now. Live from the fax markets in new york city times square, as the record breaking day for the s p 5 luchl. Our traders are tim seymour, dan fa tan, guy adami. March 2,000 have been about monster beverage, celgene, apple, gilead. So is that growth trade the way to keep playing the market . It was interesting today on the march to this new closing record high, we saw the russell outperforming the broader indies ses tim. I dont think you can cherry pick it. If you wanto