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Relax enjoy the -- we're also -- idiot just for the next couple days.
Because the industry is not really -- just borrow it and somebody said backs we have the -- through samples that so we're here like it is kind of panicky.
That's that I have ever hit exactly.
-- the viewers are ready -- the -- Tracy as we are far.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- We'll talk to that city back in April same thing is this is air and this case here in -- -- -- And we're down today by a 137.
Points Patrick Becker junior from.
Becker capital management will -- will go to flock Jeff Flock.
On the GM stuff because now.
For -- in the CEO really talked about the possibility of bankruptcy is -- Being a possibility -- use -- -- probable.
If things -- go on and -- -- back taxes but again that than.
But let's start with that Shibani Joshi is with us in here for Robert -- today.
Well lets them.
-- -- And a better pentagon back in the -- today certainly and interesting following -- to the stress tests.
Data we have right here right lot of people out there expecting yes -- got on this bill that the way the -- -- up eight out of nine weeks.
We're due for a sell lots and we're getting a little bit -- a little bit of Acela we're down -- 136 points.
On focus today we've been talking about from the banks coming out saying that they want to raise capital.
-- BT capital on all these companies issuing secondary offerings that stay alluded to shareholders seat and expect that you scenes and -- -- With those stocks that's happening GM of course we're following very closely.
What's been going on with that and that would also -- about oil prices oil prices are down.
And -- -- down energy stocks.
In certain in certain indexes -- -- in energy stocks all of them -- down because they're seeing.
Just -- concerns it before you know -- interesting is before we see see oil go up in the markets go down but everything seems to be working in in harmony right now because everyone's trying to gauge when the economy's gonna recover -- -- do you -- little things.
And it's good thing for everybody it's a good thing for oil prices does -- wanna -- -- me and got a lot.
Because that's going to be largely driven by and economic Recovery -- can impact the stock market that's an impact stocks.
But oil is down today as a ads are prices of -- and and the dollar and commodities as a holes.
Time because its oil seems to be moving into in some -- whether or not work.
Going into recession coming at -- -- global market doing better doing worse yet we get assignment.
Global markets on -- on -- panic.
Exactly so it's it moving into.
And -- you know that was different than what was going on for months ago.
Yeah -- sort of being run as a stock market obviously in the S&P in nine weeks is up 36%.
-- -- -- pull back a little but they can't be surprised NASDAQ which you cover and it did anything kind of interest in today's attitude started down and it.
And the national -- and now it's down again.
Well the -- is actually only index sets it up for nine straight weeks in a row and a lot of people are saying technology.
Could be this sector to turn things around to pull out and prop up markets because we've seen this sector really just hammered it just such -- logical -- a lot of people -- saying it would be valuation certainly makes sense considering -- -- They casts of these companies have on the -- the lack of debt that they have on the balance sheet.
So not -- all -- big surprise couple things coming at the second Microsoft issuing about six billion dollars worth of debt.
To text in there trying to raise money to you.
Intel we know it's -- -- -- fine by the EU sound announced on Wednesday.
Use lots of stuff going on at techno thing and -- happening to you ask me.
Thank appreciate your body just sit there with our top stories this morning nothing about technology -- mention this on the opening bell this morning one of the notes I got.
From a technical strategists Katie Stockton and cam was just pointing out that NASDAQ -- -- has been really -- and and hitting some technical sitting some resistance levels through the -- day moving average and the -- it broke through its it's it's high from from in November of.
It's a great source of mine runs a technology that's that technology based had to say and -- -- said that there's more opportunity.
And he spat that he thinks it is.
Welcome back right.
We'll see how that on plays out Patrick Becker junior the chief investment officer Becker capital management to joins them -- -- to see pat thank you very much for coming on what do you think about this whole lot.
First of all the market in general since that's where we are definitely talk about the banks and raising capital but what about this idea that the the rally may be a little too far too fast we see something of a pull back here on Monday.
Yeah I mean when you look at rally we've just had.
All the places where it all the pieces were in place.
You know with the short covering and then people out of the market holding too much cash I think that's what we've seen is those participants.
Getting afraid covering -- putting that cash to work.
I don't think you see.
Ferocious buying from the -- only shops.
And do you look maybe a little bit around the edges so if the rally were to continue from here I think you need to have.
Those investors that completely stepped down -- market step and it's it's a tough time for those type of people you know is -- and don't miss it I get back in -- ago back down.
Those are all questions I think that are swirling around in the market.
But it -- to go higher.
We gotta have that.
But isn't that what we've been seeing a little bit out of luck hedge fund managers jump -- insane if if this is the real thing again and I miss it.
I'm doomed to my people are just gonna jump ship -- because -- technically mixed listed a couple months ago right so we saw some people jump in and yet.
Light volume though and it's really.
I think there's not a whole lot to believe in this market just yet.
Yeah you mean there's there's some signs that their people broken force first economy get a little bit better.
It's as we said in our quarterly letter it's less bad out there.
I spent three days of the bank conference last week.
And it wasn't the big banks it was a smaller banks and we look out that environment I mean there's Walking Dead.
-- in the small bank can the FDIC just doesn't have the resources to take over all these banks on a Friday.
So the ones that haven't had -- Iran and the deposits.
They're leaving open but that's still.
In front of us and that -- the markets had huge rebound.
I think that's mainly been short covering I still don't see.
The retail investor.
Have coming into this market I don't I haven't seen them.
You know come back in yes hedge funds have I think some institutional money and it had to come back in but I haven't seen.
Did that the last person got wagon if you will which is unfortunately sometimes.
Mom and pop.
What would be the catalyst.
-- -- -- they typically like to go when it feels good.
It it start to feel pretty good.
And that's a time when they start to jump back and so that's my point if if if this market's gonna go higher I think that's the group the kind of -- -- slip some -- A little bit about that she brought up the the banks that you know that are that are in trouble still we -- -- date past -- you -- one market get past the -- stress testing.
And then this morning we get a number these -- BBC Capital One.
Coming out and saying hey we're gonna go out in the market and and and race and some money sell stock.
Diluted -- stocks are down alike it's a lot more of that is common enough that should -- I mean -- logically that should hurt banking stocks it was almost curious at the end of last week while some of these stocks didn't go down more -- that you know anticipating that.
-- we were scratch your head last week over the bank conference I'll just put a lot of executives.
Of these smaller banks and it's not just.
You know that ninety banks that gets a lot of the press because the stress test well -- All the all these smaller community banks.
All of them but -- any of them.
Need to do capital -- to and I and the question we are we ask yourself where all that money course at all gonna come from and it's it's.
Right now it's it's kind of assuming it's unlimited night and I think that's the case.
Patrick can make your millions in -- these regionals because and you make a point to say that they're still tied.
Very much real estate -- mean these -- the banks that offer construction loans to people who build right he's headed banks that offer loans to you local malls will.
There's -- -- -- now that are just blown out they blame it looks like Vietnam right so.
You have all these regionals -- of these loans that are probably not gonna get paid this could potentially.
-- you know phase two of this whole mess.
Yeah and any other thing to really focus under a great point is.
You know when you look at their earnings in the in in retrospect.
-- we're doing all those loans you know that that was.
That was the drug money if you will and the growth that they experience.
We don't see them having that the future and that's -- we're kind of spending some time right now is going OK this community bank used during this.
What is -- earnings power on the other side of this when they're not doing construction loans that's gone for a long time.
You know what what's the core earnings in a more.
-- -- Right because it's not like checking account -- -- you know we have I think you're right but we have you.
Lock down these little local bank's -- local jobs local people putting deposits and and if the construction loans as you -- which is their bread and butter are gone.
That there -- in for a rude awakening going forward as is I guess you know the whole sector.
You would think NN -- he -- had pat.
-- -- and focusing on the commercial side but.
You know where -- we in the commercial cycle right now and eat it you know that's just started to roll over.
So there seems to us there's too many of these small place I mean -- you know of there's been a new bank pop up.
-- not seem like every month for last ten years and that there needs to be a whole lot of consolidation.
In this community banks on board.
Are a couple of other things some of our viewers want to talk about jobs which we can't in the moment and how -- how -- how things in it turned around at jobs don't get.
I turned around Chris in Los Angeles and and some others posting comments asking questions.
About that but you know one other thing that I mentions is the whole idea of paying back TARP I mean some of the bigger banks and we've -- that today.
How do you look at that good thing long term they want to get out from under the thumb of the government and and what have you but again diluted in the short -- so.
From what the -- -- what's the balance here that we strike.
As investors looking at that the TARP repayment and now that we seem to be of some sort of a plan going forward and number of these banks making announcement.
Yeah I ate it in its.
There's a -- -- we as investors like -- the TARP money get.
-- back as quickly as as possible for good banks it it's it's expensive for the bad banks it's it's a lifeline.
Such fantastic for them.
Pro for a lot of better banks if four -- or seven.
We we didn't like them to take it because of the dilutive effects.
And in the banks that didn't take it in there there somehow there there's there's a bank up of Montana for example Glacier Bancorp.
They they refuse the money.
And it it's proved to be you know -- they've been in -- doing some acquisitions they've got their hands free this is a terrific bank.
That doesn't have some credit problems but there's there those are few and far between.
We we don't wanna see it taken when wanna -- -- get paid back.
As quickly as possible.
So here we are we have banks that have -- do you stay away from them as an investor -- these stocks are like lottery tickets right -- -- I dive in and take a chance even though they have TARP money.
Let's stay clear from -- on what.
What is the little guy at home do right now.
You know on the -- side I think you really want to be regionally focused.
Some parts and I should -- commercial real estate construction loan -- -- -- if you're gonna go in in the into the let's just say the -- smaller banks look at the region and there therein.
Look at where that went into the downturn.
Some are gonna be farther along with -- some of written off more of those loans summer just starting to turn over.
And every market is different.
I think you really need to focus on that of that -- in the Pacific northwest for example has not seeing some of the overbuilding that California and Florida did.
So some of the other banks at least in our region are little better off I think than some of the others and end.
We have some anti growth policies which have helped.
Contain the growth.
Is gonna help these banks long term some areas within the Pacific northwest are horrible but.
I think really you know stay away from California stay away from Florida.
Texas has been OK because the -- has been okay.
So you don't look at all -- things that is what we think you should be doing.
You know its interest.
He Patrick did one of our viewers and asked a very simple question or -- -- Charles Payne this morning I was on.
And our -- and he's been -- a -- number of weeks really the talk hasn't worked she was not a big fan of the talk Charles.
But Ed just asked a simple question did.
Has -- worked what's your answer that.
-- unity in the from the standpoint of confidence.
Of knowing the banks aren't going under.
And and in this was formed you gotta go back to Lehman going under Bear Stearns going under and -- into what the government was trying to do is give us confidence.
That these institutions.
Were going under that they were gonna back come a 110%.
And that was the purpose of -- now we're gonna go back and look at the numbers and say no it didn't but measuring that confidence -- that lift that we got.
From -- That's a tough measurable I think from that point they succeeded.
So so the answer is yes so did detached as yet -- -- lobbying to get back a lot of back and forth on about the TARP now.
We've come a little time -- and I.
-- happy about it I'm not gonna comment so less if we can move on to other sectors what other sectors do you like.
You guys were talking about technology before the before it came on.
There -- within the technology sector some of the stocks have been kind of left and behind mainly software.
A company like Microsoft.
We think looks very attractive here you see there issuing some debt today.
That's that's up possibly to buy back stock.
We're still waiting some of the details on that but he got a company -- eleven times earnings about six and a half.
Enterprise value to dot -- almost 3% -- dividend.
They have a cycle coming out with Windows 7 which we think will be a strong cycle given people could not buy Windows Vista and the debacle that occurred there.
So that looks -- you know software semis had a great run.
Wanna be kind of careful there semi -- equipment big run -- -- careful but against software.
Great business -- -- it's got maintenance most of them -- terrific cash on the balance sheets who got taken.
Balance sheet risk which we think's important in this kind of market.
Would you by the QQQQQQ.
Triple -- is Saturday night and he never carried out as far would you buy it overall NASDAQ ice bats.
Yeah I don't I don't I don't know if I do that.
It is -- romance -- had a pretty good run -- it up and it -- yeah it's it's -- you know even before the run and financials it was the best performing -- so.
I -- more you know we're we're a bottom up stock picker tight firm.
I would you know you hear me talk about software.
I I drill down and and and go company by company.
You know it's it's -- -- to -- company by company the auto -- we're gonna talk to Jeff Flock from reporters to cover the GM story a few minutes but the the idea that this auto story in general Patrick is something one of our viewers -- as I mentioned Chris in Los Angeles comments -- -- -- -- comments earlier.
About how all that fits into the job picture because now that we start to see more more auto -- jobs go by the wayside because of the bankruptcy filing at Chrysler and the expected one or possibility of one at General Motors.
-- jobs -- get turned around I know we hear all about this lagging indicator thing but how worried are you about jobs as you try to pick investments from here on out.
Very worried about jobs and it's going to be to be key.
To keep in this rally going.
And what that data looks like this fall and toward year end is is gonna determine the sustainability of -- rally.
So well I think Hillary can't step if you don't -- -- that you said Deb this this matters what happens to the unemployment rate from here now.
Yeah I think because the market usually moves four to six months before unemployment bottom so.
We could get employment and we're right we're expecting unemployment get worse over the next four months but coming in the year and when we just we expect to start seeing some improvement there given.
The market rally we've seen something that I think's important -- talk about is the administration.
Last week floated the the tax of foreign earnings.
And going after some of the companies that are reporting a little less.
And your start to see companies and in in and our conversations with companies.
They may react to that by moving overseas that could be a job loss going forward you just look in the last six months and see whether -- Has moved overseas.
-- Tyco companies which is now three of them Tyco Tyco International committee and they moved overseas but if this becomes really a you know a river moving downhill.
Companies don't need to be United States.
Those jobs go overseas.
About it I'm so I didn't have job Patrick you're dead on and this is an issue very close -- pack -- a former tax -- it's now and the -- -- Yes still whatever the exact person this is it.
-- talk about unintended consequences or maybe they're totally intended but it will backfire I know they propose this corporate tax these new corporate tax rules to keep.
Income and jobs in the US but as you said I think it will just push them overseas in this whole notion of matching.
Income and expenses and -- words to arrive.
And in it we don't have a lot of time left with Patrick but I think you hit the nail on the head with that that would just add to the job losses going -- At monetizing jobs weren't happening that is tonight's -- jobs.
That yet those are all and media and a lot of other countries or companies or do -- American companies that use those types of jobs overseas or have pushed a lot of them already.
Patrick Becker junior thank you very much sir appreciate you coming on how to thank you today -- capital management.
-- we go to Jeff flock of who's covered the GM short today and let's do that now.
And he's out of the dealer and -- -- Illinois.
Good to see it just so the we had mr.
Fritz Henderson out there on the call earlier would you take away from that.
Well I think they hit the headlines got to be that he said debt bankruptcy more probable I mean he's read in the newspaper.
Simply -- it from a better source of that but more probable today although it's still possible -- -- -- all.
The other headline was dealers that's -- became the dealers today this is the growth in -- auto complex and this is a place.
You know they get Buick GMC Cadillac.
They try to cover their faces they just spent a ton -- -- Two you know upgrade this they're also building in new dealership in the city and Chicago -- touched almost out of Chicago.
And news came from Anderson today that dealers across the country will begin to get that notices this week.
Which say you're in business and you're not a business -- essentially say we're not gonna sell you any more cars.
And I just talked to the owner of this dealership Caroline -- -- who -- -- She's pretty hopeful I mean obviously the got a lot invested here this is one of the big dealerships that they hope.
I don't will be one of the ones to survive but there's a lot maybe 2600 that wont so I take note that those -- the two prevalence of guys.
But what about the overseas he mentioned that some overseas units we're gonna have to file for bankruptcy as well except.
Would be our country by country.
In terms of bankruptcy.
And at this point you know they're still trying to sell salt.
They're still trying to sell.
I get a partner at least in the old -- with you know potentially Fiat taken apart of that or their European operation so I think.
There's a lot of options on the table right now for GM that a lot of balls and here it's what.
You know it's quite tough you know whether it's talk about you know change -- the the the wheels on a train going a hundred miles an hour it's it's a tough.
Slog for those guys right now.
This is tough slog for those guys you know on the dealer question Jeff I think its interest -- we talked about when Chrysler.
When we -- going through the Chrysler bankruptcy we talked a lot about these and then there was a journal article that kind of backtracked on the Chrysler plans.
As to whether or not the dealers would be close to what look at what's the difference for General Motors another -- the argument for Chrysler's Malawi could close.
All these dealers but maybe wouldn't save as much money to do it at the end of the day anyway is it different for GM more or now.
Well there have -- I think right now they feel like if beat these dealers can't make money they can't make -- Everything that 6200 dealers they still the same number of -- in the US as Toyota -- about 14100.
Dealers if you get a dealership like this this is a big one.
And it's a strong -- so they can provide all sorts of services that another dealership -- and they can do the kind of volume.
I think kind of the economies of scale that they really need in order to make front money right now it was great when you everybody -- a dealership but their own hometown.
Maybe -- was convenient it was kind of cool.
But it just doesn't make financial sense for the companies right now.
It's better to -- stronger larger dealerships and that's where the trend is going but it's going to be painful.
Jeff I I think you gonna need to score a little deal on the solstice why -- there.
Because I just and then at that's just one of those got to have -- -- -- -- that's not gonna.
That's not gonna fit all the kids that you get yourself -- not about -- this -- and Jeff this is so not about the kids come on now.
Tonight until we have an idea we -- rent one of them are built for the weekend can -- -- I think January I had about this and acting out the 10% equity and bond holders as part of its restructuring can you -- on -- at all.
It is clear that the government is in the driver seat pardon upon on this one and that's pretenders and said today.
That's the parameter they've given to us essentially they have given us the 10%.
Limit and that's where they are that that they've really had no negotiating rooms so they can negotiate without bond -- all they want.
But the fact is when you're negotiating from a position of here's what it is take it -- leave it I'll be called that a negotiation.
But the big satellite -- -- -- that.
I know that says -- happy to look take it to charity work I think.
We were out of the short you know at the Ford plant the other day and we pulled -- a dark Chevy truck and they were none too pleased fluently with the guys -- all right.
It takes a lot to get to block -- here hey there's my buddy.
-- they -- maybe UCL however it's on his stomach the other day I remember when we were doing that note do not show your stomach again that was unfortunate throw it for instance they hide that -- pervasiveness that it was finally got it sounds like it was a big impact arguably some of the worst television and in American history I think if you want to see a stomach -- Now here's -- tell me if you want to see atomic but it -- mean she's apparently swallowed a bowling ball of some sort.
Something like that there.
She -- -- bad she doesn't need the solstice right now Tracy.
Does -- get out of mind we'll swap.
Definitely made me the most actually is that it seems like he's just holding on for dear life you know he saved bankruptcy -- it is probable.
But but we're not there yet I mean why not just pulled the trigger on this.
Well I do think if they decide if that's the way it has to go the thinking was they would do it sooner rather than later.
But he said something today which indicated to me that they may come down to those.
To -- to the wire on this one again because.
I do think -- -- the although you know these are not secured bondholders as they work Chrysler those guys had some leverage.
And as they proved.
And despite their leverage it still didn't work out for that these guys are unsecured.
I mean if they don't take the deal they could wind up with zilch so I think -- a lot more pressure on them to take -- deal.
Yeah I have what happen to Chrysler happen to me and forgot about what's gonna happen General Motors -- -- and keep in mind Chrysler almost got it across the line having despite the secured lenders that were you know that eventually didn't come around but they got so close -- they got that close maybe GM gets the -- -- -- -- -- -- -- knows.
This -- you know -- June 1 is the deadline right so we'll keep -- and see what happens -- at a hotel.
And we'll say I saw -- work on that Jeff.
I've got to work on the candidate that makes you happy Tracy I will get good results to cigarette -- and what I keep balance shirt on right.
He did it feel today.
It's never over until mid sort of -- -- we cut away from his death in the interest of I don't know if anything anymore values that will not that -- -- It's that there's -- and Israelis and housing -- -- continued seductive you're lucky this let me tell -- from home -- Anyway -- that to cap and trade right then the for the transitional we have to have guys -- rob tally right as an energy.
Industry analysts is joining us from DC talk now below zero by the way this is a set this up the right way we're gonna talk about it doesn't have to show -- -- -- -- can't we do in the we'll have those things get really ugly right.
We're gonna talk on the final -- -- -- think that we're -- it's this whole argument over cap and trade which is them really in the next week or so gonna start to pick up and -- play both sides of the can't balanced over the next ten minutes -- so just to get it out there for -- reported that -- -- I think it seems to me up I'm by no means an expert on this.
-- is is opposed rob it seems like by a lot of people.
With that I talked to on Wall Street that are maybe a little more on the conservative side of things where is the people who would probably benefit from this to the Wall Street trading firms like this -- create a lot of new trading vehicles -- having the right or wrong.
I think that I think that's absolutely fair that if you're looking at the fundamental.
On the manufacturing in the industrial side that you're very skeptical about this.
On the flip side if you're in the trading side if you're in markets commodities -- Having the government set up.
Billion dollar market overnight that's that's pretty good opportunity.
Really then we're talking about.
Completely reverse of what.
The Obama administration's been trying to do right where basically -- -- the lower income or the lower income families middle America will get hit by this.
-- and the -- -- well we'll move on up to the affluent if you want to call that whilst.
Well that's certainly a concern congress is trying to address that.
But it is a very difficult issues.
The complexity of what we're talking about.
Is is very it's it's pretty significant and there is a real concern.
That anytime you raise energy costs it will disproportionately.
Impact the war.
And in those -- the folks right now who can least at least afford it right.
-- over -- -- ventures was just good yet there I mean it's -- regressive tax and many levels right he's -- of people -- to go out and buy gas groceries.
Keep their homes and that will.
That mean it's really -- -- sounds event and so they're the ones they're gonna feeling -- talking about the whole industry right that's middle America that's gonna get slammed as well so.
I mean completely opposite of what the Obama administration's been talking -- all along.
That's true in the -- the other thing I feel like we should do right off the bat and then get -- -- -- debated mark is one of our viewers is brought it up but I did -- I'm no expert on this and this kind of complicated.
Is talk a little bit about how the mechanics rob maybe you could do this how the mechanics would work -- this whole cap and trade.
System try to cut down on carbon emissions and use this trading system to do what we hear about at all times thrown out there what I think they -- to trade.
And I don't know that a lot of people understand it what would actually happen if this goes forward as planned.
Well congress has a number of ways to address emissions overall.
-- they could tax them to drive the cost stuff and then use the revenues for whatever they choose to do.
But right now the the soup of the day seems to be a cap and trade where the federal government -- regulate the amount of carbon emissions.
That covered entities will be allowed to -- -- and that would be the majority of our commercial.
I industrial energy sector.
Transportation sector will be included.
And it will then establish a cap on how many emissions and those sectors can and that.
And at the end of every year.
The covered entities would have to supply to the federal government.
Appropriate number of emissions credits associated -- what what they admitted over the course of the prior year.
The trade portion of it comes in where -- would government was established.
This this new currency.
-- new currency would be carbon credit.
And those credits would be either allocated freely to.
Two industrial and energy companies.
Or as mr.
Obama proposes they'll be auctioned.
Companies will have to buy them.
Once they're on the market they can be traded.
Just like we create any any commodity today cars they would be a carbon futures market.
That goes to where.
You -- talking about disagreement on the split within Wall Street.
As to whether this is a good thing or -- bad thing if you're here in the business of trading commodities this is a good thing.
But if you're looking for intrinsic value in heavy manufacturing.
-- -- -- or or our industrial sector.
This probably is not or.
Probably not such a good deal.
For your hearts and now back to.
The debate on -- but I think that was helpful for people to get an idea -- -- opponents of -- training your credits at the end of the day means so I'm on him I guess the notion being.
You wanna come in your caps have something to -- -- that blanket on the playground on -- baseball cards -- the end of the day.
At the same time though this is closely now to company's I have to go out because the big blow over there there cap.
They have to go out and pie some of these additional.
Emission credits speaks of this is gonna cost some companies even more money.
That's absolutely yeah that's absolutely the theory and what happens under the proposals were looking at today.
Is that over time.
The number of credits that are out there are reduced so if you look at that current proposal under discussion in the House of Representatives.
Will be looking at about 25%.
Fewer credits available on the market.
Then -- in in ten years then.
Current demand allowed so we have an arbitrary.
Scarce -- arbitrarily scarce commodity.
Where demand is going to be fairly substantial.
And then -- the of the result obviously is higher costs for the credits and those entities who absolutely have to have them stay afloat.
Believe the pay whatever it costs weather go out of business so bottom line are you think it's a good idea I'm involved and did the downside to it can you see the positives in it as well.
We've for the nation longer term and and the direction we should be moving -- well the science suggests that.
We're going to have to address carbon emissions globally right I think that if there's a challenge here it's that the US doesn't operate in a vacuum.
Believe it or not the United States actually isn't the largest producer of carbon dioxide China.
And what's China direct competitor for many of our manufacturing and industrial sector jobs.
China has not suggested any interest in capping an hour.
You know they're not gonna do -- that's the tough part about -- -- not gonna do it will stay with us -- -- apple moved -- the discussion we'll put to -- for -- also with as vice president government affairs and -- IPA which represents a number natural gas producers in the likely good to see you and you're against this whole cap and trade.
System which we've been describing and talking about here the last few minutes -- slot.
Well I wouldn't say we're necessarily against that I think it's more question.
Can it be crafted in such a way that it doesn't have.
The dramatically negative effect on.
Frankly the American economy.
Are energy demand over the next.
25 to thirty years will increase by about 30%.
And if you look at the agenda of the cap and trade programs is designed to reduce the the amount of -- carbon that goes in the atmosphere.
By dramatic amounts during that same period of time.
It largely hinges on the availability.
Technology called carbon capture and sequestration.
Coming on board.
Or within about the next twenty years and that really is a huge bet at this point.
So we have to I think -- from our perspective look very carefully what the consequences.
Of this overall plan will be on the country's ability to have the energy it needs for the economy.
I guess then you have to buy into this whole notion of global warming you know do we really admit as much carbon dioxide as people seem to think we do.
And I and that I guess that's really the root of the problem if or is this just to raise more money and that's.
Thanks -- and you from Ohio just said.
The governor beat me made a record amount of taxes on ExxonMobil this year I mean actually oil lookup all the oil companies paid exorbitant amount of taxes compared to him and really most companies out there these days.
So this is just -- revenue raiser just might not be the way to do it.
Well it's a very inefficient revenue raiser there's there other proposals if you want to look at them that would just directly created carbon tax.
An option that a number of companies have thought might be a better way ago.
Front it either way it winds -- becoming -- huge revenue source for the federal government.
And one of the main questions I think will be what happens with that revenue how's it distributed.
-- -- Reductions it might bring in in taxes for lower income or does it go into.
Mechanisms to try to generate a new technologies.
Needed for the year overall agenda reducing -- carbon emissions.
Right -- and that's who you talk about the income that Japanese who have kind of the river of their redistribution they're so.
So leave brings up some other options that might be on the table rob what do you what do you make of that the idea and you know maybe just carbon tax -- -- simpler -- a Cap and Trade System that would make more sense is.
Is it what strikes you is as a better option or his cap and trade in the best of the bunch that's out there right now.
Well it's it's it's not quite so straightforward I think if you.
If you if he took a step back and you analyze what the technologies are out there to reduce our carbon exposure.
But the political will is in congress right now it very well made gave that an early tax on carbon emissions is.
It's an appropriate way to go and then.
As we heard a minute ago when the technology's there for carbon capture and sequestration to phase over to a cap and trade.
When businesses are really prepared for it -- -- you can imagine the pandemonium.
-- end of our 350000.
Manufacturers that are out there.
In the two years from now as advocated by mr.
Waxman in the house energy commerce committee.
Within two years they'll have to be participating in -- carbon market.
I don't think that our manufacturers are quite ready for that.
And it may well -- that if you pursued a very small carbon tax and use that money specifically.
The purposes of developing the technology to reduce our carbon emissions.
Then you might be looking at a policy that makes more sense.
Our rob distress before you definite question real quick the president you see the bottom of your screen action that's us there is president delivering from the remarks we're expecting today on Health Care Reform barely get these all these agreements from the health care industry on cost savings which is -- -- so if you want to watch that it's live right now on the Fox Business Network President Obama speaking about.
So rob and and we are still with the C you're about to ask -- question.
Well I guess -- -- then it you know OK so it's efficient.
It seems to me that you're still going to be taxing people I mean some reports say up to 4000 dollars per household.
That's arguably the largest tax hike ever on these poor people and then you have gas prices potentially going back up I mean to -- this just seems all ill timed.
How can tell there's no question about it there is no question about that the timing on this is.
It it's -- -- at best and and there's interestingly there's a connection between the health care debate which mr.
Obama's talking about as we speak.
-- Senator Reid the majority leader.
Noted that the amount of money that a carbon tax as proposed by mr.
Obama and his auction of the -- auction of the credit.
Is it -- about the same amount of money that we need for a national health care system.
So we had earlier the question what happens with all this money.
It is a very significant question -- see how does it get you.
I would also note that the impact of this program isn't just regressive from an income perspective.
The end cut that this this proposal actually becomes a regionally.
If you live in the midwest or the southeast.
You have a much heavier reliance on fossil fuels and energy and if you're in the Pacific northwest where they have the federally financed.
So somebody from Washington State isn't going to pay anywhere near what someone from Illinois or Indiana.
Or even South Carolina will pay under these kind -- proposal.
-- and what's interesting is.
People from California and the Carolinas are supporting us because these people aren't gonna get crashed whereas you have -- you know congress people congressmen and women from the mid mid part of the contract.
Totally against it because they now that their constituents are gonna get hammered.
That's like the auto story in my that way that things down on now on the regional lines -- rob tally thanks a lot -- give us the last word from your point of interest about the timing of this in the geographical -- future -- just kind of interest in that last word on -- you think it's something we'll get down on cap and trade.
Well I think it's -- one of the big challenges here is this is the first time it's had to have a serious debate over the past.
Eight years or so everyone news if you could throw virtually any kind of legislation now it wasn't -- pastor we're gonna get signed into law.
Now we're dealing with a serious debate.
We're basically creating industrial policy for the next fifty years.
Depending upon how this thing structured.
And and and those challenges are ones that require.
A great deal more attention than than the debate has had so far.
I think one of the things that's happening in India debate in the house representatives right now we're in the energy and commerce committee.
Is is -- is the reality that.
These different parts of the country.
Bring a different perspectives.
-- did to these decisions have to be made.
And trying to figure out how to walk that line craft something that.
Both -- have a huge dismantling effect.
US industry at this time.
As well Alice -- politically doable -- is is what we're watch unfold over the next so.
I can't be heard senator all right mind how to play Lee and rob thanks very much that goes -- two years so they're good thing.
Thank you coming -- appreciate it you know I think what what it was down -- is this just like the corporate tax issue which not to talk about right but it's a big deal.
Yes if that will.
There's discussion let there be discussion but let's not shoot first ask questions later with.
Posse to -- -- from you how you -- as the -- since -- gun proponents think this through for a cup of coffee disgust.
Don't just continued to -- policy without thinking about it because there are just.
All these unintended console -- -- kind of expensive register the thing on Fox News about that coffee prices are going I don't mean do you regret that I dropped.
Buffy follows another study emphasis coffee is actually pretty good for him that's it would cover just about every -- the president's speech about health care right now live in the Fox Business Network -- it's always with us for the rest of the hour variance.
Could this is right.
I'm Mike good to see if you -- -- -- what I want to talk about your column obviously and talk about the markets in general but -- -- the president speaking right now about health care.
-- surprise you -- all that supposedly had to know what he's saying exactly right now but it's supposed to did that they've come to these agreements with the health care industry on the cost savings.
So it doesn't stunned me because I think all along you know the contrast during the primary campaign with -- with us Senator Clinton.
Was that she wanted to kind of you know the thinking was recreate the post office here basically the government is gonna run the show yeah that was that was a caricature -- -- Obama was always and look we had to -- in place and if you're an HMO.
You have tremendous incentive and always had.
To keep medical costs down.
Right you had some pricing power you've got your profit margin but you always had you know the whole story right -- HMO won't pay for something right right so there's this infrastructure replacement set of incentives that makes sense to try to seize on.
And maybe codify a little bit and obviously you don't want just to be depriving people health care but I -- the complicating issue is going to be.
The government is supposedly under that is under his proposals.
Gonna set the terms of exactly.
What high quality care consists.
And cost effective high quality -- you see the problem's going to be tough job obviously from the top down not being -- doctor's office that's the argument against.
But it doesn't surprise me that he's -- There's been working with the industry real quick -- to what we were talking about in some ways with cap and trade is that there are misconceptions about what's happening here because -- you brought this up as one people say.
All while Obama's are making a proposal on health care that means he wants the governor to completely take over the health care system but that's not exactly what's happening.
No it's not what's also funny -- you know the -- -- -- things -- without having a much of strong opinion if fifteen years ago this was proposed it would have been my Republican.
That when you talk about a market solution right when you win win -- basically setting incentives -- -- financial.
Kind of contracts and things like that and the Democrats not all against exactly right exactly.
And outcomes and that's a great idea and the Republicans this is the worst idea rivers in.
Well and they are certainly it was putting reports -- that mad money's gonna cost -- plus households and things like that there's an argument.
Many assumptions and that an industry you don't know but if there's going to be revenue than is going to be through from the government -- because right I mean there's no anything to -- that way.
-- health care.
If I could just close on this is gonna could end up -- -- I mean so that even the question and that is where it hasn't stopped.
It it depends on what we decide you know you know he's he's worth paying for obviously I mean I honestly think that's the whole health care debate is.
Honesty about and true.
You know good faith estimates of what it's going to cost right Massachusetts.
They -- broad support for that requiring -- to buy insurance.
It's costing more than they said it what -- estimated it would so.
If you really have to pass through the numbers and just sort of figure out at the end of the day what the cost going to be and then obviously -- -- faithful and to -- point -- -- Health care was considered too expensive now if you look at the numbers relative to talk 1210.
Or whatever it's nothing -- -- -- unless you explain talk to -- really ought to be explained which is it's not money spent we didn't put it a pilot set fire to it and we didn't.
You don't -- pills to people swallowed a going away.
Right -- mean people want to give the money back you something's behind it obviously it's a huge number.
That is his number what what do you make of that by the way and we will get to the markets in general for the second but that's another good point is that this is a big story today of all these banks trying to raise money to pay back chart.
What's the next step in that process in other words.
From what you're here will be allowed to like this is -- Leslie I don't think it's a matter we now have enough money you know to you to to actually be on our on.
Please take the money back -- -- -- sure that's fine -- second I don't think you know I mean my senses it can't be that simple because the government has to.
Take this posture would look this is all about -- it's all about worse case scenario planning you know people are criticizing them -- stress test wasn't rigorous enough.
Wasn't taking dire enough you know scenarios into into consideration.
So if you now say a woman without TARP money you'll be well capitalized and -- and then you fail you need more money down the -- and you can't -- private.
So I mean I think it's all -- process and who knows how exactly plays out but.
You know I do think there's been his broad recognition that.
Banks can to some degree earn their way I think that was an interesting aspect of what distressed us exercise.
Really brought about -- so I think the stress test.
-- -- massive life of its own beyond what they intended initially -- K they just kind of thought they wanted to sort of what's ratify the whole idea of too big to fail and that'll be great -- and we have also they wanted to be proactive and knew before that it was just so reactive.
You know you look at the comment boards and I'm here and have a couple of questions that might you probably could it you -- make at least make the case on the what your opinion is that you can make the case for.
This whole idea it's it's very tough for people understand and I asked -- it's not that simple why can't we have the money well what can we pay it back and he talked a little bit about.
-- -- -- -- -- -- -- -- -- People say what you don't want if they have the money they should be allowed to pay it back I've heard that argument a lot yeah is that wrong.
It's not wrong you just have to make sure that -- cushion -- going to be left with after paying the money back.
He's going to be sufficient right and as a matter come back from the table that's up today you know that the free market should be able to -- -- -- they should then -- what they should tell us that doesn't work but.
Now doesn't start with like singing it firms like Goldman Sachs is thus far done nothing wrong right so they give the money back -- -- Goldman now again has this clean.
Golden appearance about them right all the other banks rushed to -- to do the same should be on par and that's where you run the risk then have.
Too many people jump -- the -- sitting here I don't need the money and two weeks later that -- I don't I don't think any of the talked institutions.
Need an incentive to look for an example somebody just giving the money back.
To want to give the money.
Course I just think it's a matter of let's be realistic about I mean I remember when they were.
Giving out the TARP funds and right and it was of course access to almost any banking institution of any size.
And everybody was a bank and Natalie that I have odds are brother in law's chief -- officer relatively small publicly traded.
New York area banking needs to get on the board was saying -- time.
We don't need the money.
But what happens is we don't take.
You don't take it and down the road things get so bad that we should have taken it what does that do shareholder lawsuits.
Does it mean to regulators are gonna come down -- say hey guys who should take an -- so now we're seeing them.
Verse exactly try to get out of but it didn't come at a time we see on the show our viewers might remember this so of who was -- one day with the the competitive advantage disadvantage argument -- said well you know we had a net access this TARP money.
But again claims -- we didn't need it but we took it because hey this would give us the advantage to do business and we thank him a little bit of a hard time a question about -- it was -- really the point.
We weren't really -- a hard time the CEO we were we were asking that point was -- one of the program.
-- -- run properly that this guy got it when he says he didn't need it.
Mean that that shouldn't happen you can always gonna create distorted motivations and that's that's the messiness of at all I wonder what the that you know -- in terms of this motivation for paying it back.
What the rest of the system has for banks that paid back that don't have that aren't ready yet that are coming to follow Jersey City don't need to motivate they all pay -- back now because they don't want any limits on -- compensation.
But what's the story and it's gonna come out of the bank that pays -- -- that should pay the fact that I -- one Izod.
Think what it has to happen -- you have to have a transparent.
Process criteria here's the conditions you have to meet any institution has to -- and headed back their right to the government just hope these banks how much capital they need if you know -- case.
Unemployment -- -- 10% certainly they can say how much capital what kind of -- you need.
Before we -- the check.
Unfortunately though these variables are so could she of course there's so much room wiggle room right tangible common equity -- you know what we can -- -- -- ratio I have.
I'm nobody and I know how to make the ratio that kind of arbitrary right right -- -- unemployment well you know what if unemployment hits 1011% -- -- Don't necessarily need his bank is gonna have problems for every bank exactly.
So it's very -- working with their -- -- -- I think they're working with their own internal risk models and everything else -- wasn't like there was time you know these months.
For examiners to -- -- loan by loan and say you know just Schuyler is his job he's gonna default but.
Look at there's no -- you can obviously massage these numbers up and down right from the government's perspective.
At the time the biggest criticism was you didn't have any standards for which institutions live or die you let Lehman go -- picked up AIG on Iran right.
So they had to have.
Something abroad program to plug the gap and now it's very messy unplugged so -- think it is such an -- going for our next yeah even coming on -- -- I mean obviously that the banks.
Went from being sort of lottery tickets that you know a lot of people were gonna win because it was -- zero was off the table here.
In terms of what the stock was gonna do and now they've just.
They've they've ripped mercilessly you know for the people betting against and I I don't think.
There's any good way to get at the earnings power of these facts right not only do you not know.
You know what that would that the business model can deliver -- DNA for example you don't know exactly how much dilution is going to be.
And I think you're really working with -- On.
You know on exactly how relatively quickly or slowly -- get back to see any kind of normal this -- Yeah I -- -- now look at the financials I find them very Fuzzy still necessary and difficult to understand got a -- and to me there's many of them are still failing.
Right -- -- -- and then it'll add me I think the context of the at the bottom of every recession that's related to credit issues.
You know much of the banking service sector is insolvent technically which means you have to liquidated today there's not enough money to go around -- night.
And I'm my joke in my column was that you know for much of my adult life I was insolvent twice a month bid for -- special about those this is so right for -- that's kind of what you have to think about -- -- -- -- Yeah I mean what's not that I got married and got somebody who has the better jobs yeah.
It is it's your -- well.
Yeah -- -- -- -- -- -- To get around that.
I think I'll probably -- Michael come back here and talk about how we can -- Smart and we want to get -- this column by the way I've been such that I five -- good CNET posted a link to it two guys can read it about a correction -- a correction or not to correct but I'm sure Nicole can set that up for us.
That the exchange checking the markets today which put us maybe they're starting to correct it -- -- she -- Big green.
Called out we went from correction in no correction in the market from marrying Smart I -- the last part of that.
All right very Smart -- well I love for -- loves and has money and I've heard all kinds of stuff.
-- nearly Jacqueline and advanced equities were watching the market very carefully and had this back and forth action over the last nine days.
We've had up down up down up down but we've been trending higher -- -- of the last nine weeks Jack.
It's actually trending higher the S&P is up over 30% from its lows.
Today what we're seeing -- -- some broad based selling -- around hoping that it's just normal breathing in the markets here and some profit taking.
-- will keep an eye on how many down days we start to accumulate here where we go from here.
Little big banks raising capital now.
We heard today -- Capital One and he and deviancy on plastic on Friday we heard about Wells Fargo and Morgan Stanley -- I -- -- -- and they got to do it right.
I guess you know a lot of the analysts had this built in -- I saw or.
I'm really an interesting article today whereas these banks are -- creating vehicles so to pay off.
A lot of these funds back to the government ahead of time should be interested to see what they create going forward.
And did you see you have to have certain parameters they have to -- if they want -- pay back that they asked to have.
The right amount of money in the bank -- the FDA sees okay with -- -- -- -- You're talking about junk bonds the other day and that that there was an appetite for that again and you found that to be reassurance.
Yeah I thought that was interesting that.
Several months ago they yeah they couldn't get the junk bonds away and I think it's a good sign moving forward that people started to pay for them now.
People getting back in action at the financials when we talk about these secondaries and deluding the shares mean if you -- shareholder.
What are the chances -- exactly I mean that has to be built and these banks are looking for ways Sula.
So it's a -- capital to pay off.
They're being very creative but -- -- yeah.
As they lay out more shares.
As a shareholder certainly this concern there that things start to become -- -- and you know what we're looking at some big runs in the market especially finances the last couple months you know -- maybe that's slows things down here.
All right I -- I have to -- -- down 9000 turned out 8010 comes first quickly.
Yeah I think that -- we'll hang in a a pretty big swath here for the next several -- probably 9000.
All right -- -- he's optimistic book say thank you to.
All right thanks to call banks back our marriage counseling McCaffery I don't but I saw the.
Go on forever and the only reason -- come on -- -- -- right.
With a lot of trouble and accept one satellite company he broke his back in April you cold that that you said it that this rally was fluff.
Looks like it and initially in our office flop the liftoff is always there not a big red dog is always kind of -- what's got beaten up the most and I wasn't -- -- I actually you know.
In March it made a lot of sense that we should patent something much better than a balance and then from there Canada Caribbean where a lot of people expected to what I see now is.
You don't you see a lot of skepticism directed toward the -- I don't mean just.
You know to be born involved in -- from people who are -- money for a living and and I interpret that not as they are bears to think the market has to go down to most.
But that they felt they -- participated and they wanted to go down and you know we would have a thousand points in like five or six days a professional investor cannot actually.
The -- -- positions kind of change their portfolios and so what I think -- because of all the citizens they hope that they hope it comes and the not too much that designed for a pullback you pray for -- to -- 10% maybe let me smoke beginning and also the praying for me their own I think courage.
-- actually buy it when he's gotten here and launch site which it was hit sideways for a lot side racism is a victory if -- happens I think is usually just trying to trust your so overbought.
The sideways can happen and then maybe we -- for for something more people say -- -- -- what would happen United States.
These people would say wait a second maybe -- maybe we're not gonna get the ball back we don't want -- we go from here so I'm obviously I'm just trying to sort of handicap the mood.
On the street out there that you would expect to see a lot of the sentiment measures be a little more excited a little more.
You know a little more kind of showing that we've been up 35% in two months.
It isn't just because then there's a little more reserve yeah you use as a country indicated that people are getting more and more optimistic and in fact they're not and then in the hole putted OK and we you do see so much of -- suspected activity in the small -- White Sox.
Options markets volume apple records people really doing the speculating thing I'm trying to make it back.
But it's it's not clear picture.
But to me I don't see people -- -- -- balancing itself.
What little people jump -- -- if we do get that 10%.
-- -- I have a feeling.
I have a feeling too many people think they missed the early cyclical stuff like retailers and such but I'm not convinced that's a good move I think what's going on here is.
Is kind of out there the emerging markets are ripping again or if that suggests -- doesn't wanna go down it seems like it's back in a bit of an uptrend so you might actually see that materials.
Basic materials type stuff get -- discovered.
-- -- you know its outperform so much.
You know the NASDAQ has been really an excellent year for women and -- And so I think that the case for tech makes sense.
But I think a lot of it's already built to look at somebody who were.
-- in Texas and pulls out of this Saturday night -- Let's talk about the -- on grass on the composite for example of it is really good had a really big run here as -- key resistance levels selected the argument could be right on both sides of my pulls up but then maybe not the next week for the and the -- The NASDAQ was -- seven under performing last week and there's not.
That great in terms of you know perhaps the coming -- back right yes and she was -- -- and today today's action doesn't make you shouldn't frighten anybody it's a good bit of a long slog.
Yeah and now given the news -- you could -- -- excuses for.
For more ourselves so many agency in this market -- you know almost for people to start to jump back and say -- might -- time.
The stop talking about.
Less bad numbers and start talking about better numbers and so we are starting already to see is earnings forecast increases are starting to.
You know essentially rise in total number -- -- still not as much as people cutting earnings estimates but that.
I think we've seen the worst of the you know knocking down of earnings forecasts and then as you pull out of that basically had started seeing.
People actually raise their sights and exactly what I was still loads yet again I think I don't exist but that's always the way except I mean the fourth quarter of last year.
Was such a disaster.
And so when you kind of anniversary a 6% down GDP tied -- number via titles will be very comps in the -- -- yeah.
And that's so that's a thing and the thing is the market's gonna try to handicap that well before the numbers.
We implement club might have mikes and told from Barron's is here I don't know -- -- here's one of these try to finish in addition to get your tickets what's happening in media and our own industry especially newspaper industry.
This story this morning about how the journalists starting does this -- new pricing model of kind of pricing depending on how much you read -- vs a hundred dollars a year subscription.
-- -- subscription based on the website as well.
What's the model what's gonna work -- it's a huge riddle at this point but the model is back on some level getting people to pay something.
Okay and and the thing is.
We always knew that print and broadcast advertising rates -- oddball we're going to at some point converge with online race what we're now.
Realizing as -- converging down here you're not appear right and that is a big big problem because the business models don't work if that's the -- states permanently.
I've been trying to puzzle how much of this is cyclical right business is just not spending on advertising.
And how much of it is people deciding on line eyeballs are just worthless relative relative to all you know offline once so I think it's somewhere in the middle and I think that.
What we findings from people pay for a subscription you're a much higher quality.
Candidate to be advertised and that's what media's gonna try to -- More and more gentle readers and they're more likely to bottom products that are being and that's -- in my.
I mean you spend a dollar advertising in the paper.
-- that -- needed a dollar back from bad -- from a newspaper you only get ten cents back from the webcast today as it didn't doesn't mean he -- difference -- and you money spent that's.
Not a good model.
It is not I do you think that you know like a month or two ago the big media stocks were happy were pricing -- like.
Forget about it nothing's ever gonna come back he's got -- never gonna figure it out if you do allow people to buy more stuff ala -- You know I -- showed that -- on some -- level that it can work and there's always other ventures that something's gonna head but it's totally into.
Given the show away for free and I just want everything transparent -- ten -- -- so -- -- that he's -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- For parents check out the podcast by the way if I haven't mentioned that already always available on our team -- I'll -- back here tomorrow noon eastern on foxbusiness.com moment.
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