Putin Problems: Street Smart (08/07)

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Aug. 7 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

Luxury, purchases.

The nrs is looking for that 2.5%. the international council of shopping centers said the average spend is going to be about $285. that's up about 40%. i don't think we'll see 40% but i think we'll see a little bit of an increase.

It's not exactly teen discretionary.

At least with back to school you see parents stepping in a little more.

Right.

Thanks so much marie.

That does it for on the market.

We'll be back with more.

But first, street smart starts now.

U.s.-russian relations reminiscent of the cold war?

What's reigniting the new round of political combat?

It isn't just a snowden fact.

And start your engines.

Earnings after the close.

And we drive right into the middle of the action.

Plus, all the news that fitsprint.

But is it good to buy?

What newspapers are really worth.

This is street smart.

All right.

Tapering from the fed is near.

The most important hour.

59 minutes to go until the closing bell and we are scouring every market for your last hit of today and first trade of tomorrow.

Second day in a row we've had this taper talk and it's taken its toll on the market.

We'll show you the three charts that explain exactly what's happening in the market today.

Take a look at the dow industrial average.

Down 55 points.

If they're pulling away the sugar, that's pulling away a reason to go out and buy assets.

If you look at the ten-year we're getting the opposite reaction.

It's down today.

That admittedly is curious.

2.6% the last on the 10-year.

Finally, one asset where there is no doubt about what is happening the british pound up 1% as the new governor mark carney makes very clear that he is going to be very clear about guidance.

10% unemployment, 2% inflation sounds an awful lot like the same threshholds here in the u.s. these are stocks you need to be watching.

Julie.

What are you watching?

Let's start with bank of america because the department of justice has filed a lawsuit against the bank accusing it or mall feesance during the financial crisis.

Or i should say pre-financial crisis.

Accusing it of bundling toxic debt, knowingly, into $850 million worth of mortgage-backed securities as there was sort of friction among different people at the bank in 2007-2008 so those shares have been falling.

I want to sneak in a two-fer here.

If you look at time warner, the company saw an increase in network ads sales.

Its profit beat estimates on the flip side, disney being pulled down by the lone ranger.

Talk about trading lower, i want to get to first solar.

These shares have been tumbling today.

On the one hand trying to deal with general electric to buy some of its technology and in exchange they're getting a small stake in first solar of about 1.8%. on the flip side, first solar said its sales tumbled by 46%. for that reason those shares are under big-time pressure today.

All right.

Thank you very much.

Now the big story, everyone.

The cold war is heating up.

Tensions are erupting between washington and moscow.

President obama has canceled next month's meeting with russian president putin over their refusal to turn over edward snowden.

President obama spoke about the cold war mentality that's impacting russian-american relations.

There's been times when they slid back in the cold war and cold war mentality.

What i consistently say to them and what i say to president putin is that's the past.

And we've got to think about the future.

And there's no reason why we shouldn't be able to cooperate more effectively than we do.

But it's about more than a snowden spat.

Last month putin signed a law allowing the police to arrest tourists and foreigners suspected of being gay or prow gay.

A measure that contradicts and could impact the games.

As a result of the tension, a serious diplomatic fall-out seems to be taking shape as we speak.

So what are our president's next moves and how much of a strain do these putin problems put on our economy?

Joined by the director at the center for strategic and international studies.

Andrew and ian, i'll start with you.

Ian, the tension seems to be heating up but i know you say it's been going on for a while.

Russia and u.s. relations kind of suffer at the moment from what microeconomists would call intrancetive preferences.

The things about which russia is unable to yield or show flexibility to u.s. interests are matched on our side by things about which we are not prepared to yield or show flexibility.

Snowden is one and gay rights the other?

Human rights is a very important issue.

There's no middle ground is what you're saying.

At the moment there's very little we can offer each other.

No middle ground.

A fancy way of putting it.

Like republicans and democrats.

Except the difference is we speak different languages.

But we have big events.

Think about the olympics.

Think about the money that american corporations are already investing in this.

Obviously nbc, which will host on tv the games.

But all the american corporations that are spending to advertise there.

What sit going to mean?

If in fact we find ourselves in a situation where there's such a standoff that some want to pull out, what will it mean?

I think we have to go quite a bit further tore make the decision to pull out of the olympic games.

Dial us back a bit and tell me, as a sponsor, suppose you're pepsi-cola and you're going to be spending a lot of money on these games to advertise.

Suddenly there's a backlash from the gay community that is up in arms about why are we over there in russia giving -- given their human rights stance on this?

This is where you can hit putin in a spot that maybe he is going to -- where it's actually going to make an impact on him.

When it comes to dollars and income of course your big sponsors for the games aren't happy with what's happening in the broader relationship.

And with a lot of thing that is president putin is doing.

But i think that president obama -- and frankly, i really don't think that it was the snowden affair that was the most important factor here.

And if it is the most important factor i would be extremely disappointed in the obama administration.

But i think it is the overall relationship, as they say.

Mr.

putin is being very, very intrance jent on a number of issues.

Now, on nuclear security, that's number one for the obama administration.

The russians have come back with no proposals.

Now, there are other areas where mr.

Putin has been intrangnt and that's on economic and trade an investment.

And there our proposals are getting no response.

That's surprising, because the two sides sing from the same song sheet at least rhett torically.

I hope this message pits mr.

Putin where it should and having such an unconstructive relationship with the united states of america is maybe not so much in russian interests.

And i disagree with ian somewhat.

I think on some issues we can find some middle ground.

But the russians and putin, they have to be ready to come talk to us in a serious way.

Arguably -- and -- they would probably say the same of us.

I want to get your take on this notion of being able to find middle ground and why we can or cannot seem to do that.

I think the difficulties that the putin administration finds in coming closer to the u.s. on many of these issues is really of a domestic nature.

A lot of the authority of the regime rests on its sense of being the leadership of an important strategic power.

And where it shows weakness viewed in its own terms, it's viewed among the larger population as demonstrating that it isn't quite so powerful.

And that's very difficult.

Hang on.

So if i'm hearing you, it almost sounds like what you're saying about russia is what many have said about chinese and asian cultures in general, the notion of saving fate.

You must appear to be strong.

Looking strong is always a component of any political culture.

But in russia, particularly in this current point in its history where the economy is not doing so well, they've face add couple of diplomatic and strategic setbacks in the world with the loss of libya, the client climate in syria, assad.

The pressure to be more cooperative on the nuclear iranian program which they support is unwaivering.

And they have to demonstrate that they're willing to stand up to the u.s. andrew and ian, take a moment and listen to this from the president of the united states on jay leno last night talking about his concern over their lack of tolerance for gay rights.

Whether you're discriminating on the basis of race, religion, gender, or sexual orientation, you are violating the basic morality that i think should transcend er country and i have no patience for countries that try to freet -- treat gays or lesbians or other persons in ways that intimidate them or are harmful to them.

What does it mean the rhetoric is getting this heated?

Et means -- it means that president obama is mad and is not going to take any more of it from mr.

Putin and the russians.

To the point that you're making this issue.

How so?

You look at where russia's position is on gay rights and there are an awful lot of other countries in the world which aren't very far from the russian position.

But he's taking issue with russia and with putin.

So there's significance in that.

Back to the central question of this panel.

What does it actually mean for our economic relations with the country and what is it going to mean for the olympics.

Do you think sponsors will pull out?

No.

there's too much sponsorship deals in the olympic games are a bill dollar industry.

-- billion dollar industry.

I don't think this latest diplomatic issue is going to upset the calculations for sponsors of the olympics.

But i will say that we can't really expect in the term any improvement in the relationship mostly because of difficulties of investment in russia selts.

This is things outsiders have no control.

The rule of law issue.

And obviously you're in a vulnerable position the you're an american company investing over there and you don't really know what's going to happen.

That's the reason it trades in six times earnings.

Ok.

or -- thank you very much for being here.

Fascinating discussion.

Coming up, low rates.

They don't have to mean low return.

Adam is going to explain in today's insight and action.

Plus, checking in.

It just got creepy.

The world's weirdest hotel.

Coming up next.

Low rates.

But that doesn't mean you have to settle for low returns.

Time for a little insight and action.

Let's look at the 10-year over the past 30 years.

This is not exactly a surprising chart.

If you don't know this one by now, we have other issues to discuss.

Look where we are on the 10-year.

We're at about 2.6%. it's been a very steady move all the way down.

And as we're learning from fed bankers whether it's ben bernanke here or mark carney in the u.k., forget about the pape taper.

The fact is bond buying, rates are going to stay low for a along time.

We know that because of the threshhold that they have established at the central banks around the world between 6.5 and 7% for unemployment and 2 to 2.5% for inflation.

We're nowhere near for either case.

Which means this low rate will stay low for the foreseeable future.

Rates are staying low.

This here's the thing though that we don't need to settle for low rates.

We have options.

The 500 dividend yields about 2%. corporate 3.9, junk at 5.9. but look at this.

That gets my attention.

Master limited partnership yielding about 6.3%. mlps are companies organized in a very specific structure.

They have to pay out at least 90% of their income to investors as dividends and tend to be like pipe lines, oil field services, real estate.

We have found of the 200 mlp's, we have found 10 that yield at least 5% and are gowing their payout at least 5%. some of these you've probably never heard of.

Alliance resource partners.

Here's one.

El paso pipeline.

Kinder morgan.

Some of these, one oak partners, a lot of energy because pipelines have very predictable businesses.

Like toll fair.

The other thing with that kind of predictability they are returning this year about 25% versus 19% for the 500. so they're yielding, growing, and returning.

Three reasons to like them.

I'm going to post those stickers on the twitter handle.

All right.

Thank you.

We'll watch for it.

Our closer says when it comes to mlp's anything that produces good yields and potential for growth should stay in demand.

A seven-time member of the institutional investors all-america research team, john.

Welcome back to street smarts.

Good to have you here.

A lot of people worry about the taper and rising interest rates.

You say they don't need to be.

You should always worry a little bit.

I think mlp's have the ability to raise their dividends.

That's the trick.

They may have bond-like characteristics but they also have the ability to grow.

With more and more baby boomers facing the need to fund retirements attractive yields become more and more.

But in general people don't need to be worried about a rising interest rate environment.

Is that because they go along with the better economy?

That's a good point.

It's why rates go up.

If they go up, because the fed is trying to knock the economy down, that's not good for anything.

On the other hand, if they rise because the economy is getting better -- the fed can set rates at three levels, to stimulate, to do nothing, or hold back the economy.

That middle level actually rises as the economy gets stronger.

Earnings go up.

Earnings, sales go up.

And you probably have more growth potential.

Have we seen evidence of earnings going up as you look out into the future?

The forward earnings expectations has been rising.

Even as individual years come under slight pressure, normal pressure i think is earnings projections become earnings reality, forward numbers are still rising, slightly.

And this is happening where the economy is still very weak.

As you look out into the future, 2013, that red line, higher earnings than the current year, and 2014 higher still than that.

And as we move forward, closer to the 2014 number, the way i look at it is if we just grow consistent current forward expectations at a 4% annual rate, in theory that number could be higher, and put a 16 multiple on that, $125. john just got to my attention.

The forward numbers, you factor in half of 2014 because we're halfway through the year, is $11 at this point in time -- $118. bottoms up.

The bottoms up number still have a tendency to rise.

And i think if you just take them forward, just do the math, 17/12. where is the market?

I can by the end of 2014 it can be at 2,000. wow.

An average on the market, earnings expectations are up 4% on a forward-looking basis, it sounds like an aggressive call.

It's funny, that's 20% up from here.

You say that's crazy talk.

But we're already up 20% this year.

So 20% numbers returns actually do happen.

It may not go on forever.

But over the next 1-1/2 years, the sort of delightful tension we have between success and failure, i don't think it goes away.

All right.

Coming up, a hotel where you can chill out.

We mean it.

On a bed of ice.

Part of today's global outlook.

Then, start your engines.

We are talking tesla ahead of those earnings that come out right after the bell.

This is street smart on bloomberg television and we are streaming on your tablet, phone, and bloomberg.com.

Take a look at some of the weirdest hotels, kind of unusual, some might say weird.

Have a look and you tell us what you think.

So what dung?

I've been interest -- do you think?

I've been interested in that ice hotel for a while.

Think of all the work they have to do to keep that ice cold while you stay warm.

I'm told that it comes with fur blankets.

Real fur.

Why not?

I like the treetop one as well.

And the star wars theme.

You can go as an ewok or whatever.

Up next, tesla reporting.

After the bell.

Reving up to release its quarterly results.

Tesla may soon be more than just cars because in one week the ceo will unveil his the hyper loop.

Pretty cool.

The method of long distance travel involved plummeting through the earth at hyper sonic speed.

The founder of tesla cars and owner of space x has already established a reputation for revolution yidsing travel.

Though his latest proposal may be earthbound that doesn't mean it's any less space age.

His bold idea for hyper loop has been generating a lot of, well, hype.

It promises to turn travel from l.a. into san francisco into a half-hour commute.

Et 3 is a colorado company developing a tube transportation system pat rned on long distances through tubes they're calling space travel on earth.

The top speed?

4,000 miles an hour.

But without some kriscal thrust from investors that may remain a pipe dream.

Reaction engines is marketing a cooling engine.

The proposed space planes could carry 300 passengers around the world at milwaukee 5. but with no windows, the views leave a lot to be desired.

The u.k. promised millions to continue the development.

And a fuel efficient version of a fighter jet?

Maybe one more option at corporate ceos a fast ride.

All sorts of technological solutions.

But one thing that they don't need to worry about is funding.

The most grand plan for the future.

May not help this afternoon, however.

Estimating a loss.

Can he convince his investors that he can bring back the electricity so to speak?

First over to you, matt.

What are people watching for most?

What i watch for most, because i'm a car guy, are things like torque, instantly.

Also electric vehicles are starting to be combugs engines and cool in important races.

But also, i'm obviously a business journalist so my second thought, more importantly, is this is a company whose stock chart looks almost impossible.

A gain of 350% in the last 12 months.

Most of that came this year.

So it's easy to mistake the actual stock chart for a dineo of a super bike.

If you look at how people value tesla it's a little confusing.

The company is worth $16 billion at today's share price, almost twice the market cap of fee yat, which owns chrysler, dodge, jeep, others, also sells over 1 million cars a quarter and tesla struggles to get to 5,000. that markse it difficult to try to value tesla by its almost nonexistent sales numbers expected to come in at $388 million for this quarter.

That's almost a rounding error for toyota or gm.

Toyota puts out that plus $63 billion in a quarter and also earned $6 billion in profit.

Tesla expects to lose money, about 20 cents a share is where we'll see that.

That makes it difficult to value the company on a price to earnings basis and book basis doesn't make sense for a car maker unless it's in bankruptcy.

So you have to wonder why 8 out of 14 say you should buy these shares at $135 a pop.

Deutschee says they're worth more.

Northhand security says you should add another 100. but what are they basing this on besides faith and a transport system that looks cool.

Let's go to andrew.

She has been bullish on this stock.

Could it just be too expensive and rea?

So at 200 price target there's no hyper loop estimates in my published estimates.

Really, tesla is a market share play on the 1.5 trillion auto market.

And people have stopped asking what could go wrong with tesla.

They started asking what could go right with tesla.

And the answer is they can start to capture a portion of that $1.5 trillion auto market.

Are they doing it quickly enough for you as we speak?

Tesla's innovating pretty fast for an auto company.

Faster than is typical.

So clearly people are satisfied with the progress.

The next generation of vehicles, probably a 2017 story at this point.

And the stocks kind of trading on a little bit of a discount to that potential of what i think they could do in 2018 and 1e9. i wonder how do you compare this though?

If you talk about what's typical for an auto company do you have to go back to 1903? tesla went from sales from zero to a few thousand to 5,000. and they're not expected to go out of that range any time this year.

Are they?

We're on the rapid part of the growth trajectory.

In q-1 of last year they did about $30 million.

But they didn't have a car out last year.

Right.

So this is the first car they had a product to sell.

Right?

And we saw them sell 5,000. no.

How rapid is that going to climb?

So this year the goal is 21,000 units.

Next year may be doubling that.

Until they get to their mass market car.

There's potential to do 50,000 units of model s. then the lower cost car, $40,000, their initial volume will probably be about 200,000 units.

The factory can do 500 untse,000 units without a ton of extra investment.

That's the way to think about it.

It seems like a really big bet on the future.

I think that's the point matt's making.

You're putting your money on the line here and these are small numbers in terms of how long vehicles they're actually selling.

You need them to get to a much larger part of the market.

But they're proving the track record.

Three years ago the model s was a concept, even a little over a year ago the model s there was no deliveries.

Today it's endorsed by consumer reports as being one of the best cars on the market.

Steadily moving toward a 25% growth margin on that car.

So they've done a lot in the last year.

It's not without merit that people might look to the future and think what can they do next.

What do you think?

The first thing i learned is anything can happen.

I had a target of $60. obviously it's exceed that had.

So the play i'm looking at is a probability play.

Not where it's going to go but where it's not going to go.

Because of the extreme high volatility, nobody has any certainty, you can sell up above, 165 up above and you sell a 115, 110 put spread down below.

Take in about $1.50. and these are option that is expire on friday.

It's an event-driven probability play.

But neck can happen with this stock.

That is absolutely for sure.

It's dealing in not reality.

And touf be aware of that and control your risk no matter how you play it.

Really quick.

What do you want to hear today?

I'd like to see at least 4500 units delivered in q-2, they're on track with their full year delivery projection of 21,000 units and i want to see steady growth.

We want to see good growth margin improvement and tracking to 25%. i want to remind adam thate beat the bmw.

So the technology is there.

Thanks.

We'll watch for those unit sales.

Thank you.

And matt miller, thank you.

I'll see you later in the show.

Coming up, all the news that's fit to print.

But is it fit to buy?

The value of the good old gray lady.

Coming up next.

The purchase of the "washington post" may look like a steal.

But compared to newspapers like the "new york times," the deal coubled be double the going rate.

How rich was the "washington post" deal and how much could something like the "new york times" command as a result?

Well, they said about 17 times very adjusted profit figure.

As you know the newspaper division was operating at a loss.

But if you adjust it it's 17 times.

If you apply that to the "new york times" you get to a valuation that basically doubles where it's trading today at about $4 billion which is crazy.

But as you know, the guys that are doing these deals and buying them aren't looking at the multiples like us.

They're looking at the brand name.

So are you suggesting that it's a and the price has been coming down since the purchase of the "wall street journal." and just to put this in perspective even further the "new york times" is a much different story than the "washington post." remember, the family that controls the "new york times" has been shedding assets around the "new york times" and keeping the core of its business.

Right?

And also, they've been making really extraordinary headway into digital.

So even though their ad rates are going down they've dean digital subscriptions increase.

So a buyout of the times, although we love to talk about it, many people around the company, especially bankers close to it, say the most likely outcome is that the family that controls it actually takes it private.

Because these assets you could argue are not publicly traded, don't fair well in the public trade.

Very interesting point.

Stay here.

We want you to be part of this conversation.

Let's bring in the analyst with standard and poors covers both the "washington post" and the "new york times" so he brings an interesting perspective to all of this could the "new york times" be next?

I don't think it's really for sale at this point.

I just have to say the s&p -- so, you know, if you look at the "washington post," the financials on any type of capital metric the price that was paid isn't going to match up and the multiple is going to seem extremely rich.

But you're also dealing with near profit loss.

And any time you're straddling that gains and losses, the multiple is going to be exaggerated.

As you look at the "new york times," they actually have stabilized their business.

They actually do have a steady profitable business.

They're growing their circulation.

And they've also trimmed a lot of the noncore entities to allow them to focus, to leverage the "new york times." so they're taking a little different strategy going forward.

As we discuss, who potentially could be next when all this attention suddenly gets focused on one company, you naturally go to the next acquisition.

And the "new york times" seems the obvious next.

There has been a fair amount of discussion about will they sell the financial times.

That is out there.

What's unclear is how this valuation will impact it.

As you pointed out earlier, it's suggesting an unreal or what seems like a ludicrous valuation, nearly $2 billion, if you were to run the metrics.

And you could argue that the "new york times" has an unbelievable digital presence already.

And they're getting paid for that digital content unlike the journal which gave a lot of it for free for a long time.

Isn't that part of the issue?

The "washington post." the post, thank you.

The "washington post" was late to the party in terms of kind of reluctantly adopting that.

You look at the "new york times," they led the movement into establishing a pay wall kind of building out the concept and showing success in that metric.

The "wall street journal" actually had a pay wall as well.

Financial times, another good example.

All right.

Thank you very much for being here today.

Coming up next, we're searching for healthy growth.

Our closer is going to show us the one sector that will continue to outperform.

Who cares if it isn't cheap?

Our closer showing us a sector that still has room to grow.

John, what is it?

Health care.

Something we all use at some point in time, i hope.

Slade, yes, we all need it at some point.

So it's growing, it's not cheap.

But let's take a look at the chart and try to make sense and give us a little perspective.

That thing is really still you want to buy a chart that looks like that?

The price on that but the valuation is quite reasonable.

If you look at the basis, what happened was three or four years ago there was such negativity.

What started it off?

About 30% less in the market.

Here's a group that traditionally, historically has grown faster and the market has traded around 10 to 20% premium at 30% discount.

And the thought is, obamacare is going to be a big problem.

I think people failed to focus on the fact that government spending is going to push a lot more money towards health care spending.

With an aging population, they start -- the demographics.

And when the government is picking up the bill for people who are getting, i understand there's money coming in, fresh money.

If you look at the relative valuation, what do you see?

It's gone to the premium.

But the band i think is somewhere in the middle of the band the last 15-20 years.

Throw out the wide numbers.

It's probably between a 20% premium, maybe a little more.

You're at a slight premium right now.

I think the news is going to be positive going forward.

Here's the relative ratio of health care versus the s&p 500. it's just starting to trade at a premium.

How high can that go?

We see back in 2001 it went to 1-6. do you think it can keep going in that direction?

I don't think it gets that far.

I'll take 30% and call it quits.

I think until the actual program rolls out completely, until we start to have to pay the bills i think there's room for outperformance.

You're shaking off a lot of excessive negativity.

Now you have government spending working in your favor i think that makes for a good story.

All right.

Well, from walt disney's lone ranger to freddie mac's profit jump we have the top ten stocks.

The close coming up.

Plus next hour, do it yourself surveillance.

Meet the man behind the smart phone spying kit called creepy doll.

Coming up.

. . if you missed everything that happened during today's session, we are getting you caught up on the only stock to need to know about today.

No.

10, disney is down more than 2% right now because of marketing costs.

It expects to report a loss of $190 million this quarter on the box office stocks.

The lone ranger fell off his horse.

Ralph lauren, down about 7% today.

It has fallen the most in a year.

Rao floor and also giving a caution -- cautious forecast for the current quarter.

The oreo cookie maker, mondelez is down.

We will bring the numbers as soon as they crossed.

The solar panel manufacturer, first solo -- first moller is down.

Profits slid to the second quarter.

Renown is down more than 2% today.

-- green mountain is down more than 2% today.

It has been struggling from competition of other companies that have released their own thing will bring systems.

#5, the low is down over 7% -- almost 7%. are the good times coming to an end to?

The stock tripling, that is pretty amazing.

It is almost as good as tesla.

You gave her a hard time.

I did not mean to give her a hard time.

They have not really solve anything yet.

They made a profit last quarter.

Take right you can get.

Number four, time warner.

It posted a second quarter profit that topped estimates.

Time warner also pushed back its plans to spin off.

Groupon shares surged as numbers came in well ahead of estimates.

No.

2, freddie mac, up more than -- let's take a look at the stock.

Yes, more than 2% after the mortgage giant said it gained $5 billion since june.

It will also pay a dividend of 1.4 -- four $0.4 billion to the treasury.

Making money for all of us.

The number one stock of the day, tesla.

The electric car maker reports second quarter earnings after the bell.

It may have slipped into the red.

We want to keep a year for all of the after hours results.

We're coming up on the close of trading.

The dow down about 46. [closing bell] this is the third day of losses here for the market.

A lot of uncertainty right now.

A lot of talk of tapering.

Speculation is that it could come earlier rather than later.

That is your clothes.

-- close.

Matt is covering test lab.

Julie is on green mountain.

First, let's get to our roundup.

These are the stories we are tracking ahead of tomorrow's open.

Talking about aol, making a big deal today.

It bought a video platform for four hundred $5 million.

It is the largest purchase of today, topping the $315 million that a well paid for the huffington post in 2010. three years ago, most people thought aol was probably not.

To be around.

-- not going to be around.

This new is purchase makes as the biggest player in video.

If you have been following the video, it will affect the two hundred $40 billion global tv space.

Bet on tv, bet on digital.

That is how people are watching television more and more.

Everything changes.

They have only the name in common.

Things change so quickly.

Sears is still trying to figure that out.

As is j.c. penney.

I watched bloomberg on my iphone every morning.

From 81st street down to 59. adam johnson watches tv on his iphone on the sidewalk.

You can listen to it on the radio and then you can watch for your going.

I want to see this surveillance.

I have another acquisition for you guys.

Are you ready for this one?

If you were actually planning to buy a one or two bedroom apartment in new york city, you might have a difficult time, especially if you need a mortgage.

The numbers of apartments available for less than $3 million has plunged.

The average two-bedroom apartment costs $1.4 million.

And there is no supply right now.

Bidding wars all over.

It is like 2007 all over again.

We both lived in bronxville.

It is not like the other markets where things just went crazy -- crazy at expanded volume.

But new york have not been over build.

There's just enough land that there is a lot of air.

There are places for you could have taller, a lot more density in new york.

Are you better off in a city like manhattan where prices are so steep to actually continue renting?

Think of the down payment.

It that money could be liquid elsewhere.

Or by a weekend place.

N.y. was expensive before was born and i suspect it will be expensive when i'm gone.

You've got roughly 10% appreciation per year.

Paying the taxes, your real estate agent, the maintenance -- and getting a headache.

The head of the rnc, reince priebus, threatened cnn and nbc, saying that his 2016 to innovate would not participate in the presidential debate if they went ahead with programs about the life of hillary clinton.

Take a listen.

My view is this, we know that she is running for president.

These networks are leveraging the fact that she is going to run for president.

They're using it to make money.

I'm just telling you as chairman of the party come i'm not.

To let them depose our candidates -- not going to let them depots are candidates while doing this on the other side.

Maureen dowd agrees with him.

She writes this -- nine she is saying that this is not fair.

That is, assuming that hollywood does a nice portrait of her.

How are we going to portray people?

Diane lane -- classic, classic.

But i don't think either hillary or diane lane conjure up cat woman.

Diane lane?

Michelle pfeiffer was the type of -- was cat woman.

Hyperbole.

Interesting.

This company came out with earnings.

That is enough.

20¢ a share.

We were looking for a loss of 20¢ a share.

That is knocking the cover off the ball.

It is quite a small company.

They sold 5150 cars in north america.

We were talking about the incredible -- we are not talking about the incredible.

But that you'd want to see if he were to invest in this company.

It is not a huge jump.

Last quarter, 4900, this quarter, 5150. it but is progress in percentage terms.

The interesting thing is, check out the stock.

They were getting crushed today.

People were worried about what this earnings report would portend.

We see the stock going up over 300% in the last eight months.

After it got crushed, they came out and beat earnings.

Now it is up just as much as it was down before the close.

Not a lot of movement if you look at the whole day of trading.

They beat expectations on unit sales.

They are opening a store in china.

All you have to do is say we are opening a store in china -- bikes and people get excited.

12% of its sales are sold short.

-- and people get excited.

12% of its sales are sold short.

It is just under 2% with the s&p on average.

It corrects the short covering -- the short-covering you could make that argument.

It is better or worse than what you thought it was 10 minutes ago?

That is what makes the news.

Solar city, another elon musk property, he is the chairman of the company is out.

These shares, by the way, have quintupled since the ipo in december.

It has done even better than tesla.

People do not with a look at earnings per share at this firm, because the accounting is tricky.

But they look at megawatts.

How many megawatts of solar power was installed on people's nerves?

In the third quarter, the prediction for 70-77 mw from 53 in the second quarter.

This guy, elon musk, really knows how to gain market, right?

Or he's got the magic touch.

Both of those companies he owns are up four times in the last year.

We have jon ehrlichman standing by with us for groupon's numbers.

Let's start with the results, the fact that this company's revenue in the second quarter was higher than estimated by more than a few million dollars.

$608.7 million vs an estimate of $606.1 million.

But the outlook is not as encouraging as some were hoping for.

It could be less than $600 million in third quarter revenue.

The stock reaction, a couple of things to keep in mind.

This company has given the go- ahead to potentially buyback upwards of $300 million in stock.

The company had a lot of questions about its bottom-line performance.

It just as interesting, erik blog kospi, one of the co- founders of the business, has been named as the permanent ceo.

Andrew mason, who led this company as a public company was ousted in late february.

Eric less costly and it had leon's this -- eric lefkosky and ted leonsis are serving as chairman and permanent ceo.

It does raise the question of whether they were in the position to find someone from the outside to take the company to this next level.

They are talking about 50% of north american traffic coming from mobil.

But there is still a lot of work to do and they claim seasonality into that outlook.

Thank you.

That, are you watching in the gulf this weekend?

I definitely will be.

The championship kicks off in rochester, new york, tom keene's hometown.

Is that where he is from?

Yes, he is.

And tiger woods is looking to end a five-year major drought.

Tiger woods is the 41 favorite . nicholson is -- is the 4-1 favorite.

Phil mickelson is the next.

Tiger woods has been doing well as long as it is not a major.

And he can win any tournament, but not the majors.

No pressure.

Indeed about all of the alimony that he has to pay.

He's got issues.

We talked to phil mickelson about two weeks ago and i asked him the difference between losing the u.s. open and a few weeks later winning at the british open.

He said, because i lost, i had to change the way i thought about it and i could not be easy on myself.

I could not get down on myself.

All the things had to be in the right place.

You are a good golfer, right?

I am a bad golfer.

I make him look -- i make him look good.

If you are up tight, then your entire swing is off.

You need the mind control to keep yourself confident.

You have to not pay any attention to the hundreds of thousands of people looking at you.

Or if you do something wrong you want to be yourself.

No, you've got to put it in the past.

It does not matter.

I will have nothing to say about it.

Before we go, -- before we let you go, i want to bet your final thoughts on the market.

You are able.

Right, i don't think it is going to go down a lot.

Sooner or later, we're going to have to pay for the excesses in the last 25-30 years.

What happens in the fall, tapered?

Maybe not september.

It will only tapir if there is an impact on the economy.

Could you argue that tapering at this point, once it actually happens, we will sort of say, ok, not that big of a deal.

The loss in the chairman of the fed wants to do is to cause the economy to contract.

He has come very far.

Why turn back when you're getting close to the end of it?

That is your clothes, everyone.

-- close, everyone.

Here's a look at what is next.

Creepy dollars, the new way to hack and track smartphones from the comfort of a couch.

And our commander in chief is also a comedian.

You play a little golf and you try to play a little basketball.

It is a sad state of affairs.

But it was not all jobs went he landed on the late-night scene.

Highlights, coming up.

Plus, a real-life hundred game for kids.

And the dark side of shark week.

Stay tuned for your first trade tomorro, all coming up.

? amgen has boosted its offer to buy on its pharmaceuticals . cristina alesci has more.

And christ basically, onyx is playing hard to get cured -- basically, onyx is playing hard to get.

We will have to see where this pounds out.

Onyx has a blood medication that is expected to grow ninefold in the next couple of years.

It is worth two $0.4 billion.

-- $2.4 billion.

That is a big deal because it has concentrated on two main products.

Basically, you need to buy pipeline assets.

You cannot just put all of your eggs in one basket.

And when it looks like an opportunity, you go in and scoop them up.

Exactly.

And research and development is a huge cost for these companies.

Many of them cannot support the additional r&d, so they have to go out and buy it.

The stock had been trading just a couple of days ago at about $136. the $130 deal, you could argue, is a disappointment.

We are hearing that pharmaceuticals will be a very active factor and we will see some of the highest premiums when you compare it to all other industries in m&a. you are not surprised that people are bidding 136 on a $120 deal because there is so much excitement.

Exactly, and now when you look at pharmaceutical and mandate, you could see -- and and and day, you could see slightly different deals.

There are things called patent cliffs, blockbuster drugs that expire.

And we are also looking at government health care.

They will not be able to charge as much as they used to.

The transformational deals that brought them into trouble in the first place, they will pay less for those.

At the you are outsourcing your research and development.

You are willing to pay a little bit more because you did not have to invest in the research and development.

Exactly.

And a lot of these bigger companies are forming partnerships to code developed and co promote drugs.

-- to co- develop and co-promote drugs.

A little bit of give and take.

We will see a much more activity in pharmaceuticals and specialty pharmaceuticals both.

You just created our next big trade segment for tomorrow.

Thanks.

Absolutely.

Coming out, who is like a norwegian?

Why not?

We are setting sail on today's next big trade.

And still ahead, the tiny computer that could become the next big spike.

? it time for our next big trade.

Contagious viruses, fatal crashes, that anybody book a big cruise anymore?

Yes, they do.

It is still one of the biggest values out there providing cheap entertainment, relatively speaking.

Let's talk about the difference between norwegian verses carnival.

Norwegian is a lot smaller.

They operate 11 ships right now.

They will be adding three more ships in the next three years, increasing their yields an average cruise days while the third -- by over 30%. carnival has 100 ships.

They will be adding seven in the next three years.

Which they definitely need to do, because they've had so many problems.

Does norwegian operate itself differently?

At a couple of levels.

It won, they have unique pricing.

They allow customers to customize their level of services.

They can start at a lower level and upgrade while they are on the ship.

It gives the operator much more for charity to sell the increased margin.

Only about 30 seconds left.

What do you pay for this company on a multiple and how much upside?

We look at the p/e multiple.

We look at how they are continuing to rise with the number of cruise days.

We think it will increase 30% from here.

That is impressive.

It is already having a very good year.

Thanks for joining us.

This is really cool.

It is like a minicam on steroids.

The creator of the previous spy where ever.

It is not just the government that can track the government every move.

Now you can do it, too.

And on the cheek.

One company is bringing nsa type of spyware to a computer near you to spy on whatever you want to spy on.

It is called creepy doll, fittingly.

The creator joins us now.

Walk us through how this system actually works and what it does.

Creepy doll has several different parts.

The idea is that you distribute centers around an area and each sensor is a -- looks like this.

Any u.s. be battery it works fine.

-- any usb battery works fine.

Anything it can find to connect to it, it will cut through all of those nasty little things and attached to each other.

And then it will send out wireless pocket constantly.

What are you able to determine?

If i took your device and i put it outside adam johnson is apartment, what would i be able to learn about adam?

Of lot of different things.

It is less about his apartment and more about when he is walking around downtown.

You would learn where he is able to frequent.

You would see him go to coffee in the morning, go out to fetch lunch.

And i will see this on my computer on my on my mobile devices?

You can actually see it on your ipad.

In other words, any place that i go and i say, i'm here, like i used it for square to say that i'm here, that is transmitted through my phone and the ultimate big, through your box and to your ipad.

It is more than that?

You don't need to check-in, exactly.

I can find your location without any contact from you.

But i also get your dignity information from the sites you use on a daily basis.

It turns out that mobil apps leaked far too much data.

I invite someone to online address, online dating profiles, what features they have applauded, what website they use, and even what whether applications they use.

Wow, that is creepy.

It is for sale right now?

I guess.

It will be available very shortly.

The software is open source.

The individual nodes will sell for much less.

Everyone can contribute and add more things to spy upon.

It seems like it should be illegal, but it is not.

Why?

It is research, on his part.

But we need to be thinking about is companies that are trying to keep their information secret.

Forget companies.

I like the idea that he can figure out my life story.

But think how valuable that information is to companies that are trying to figure out where you, trish regan, like to shop.

Facebook can figure out a fine shopping for a red dress on mind and then target all of the red dresses at me.

Isn't that already in existence?

It is, but the difference is that some people are ok with the government spying upon everything.

I know that they should be, but they are.

Some people are even ok with facebook and google knowing everything about you.

Most people are not ok with every kid in his basement nearly everything about you, but the mobile devices are leaking so much that everyone will.

Everyone can track every other person on the planet because we need to change the way we deal with this information.

If you think about it, the person who is going to make some money here is the person who comes up with the programs that make your iphone saif from something like creepy all.

And that is exactly what companies like at&t, rise in are all trying to come up with it.

It is like the next generation of mcafee.

That is what mcafee was set up to do on a pc.

What is taking so long?

Exactly.

There are structural problems.

The app ins lead to much data.

But in the first few seconds of a connection to wireless and node, you lead a lot of data before you can get your vp and software on line.

And the protocol is set up to -- so that the iphone begins out its location and at the network is connected to every few seconds.

I can always track you around the city even if you are not doing anything.

There are many structural levels.

Why isn't this illegal?

It did because the law has not caught up with technology?

It no, because the way you would make it illegal is to make it illegal to sit in a cafe and over your someone talking about their next venture capital moves.

In essence, it would be to make it illegal to have the years.

-- to.

Ears.

These are just vibrations to oscillations in the air.

What you can do is make the app makers not leaked so much data.

Is that a design flaw on the part of the phone?

Is it apple's or the phone network's job to make this a safer?

Yes, it is.

They are the ones who have the ability to do so.

Individual users do not have the ability.

Apple has the responsibility, as does every application developer, to make this problem go away.

Let's say, i wanted to try to track some people.

What i have to put these units in locations where i think people are, like their apartments, their offices, etc.? and what i need a lot of them, or would it just take one and then it happens if i say, go find this web address for this person?

Usually, the best ways to distribute them around and urban core.

Then you can find them when they walk by.

You probably do not want to have a very high densities of that they are always in range.

A few scattered around within a day will find out more than enough information.

What is your plan, adam?

It is fascinating.

Now we know how it works.

It is creepy.

It is a little creepy.

Thank you for being with us.

Coming up, the hundred games and get real in today's weird wall street.

And president obama is in california this week and stopped by to see one of his favorite late-night talk shows.

You may have seen that.

? president obama was on jay leno's late-night show last night, contract -- continuing a tradition of breaking in new ground and making a few jokes.

It was pretty much highlights.

There was a lot to talk about yesterday, and the president did just that.

He was continuing the tradition of politicians using the late night message to get the message out.

Do you know what the first was?

Richard nixon and john kennedy both went on late night.

Back then, it was jack paar.

But barack obama was the first to do late night interviews while in office.

Sometimes he does funny things, like slowdown in the news with jimmy phelan.

Sometimes not so very funny things, like talking about russia and things like trayvon martin and edward snowdon.

It directs that is how comedy goes, right?

[laughter] initially denied or not getting along and then you keep bumping into each other.

But what has changed?

Who saw the light?

John mccain and i have a number of philosophical differences, but he is a person of integrity.

He is willing to say things regardless of the politics.

And he was talking a lot about cooperation tonight -- last night, talking about what he would be -- what he would like to be doing with president putin being in the cold war mentality.

Of course, that was a ploy to get edward snowden back over here.

And he was claiming that we do not expire on our own citizens.

There is no spying on americans.

We do not have a domestic spying program.

What we do have are some mechanisms where we can track a phone number or an e-mail address that we know is connected to some sort of terrorist threat.

I guess it's the fat -- depends on how you define spying on our own citizens.

Right -- if someone is tracking my e- mail, that would count in my eyes -- in my book as spying.

But if they have the number of a known terrorist and they see that terrorist is calling the u.s., it is logical that they would want to start collecting the numbers he is calling.

But if you start searching for pressure cookers and trish starts searching for fertilizer, they might break down the door . freddie mac continues to send money to the taxpayers.

Freddie reporting a net profit of $5 million in the second quarter, the second straight profitable quarter.

Another four $0.4 billion to the treasury in dividends.

In all, freddie will have paid back $41.4 billion to taxpayers.

It is not technically repayment for the bailout, but it does get closer to the original bailout of $71.3 billion.

It is not stopping president obama from the push to shut down freddie mac and fannie mae.

He repeated his call for stripping back the government's role from the private sector.

It -- we are confident that the government could be a backstop so we still have affordability in mortgages above but it is not the dominant player.

The big question is whether these successful earnings in fannie -- freddie mac and fannie, do they speed up this position of a smaller government role?

Or do they slow it down because of paying back taxes overall.

When can we expect to year from fannie?

It generally, you hear from them in the same week.

I would expect any day now.

Thank you so much.

We're walls.

Coming up.

-- weirton wall street is coming up.

? it is time for weird wall street, where bazaar is just business as usual.

-- bizarre is just business as usual.

Have you ever had dreams about being catness fighting for your district?

Malcom i have to sad had dreams involving her.

And now you can't have your own -- can have your own hunger games camp.

It is inspired by the series.

I just don't think that it's a good thing.

I think it is awesome.

It is not a good thing.

It is a little out there, but the movie was out there.

What parents send their kids to a hunger games camp?

Probably the parents of the kids that say, i want to go to this camp, i want to go to this camp, i want to go to this camp.

What is more credible than watching the manning brother's face off any super bowl game?

How about seeing eli and peyton manning wrapping -- rapping?

It is called "football on your phone." there are pitching directv's nfl package.

Get it, football on your phone.

I'm in.

Assuming that they will play repeats.

It already has over 2 million views on youtube.

And i would wager there will be a few large -- a few more because people will want to see it after our show.

Speaking of things you may not have seen but might want to seek another with a dead shark found on the new york city subway last night.

First upon almost every time i get on the subway, which i've tried to limit as few as possible, i would love to see a shark.

It was sad that he was dead.

Who does that?

Who kills a shark and then put that on a subway?

I have a buddy who got a sharp, but he did not bring it back on the subway.

It would have been cool if it was alive.

Weird.

We will see you tomorrow.

? well, it is time now for on the markets, a look at what is moving in the markets, and i am olivia sterns.

Let's take a look at how we finished up the major sessions, all of the inch marks ending in the red, the dow and the nasdaq down region -- all of the bench marks ending in the red.

A few big movers, and let's start with amgen, up almost six %, and this is after they boosted an offer in their bid for onyx, and tesla reported a surprise second -- quarter beat, and also surging after the hours, second-quarter sales that topped analysts estimates, and there was after hours, and joining he is the director of fixed -- income securities.

Thanks so much for joining us.

What do you think is behind today's selloff?

Is it all just anxiety?

Even over that, there are a couple of things.

I think the market realizes that at 834% rate, -- at a 34% rate, that is in the mind of investors, and perhaps they think the fed is going to remove some of the punch bowl, which by itself is not a big deal.

Fundamentals are pretty attractive longer-term.

It is just on a near-term basis when they are used to stimulus, local stimulus, from banks including the fed, maybe they think that stimulus is going to pull away, and they really do not know how to recalibrate, and those are the hiccups you have been seeing.

Every once in a while, it ramps up the anxiety, and that is what we are seeing right now and this week, in general.

Is this an overreaction we are seeing this week?

I do not think it is fully priced in.

Modest and encouraging in august, and we do get the announcement in september like we are expecting, you will see a temporary reaction in the stock market, and it will pull back.

Likewise for the bond market, you will have some overreaction.

The 10 year is at about 260, but you will get a reaction in both cases.

Today we heard from the new bank of england governor, his first press conference since he took over from mervyn king.

What did you make of his comments?

It is almost only the u.s. fed that is saying they are almost ready to take away the punch bowl, them saying they are still going to support you.

I think we are seeing a breaking of the ranks.

This text has been automatically generated. It may not be 100% accurate.

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