tv Power Lunch CNBC June 30, 2015 1:00pm-3:01pm EDT
hat is going to make a difference in the lives of ordinary americans, are we going to give them more opportunity so that if they work hard they can get ahead, are we going to make this a more inclusive economy, a more inclusive society, a more fair just society? if that's our north star and we keep on tacking in that direction, we're going to make progress, and i feel -- i feel pretty excited about it. so i -- i might see if we can make next week even better. >> another press conference. i love press conferences. it's my press team that's always holding me back. i want to talk to you guys every day. sorry, josh.
>> translator: we take the issue of security at large very seriously. we take the question of security at large-scale events as very serious issue which means that we involve all of the those bodies or agencies that can and will issue proper security for the olympics. they include the armed forces, the federal police service and all of the state level police bodies in the state of rio de janiero. we already have experience in the public security arena because last year we staged the world soccer cup and we had to provide security not only to just one city. rather, we had to cover the whole country and there was not one single action that was left uncontrolled in the 12 different host cities of the world cup in brazil thereby establishing a very effective control system by
means of command and control centers as well as my training control centers covering all activities, including the displacement of athletes and high-ranking government officials and authorities. so we followed up on and ensured proper security conditions to all of those steps. ands that why i am certain that we will be in a position to ensure absolute security during the olympics just was the case during last year's world soccer cup. i actually believe that the upcoming 2016 olympics to be held next june, july in rio will be a unique and special occasion because it will bring together the joy of the brazilians and the beauty of rio. of course, each country tends to
think that they have the world's best city but i think rio de janiero is indeed the world's best and most beautiful -- most beautiful city so the olympics will bring together excellent organizational capabilities and also the wonderful ability of brazilians to welcome and receive visitors and athletes and all of those who wish to come to brazil, you have a standing invitation to come to the olympics because we'll certainly ensure not only proper security conditions but also we will make sure that you be able to enjoy great celebrations during the upcoming olympics. call monour sao paulo daily news reporter for the second. >> petrobros is being sued by many american investors and is being investigated by the department of justice because of allegations of corruption. is it an issue of concern?
>> i make it a policy not to comment on active cases that are working their way through the justice system partly because the people here in the united states know that the lawyers work for me and i want to make sure that we appear impartial. i'm not familiar with all the details of the case so i'll decline to comment on the special fix. i will make a general statement that i have had the opportunity to work with president rousseff on the open government initiative that we've been trying to mobilize internationally, and brazil has
been a great partner in that process, that the more we can creed accountability and transparency in our government systems, the better off we're going to be, and that takes work. it takes time but brazil's been a strong partner with us in that process, and i hope that both countries can continue to make progress on that front. >> translator: i would like to highlight the fact that petrobras is indeed one of the major oil-producing and oil-exploring companies in the oil and gas industries. petrobras has more than 60,000 employees and some did engage in corruption or acts of corruption. therefore, therefore, the investigation, of course has been going on by the
federal prosecutor's office and they are being sued by that office. the circumstantial evidence that is available from the prosecutors are pretty substantial circumstance stangly so what i'm trying to see is all legal measures that may be taken against will certainly have taken into account those acts of corruption were practiced within petrobras, yes and it does not involve 100% of the company and all staff members so it therefore follows that those who did practice acts of corruption be held account ableable and be punished. the people who actually engaged in the acts of corruption. to them what will happen to the corporate processes. the good news about petrobras is
a strong company and very well managed with proper governance and compliance processes well in place and properly adjusted. were that not the case, how can you or how could you possibly understand that it has come to a production level of 800,000 barrels a day? further moremore this year it was awarded the oscar of the oil and industry oil and gas industry by the otc, the innovation award was granted to petrobras this year so it is a corporation that is at full blast. it is a fully operational company, not the contrary f-. as regards to your second question. i have never appointed nor have i dismissed ministers that may have been appointed or dismissed by the press or by the media. that being the case i will await until all facts and events be properly looked at and disclosed
before i come to an assessment but at least in principle it's necessary that all of us have accessed to the same information. the brazilian government does not have access to the court records. strangely enough there was a selective leakage of information supposedly or allegedly stemming from the court records so apparently people are free say whatever they want and those who are accused have no way of defending themselves because they don't know exactly what they are being charged with. we are a country marked by a democratic process. we were able to put an end to all of the arbitrary arrangements and violation of rights of the past and we had the strong military dictatorship so given our track record we should really enshrine the right to defense and stick to the principle of sentencing only when evidenced is available, not the other way around. i mean people have the right of
proving that they are innocent. only those who accuse are the ones who should provide evidence of guilt. i mean that's the underlying basic principle of western civilization that we all share. that's what we talk about when we talk about democracy, people's right to a fair defense and also the burden of proof. the burden of proof lies on the accusing party, and it should be, of course a grounded type of evidence not just allegations, speculation that does not ensure access to all of the court records. that would be medieval. it would send us back to the middle ages. that's not what we do in brazil today. >> jim, about last week i had a chance to do the rose garden celebration. court decision around same-sex marriage. did i not have a chance to comment on how good the white house looked in rainbow colors. that made it a really good week
to. see people gathered on an evening outside on a beautiful summer night and to feel whole and to feel accepted and to feel that they had a right to love. that was pretty cool. that was a good thing. >> no regrets on -- >> that was a good thing. and -- and the only bad part about was i couldn't go out and peek at it myself because then i would have had to clear out all the people or the secret service would have so i -- i could only reflect on it from a television screen. that's a moment worth savoring. thank you very much, everybody. >> all right, folks.
that with a the president along with the president of brazil. mr. obama finishing that news conference with brazil's leader. >> indeed the president concerned over greece urging both sides to come to a resolution so let's get right back to the heart of it in athens greece where michelle caruso-cabrera is live with new information i believe on the greek drama. >> reporter: yeah. we just heard from aamerica el in the last 20 minutes. she's the leader of germany, and she dashed hopes that somehow there would be a last-minute deal today. the reason we thought there was a possibility is we expect right now, though we haven't gotten confirmation that it started, eurogroup finance ministers, all the finance ministers from the countries that use the euro are supposed to get on a conference call and consider a last-minute request from the greek government for a bailout extension which would give them more time to negotiate and a new program that would last roughly two years, but angela merkel came out and said no new negotiations until a big referendum occurs here on sunday so quite negative. let's see.
maybe something does come out of that conference call with the finance ministers, but she seemed to suggest that it wouldn't. the referendum on sunday is a surprise event that alexis tsipras announced over the weekend. we were told behind me there was a vote no rally. today there's a vote yes rally, look to be of equal size, maybe this one is a big better but competing forces in greece on what should happen on sunday and how people should vote. the prime minister of the country telling its citizens that they should vote no. don't accept the current bailout package being offered which would give him a stronger negotiating position in order to get a better deal for the greek people but other eurozone people are saying no way. consider sunday's vote to say in or out. you take the package you stay in and if you don't take the package it will be much tougher to stay in the euro. we're waiting to see what comes out of that euro group finance teleconference meeting. >> merkel not budging in the meantime. let's turn to another flash
point, puerto rico, but the markets right now are looking marginally positive okay but we did give up some of the earlier gains. the dow had beenp by triple digits. financial and industrials at this stage are the leading sectors while the utilities are the biggest laggard down in the red behind me. dow and s&p 500 remaining negative for the quarter which would put the s&p in danger of falling for the very first time folks, in ten quarters. the nasdaq is still on pace for a ten-quarter winning streak but the major averages are all down around 2% for the month of june which is the worst monthly performance since january. so let's also get a check of what's happening in the overseas market. europe did end down, of course, weighed by what's going on in greece. a lot of uncertainty still there. the uk ftse was down by 1.5%. the french down by the same amount and germany's dax down by 1.2%. big rally in asia. china's stock market has been a roller coaster, right, but it
did soar overnight by 5.5% after falling into bear market territory. the shanghai and shenzhen up very nicely in overnight trade. we're all caught up on what's been happening in the markets here and around the world. back over to you. >> a very turbulent day, mandy, in the currencies the euro versus the dollar. certainly yesterday and the euro under pressure right now. let's find out what the currency market is signaling about the drama unfolding even as we speak in greece. sarah eisen is at the new york stock exchange. >> does seem odd that the euro is going through an existential crisis that threatens the viability of the single currency and the market kind of a big shrug. it is down today, the euro but still up for the week and up sharply yesterday so the question is why the resilience? here are some possible scenarios going around the desk. trade remembers thinking a yes vote is looking more likely on sunday meaning greece will stay in the euro. also, there are no signs of immediate contagion threatening
other countries and the greek troubles could actually push a federal reserve interest rate hike later. that changes the euro/dollar calculus a bit in favor of the euro so all of these factors are keeping the euro and dollar pretty qualm but wall street pros like alan ruskin says the euro is still a buy because the fed is seen as moving first. a ton of uncertainty surrounding what happens after the greek vote sunday whichever way it goes mandy. >> thanks so much for filling us in. keep watching. 1.1145 is where we speak for euro/dollar. now to puerto rico in a stirring speech the president said the commonwealth cannot pay its debts and wants to delay bond payments for a number of years and increasing taxes and cutting spending will lead nowhere and kate kelly is live in san juan for us. is everyone owning puerto rico's
triple tax-free debt waits and watches, right, kate? >> that's right, mandy. it's crunch time here in san juan where governor padilla as you just mentioned said very recently that the economy here rather is in a death spiral and that the island's debts are simply not payable. now he was referring, of course -- he was referring, of course, to some $12 billion in an overall debt load it a puerto rico holds, and tomorrow based on estimates from market participants i've spoken to some $1.9 billion is due to creditors above different loans, the puerto rican power authority, general obligation bonds among others default legally speaking is not supposed to be an option nor is chapter 9 bankruptcy though there has been legislation to try to change that. meanwhile though the governor is sending a message to investors that they need to show leniency or risk coming away with nothing. earlier today on cnbc muni bond
expect looked into this and said in some ways this message has been telegraphed for some time. >> what's interesting is that tie months ago the governor said it's folly to consider that we would not pay our debt and now he's saying it's folly to consider paying our debt. this is something, you know that i think many people certainly i, have seen coming for a long time. >> she also said his message felt like a stern warning to hedge funds in particular dozens of hedge funds invested in puerto rican debt including paulson and company, davidson and kempner among others but the impact could be felt among retail investors pretty strongly, too. according to figures put together by morningstar based on dataing from this calendar year some 53% of open-end mutual bond furnds in the u.s. are invested in puerto rico in some way with the average position size being at least 3%.
now creditors on the hedge fund side apparently have made a deal offer to puerto rico within the last few months of about $3 billion in new loans with some contingencies, but from what i'm told mandy and tyler, the government has essentially shrugged that off and they are once again asking for even better terms. >> thank you very much for filling us in. kate kelly live in san juan. the liquidity illusion. genesis' bill gross will be joining us on "power lunch" to explain about his big fear in the bond market ahead and the dow, s&p are headed for their worst month in january, down about 2% in june. will we get a july bump? why next month may favor the bulls. ♪ every auto insurance policy has
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liquidity firm kkr paying almost their 1 million to settle charges it passed on more than $17 million nun successful pieout expenses to investors. packaged food company conagra food disc raoul corp less than three years after paying $5 billion to buy the company and shares of for-profit education company apollo education group dropping down a whopping 15% today as the university of phoenix operator continues to struggle with declining enrollment and lackluster profits. ty? >> stocks well off their highs and with a little bit of a gain about 11 points on the dow. the focus still very much on
negotiations over greece. the debt threat there if greece leaves the euro. what effect will that have on stocks going forward, as the saying goes. let's bring in michael farr my washington, d.c. friend, cnbc contributor. michael, great as always to see you. >> thank you. >> there are a lot of cross-currents we've dealt with in the first half of the year, many of which are going to persist into the second half i believe. greece ain't going to be over quickly. rising rates ain't going to happen quickly. puerto rico, which is a new threat ain't going to get resolved quickly so what does the second half look like to mr. farr? >> i'm going to agree with my good friend in new york mr. mathison. i don't think this ends quickly. this greece situation, grown xlas end. hearing about it for so long that it's hard to believe now, now it's really going to be a problem. it does look like now it's really going to be a problem and there are two stories here. there's one of this
irresponsible government who has continued to make politically convenient choices at the expense of their economy and at the expense of actually their people and certainly i think they have failed in leadership of their people but there's a real tragedy going on too, of the greek people who are suffering and probably going to suffer more. sooner or later you have to hold the line, and we're finding these two countries and i guess not a country but puerto rico as a u.s. province is in the same kind of dire financial straits. >> michael, you know i sit there and i go you know when you overborrow lev's a you know what. >> yeah. >> you know what word i'm thinking of, but the greeks in their defense would say we have already seen our taxes go up 30%. if i'm a pensioner i have lost 50% of my pension or more. i can't take any more, and if you impose it on me there very well could be revolution in the
streets. >> there very well could be, and that's really the underlying tragedy going on in greece. they have raised taxes and those who are most vulnerable and those who are unable really to afford anymore are being stuck. >> you would think, michael about, what would happen if that kind of austerity were brought to the united states. it would never happen, by the way, but a 30% tax hike? cut social security 50%. come on, man. >> no, but people here pay their taxes. the revenues are there. tax fraud, tax evasion as we've listened to michelle caruso-cabrera who has reported on this fabulously well. i turn up the volume wherever i see her on because we really get great information. >> so do we all. >> she's said collection, the tax res there, but collections haven't been there and the revenues aren't there for the greek government so they haven't been able to afford it so you have to collect. we actually collect taxes here but this piper has to get paid sooner or later and it looks
like the european union is absolutely serious about this. >> right. >> and the precedent-setting, tyler, both in puerto rico and greece, are two of the main things that i think investors have to watch right now because there are other countries and other debtors who are also on very thin ice. >> we have to leave it there. michael, always great to see you. >> thanks, tyler. >> michael farr. >> calls it the liquidity illusion. genesis' bill gross joins to us tell us why he's worried about the liquidity in the bond market and the impact of that as the fed begins to raise rate. the s&p ending down for the week and the quarter. the problem facing traders ahead. don't go away. k you can put off checking out your medicare options until you're sixty-five but now is a good time to get the ball rolling. keep in mind medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans
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welcome back to "power lunch." abercrombie & fitch getting cut and a turnaround may take a while and that the company faces sales and margin pressure. shares down by 2.will%. fitbit with an outperform rating says fitbit is gaining share in a rapidly growing business and sony with new stock shares and debt. it will invest the money into its growing image sensors business. let's go to the bond market now where rick santelli has been watching what's happening over there at the cme. ricky, how is the day shaping up? we had some economic data this morning thrown into the mix. >> yes, definitely, and if you look at consumer confidence it was pretty strong. one of the few three-digit numbers we have going back all
the way to the time of the crisis but chicago pmi was definitely on the weak side and at quarter end. month end activity, year end and a lot adjustments push yield down. two-year chart of the euro over the dollar is the best chart do look at. yesterday was a wild range but didn't settle that far from the previous range and today it's giving a little bit back but the two-day gives you a better look at the chart. usda reported 12:00 eastern if you're long corn wheat or beans you're doing pretty good. you know we have less stock and basically less acres planted and we're at the high futures price of the year pretty much in all three grain commodities. tyler, back to you. >> all right, mr. santelli, thank you very much. turning out to be a june swoon for stocks. what about next month? why july may favor the bulls. "power" is back in two and bill gross raising concerns over market liquidity in his latest and always provocative investment outlook.
hello, everyone. i'm sue herera. here is your cnbc news update. as the iran nuclear talks continue in austria both sides agreeing to extend today's deadline until july 7. the new deadline would avoid giving congress 30 days extra to review any nuclear deal. new york department of corrections says three members of the clinton correctional facility executive staff have been put on administrative leave along with nine security employees. the prison is where inmates richard matt and david sweat escaped from three weeks ago. jetblue now charging for checked bags. customers who buy the cheapest blue tickets will have to pay $20 for first bag when booking online or at a key yosk and $25 at the check-in counter. the fee applies to new bookings only. that leaves southwest as the only major airline that offers free checked bags. egypt's president leaving the military funeral for the
country's chief prosecutor who died yesterday in hospital after a car bomb targeted his motorcade. it was the first assassination of a top egyptian official in 25 years. and that is your cnbc news update this hour. back to you, mandy. >> thanks very much for that stew. stocks are very marginally high today despite fears about greece puerto rico, you name it. all that sort of noise being thrown into the mix there but the dow is still down for year and for the month sinking nearly 2% in june so what about july. july arrives tomorrow. how do normally we see the second half of the year kicking off. dom chu you've been digging in. >> on a positive note, mandy, and the reason why i say that is over the last ten years july has been a predominantly positive month for the markets, again, over last decade. asked our data partners to take a look at numbers and here's what they came up with. the three major indices post average gains during the month of july. s&p 500 up 1.5% up 60% of the time, not too badch the nasdaq
the biggest gainer up by about 2%, also positive 60% of the time but the dow from a batting average standpoint, the real winner here. it's up 2% and it's up 7 out of the last 10 years so it has the best winning percentage. sector standouts, take a look because we do see interesting themes developing. over the last ten years, take a look at -- take a look at some of the stocks. let's do that instead. apple is one of the big gainers here up about 9% -- up 9% up 90% of the time. alexion pharmaceuticals as well. big return 13% on average for the month of july and up nine out of the last julys. celgene the same story and snap-on tools, twelve 12 stocks up nine out of the last ten years and one stock, just one in the entire s&p 500, that's been up 100% of the time over the last ten years in the month of july and that's big blue ibm, up an average of 6%. it's been up ten out of the last
ten julys so there you have it, tyler. one stock to watch. not saying this is all going to happen the way it has happened in the past. not an indicator of future performance. still historically context-wise for the last decade interesting that these stocks tend to outperform tyler, in the month of july. back over to you. >> and for more on dom's story about market performance in july please visit powerlunch.cnbc.com. all right. drama in greece. still no resolution as we push towards a possible sunday really a probable stunned referendum over in that country. the greek etf having an awful week, one week down about 19%, and then there's the yield on the ten-year greek bond. the yield is 15.4%. compare that about 2.2% for the u.s. bond. michelle caruso-cabrera is live where there is a demonstration going on in athens. hi, michelle. >> thousands of athenans taking to the street once again, tyler,
the vote yes rally occurring behind me in front of the parliament. vote yes and that referendum that you referenced will happen on sunday. the greek prime minister has asked the nation to vote on whether or not they should accept the very tough bailout agreement that has been offered to the country, accept the reform measures which are going to be tough and in exchange we'll give you billions of dollars to help you keep paying your bills. tonight's vote yes rally compared to yesterday's vote no rally, tonight is larger far more densely populated and 20% larger. i who is also add that tonight it's been quite rainy and still the crowd has been very determined to be out here. we're still waiting to hear whether or not there's -- anything that's going to come out of a teleconference between the eurozone finance ministers who are considering a last-ditch letter from the greek government for an extension of the greek bailout that would give them money. so far no word on that. i did speak with the former greek prime minister george papandreou today and asked him is greece still in the euro six
months from now. >> despite the many voices who say it would be better outside the euro family it would be a disaster for many. we have cut a deficit of 15.7% and reached a primary surplus. it would be terrible to have a new adjustment at a time when the greek economy is quite weak. >> the prime minister is very hopeful that there's a yes vote on sunday even though it's not clear what happens after that vote how things will progress and if the banks are going to be able to reopen any time soon. guys, back to you. >> all right. thank you very much michelle. volatile day of trade, but the markets are now trading just a little bit higher. as you can see there the nasdaq up two-thirds of 1% and the industrials up .33% and greek contagion fear still very much front and center and that's where they are likely to stay for remainder of this week and the remainder of neck.
larry mcdonald, a cnbc contributor. larry god to see you. what is the betting on whether greece stays in the euro and what it would mean if it leaves? >> the key thing we're watching tyler, is the relationship between credit quality throughout europe and let me explain that. so central bankers around the world have drastically distorted the relationship between credit quality and bond prices okay so they have drastically changed the rules of the game going on for decades and draghi's famous -- >> how so? how do they do that? >> because they are doing qe programs all across the world in europe and japan and the united states we're done now, but when you do qe -- >> an artificial buyer in the market driving the prices up. >> exactly. have you an artificial buyer that greets a froth of buying across all different types of bonds to try to capture those -- that buying and draghi -- here's the thing to focus on.
draghi is famous whatever it takes line from the summer of 2012, that credibility is on the line here and the way you scientifically or mathematically measure how credible he is by watching credit spread contagion so the relationship between portuguese spreads and spanish spreads relative to say german spreads and the central bankers are being kind of called out here by the markets, and if -- if those spreads on the other countries don't start to come down that's a warning sign for u.s. equities because that means the central bankers are losing key, key credibility. >> and what it said about doing whatever it takes to keep the eurozone together do you think it's already cracking a little bit when you consider on sun the ecb made the decision not to extend the emergency funding and therefore the banks had to shut in greece. >> exactly. that was -- they actually did two blows. there's been two blows to
draghi's half ittation. one when they did the first qe program announced earlier this year, $1 trillion they weren't buying the greek bonds, a buying all the other bonds and that's one crack and if they want to do whatever it takes they should be expanding. that is really what created the crack in the credibility, and we want to see if they are going to do something to try to get that credibility back. >> larry, thank you very much. larry mcdonald, we appreciate it. >> mandy. >> let's turn a little closer to home then, ty and turn to the state of the american auto industry. last month our phil lebeau told us auto sales would be huge. he was right. it was a record. will it be right again when we get the latest numbers tomorrow? phil is live in chicago with a preview. your credibility is on line as well then phil. will you be right? >> mandy, i would expect that july we will see very strong sales, not record sales for the month of july but very strong sales. over 17 million is the expectation, and it basically what we're seeing is an
extension of what we saw in may and in june where people are continuing to come into the showroom. most of the estimates that are out there from wall street as well as analysts in the auto industry calling for sales -- a sales pace of between 17.2 and 17.4 million and we've talked about this for months now. the strong economy, low employment and low interest rates when it comes to financing a new purchase. all of those are driving demand right now. take a look at the auto sales on an annual rate going back to 2010 and you can see how much they have improved. that 16.5 we have blown well past that for 2015. the expectation is the euro will probably finish at 17.2 and oh, by the way the national auto dealers association is now expecting 2016 sales of 17.6 million, and what is selling right now are the same things that have been selling over the last couple of months. talking about suvs, crossovers. pickup trucks. they were big in may. they will be big begin in june.
in fact, when you look at pickup truck market, it's a pretty lean inventory out there right now, not only with the full-size pickups but also what they call the mid-size pickups which, mandy, by the way which is the size of what full-sized pickups used to be, gm ford chrysler year to date you see the divergence and the benefits that chrysler has gained by doing manufacturing over in europe. the other part of this is all of the consolidation talk out there and the belief by some investors that sergio moracio will create a deal to merge with other big automakers. it will be a big day. >> thank you very much phil lebeau. >> apple launched its music service. will it hit the right note for music servers? and clocks get an extra second to sync up with the earth's
welcome back. bob pisani on floor of the new york stock exchange. let's take a look at s&p 5 up. been moving at a fairly narrow trading range being smacked around by some of the various greek headlines, some optimistic, some not so optimistic. the s&p 500 has right now moved into positive territory. want comment on first half of the year. a pretty tough time overall and a number of different groups in particular. energy stocks and the retail groups. we got a number of energy stocks at new 52-week lows today including chevron which has been a major drag on the dow jones industrial average, down about 9% and some of the other stocks are down. exxon is essentially at a 52-week low. take a look at retailers of walmart is another major problem for the dow. it's down 13% so far this year and that's been a real drag kors also at a new low, hewlett-packard, a former dow
component on the down side as well. we've emphasized banks and health care big winthers year but a number of sectors are in clear downtrends. transports have been down and energy and interest rate sensitive groups like utilities and reits and china has been on the upside that clearly has been on the downtrend for the past year. >> thanks very much for that. let's bring in hayes miller head of global asz et management and the manager of the five-star rated alpha clone alternative etf. hello to both of you. >> hi. >> bob said up what we've seen in the first half. what does the second half look like you to? >> i think it will be a lot like the first half. drivers in the market it's been about growth. if you look at the factors that are driven the stocks that have performed well it's been about momentum which, and i don't think that's driving everything and it's about growth. value, cheapness for cheapness
sake or even high-dividend yields haven't matter that had much and i think investors will continue to demand some sort of potential for dividends to grow demand some potential for earnings to grow and that's going to favor particular sectors in the u.s. market. >> so you're saying basically winning sectors so far are going to continue winning and the lag yards will continue lagging, hayes? >> yeah, i think the spreads of valuation allow for further re-rating of information technology and certain industrials and financials -- and financials are beginning to respond mostly to the fact that we would expect the yield curve to start to steepen as the fed begins to normalize interest rates and steeper yield curves will be good for banks. financials have a real nice balance of both value on the one hand and interesting growth characteristics on the other. >> not very exciting the much the same? do you think the second half looks very similar to the first
as hayes was suggesting? >> i'm afraid i'm going to disappoint you as well. what we're seeing -- our index is a great lens to look through to sort of have a look at what institutional and hedge funds sentiment is with respect to equities and we've seen them increasingly become more and more bullish quarter over quarter. just as an example, their largest position, looking at average largest position, size in terms of dollars, it's increased 8% last quarter. the total market valuing of all equities disclosed in their filings has increased 5% and the market has only been up 1% so i think their view is we're in a worldwide economic recovery and that the recovery will continue. of course there will be air
possibilities like greece, like puerto rico and that's why our index, and they can adjust their exposures to the market accordingly, and our index does the same. it has a built-in downside hedge that kicks in when the market turns bearish. >> expect equities to close higher on the year with pockets in between of volatility. hayes and maz, thanks very much for joining us. >> for more go to powerlunch.cnbc.com for today's power play. ty. >> the first half and second quarter almost in the books.
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$1.9 billion in interest payments by tomorrow and that is july the 1st. secondly we learned that over the last ten years july has been a good month for the markets. the dow's average return is 1.2%, the s&p up 1.6% and the nasdaq up 2.2%. finally angela merkel of germany spoke at top of the hour dispelling any possibility of a last-minute deal for greece. she said, quote, we will not negotiate on anything before the referendum which is later for this sunday. if you missed any of the big stories in the past hour you go visit our site, powerlunch.cnbc.com. ty, over to you.
cash back from spark means thousands of dollars each year going back into my business... test. test. live at the nasdaq market site, come up on the second hour of "power lunch," stocks jump a leg higher and bill gross has a warning for investors. he'll tell us what it is and we'll get his take on greece
puerto rico and the fed. four trouble spots for the market and how to trade them and something is happening to millionaires that has not happened in years. we'll tell you what that is in the second hour of power but first back over to tyler and mandy. >> thanks very much for that melissa. wall street closing the books on the first half. it's been a volatile ride so far. the dow back to negative and nasdaq still higher year to date. some sectors still all over the map. look at the food stocks mcdonald's dropping out gains and chipotle dropping double digits and starbucks up. what's ahead for fast food and jane wells with the second half playbook. hey, jane. >> reporter: hey, mandy, the restaurant index has done twice as well as the broader market over one year but are investors feeling a little full? we'll talk fast food right now. chains are competing to improve. apps that let you pre-order and starbucks is testing deliveries and rolling out mobile ordering and taco bell has mobile ordering and mcdonald's is very late to the game but all have
their fans. >> loves mcdonald's,ment do have starbucks. >> i don't really go to mcdonald's a lot just because obviously it's super unhealthy. it's more of like a guilty pleasure like if you're at the airport or something like that. >> the last time i had mcdonald's was when i was 16 but i would go back but only to get fries. >> every time i'm at the mall. >> we're going to have more on this at "fast money." we'll talk about fast casual and tyler let me go back to you with breaking news. >> jane, we've got a little more time than we thought there. finish your thought. >> okay. i'm sorry. technomics says expect more menu mashups like the famous taco bell dorito and the yum brand pizza hut has wendy's selling baconator fries. inflation is slowing but that could be more than offset by higher wages and heading into
difficult comps which could slow considerably in the fourth quarter. some top picks piper jaffrey starbucks with more sales and credit suisse has dunkin'. more on "fast money." >> we've got breaking news. that's it for the first hour. >> now some breaking news. melissa? >> all right. i'll take it from here. fed vice chairman stan fisher speaking in england at this hour says the fed comety will rate rake hikes and says the fed's objective of maximum employment and 2% inflation do not need to be fully reached in order for the fed to raise rates. that's on the one hand. on other side fischer saying the fed is mindful of the risks of tightening too early. on the economy, he says that the economy is now close to full employment. and had some good things to say
about the job market including tentative signs of wages going up. now on inflation he says the fed sees a 2% inflation being reached within two years. there's evidence that the consumer -- the consumer demand is rebounding in the monthly data and the economy is likely to go 2.5% in the second quarter. pretty good bounce back from the negative numbers reported in the first quarter. abeing mo big negatives, talks about the strong dollar calling a significant head wind to the u.s. economy and saying the dollar will restrain growth for some time even after transitory factors in the dollar work through the economy and the dollar is weighing on u.s. inflation. guys, i want to point out that in march fischer said that the rate hike would likely be warranted this year sometime but he's not using that this year. just talking about the objectives which is the new way that the fed talks about it and just basically warning that the fed is going to weigh rate hikes at each of the upcoming meetings. melissa. >> steve liesman, thanks for that. >> let's get bill gross' reactions to bill fischer's
remarks and let's bring in the panel and with me is cnbc contributor brian kelly and contributor dave seeberg and four big trouble spots for nations. you just heard from the fed. no one really knows when the rate hike will come. fears of a possible greek default and third, big concerns over puerto rico's debt and fourth, china is a wild market play. let's get started with the fed. brian kelly, steve liesman said that fischer seemed to leave the door open to a possibility that a hike might not happen this year. >> fischer is generally known as a hawk so for that type of statement that's about as dovish as he's going to get. with everything that you just mentioned going on kind of the four big problem spots around the world, it's going to be very difficult for the fed to raise rates this year. you know i would bet it doesn't come until 2016 at earliest. >> right. david, is that what you see from your point of view? >> yeah. i agree with brian on that. i think it's going to be very difficult for them to do it but when they do it talking about 25 basis point, not a lot here. i'm not super concern the market
is going implode. i think we're in a range right now. i think the market's basically fairly valued melissa. i think greece is basically an excuse for traders and investors to take profits right now or sell stocks. 2% off the all-time highs. i think puerto rico is a non-event and essentially, you know, i look at the rate hike and say the biggest risk we have is we have the bond market and as rates go higher what's going to happen from the liquidity perspective there. the biggest thing to keep an eye on as far as turbulence in the overall markets. >> liquidity is a concern of many people out there including bill gross who we'll talk to in a moment. scott, i want to talk to you because the grexit is having an impact on the markets in terms of markets being fairly valued. in that per special everything is fairly relative. in a world where everything else is at risk doesn't that make the u.s. markets more attractive? >> i think it absolutely does. if you were an investor wouldn't you want to be focused on the united states which exports
about a third as much gdp-wise as germany. in fact i think you'd be looking at small-cap stocks because they export even less. i certainly wouldn't be looking at gold. gold had a horrible day yesterday given what it should have done. treasury had a great day yesterday, but they will give that back and that's why we trade. i would absolutely want to invest in the united states if i were worried about greece. >> want to get to dom chu taking the pulse of wall street strategists. what's he saying? >> we at cnbc take a portfolio all the strategies on wall street and figure out what their target prices are for the year so nothing has really changed given the greek headlines. that's not to say things won't but let's give you a snapshot of what we're talking about. first of all, there is at least for right now what seems to be a more bullish forecast for what's going to happen with the large company s&p 500 by the end of the year. the median forecast among strategies that we poll at cnbc is 2,224 so we've got about -- probably an 8% upside right now
given where markets have kind of pulled back to over the last day or so. if you look at the low. that forecast is one reason goldman sachs, both of those guys think we'll have a 2100 s&p 500, not far from where we are right now. as for the most bullish people on wall street they all say 2325 so even higher than what the average forecast is so right now with everything else held constant, no changes have been made still, 224 the median forecast for where people think we'll end the year for the s&p. back over to you. >> thanks very much. most bowelish forecast 2325. brian kelly, i bet you're saying no way. >> i'm saying listen can we get up another 6% 2% and i think that would be. up so much since 2009 and you don't make a lot of money by just following what the strategists do. where you make money is going against what they are saying finding out where they are wrong
and finding out and deciding hey, maybe fwres is something more than this and maybe puerto rico is going to lead to default or soft default as puerto rico did over the next six to 12 month. those are the types of things you have to look at to make money. would i not follow the strategists at all. >> david, i'm wondering if you have expressed the notion that perhaps we're fully valued at this point. when you take a look at what's going on around the world, and brian kelly mentioned going against the grain and you see rates and what they are doing, yesterday we saw the biggest one-day price rally in the ten-year since 2011. if you went against the grain for strategists on yields, on bonds, you'd be making a lot of money right now because they have been all wrong pretty much. >> yeah no doubt. >> look it's all about alternatives. we've known, that you know through the past few years, but, look melissa the importance to keep an eye on from the stand point market is, you know top line growth is super important, predicated on some buybacks to really drive earnings growth, right? is top line growth going to be enough, strong enough to offset
the benefits that we've seen from the stock buybacks and honestly i think we're in a digestion period. i think it's going to be a period of time where the market is sort of in this little malaise until that can really start to pick up and i believe it's going to be at least six months to possibly a year so i think we're in stall mode for a period of time which isn't a bad thing. i don't think we'll fall off the face of the earth but i don't see a tremendous upside until you see the economy pick up enough to where top line growth can offset the benefits. >> how are traders positioning themselves from your vantage point ahead of the referendum? >> they are tending to focus on value, value, small-cap stocks you know. if b.k. were right, everybody would be buying the german etf and we saw that break below the 200-day moving average today, down a bunch more today. people are selling that regardless of price. they just want to be out of germany and be focused here in the united states smaller cap stocks and value tilt. >> all right.
thank you to you all. david, scott and brian kelly. tyler? >> all right, melissa. minutes ago our own steve liesman told you about comments from fed vice chair stanley fischer and joining us first on cnbc is bill gross, portfolio manager of the unconstrained bond fund. bill, always good to see you. i saw in those comments that the fed will be considering interest rate moves at meetings later this year. that sounded to me like what we already node but i'm no scholar of what the fed says. did you hear or see anything different in those comments? >> not much difference tyler. he spoke about data dependency and about the fact that the fed didn't have to see 2% inflation in terms of when they are going to raise rates. i think they will raise rates once in 2015. i think it's because -- not because of an economic reason or because of inflation but because they simply need to get off of
the zero dime and need to show that the economy in the united states and elsewhere, you know can exist and can prosper, you know, with interest rates that are none zero so i think we're going to see a hike that's very gradual. i don't see anything different in terms of fischer's statement. >> we've been saying up in the lead up to our discussion here that one of the things that is concerning to you right now is liquidity. explain where and why. >> wellit's necessary for a finance-based capitalistic system. in the past several years and certainly during the lehman situation we saw illiquidity. we saw institutions and individuals delevering and reducing positions, and liquidity just wasn't there. at that time the fed provided liquidity as the buyer of last
resort but now, you know the fed is in a more limited position. they are not able to address the situation like they have in the past. certain regulations and rules by, you know the justice department in terms of aig and otherwise suggests that the fed will not be the same significant player in the future and so basically the market is depending upon itself for future liquidity, and i wonder you know, during a panic situation whether it's china or whether it's greece or had it's a butterfly wing that basically disrupts, you know the nature of financial markets, whether or not liquidity will be sufficient. >> and we just want to mention here, bill that the dow is up triple digits right now, ten points off the session highs. specifically when it comes to liquidity it is this quote, unquote, shadow banking sis them a that you pointed out, not required to care the reserves
and that's where the source of the ill liquidity problem will be. i'm wondering what asset class shall we look for. i mean is it going to be ill liquidity in the bond market or high yield market. where are we going to see those cracks happen? >> the shadow banking system as you mentioned, it is a system that is anything basically but banks. it includes mutual funds, it includes etfs and it includes private equity and the stock market and includes you know anything basically that doesn't have a government guarantee in terms of you know insurance behind it and it's been a significant part of the financial-based system for 5, 10, 20 years. probably 40 to 50 trillion in terms of size. where's the vulnerability in terms of that shadow banking system? hard to say. would i say that, you know certain etfs, which are being used by institutions as liquidity vehicles in and out
types of vehicles to get into the stock market to get out of stock market, to get into certain currencies, to get out of certain currencies once institutions start using those etfs as a liquidity certain type of vehicle, then i think that the system itself has to wonder just how liquid the system can be under those circumstances. >> i'm sure that many people at home, bill are thinking how is this going to impact people? we mentioned etfs and so many are invested through etfs so it will impact them so what will a run on shadow banking system look like and how will the impact with one person's ability to get in or out of an etf? >> well i think individuals are fine. individuals should not shy away from etfs, but, you know, the fact is that they have spreads. the spakt that as investment banks and banks in terms of their ability to offer and to bid on bonds and stocks going
forward, it is going to be limited relative to what it was. i'm not suggesting that the individuals, you know should not pie etfs, should not buy mutual funds. it's merely a situation in terms of larger institutions that i think are somewhat abusing the situation in terms of their in and their out in terms of liquidity, so, you know let's not panic, but let's be away and i think the government is being aware that there's a financial stability oversight council that's looking into you know know strategies specific to financial institutions to identify those that are so big that perhaps there should be some regulations priced on them. >> bill are there certain kinds of etfs or certain providers of etfs whose products might be more vulnerable to a liquidity problem than others? how would i ever know that my etf might be one of the ones that could run into trouble if there is this kind of liquidity
event? how could i tell? >> well it -- it's hard to categorize it and i would say. this has been mentioned before at black rock and others that certain levered etfs that deal primarily in high-yield bonds and deal in bank loans, et cetera, you know, are perhaps the most vulnerable. any financial institution or bond sheet which is levered, you know basically during a liquidity crisis faces a problem, and so the levered etfs are the most vulnerable. >> always great to speak with you. thanks so much. bill gross of janus capital. >> the news coming fast out of greece. we'll have a live report from athens straight ahead. also ahead, we're digging into one biotech that just got a their 1 billion boost. latest why millionaires are raising a big red flag on the market and stocks worn back late
this afternoon. we'll tell you which way when "power lunch" returns. helping protect that world takes state farm. we live in a pick and choose world. choose choose choose. but at bedtime? ...why settle for this? enter sleep number... don't miss the lowest prices of the season, going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow! only at a sleep number store. right now, find the lowest prices of the season with the c4 queen mattress set only $1499.98. know better sleep with sleep number.
extension of the old bailout. the creditors said they don't want to negotiate anymore. already an offer on the table and they basically walked away from it but everyone now believes the creditors will negotiate because the creditors are afraid of a no vote on the referendum on sunday. they believe that if they make some concessions now this is the theory going around that tsipras will turn around and support a yes vote on the referendum or in the best case scenario cancel the referendum all together. the bottom line melissa, we're in what i call the endless hole of mirrors of game theory back and forth on what everybody thinks everybody else's position. right now there's hope that perhaps the creditors will give ground just enough on some of the negotiation to satisfy sirp race -- to satisfy tsipras. back to you. >> thanks so much, bob pisani and the s&p by the way within one point of intraday highs at
this point. shares of juno therapeutics jumping. this billion dollar partnership, $150 million up front and 850 million down the road. had a does that tell us about the sort of risks embedded to this product that it's not necessarily a slam dunk. >> that's a great question. in fact, there are numerous risks. first of all, it's a technology collaboration. in fact it involves many potential products down in the future or out in the future and the key on the risk side is that maybe those products don't work or maybe in fact they work but they don't work well enough in order to recoup that overall investment. remember, celgene put forth 150 million in cash and have an asset in stock and can liquidate that at certain points in the future and can increase the overall stake to 30% so the key question to them is when you look out in the future how do
we our company, celgene, think about cancer in the future? one way is to think about it through genome therapeutics. >> you thought this was an overreaction to the upside? >> listen i'm a firm believe in the technology, but here's the key. it's a personalized therapy, so what you have to do is you have to actually treat individual patients, and because you treat individuals patients this requires a very broad manufacturing platform and what i would like to see is i would like to see numerous patients treated from that manufacturing platform not at the sites in which this was developed, not at sloan-kettering but at juno itself, but once that occurs and i think it's repeated many times, that's when i think this really really becomes exciting. >> you mentioned the purchase of celgene of juno stock and what does that mean of the valuation of other stocks such as a kite
or bluebird? does that imply their valuations should be higher? >> certainly does and it's not only kite and belacom and all of these companies have sort of been this pie in the sky idea with respect to cancer therapy, and i think what this transaction does is it really provided a third party validation for the technology itself, in the only for juno but for a number of other companies that are involved in the space. >> all right. tony, thanks for your thoughts. appreciate t.tony butler of guggenheim. tyler, over to you. >> up next a world of worry and the impact on your money. we've got a live report from athens straight ahead. plus the wealthy getting nervous about stocks. robert franks joins us with the millionaire indicator. what does it tell us? >> that millionaire confidence fell to its lowest level in 60 months. what's got them worried and where they are putting their money when "power lunch" returns. i even accept that i live with a higher risk of stroke due to afib, a type of irregular heartbeat,
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judge to have allegedly frauding investors. lynn tilton who has been on "power lunch" before and so basically a u.s. district judge in manhattan dismissed the lawsuit lynn tilton filed back in april against the s.e.c. saying she lacked the power to block the agency from per suing its case against her. so once again her partners will continue to follow this developing story. back over to you, melissa. >> thank you mandy. something is happening to america's millionaires that's not happened in years of the let's get to robert frank with that big money red flag. robert? >> reporter: indeed millionaires are backing away from the stock market, and their confidence in stocks has fallen to the lowest level since the financial crisis. the millionaire investor confidence index, fell six to 5 and it means from millionaires have gone from bullish to neutral and their big wore set fed and the move towards higher interest rates and that's about their top economic concerns.
most said market conditions followed by the political climate and then the economy. most are playing to stay on sidelines and very few are putting new money into stocks. when asked about those who planned to invest in stocks in the coming month, that number fell to its lowest level since april of 2009 and bonds were showing the worst levels in the 11-year history of the entire index. melissa, this survey was taken between june 18 and 24 before the worst of the crisis in greek and puerto rico which may mean millionaires are even more bearish today. >> thanks. oil is moving higher as the final trades cross for the session. we're going a the nymex when "power lunch" returns. oment spontaneously turns romantic why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms
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hello, everyone. i'm sue herera. here is your cnbc news update this hour. new jersey governor chris christie launching his bid for the presidency. the republican formally announcing plans in the gymnasium of his old high school. >> strength and decision-making and authority back in the oval office, and that is why today i am proud to announce my candidacy for the republican nomination for president of the
united states of america! >> a federal appeals court in new york says apple violated antitrust laws by colluding with publishers to raise electronic book prices back in 2010. by a 2-1 vote it ruled that a lower court judge was right to find that apple violated the laws to upset amazon's control of the market. an indonesian air force c-11 hercules crashed into a residential neighborhood killing at least 20 people. the plane crashed just two minutes after it took off from an air force base. the pilot radioed that he was returning to base because of engine trouble. 82 hundred golf shuttle and utility vehicles are being recalled because of leaky gas tanks that pose a fire hazard. the vehicles are sold from january through may. in addition yamaha is calling in about 2,000 golf carts because of front wheel hubs that can crack and cause the wheels to detach. that's the cnbc news update this hour. back to you, ty. >> it's the golf cart's problem.
that's why i'm such a bad golfer. >> absolutely. >> that's where it all starts. >> i knew it. i knew it. >> you were right my dear you were right. >> oil higher after hitting a three-week low. let's get right down to the golfer jackie deangelis at nymex. >> you can blame it on the cart not the outfit. that's the worst thing you can do. let's talk about oil prices here because we had strong momentum to the upside here even though the equity market backed off a little bit. we closed out more than a dollar today, just under $59.50 here for wti despite fact we have a being have toer dollar some of the strength came when we got the announcement that the nuclear talks regarding iran were extended to july 7th, but also this is buying the dip mentality. we've seen this for quite some time. we move some ground and traders get back in and, of course, a big drop yesterday. meantime, still hanging out under that $50 level. what was interesting was today we broke under the session low, was under 58 so we have to watch this one very closely. back to you. >> all right, jackie. thanks very much. greece making new proposals and
michelle caruso-cabrera is live in attens with in athens with this breaking news. >> the big fat goose egg to the new proposal. the finance minister tweeted out that the meeting was over and there's no deal and guess what another last-minute chance at a deal because the french finance minister says greece is going to submit another proposal tomorrow, and they are all requesting to get together and do this again. so -- so it's been quite a dramatic set of event here. we're waiting to see if there's yet another chance that they actually get a deal done. going on behind me the vote yes real, very very large. bigger than last night's vote no rally and even though there was a heavy, heavy rain going on in athens, uncharacteristic this time of year. meantime, banks are closed again today. the economy is screeching to a halted. we had time to spend -- we spoke this morning with a gentleman who runs a clothing manufacturing and distribution company here in greece and he
says ever since this weekend the economy really has come screeching to a halt. >> not the best. it's a matter of psychology where you buy. it's like supermarket think that you need to buy it in order to survive. when people stop feeling safe apparently they stop buying clothes. yesterday i was informed -- >> by the bank? >> by the bank. >> because? >> because it didn't trust the greek bonds. in order to continue we need confirmation from your bank but the banks are closed so i don't really have anything to do. >> reporter: so what do you do? >> we wait. we're spectators in a bad play. >> reporter: you want to tell you how to vote on sunday? >> of course we're going to vote yes? >> reporter: why?
>> because i'm a european. greece is a part of europe and no matter what people say this is a europe i want to be in. >> reporter: are you sad? >> i always try to find the best -- the best scenario. survive and do well no matter what is the case no matter what is thrown at me. >> reporter: he made evans to his lts being cancelled, letters of credit. it's a fundamental thing you need to do to trade in the world, to move your products around the world is to have letters of credit and if they get credit you are essentially frozen. guys back for you. >> michelle caruso-cabrera live in attens for us. back to you. with greece on the brink why isn't gold getting a bid? kathie lee specializes in gold tracing and rich rothd with isi. how come gold is not catching a bid? >> i think there's a couple reasons for this. first and foremost everyone will agree while there's anxiety in the markets right now there isn't all-out panic.
otherwise gold would be spiking much higher and the euro would be trading below 110 but that's not the case. now in terms of the movement specifically, i think as michelle said, there's still hope that there's going to be a deal before the july 5th referendum or at the minimum eurozone officials will not allow financial to occur and dollar index is still rights and that's keeping gold under pressure and we talk about safe haven. it still seems like investors prefer bonds over gold right now and that's where they are parking the assets. >> rich, how does the chart look for gold? >> given the macro uncertainty, gold should be working and it's not. that's a bearish divergence. bring up the chart and i'll tell you why i'm selling gold and buying stocks here. when you look at career-to-date chart, you can see we get off to a fast start. you rise 2% within the first two weeks but it's all downhill from there. you can see over the past three months we've established this rounded bearish top. that's a continuation pattern to the downside.
i think we break below 1168 your key neckline support and when you zoom out and look at the weekly chart it goes from bad to worse for gold. look, there's been no better strategy over the past six years than buying gold above the 100-week moving average and selling it below the 100-week moving average. right now we're below it, still a seller and think a downside target of 1,000 is a target and be a sen the break above the 100 week i remain a seller. 14% downside here. strong dollar not going higher in the face of the macro uncertainty. all of that tells me you want to be a seller of gold and a buyer of stocks. >> kate and rich great to speak with you both. thank you. for more trading nation head to tradingin addition.cnbc.com. tyler? >> forceful argument right there. stocks are higher. a rocky ride and a little bit off their highs at least as high as the dow goes. a 3% gain for the nasdaq composite. half a percent for the s&p and with greece and all the other worries still out there, where
apple music launching today offering a free service for three months and then it will cost $10 a month. in an interview the apple exec eddie cue as in cue in music didn't seem concerned over rivals spotify and pandora. saying i'm never losing any sleep on competitors. we spend all our time and energy on thinking what it is we want to build so will it be a success and should the competition like spotify and pandora be worried? natalie morris is a tech contributor and we're joined by jeff price, a record label executive, label of you had aium which helps musicians get played
any time their music is played on any digital platform. natalie, it seems it me for one of the first times that i can recall apple is late to the party. are they fatally late. >> well, that's the big question, right. one of the first sponges that i listened to when i downloaded this today was taylor swift because i thought it was symbolic that apple is willing to concede with the launch of this product that they have dropped the ball for a long time, but like the taylor swift debacle they are also showing that they are going to win, that they intend to win with this. they are going to be flexible that they are going to go at this with all their force and i think if any company can succeed at this just like the watch, why not apple. they have the best chances. >> jeff, weigh in here about the paying of artists, of course taylor swift, a very publicly saying no to spotify and initially no to apple until they went along and said we're going to pay you. artists ought to get paid when their songs are played, right. >> absolutely. what's interesting about apple is the number one revenue
supplier for music creators and copyright holders. that's where people go to buy their music and what's happening today is there's potentially a cataclysmic shift overnight where people stop getting music via download and start getting it via stream which will impact the bottom line. unlike spotify it wouldn't have that impact but with apple there could be a huge shift. yeah, we have to get the money and have to get it right now and need to figure out formulas and we're still trying to figure it out. the models so far aren't really giving the copyright creators really what they should. >> correct me. in aurk me area here why would apple, they revolutionized music obviously and they charged per cut or per album and presumably the artists got a fair share there that can be debated but why would they say initially on the streaming product that they didn't want to pay. >> honestly i think they forgot. it's that simple. there is an industry standard that has existed for the past
ten years that says when there's a free trial subscription the streams that occurred during those trial subscriptions will not be paid so apple is just following suit. what i think they forgot is hey, everyone is making their money off of us from downloads, and if we turn around and make everything that the labels and artists are providing for free overnight it will can nallize their income via download so i don't think they didn't think about it. >> my question is why didn't the record labels think about it? >> they did and taylor swift became the biggest public voice and the beggar's group came forth with the public label. european labels were not signing on. the american labels were advised by a1im, a trade organization not to sign. this didn't happen overnight because taylor swift. >> there's some egg on face of the record labels and now i think they are kind of shaking in their boots because they are thinking, well didn't really represent our artists all that well and one artist had to go straight to the source in order
to change something and now with this connect feature where you can connect directly to the artist and buy tickets from the artists and buy songs directly from the artists what do we even know this for anymore? >> i agree. labels dropped the ball in allowing them to get free acquisition. i will disagree with one point which is in this particular case the labels did stand up and they said wait a second. it's not quite working, but you're right. perception is reality and taylor swift became the voice of the problem and this was already going on behind the scenes. just good timing and everyone came out smelling like roses. >> natali, great to see you. >> melissa? >> shares of apple trading higher just under 2% and let's bring in brian white to see what the news service would mean for stock. great to have you with us. he's not concerned about the competition and maybe he's not concerned because at the end of the day this is not a big deal for apple's revenue. is that the case?
>> exactly right. i think what this does today it really separates apple again from the mobile device competitors, right? this is all about the ecosystem, not necessarily about economics. i think this enhances their ecosystem like apple pay and i thought they executed superbly today. >> is there anything in your model for this? >> yes. we've not add anything incremental for the service. itunes is already in the model and the other services and apple pay are in the model so the incremental head winds are not in the model yet. >> you say it's all about china and some of the metrics look pretty good. 3g and 4g from china, unikom rose 16% and subs increased by 61% year on year. how is fiscal q2 shaping up for apple in china? >> when i think about apple in china and we were there in april and what we you a is people still waiting in line in hong
kong for iphones and so i think, you know apple has a long cycle ahead. the mistake a lot of people are making is the new iphone comes out, bigger iphone and everyone upgrades at once and it's really not the case. this is a two or three-year cycle, and i think things today, like apple music and apple pay, it's going to drive people to gravitate towards the apple eco-system and that will drive ipad and iphone and other products over time. >> all right. brian, thanks for your time. buy rating on stock, $195 price target. tyler, over to you. >> there are 86,400 seconds in a day. bet you hadn't thought about that in a while and what's the big deal if we have one more second. we will tell you why it could be a very big deal thanks to the rolling stones. "power lunch" returns in 165 seconds. ♪ time is on my side, yes it is ♪
puerto rico's governor saying the commonwealth cannot pay its debts. he says he wants to delay bond payments for a number of year the governor added that increasing taxes and cutting spend will go lead nowhere. puerto rico's unibond index falling hard down about 10% in just a week. let's get to san juan where kate kelly is joining a
representative who represents puerto rico in the u.s. house congress. kate. over to you. >> reporter: thanks so much, melissa, and resident commission er commissioner is that accurate and is that a good development? >> i hope that's the case. that's what we should be doing. this talk about a moratorium and all of puerto rico is dead or restructuring of all of puerto rico's debt is not right. that's not the way this works. there are 16 bond issuers in puerto rico. the central government is one of them. general obligations. there is no reason why we would not be meeting those obligations
near term. >> it's going to be unpayable long term. >> yes. we shouldn't be talking about that. there is so much we want do and should do. right now and next year and the following year puerto rico when we talk about the central government its revenues range close to $9 billion a year. the cost of debt service, meeting those payment obligations on a yearly basis is about 15%. it's high but it's manageable. it's a painful process. we cannot continue imposing new taxes on people and businesses when we grow this economy. that's what we should be going through and should be avoiding talking about any default or any
moratorium. >> default is not permissible, is it? >> our constitution provides we should be making bondments as they become due in first order. i would not support it. i chair a party in puerto rico. my party delegation would not support it. you need a super majority to do that. it's like we shouldn't be talking about that. having said that i am proposing chapter 9, access to chapter 9 for puerto rico but the way chapter 9 of the bankruptcy code works, it's only available to utilities, government-owned utilities and municipalities. the same happens with bond issues. when the time comes, when any bond issue expires, matures,
then you have to evaluate the situation. you cannot be forecasting either a default or moratorium. it doesn't work that way. >> we are short on time. you had disagreements with the economic study released. what is your message to governor garcia padilla? >> i met with the governor today. i know that the financial market markets, our creditors are looking forward to a five-year credible fiscal plan. i want to sit on the table. i want leaders to be part of this process. when you talk about a five-year plan in puerto rico where you have a four-year cycle, it transcends administrations and makes sense to contribute in that process. >> will he take you up on that? >> i think so we need to
structure it so it's not me participating in meetings, but to really have a say on a five-year plan. apart from that what i am saying is we have to look at each and every one of these entities on its own. right now the puerto rico electric power authority are undergoing negotiations with creditors. could you have restructuring there, but it's negotiating. chapter 9 is useful because it's a legal framework available in the states for cities for entities like the power authority. it should be available in puerto rico. we've got to leave it there thank you. interesting news on puerto rico. >> live in san juan. >> we are setting you up for the final hour of trade. stick with us. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. ♪
everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet? the markets are higher with investors watching greece and puerto rico. given what's going on in europe and greece you say the markets look expensive. they may be fully valued. is it time to be 100% invested in the u.s. stock market? >> this is one of those times where you are going to do well avoiding certain things. it's important what you avoid and don't buy as what you do buy. avoid the high yield market and municipal finance market. those are two bubbles.
stock market is slightly overpriced. not nearly as dangerous. >> in the past you liked financials. what about the steepening yield curve which doesn't look as steep. end of march 10-year was 1.93%, these days 2.3%. is financial the slam dunk investment they looked like at the beginning of the user? >> we are going to have a steepening yield curve. investment banks do well in that kind of environment. morgan stanley, goldman sachs do well when that yield curve steepens. >> you like housing. >> we'll get back to that 1.5 million. names like stanley, black and decker will be strong and are relatively cheap. >> you told me to go easy on high yield.
these are like potato chips. go easy on municipal finance. in the stock market specifically, if i want to identify some areas or some names that i might want to cut back on what would they be? >> there are the financial guarantors today that have exposure to municipal bond market. that's going to get ugly. those are going to be hard hit. anything with significant exposure to puerto rico and state and municipal finance. my own state of illinois my own city of chicago will have a tough time in the municipal bond market. any stocks that are related to that area are going to be a tough time. >> anything else that you would avoid? >> yield-sensitive stocks will come down more as interest rates go up. reits are overpriced utilities are overpriced.
the stocks people stretched for long yield have a long way to go down. >> thanks. tonight on "fast money" twitter is 5u7.5%. the latest on the m&a rumors. >> great to be with you. "closing bell" starts now. >> welcome to "closing bell." i'm kelly evans at the new york stock exchange. >> i'm bill griffeth. there goes peter tuckman. you're welcome. this is the final hour of trading the first half of the year. the s&p is in positive territory year-to-date. the dow is negative. that could also change.