Skip to main content

tv   Power Lunch  CNBC  September 23, 2015 1:00pm-3:01pm EDT

1:00 pm
one of the names that's a great opportunity. >> thank you for having me. scott will be back tomorrow. appreciate that very much. check out the 2:00 show "power lunch," but "power lunch" the 1:00 show with the great mandy and tyler begins -- i'm just -- i'm going to eat all the seconds until the show starts, three, two, "power lunch" right now. >> lace them up, "halftime" is over. the second half of the trading day starts now. >> but he did call us the great, the great mandy and -- i will take it. >> he's a giver. >> i'm tyler mathisen along with mandy drury. volkswagen's scandal has claimed its first victim. the ceo stepping down but this scandal is having a far-reaching impact far beyond the board room and the c suite especially in the auto supplier stocks. >> stocks in general are under pressure. the major averages are down 2.5% in the past one week. the mega cap names weighing down this market right now, we've got them for you.
1:01 pm
>> and another bridge scandal, but this one involving cards, playing cards, and it has a former top wall street ceo wrapped up in it. you have to hear this story p.m. bridgegate part two. shares of volkswagen are rebounding right now at this hour. they are up about 7%, but that's not the half of it because they were basically cut in half earlier this week. recouping some of the big losses over the past few days. the automakers's ceo resigning over that emissions scandal that is plaguing the company. there could be more top departures. that could be the least of it. some of these folks may face criminal charges. >> and that was addressed by the executive committee in announcing the resignation of martin winterkorn. today he's no longer in charge of the world's largest automaker. he resigned saying he's been shocked by the events of the last week. in announcing his resignation the board of directors, the exec
1:02 pm
at this committee for the board of directors said in the view of the executive committee criminal proceedings may be relevant due to the irregularity. the irregularities surrounding the software that was put in diesel engines, particularly here in the united states, almost a half million of them that basically tricks the vehicle into understanding when it's being tested for a clean air test. that's when it cuts emissions. otherwise it's spewing more pollutants than it should. 11 million engines worldwide have some type of software irregularity. that's approximately 20% of the volkswagen vehicles sold since 2009. clean desell sales, we should remind you, are still suspended in the u.s. the question becomes who is the next ceo of volkswagen. the board says it will decide on friday. three people you should focus on. mattias mueller, the head of portipo porsc porsche. another person to watch however, rupert stadler.
1:03 pm
he's done a great job over the last couple years running audi. their sales success in the u.s. and in china, that's getting a lot of attention as well. bun name you don't want to overlook is herbert diess, he's relatively knew at volkswagen. came over after a career. he's enough of an outsider he could be the right person to come. take a look at shares of volkswagen one more time. the shares are rebounding after what's been just an incredible sell-off over the last week. more things will be coming out over the next couple days regarding volkswagen and don't be surprised if we see more executives leaving. >> that scandal is having far-reaching impacts in the auto industry and especially in the area of auto suppliers. seema mody is back. fabulous to see you once again. >> fabulous to be here. we are seeing a big fallout in the auto sector.
1:04 pm
let's start with the names that this high exposure to volkswagen. if we look at the supplier, delphi automotive, gentex. analysts say these are some of the names that could be impacted if we see a decline in vw volumes and that's the big fear and the reason why all of these stocks have been selling off over the past two days. but it's not just suppliers. other european carmakers are underperforming in the wake of the emissions scandal. analysts citing brand reputational risk to bmw, ren kno renault, and daimler, all down. that's caused the etf to tumble 20% from the 2015 high hit on april 27th. analysts at citi say they're awaiting further information to
1:05 pm
accurately estimate the global impact of this scandal as ts possibit is possible reviews and investigations could begin in other regions. jpmorgan writing we could see stricter co2 emission controls going forward. as people try to get their head around this story, investors hitting the sell button on many of these auto related names. >> thank you very much for giving us the rundown there. this is a space that will keep on watching. we have a news alert in the bond market right now with five-year notes up for auction. rick santelli has been watching all that action. yesterday you gave the 2-year note auction a "c" grade. what about today's 5s? >> we are improving. this one is "b," "b" as in boy. definitely above average auction. let's go through it. $35 billion in 5-year notes. makes $61 billion in supply thus far. tomorrow $29 billion 7s. dutch action 1.467. the offer side of the one issue market was 1.47.
1:06 pm
lower yield, higher price. that was solid. 2.57 above average bid to cover. slightly above average indirects at 63.5. the only sub number was 5% on directs versus 7% 10 auction average. so we give it a "b" and, indeed, tomorrow will be the 7 year. one thing i need to point out, volatility was quite low in treasuries whether it was the cash, the futures or the one issued market. tyler, mandy, back to you. >> thank you very much, mr. rick santelli. stocks are struggling this hour. the dow and the s&p trying to avoid their fourth loss in five sessions. if we take a look at the numbers here, the dow is down by about half a percent. a little less so for the s&p 500 and the nasdaq percentagewise but nonetheless we're still in the red. let's get more with bob pisani from the floor of the stock exchange. you've been talking about your concern with the lack of buying and maybe or not the whole ethic of buying on dips might be dead. >> well, it's in a little bit of
1:07 pm
danger right now and it's not just today. it's been ever since august 24th when we had that big drop down, the dow about 1,000 points. let's look at the s&p 500. we, of course, have a holiday. it's the yom kippur holiday so the volume is on the light side. we've been moving down throughout most of the day just off of the lows. in terms of what's going on look at the markets midday. let's call it a slow drift downward. we've had problems since the fed meeting. i made comments and i was on the wrong side of that comment and the wrong side of that trade. 3 to 2 declining advancing stocks. seshthors today, either side of positive or neg at this but in the middle of the day it's been slightly to the negative side with materials, energy, industrials, and consumer staples all just fractionally to the downside. what we need is some stability in the global economy. unfortunately we didn't get it from china overnight. china's flash manufacturing number coming in at 47. that was a little disappointing.
1:08 pm
it was the lowest prince sin ee march of 2009. you can see what the commodity implosion is doing to some of the commodity countries. another new low in brazil today and some of the big companies, big steel companies, all to the downside. devastating losses in the last couple months in brazil. mandy, back to you. >> the brazilian 10 year is at 16.5%. thank you very much. oil is also under pressure on the back of the latest inventory data. we got supplies down from last week but the refinery run rate was down. wti crude is off by 2.6%. brent is down by 1.3%. crude was moving higher earlier on this morning. we saw a reversal there. tyler, over to you. >> to dominic chu we go.
1:09 pm
>> tyler, mandy, biomed realties up about 14% to 15% on talks that it has attracted possible interest for a deal from private equity firm blackstone. that's akouccording to a bloomb report. it's a reit that specializes or is geared around biotech. certainly shares to watch. back over to you. >> thank you very much, dom. pope francis beginning his first full day in the united states. he met with president obama at the white house. the holy father has not been afraid to criticize the free market system, globalization, technology, consumerism. made his views known on climate change as well. we will discuss his influence on business and the economy next. you're watching cnbc, first in business worldwide. need to hire fast?
1:10 pm
go to ziprecruiter.com and post your job to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free. go to ziprecruiter.com. whyour boss?ork for? yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird.
1:11 pm
1:12 pm
in the headlines at this hour, facebook's instagram now hitting 400 million monthly active users making it far larger than rival twitter. instagram had 300 million users just in december. facebook shares are up 20% this year and higher today. first niagara soaring up 15%. the regional bank said to be working with jpmorgan to explore strategic al terns tifs. and m wylan suing over statements made over an
1:13 pm
unsolicited offer. china's president taking the stage, a full day of meetings including a tour at a boeing assembly plant, dinner with bill gates, and business round table with u.s. and foreign ceos. michelle caruso-cabrera is live in seattle. hi, michelle. >> and that business round table is going on right now, tyler, in the building you see right behind me, the westin hotel. we know who is in there because they put out a list and we were able to get in there to set up a camera earlier. you can see general motors ceo mary barra is sitting there with tim cook on her right, warren buffett on her left. seattle is no stranger to chinese leaders. believe it or not, every modern chinese leader who has come to the united states has visited seattle. let's start with hu jintao, the president sisor to xi jinping. back in 2006 he and his wife
1:14 pm
visited seattle before going on to meet with the president at the time and then in 1993 there was also meetings with bill clinton. they all go to boeing headquarters to see the manufacturing facilities. and then deng xi penguin in 1979 also visited seattle. we're showing you the texas video because it was an acaanic moment in u.s./china relations when he went to a rodeo in texas. he went there, ate barbecued spare ribs. he wore a cowboy hat, a ten gallon hat, watched bronco busting, steer roping, rode around in a stagecoach, and then went on to do the more mundane things, signing an accord with president carter at the time, going to big dinners in atlanta. but that was an incredible time in the history of u.s./china pi and people are wondering if that's the situation we have now
1:15 pm
with xi jinping being here and what's the state of relations between the american business community and the political community here and the leadership. we want to know what's happening in that meeting. the ceo of dow chemical is in there and he's promised to come out and talk to us after the meeting and hopefully we'll see what was said and talk more about the tonality and how it went in there. >> michelle, thank you very much. we look forward to that interview. meantime, pope francis has his first full day in the united states today speaking at the white house earlier this morning. our mary thompson has been following his every move live from washington. mary, the pope has not shied away from criticizing big business where he thought it was due. so where does he stand on things like the free market, global station and more? >> ahead of the pope's visit, papal watchers warned us we snunt be p shouldn't be putting francis in a box. they maintain his message is far more nuanced. he's been critical of the free
1:16 pm
markets which he feels contributes to a throwaway society. he's seen the direct negative effects on globalization on his native argentina, especially the poor, and any reader of the bible will tell you he's hardly the first to criticized idolatry of money. of course, remember that his mission is to serve the poor and in considering and assessing free markets and capitalism, he turns to his jesuit training and that idea of constant questioning. here is vatican spokesman father manny durantes. >> the holy father believes in the goodness of capitalism. so many people who have received employment through the benefits of capitalism. the question is why doesn't that capitalism and that free market really benefit all the people who participate within that market? >> now, it's expected we'll hear more about the pope's views on income inequality when he speaks to congress tomorrow though he is likely to strike an encouraging rather than a harsh tone reminding those in power
1:17 pm
they have the power to help those who need their help. at the white house today he also provided an outline of some other topics he's likely to focus on as he goes up and down the eastern seaboard including immigration, climate change, and religious freedom. back to you. >> mary, thank you very much. more insight now from noted historian and pulitzer finalist gerald posner. his latest book is called "god's bank ban bank." appreciate you being with us. let's talk about this pope, francis, and how you would characterize his views of capitalism, business, and the accumulation of wealth. >> he's cynical about capitalism but, tyler, the catholic church didn't embrace capitalism for a long time for a couple hundred years. they stayed away from it. they viewed it as the province of heretics and jews and only embraced it in the 20th century
1:18 pm
when they had no other option. they couldn't raise taxes and they needed the money. they created a vatican bank in the middle of world war ii. he's criticized savage capitalism but that bank has practiced that for decades often at great scandal. >> so what was the church's main beef with capitalism? that it took away from their spiritual power or their power period? >> one thing, no question they thought it took away from their power but it was also mixed with modernism, plurality, the idea that capitalism and the american idea that you could keep government and religion separate. they didn't like that at all. they really viewed themselves in many ways as a monarch, which they are, and capitalism gave too many personal freedom in that sense but they have come to embrace it. still it's some distance. even john paul ii who worked with ronald reagan to bring down communism was not so crazy about capitalism. it's just that francis is more outspoken. >> this is mandy joining the
1:19 pm
conversation. certainly the vatican bank over the last 100 years or so as you say has not been without scandal. certain dirty dealings with the nazis during the second word war, certainly money laundering, business executives managing to hide their money through the vatican bank. to what degree do similar abuses still occur at the vatican bank and to what degree do you feel the current pope is able to stamp out that corruption. >> i think he is reforming the bank, no question about it. the bank was run by a group of priests who essentially were practicing standards worse than enron was using. at one point in the 1980s the head of the vatican bank, the equivalent of the head of the federal reserve was indicted, a bishop, and they kept him inside the vatican so he didn't have to stand trial. it's had a bad history. but this pope has to reform it. they're in the euro. brussels and the eu inspects the
1:20 pm
bank. they've passed their first laws on the amount of cash you can bring it". francis is bringing them into the 21st century kicking and screaming. >> first, is the vatican bank now clean, that's one. number two, is the vatican a foundation or a corporation? >> the second one first, i think a its a corporation. >> the book is god's banker, a history of money and power. >> timely and certainly very interesting. the major averages, well, they're struggling a little bit and they're down 2.5% over the past one week. we're going to bring you the mega cap stocks that are dragging down this market. plus, check out the nasdaq biotech etf, the ibb. it's got pretty slammed this week amid the heated debate over soaring drug prices.
1:21 pm
should you be buying the sector on this dip? we'll discuss that. don't go away. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom. legal help is here. i was out for a bike ride. i didn't think i'd have a heart attack. but i did. i'm mike, and i'm very much alive. now my doctor recommends a bayer aspirin regimen to help prevent another heart attack. be sure to talk to your doctor before you begin an aspirin regimen.
1:22 pm
aspirin regimen. alaska. finally. the search for brown bears begins. denali highway. low on gas. pit stop. fill up. double points. yep, that's cold. tired. day 2. coffee. eggs. double points. beautiful. majestic... nothing. where are you, bear? warm. warmer. warmer. yes. wherever the journey takes you, carry american express gold. it's more than a card. it's the gear that gets it done. i'm watson. and today hundreds of companies are putting me to work. i'm teaching watson to help your vet speak dog. you're a dog, right? i'm teaching watson to help you make healthy choices. i'm teaching watson to help design a vacation around your personality. don't judge. i'm teaching watson to answer endless questions. how big is infinity? where do babies come from? why can't i have chocolate for breakfast? i'm watson and i'm ready to work with you.
1:23 pm
welcome back to "power lunch." casino stocks are taking a hit today. fitch is revising down its 2015 forecast for m macaw gaming revenue. fitch is still saying they
1:24 pm
expect 2016 to be a more stable year for those revenues but for right now the down trend, mandy, for the casino stocks continues. >> thank you, dom. take a look at the ibb. it is down significantly over the past week as biotech companies are facing harsh criticism for price gouging on select drugs. cory davis is here. how much of this is solely because of hillary clinton's tweet and do we think we need to take her proposal seriously? >> i think the vast majority of the down tick was from her tweet and subsequent rhetoric. this is nothing new. she's been at this as well as her husband, bill, for the past 15 years or so about coming after drug companies. it makes for great political rhetoric but at the end of the day i don't think any of these proposals are anything new or dramatic and i just don't think that at the end of the day they will end up getting passed. even if they do they will not have a material effect. >> so basically you don't think
1:25 pm
they would gain much traction with congress. >> this is legislation that would have to pass and there have been attempts in the past several times to push this stuff through and it doesn't make good analytical sense. >> okay. talk to me about the valuation of the sector where it stands right now after the dip. you can't really lump all biotech companies in together. they're all very different. do you think there are any particular bargains that have been thrown up recently? >> biotech and specialty pharmaceuticals a still a stock picker's paradise. they trade on clinical data. they trade on individual drugs and that's what i love about this sector. my top pickoverall is a company with a drug on the market that is going to rebound. >> are there any that are still overpriced? >> nothing i can really see. it always depends on what clinical data is coming out and where the valuations are going to go. nothing obvious to me.
1:26 pm
i think it's a great sector to be invested in. >> thanks for your thoughts. let's check on the bond market. rick santelli gave the bond auction a "b." he's out at the cme. >> if you look at an intraday of the aforementioned 5-year note yield, it hardly moved at all at 1:00 eastern when the auction i gave a "b" ended and if you open up the chart to may 1st, you can clearly see the glide path is to the lower end of the range. brazil, everyone talking about brazil. the emerging market like many has problems whether it's the commodity route or the fact the currency is down 35% this year alone so let's take a look at the dollar versus bra brazilian real. a ten-year chart. when you also consider they have 9.6% inflation rate, things start to make sense. when you think of interest rates, of course, figures into this. let's look at their ten-year. it's well over 16%. i went back to '07 on this chart because the only other comp to
1:27 pm
this was when it was close to 18% during the depths of the crisis. also s&p this month downgraded it to junk. tyler, back to you. >> all right. mr. santelli, the major averages are down today taking a big hit over the past one week. down about 2.5%. what is leading the declines? the mega cap names dragging down the market. we'll talk about them plus move over governor christie there's another big bridge scandal. but this is the other kind of bridge. it's one that involves playing cards. you won't believe who has gotten wrapped up in it or maybe you will. former bear stearns ceo jimmy cane. you've got to hear this. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets
1:28 pm
and drive forward with broader possibilities. cme group: how the world advances. it's from virtually anywhere.rn of danger it's been smashed, dropped and driven. it's perceptive enough to detect other vehicles on the road. it's been shaken, rattled and pummeled. it's innovative enough to brake by itself, park itself and help you steer. it's been in the rain... the cold... and dragged through the mud. introducing the all-new mercedes-benz gle. it's where brains meet brawn.
1:29 pm
1:30 pm
hi, everybody, i'm sue herera here is your cnbc news update. eu presidents and prime ministers are considering the plan in favor of a quota system to relocate 120,000 migrants to europe. conflicts in the middle east have forced millions to flee their homes. the plan though seems to fall short of what is needed. more than 480,000 migrants have
1:31 pm
come to europe by sea so far this year. the government's office of personnel management says 5.6 million people's fingerprints were stolen in the agency hacking revealed this summer. that is more than five times the number estimated. although the 21 million former and current government employees whose information was compromised remains the same. another lawsuit filed against revel casino. investors claim they were cheated out of millions by the casino's power plant. they allege the company lied about the status of bonds that paid for its construction. two investment funds bought $35 million worth of those bonds which ultimately lost 70% of their value. and a record-breaking performance on the soccer field by robert lidnow ski. he stepped off the bench at halftime to score five goals in nine minutes giving his team a 5-1 win. not surprisingly, that is the
1:32 pm
fastest five goals score in european league history. >> whoa, that was a beautiful -- kristina, our producer has a big smile on her face right now. >> i'm sure she does. >> let me assure you she is there. she's going to name her baby lewandows lewandowski. >> why not. can you believe that? >> let's look at gold, they deserve a goal. there you go. gold, come on up here, baby. i can't do it off the top of my head. $1,131.60. that's $6.80 higher on the day. that's about 0.6 of 1% higher. hard days for copper, ladies and gentlemen, and there you see it. not such a hard day but a small decline there. silver a little bit higher, so is palladium by a bit more, almost 5.5%. platinum down 0.6%. let's look at the equities and where they stand on this wednesday. the industrials off 98 points,
1:33 pm
continuing a bit of a prolonged slide, shall we say. nasdaq off 11, about a quarter of a percent, and the s&p 500 at 1935. that's a decline of about 0.4%. bob pisani at the new york stock exchange, bertha coombs uptown. bob, you first. >> sort of steady as she goes on the downside. take a look at the s&p 500 after the european close. remember, we got a holiday here, yom kippur. volume on the light side. 3 to 2 declining to advancing stocks. what we need is some signs that the global economy is stabilizing a little bit. in the absence of that, and china did not help us overnight with disappointing manufacturing numbers, you get weakness in the big global names. look at the dow industrials. look at the downside leaders. all of them are the big global industrial names. caterpillar, boeing, dupont. they are the one that feel the biggest pressure. if you look at the dow leadership, those stocks that are either up the most or down
1:34 pm
the least, they're all defensive names. pfizer, merck, mcdonald's, united health care. the market has a defensive tone to it with selling pressure in global strindustrials and materials. the global economy, new lows in some of the big commodity names. brazil is having a very ugly day again. a new low in the markets there. two steel companies, a big bank there down 16%. these stocks are becoming almost penny stocks at this point. they have been down relentlessly for the last year or so. guys, back to you. >> thank you very much, bob. 9 out of 10 sectors are now negative quarter to date including the tech sector. let's get a check on what's happening with tech today with bertha coombs at the nasdaq. >> hi, mandy. we have tech sort of mixed today but really it's biotechs we are watching. biotechs are responsible for a
1:35 pm
third of the decline this week. after moving into positive territory, down for the fourth straight day in in firestorm over drug pricing that's erupted this week elicited by turing pharma's price spike. large caps mixed at this hour. the new cholesterol treatments are facing push back when it comes to price. that could be a big issue going forward. herren therapeutics is bucking the trend after positive data on post operative pain medication with analysts raising their targets on the stock. that's quite a chart, isn't it? tech overall, the big caps are mixed. investors shrugging off another weak reading on chinese data as executives meet with xi jinping in seattle. when you look at some stocks with big china exposure, wynn,
1:36 pm
baidu. >> 80% of the stocks in the s&p 500, 4 out of 5, are now in correction territory. dom chu here with a look at some of the mega caps which have been pulling the market down. >> if you look at the heat map behind us -- >> really graphic. >> it feels heavy. you'll hear traders say that and use that terminology, it feels heavy, it feels like maybe there's a little more downside to come. it hasn't been panicky up until this point. let's look at these. in a capitalization weighted index, market values matter. >> big stocks matter more. >> that's right. look at this, like you said 400 members falling by 10% or more from recent 52-week highs. 30 of those names have market caps in excess of $100 billion. they're going to have excessive weight on the way the index tradesoverall. here is a sampling of the names that made those 30 in terms of the overall influence on the
1:37 pm
markets. you heard bertha talking about other big names. biotech health care has been a big part of the story. gilead sciences is off 14% from its recent 52-week highs. showing some weakness there, maybe not a great sign. disney shares, with he kn-- 16%o the downside. citigroup off 17%, and then financials to technology. remember, technology, financials, health care, the three biggest sectors in the s&p. intel off 24% and chevron, the biggest decliner in the s&p 500 with a market cap of $100 billion or more since its recent 52-week highs. if you're looking for some of the names really weighing things down, these are the guys that are doing it and next hour in "power lunch" we'll take a look at some of the stocks that have been holding things up in this current market. back over to you. >> thanks very much for laying it out. should investors be concerned that most of the s&p 500, 80% of the companies are in correction territory? joining us now gina marsdon
1:38 pm
adams and hayes miller, head of global multiasset north america. thank you very much for joining us, both of you. gina, bears are currently at their highest since 2011. is this something we really need to listen to? is it telling us something or is this maybe even a good contrary indicator? >> yeah, i mean the other thing i would throw into there, mandy is that bulls are at their lowest level in several years as well. so not only are there more bears but there are fewer bulls. that's usually a good sign we're finding a bottom. i would wait for more bears to emerge before we finally get to that bottom and really three fundamental factors need to change. it seems to me very clear that china and emerging markets, commodity prices, and the fed, all three together are really holding the market hostage at this point. we need to see emerging market data clear, china produce some form of a bottom and a recovery
1:39 pm
into the fall and winter months. we need to see commodity prices bottom. let's not forget, that's where this all started last summer. commodity price weakness led to earnings weakness on the index and that has continued over this summer. finally, we need the fed. what the fed did this month was really muddy the works for the market. we have no visibility as to where the fed is headed. we need some clarity on fed policy just to relieve some of the market concerns at this point our view is until those three signs really clear, we won't get the all clear. >> it feels like you got a lot on your wish list there. they're pretty big wishes. how long do you think it will take for us to shake out for the market to find a firmer footing? >> right. well, i think some of it is somewhat policy dependent. policymakers really hold a lot of the cards here. chinese policymakers and u.s. monetary policymakers can change our minds on the market at any moment considering they send the
1:40 pm
signals. so it's very day-to-day there. in terms of commodity prices, i think commodities are reacting in some ways to what's happening with policy, but they're also reacting to real economic data. policymakers will largely provide us with that first clue as to when the all-clear is coming and then they probably will perceive improvement in market data out of the emerging markets which will make us feel better about the earnings trajectory. >> hayes, you take a global perspective when you invest. u.s. has very loose monetary policy but it'ser there even lo other parts of the world. >> when we look at the world from an economic point of view, there's no reason to get too worried we don't believe about a recession, and traditionally to get a correction of 10% to turn into a bear market of 20% you normally have to have a recession. so right now there's so many other indicators that are
1:41 pm
beneficial, increasing employment amongst them. obviously that means more people with wages to help along the consumption pattern. so we believe that the consumption side of the equation looks pretty good globally. the investment side has been a little weak and governments are constrained but when we look at europe and look at japan, we see more slack in the european economy which allows profitability to grow, the opposite of the u.s. where we have -- we're approaching neru and it's worrisome that wage inflation might become a problem for profitability and in japan its a little different dynamic but the ability for kuroda to na initiate another round of qqe. >> gina and hayes, thank you very much for joining us today. you can go to powerlunch.cnbc.com to to see what gina and hayes are avoiding right now. hayes prefers financials and
1:42 pm
consumer discretionary global and telecoms in europe when you get down to the sectors' nitty-grit nitty-gritty. we could be in for a multiyear bear market in oil. that's ahead in the second hour of power and only 92 days until christmas. ah! why this holiday shopping season could turn out to be anything but merry. "power lunch" is back in two.
1:43 pm
♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
1:44 pm
♪jake reese, "day to feel alive"♪ welcome back to "power lunch." check out shares of carnival corporation. the cruiseline operator near its best levels today. they're rebounding after reporting weak guidance in its earnings yesterday. carnival earnings did beat on the top and bottom line for this past quarter. overall the shares up 13%.
1:45 pm
year-to-date 26% over the last 12 months and rebounding from yesterday's losses. back over to you. >> thank you very much, dom. intel has been upgraded from under perform to market perform by bernsteins citing a better outlook. metlife is increasing a stock buyback program to $1 billion. the decision came as the company awaited capital rules for federally regulated life insurers and jcpenney is replacing elizabeth sweeney with john tige. sweeney has held the job since 2012. jcpenney shares little moved by the news. all the major averages have been struggling this afternoon. they've been struggling this year, frankly, as investor focus remains on the fed. concerns about slowing growth in china. let's bring in lisa jones, president and ceo of pioneer investments u.s. arm. welcome, lisa. good to have you with us. you've been around -- not you but pioneer has been around, second oldest mutual fund company in the country.
1:46 pm
>> 1928. >> and in boston, a hotbed of investing talent and mutual fund talent. >> correct. >> let's talk a little bit about the change this year and the big change is that for first time in a long, long, long, long, long, long, long, long time active managers are beating passive managers. >> uh-huh. >> i think index funds ought to be the basic core of most investors' portfolios. tell me i'm right or wrong. >> so we're going to have a good conversation. you're not right or wrong and we're not here to say it's one or the other but in this market environment of increased volatility and incredible confusion active management matters. over the last several years as you have seen an increase in passive investing, investors have had a positive return environment. they believed markets are fairly efficient, and index investing has become quite popular. in the market environment that we are in and given the volatility in the markets which we expect to continue, we believe that active management
1:47 pm
is prupt and can add value. >> so it isn't merely you think active managers add value in down markets. that's not your point because the facts don't back that. >> uh-huh. >> but that they add value in volatile markets. >> they add value over the long term and in particular in volatile markets. >> what particular active strategies do you think people should be takin onboard at the moment? >> there are two particular areas we're speaking to our clients about. on the equity size, there's been a lot of conversation today about u.s. equities and the returns of some stocks. with a skilled investment manager who can seek high quality companies and demonstrate a conviction in investing in knows ideas over the long run we're very encouraged by the return profile and importantly the downside protection of those strategies. given the rising rate environment that we're all talking about, we believe -- >> but which hasn't happened yet. >> it hasn't happened yet but we do believe that it will happen at some point, and we've been
1:48 pm
positioning our fixed income funds with multisector flexible opportunities that can invest in diversified portfolio across all sectors. interestingly, as we talk about index investing, if you think of one of the more popular bhen benchmar benchmarks, the barkley's u.s. aggravate with heavy exposure in treasuries, that in and of itself during a rising rate environment can be a bit more volatile. >> i take your point. you were pointing ut earlier basically 60% of your asset base is in fixed income, and i am persuaded in a rising rate environment. if i'm in a fund which is a questionable decision in and of itself for fixed income investors, i think i want a manager running it in that kind of environment. talk to me about the cost difference however. >> yeah. >> the indexers have an edge on price. >> right. >> most of the time that matters. >> they do. and that's one factor when you should consider investing.
1:49 pm
the other factor i would take a look at and in particular when you look at indexes and if you just use some of the market cap weighted indexes, as those stocks continue to grow and they get to be a larger percentage of that index, you're starting to get exposed to concentration risk within a particular benchmark. i would suggest cost is one, skill of the investment manager is another, and diversifying your risk which there are many in today's market, whether i liquidity risk, concentration risk, exposure risk across sectors, or stock specific risk, that we think in addition to price that all of these other factors are being exposed to risk is a prudent way to evaluate your mutual fund investing. >> thanks for coming by. the case for active management. you have been doing it well since 1928 you said. >> 1928, yes. thanks. thanks for having me. >> thanks very much. >> lisa is president and ceo at pioneer investments in the u.s. okay. here we go again, one week from today the government will shut
1:50 pm
down unless congress passes a new budget. so what happens if congress does not? how it could impact your life and your money. that is still ahead. we're back in two. hi my name is tom. i'm raph. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom. legal help is here.
1:51 pm
1:52 pm
1:53 pm
here are this hour's power point. stocks struggling but off the lows. materials the biggest drag with tech the best performer. among individual, pfizer, vitae, a -- visa and apple leading the dow. >> big cheating scandal brewing in the world of competitive bridge and it involves a former high-profile ceo whose love for the game and other things has landed him in hot water before. details in two minutes. james reinhardt is reinventing the second-mand market. his san francisco based company thread up has removed the difficulties of buying and selling your clothes by picking them up and selling them for you. and not surprisingly technology is at the heart of the new trend. for more watch "your business"
1:54 pm
sunday mornings at 7:30 on msnbc. we thought we'd be ready. but demand for our cocktail bitters was huge. i could feel our deadlines racing towards us. we didn't need a loan. we needed short-term funding. fast. our amex helped us fill the orders. just like that. you can't predict it, but you can be ready. another step on the journey. will you be ready when growth presents itself. realize your buying power at open.com.
1:55 pm
(vo) wit runs on optimism.un on? it's what sparks ideas. moves the world forward. invest with those who see the world as unstoppable. who have the curiosity to look beyond the expected and the conviction to be in it for the long term. oppenheimerfunds believes that's the right way to invest... ...in this big, bold, beautiful world.
1:56 pm
we've got a big hour ahead for your money including why it's groundhog day all over again, how the battle inside the beltway may shut down d.c. plus we focus on your money with three interesting stock picks for your portfolio, and if guggenheim's scott minert still thinks stocks so tumble. and andrew liveris is joining us. eight years after his love of bridge may have cost jaimec ayne his job, the card game is once again causing him some let's call them public haix
1:57 pm
headaches. >> you know, thanks to a whistle-blower and some telling video of past bridge games, jimmy cayne finds himself in the uncomfortable position of being involved in this unfolding scandal. late in august two players on his six-person team, israeli pros were accused of cheating their way through a variety of different tournaments over the years, including the vaunted spin gold competition this summer in chicago which thanks partly to fisher and schwartz's success cayne's team won. the israelis have denied any cheat and cayne said he'll forfeit the trophy if necessary. a whistle blower in norway was advised by local police to vacate his home for a time after ominous reactions came his way after the initial allegations. then in september two more sets of bridge pairs were accused of cheating. the number oneanked player in the world and his partner and
1:58 pm
two german team members who admitted to unethical behavior. all the alleged cheaters are sitting out the upcoming bermuda bowl which is a big tournament starting saturday in india and cayne though he personally is not accused of cheating is down two key players at an inconvenient time in the season. it's a source of intrigue in the world of bridge where many of bemoaning the infamy that's come bon their beloved sport. they're fighting to be acknowledged as a sport. >> i don't know how to play bridge. i don't know anything about it. what is the allegations that they did? i mean in poker or -- it's card -- >> how does the cheating work if it happened? >> yeah. >> so it's actually a little bit tricky because the way competitive bridge is set up, there's a divider where you can't really see your partner's face. but supposedly there are these card tray tables in the center of the table and you could shift them to signify diamonds, clubs,
1:59 pm
spades as a suggestion for a next move. the other thing people have beea suit or drinking water loudly. there's all manner of different potential signals when you predetermine something with your partner to indicate what might be in your hand or how she should bid. >> as ty put it, it's bridgegate part deux. >> it is. >> kate, thank you very much. thank you for joining us for the first hour of "power lunch." >> indeed. more power coming your way. brian, it's over to you. >> i heard they rigged some cards to pass emissions. i need a flub for that one. it's almost 2:00 on wall street. almost 11:00 in bend, oregon, stocks are in the red but well off their lows. the dow down just 56. we were down triple digits earlier in the session but the dow being down at all might just be because of the move in oil. yeah, crude oil down again under $45 a barrel for much of the session. we're at $44.77 right now off 3.5%. we're going to get more on all of that with some big guest this
2:00 pm
is a moment but first china's president just wrapping up a meeting with business leaders in seattle. among those in attendance, disnis's bob iger, warren buffett as well as dow chemical's andrew liveris who is live with michelle caruso-cabrera. michelle? >> he just walked out of the meeting sitting right here with me right now. tell us everything. >> everything. >> joking. what did the president say that was noteworthy to you? >> so noteworthy to me personally and the ceo round table, the speech he gave last night, he went into granularity which means the u.s. economic relationship with china matters. that he's here to talk about issues such as the cyber issues. he's here to talk about intellectual property, here to talk about in essence the beginning of a trade in investment treaty between the two countries.
2:01 pm
elevating china to a domestic economy that has high value solving their issues and there are substantial issues around food safety. the climate change goals they share in common. meat and potatoes stuff but important stuff to u.s. companies that do business in china. it means market access and fair rules and transparency and rising boats lifts -- tide lifts all boats. similar standards. >> last night he tried to send a reassuring note on the economy. >> yes. >> when the granularity that you talked about, did he add any more to that to give us his sense of the chinese economy right now? >> no. granularity in the short term, no. i think the protu-- i don't this an awful lot of granularity he provided above and beyond what you heard but he did add what i really do believe about china and i have been going there a long time ised lo the long game. he says this is the right long game for china. this is the right sort of thing
2:02 pm
china needs to do to transition. it is transitioning. come with us, be with us. this relationship matters to us. it matters on many levels. of course, economic, but beyond that strategic. he had a lot of granularity to that. >> i tweeted out a lot of what he said last night. there was a lot of skepticism from high-level places when he said we're not interested in expansionism. do you believe him or is this just talk and diplomacy? >> you know, the long game on china's role in the world i don't think any of us can look at that speech and say there's china expansionism or china wants to be the big gorilla of the world. there's none of that in the psychology. over and over, today, last night's speech, in my view keep remembering what he said about taking people out of poverty. 200 million people by world bank standards. they have real issues with disparity of income and urbanization and the rate of generation of engineerers for --
2:03 pm
9 million a year, they can't find jobs for them. so they have very domestic centered still and i think they will stay there for the next decade or so. >> but it seems sometimes his efforts is about trying to take even tighter control over the economy and be more top down and command control rather than understanding that what makes an economy stronger is dynamism and freedom. >> they talk capital markets. but make no mistake, this is not a ground up economy. okay. this is a top down economy. now, they say they have to have it that way. they want stimulating domestic consumer and demand. they want social security and pensions and all the things that come with a market economy but they don't want the volatility. by the way, that's true of a lot of places, but in particular there because of the social reforms that yet need to be undertaken. >> the cyber security. the white house is talking about the potential for sanctions
2:04 pm
against china. >> yes. >> what's your opinion on that? >> look, commercial attacks on companies like ours are real. they're real and they're from china, okay? the chinese can no longer just turn a blind eye to that. >> is it the government attacking you? >> well, i'm not going to give you that information but they're coming from china. so we're working with all the governmental authorities. we're not alone. companies of high technology capabilities like ours, this is our number one, number two, and number three concern right now. so i think, you know, the appropriate amount of strength and resolve out of that u.s. government is appropriate. >> and did he dress it enough f here for you today? >> certainly the beginnings. awareness is high. what's going to happen out of awareness, i hit the rubber has to hit the road on that one. >> an uncomfortable question. reuters wrote an unflattering por trot of you today based on information they got from a freedom of information request. any response to that article? >> well, this is an organization that seems to be intent on
2:05 pm
digging up stuff from five years ago that was resolved. the insinuations are baseless, are false. they're on a mission to do something we we don't understand. look, fully disclosed, fully investigated. our processes worked. there was a misallocation of expenses in the customer events group from over five years ago. immediately fixed, reimbursed, system institutionalized the fix and we moved on. my company is ethical, i'm ethical. they clearly don't know me. >> there was a tonality that suggested you were slightly imperial in some ways. >> oh, my god. so i would welcome you or anyone like you, come travel with me and be with me for 24 hours and see how imperial my life is. as i drive my own cash in the little hometown of midland, michigan, as i grocery shop with my wife on a sunday and meet the workers from our factories. i'm from a small town in australia. the world in imperlal in
2:06 pm
australia, we reject the world. we didn't fight a revolution but i am as domestic and as local and as humble as you will find. i'm the son of greek immigrants. i have pinched myself daily i'm in a job like this. totally off base. come be with me. >> thanks so much for joining us. >> not at all. nice to be with you. >> guys, back to you. >> michelle, thank you very much. now to the big vw scandal. the ceo in germany, he is out. phil lebeau joining us. any indication of who may want to step into what you could arguably call a hornet's nest and become the ceo of vw? >> it is a hornet's nest, but ts still the world's largest automaker at least by sales volume in the first half of this year. so it's not as though they're taking over a job where everyone is like, stay clear of here. it is a company that has a lot of potential but they're in the midst of a terrible mess right now. just within the last couple hours executive committee from volkswagen came out and now said
2:07 pm
martin winterkorn has resigned as ceo of volkswagen. you've got more executives expected to follow according to our colleagues at cnbc in europe who have been talking with sources and the new ceo will be named on friday, and announcing -- and in announcing the resignation of martin winterkorn the executive committee said, this is the most interesting thing, in the view of the executive committee, criminal proceedings may be relevant due to the irregularities and they're talking about what's going on with diesel e mmissions and whether or not knowingly there were people within the company who created this software that was rigged to beat clean air emission standards. u.s. executives for volkswagen, they're cooperating with a number of investigations. there are multiple in many countries. volkswagen has retained kirkland and ellis, the law firm that represented bp. they're representing volkswagen as well. the question about who replaces
2:08 pm
martin winterkorn, three names are coming up. matthias muller is considered to be the favorite to be the next ceo but also you can't count out rupert stadler, the ceo of audi. audi sales have been growing incredibly fast over the last couple years. his success there is getting a lot of attention. and one last name and i have talked with a couple people within the last hour who have said look at this guy. herbert diess. he came over from bmw within the last year. he's new to the company. he would fill the role of being an outsider yet familiar with volkswagen. so keep an eye on those three. we should hear from the board of directors by friday on who the new ceo is. take a look at shares of volkswagen versus toyota over the last year. wow, look at that drop at the very end. these shares have been hammered over the last week and that's why you see volkswagen down 36% in the last year. brian? >> phil, i got a question for you actually. defending who they choose as ceo, can we read the tea leaves and try to figure out if vw
2:09 pm
might actually be an acquisition target of some sort? >> not based on who they choose for ceo. and melissa, i know they've lost a lot in their market cap. i think that volkswagen is not a takeover candidate. i think volkswagen if anything when consolidation takes place in the auto industry, it becomes the acquirer. it is not so far -- it hasn't fallen so far that it becomes acquired by anybody. you have got a number of government entities in germany that joan a stake in volkswagen. they have a vested interest in volkswagen calling the shots in any consolidation in the future. >> you know, phil, listen, obviously this is a massive business story, but i'm willing to bet that a few hundred thousand vw owners could give a cam shaft about what happens to martin winterkorn and more about what the heck they're going to do with their cars. has vw indicated what their diesel drivers can do? >> not yet. they're still working out what the remedy is going to be for that 482,000 vehicles that have
2:10 pm
these defeat devices in the vehicles. basically means that they're spewing out more pollutants than they should be at this point. yes, those vehicles are not in compliance, but they haven't been in compliance for some time. regulators are working with vw to figure out do they do some kind of software fix, is there something else in terms of the engine management software that can be done. once they come up to that solution, then they will communicate that with the owners of these vehicles. i should point out, we were out d our cameras were out in california talking with some owners of different vehicles, diesel vehicles today, they're mad. they're mad because the whole idea behind diesel was it's cleaner burning, clean diesel. and now obviously because of what's happened here a lot of people are saying they were sold a bill of goods in terms of buying a volkswagen clean diesel vehicle. >> big loyalty issue. phil, thank you. phil lebeau. take a look at the s&p 500 heat map. all of the stocks on the index in the red. actually 80% of them in correction territory. a lot of them in the red.
2:11 pm
down 10% or more from all-time high but it means 20% of s&p 500 stocks have actually been holding strong. so let's get to dom chu with more on these s&p standouts. >> so if you take a look at today's chart we've just shown viewers, it's about split, about half and half. maybe a little more green than red so far. if you look at the overall pictures for the s&p 500 since each individual member's 52-week high, it's recent highs, like you said 100 members are within the 10% mark. they've pulled back a little bit from higher levels but they're not yet in the 10% plus correction territory or even bear market. among those, 40 of those stocks are hovering within 5% of their recent highs over the past year. so here is a look at a few of them just to give you an idea. they run all kind of industry groups here. when it comes to do-it-yourself autos. we were talking about the auto and emissions things happening with volkswagen, some people like to work on their own cars, they go to auto zone. those are within 4% of recent
2:12 pm
highs. united health group, those shares are within 3% of their recent highs as well. consumer staples is a big theme. is there consolidation? could somebody be a target. campbell's soup is only 2% away from its recent high. nike shares getting close as well. a a activision blizzard, they're helping to hold up the market. much more ahead on "power lunch" part two. we're ushering in the first day of fall with six stocks you might want to consider owning as the seasons change. later, if you think that oil must turn higher because it's fallen, we've got a guest who has a chart that might just change your thinking. plus pimco's richard clarita and scott from guggenheim. a lot to do. don't you go anywhere.
2:13 pm
hi my name is tom. i'm raph. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom. legal help is here.
2:14 pm
and i am a certified arborist for pg&e.ughes i oversee the patrolling of trees near power lines and roots near pipes and underground infrastructure. at pg&e wherever we work, we work hard to protect the environment. getting the job done safely so we can keep the lights on for everybody. because i live here i have a deeper connection to the community. and i want to see the community grow and thrive. every year we work with cities and schools to plant trees in our communities. the environment is there for my kids and future generations. together, we're building a better california.
2:15 pm
welcome back. i'm eamon javers in washington where we are now just a week away from the deadline to fund the federal government or else we face another federal government shutdown just like we saw back in 2013 as republicans and democrats in washington are unable to come to an agreement at least so far on that budget deal. here is what's likely to happen now between now and the end of the week. republican senate leader mitch mcconnell said yesterday he's going to bring up a short-term spending bill to fund the government through 2011 -- i'm sorry, through december 11th. that's going to include a planned parenthood spending cut
2:16 pm
back. that's going to be a problem for democrats. that's not going to succeed on capitol hill. so what we're likely to see after that is what they call a clean cr. that's a bill that would short term fund the government until they can come up with a deal. what happens if there is a shutdown? here is what happened back in 2013. a couple of key problems that affect business, particularly banks now trying to deal with social security number verification. that's been an issue in the past in 2013. banks were unable for some period of time to get those social security numbers verified. they cited a backlog of 1.2 million requests just in the first two weeks of the shutdown back in 2013. thef aa, the faa aircraft registry will close. it closed in 2013. an industry group estimated is delayed 156 aircraft delivers worth $1.9 billion.
2:17 pm
we'll have to see how the jobs report is impacted. in 2013 agencies were unable to release reports including jobs report, cpi, the petroleum and storage commodity reports. guys, clearly a big impact for business here if we don't get a deal by the middle of next week. >> just embarrassing for america once again, eamon javers. thank you very much. rich, we're going to get to your secular outlook and the fed and global macro, but we started talking about this in 2009. seven straight years we've talked about it. we had a shutdown in 2013. what is your take on this with regard to the economy and maybe the confidence in the united states. >> great question, and i certainly hope we avoid a shutdown and as your reporter indicated, the leadership on the republican side wants to avoid a shutdown, boehner and mccconnel. there is a group that would like to shut down government and i hope they fail. that's not going to solve any problem.
2:18 pm
>> if we do have another shutdown, 16 day this is 2013, do you ratchet down your gdp estimates? >> we've looked at it and we think it could have a modest impact. maybe a 0.1%. >> you and pimco have a global growth estimate for everybody in the world of about 3%, and yet 409 central ba-- 40 blancentral have cut rates. 3% is not exactly wide growth. >> our range is 2.5% to 3%, so that's the upper end of the range. that's an excellent question. central banks are easing. i think it's more than 40 central banks including china, cluck the eurozone, japan. so a lot of easing. what it's telling you is that central banks are probably facing diminishing returns. they're not zero but diminishing returns. they're potentially a source of
2:19 pm
volatile as ity as we saw over summer. that's why it's not producing a gangbuster recovery. >> we've talked about china extensively. i have been talking about brazil probably more than most. what is the number one concern that you've got globally right now? >> i think the number one concern is a hard landing in china. i think they'll avoid it. the officials there are capable but they have some challenges. we saw this summer, you know, just a move in the exchange rate on the equity sell-off triggered a pretty big global market sell-off. we don't think it's likely to happen but if it were, that would be a left tail risk. >> richard, it was a real pleasure. thanks for coming in. >> thank you. >> let's turn to another smart guy, scott minert, scott, i consider you a friend so i'm going to ask for your help. >> all right, brian. >> can you do that for me? >> for you anything. >> can you help me stop talking about the fed? why does the fed matter? does it matter? are we making too much of it?
2:20 pm
because you have said we need -- you've said this, you have written this, it's time we get past the fed. help me help our viewers do that. >> well, first off, i think we should put together a recovery group for this and start confessing our need for help. look, we're spending pay too much time on the fed and are they going to raise the funds rate, you know, this month, next month, december, january. at the end of the day, brian, it isn't really going to have that big of an impact on the real economy right now. yes, if we don't get it done and start it at some point, it has a long-term implication, but spending the amount of time we're spending debating when it's coming is really just a waste of time because there are a lot of more fundamental, structural underlying questions out there that are a much bigger risk to the market and a much bigger risk to the world. >> you know, i think you just really in your usual nice, polite way slammed me a little bit, scott, but i appreciate it
2:21 pm
because sometimes in order to get help you have to acknowledge you have a problem, and i have had a fed problem. i must say that, but i'm glad to hear you say a 25 or whatever he get won't matter that much. we're still in massively historically low rates but you think -- i'm moving on to the bond market, the 10-year could move lower. are you still in that camp? >> i am, brian. it's interesting, you know i have had that call for a while, but when i look around the world, i see what's going on, and you just referred to it in the last segment. there is no growth and aggregate demand around the world. these policies that are being used by central banks are, you know, beggar thy neighbor policies, and we know by depreciating your currency and printing money, it really doesn't create more demand for goods and services at a fundamental level. and so at some point the world i think is going to have to wake up to all this and start to
2:22 pm
understand that growth is not where we want it to be and, of course, in certain places like china where growth is continually disappointing, we're going to have to see some major readjustment occur in those markets and, you know, one of the things i'm expecting is a pretty massive devaluation in the r & d here at some point which would send a lot of capital rushing to the united states as a safe haven and could put the 10-year note -- as i have said before -- even below 1%. >> i want to get the equities out of the trade. if we have another devaluation it could spook investors. the first one, take a look at what that did. you're calling for another 10% downside to the s&p from here? >> i think so. >> what's going to trigger that? is that going to be a china deval? >> it could be. the problem i've got with the china situation right now is, you know, given all the rhetoric, the visit to the united states and then we get
2:23 pm
the plen yum is coming up toward the end of october, the chinese just seem to be loath to devalue their currency and it's building up more and more strains inside the domestic economy, and so until we get that devaluation, i don't think the other shoe has dropped yet, and we are in a period of time where seasonal weakness is very powerful. on a risk adjusted basis, september, october are the worst months of the year. >> right. >> and i just think we're extremely vulnerable and i wouldn't -- i would expect we're going to have to at least test the lows again from the recent correction and probably go lower. >> but here is what doesn't make sense to me. and that is you say that there is value. you see some value in emerging markets. how do you see value in emerging markets if you see another shoe to drop in china? which markets are you looking at? >> you're right. this becomes a timing question. when -- in 1997 i started buying
2:24 pm
asian equities and people thought i was crazy but when we looked at them on a valuation basis, they were becoming cheap but we know valuation is not a good market timing tool. but five years later when i look back, i was a genius because 1997 was a great entry point, and -- but stocks did get cheaper going into 1998. i think we're at a similar place today. i think that stocks like for brazil probably have some more downside but at the current valuations, their institutions bike some banks that are strong, when you consider brazilian equities on a dollar basis are down 80% from their highs i fundamentally don't believe we're going to shut brazil down and send it off -- >> scott, scott, scott, my friend. a you are a genius but you're also a madman.
2:25 pm
ten-year brazilian debt today hit 16.4%. their 10-year is yielding 16.4%. that is the collective wisdom of the market saying brazil is in big trouble. >> right. and, you know, brian, i remember a time when the 10-year treasury hit something close to that, too, in the united states and it was the beginning of a massive bull market. >> i can't fight that. you win. can't argue with that. >> i don't know if i win. >> you have data on your side, scott. i appreciate it. scott minerd. thank you. still ahead, be aware of the christmas grinch. we're digging in on two new reports calling for a not so merry christmas on retail. on that happy note, "power lunch" will be right back. at mfs investment management,
2:26 pm
we believe active management can protect capital long term. active management can tap global insights. active management can take calculated risks. active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management.
2:27 pm
2:28 pm
welcome back to "power
2:29 pm
lunch." i'm jackie deangelis reporting from the floor of the nymex. just about a minute away from the oil close here and pressure on wti continues. we're sitting at session lows at this point, $44.50 is where we stand now, a near $2 loss today. we got a supportive inventory number this morning but once you got deeper into that report you saw that imports declined and the problem with that for traders means there's oil out there. it just may not be coming into the country so the supply glut continues. having said that the equity declines also weighing on the markets. we haven't forgotten about china. and u.s. production ticking up slightly in the report as well. it was a minor tick up but traders don't have confidence the declines we've seen are for real. >> let's bring in craig johnson from piper jaffray and you're well known to our trading nation audience here but you and i actually had dinary couple weeks ago. i said -- everyone says sullivan, you're so negative on oil.
2:30 pm
i said oil might recover next year and you said no. and you've got some charts that suggest that oil could be in a bear market for a long time. why do you say that? >> yeah, brian. thanks, and if you pull up the chart there that we've got on the energy sector and one of the things we've looked at is energy on a weighted basis and an unweighted basis but the chart you specifically have the weighted basis. when you look at energy and you look at the relative performance of the energy sector against all the other sectors in the marketplace, a couple things stand out to us. first, note in 1981 you saw price and relative strength working in the same direction. but then in 1981 start of the big bull market that lasted until 1999-2000, you saw the energy sector underperform from '81 to 1999. >> i want to stop you for a second. what our viewers are looking at, it's nuanced a bit, is the relative performance that you're talking about. bring that chart back up, guys. thank you. is the orange line and from '81
2:31 pm
to 2000, although it's not as dramatic on our chart as ts it on yours, it's a pretty steep drop while stocks went up, and, therefore, the gap grew almost every year for 20 years. >> that is absolutely correct, brian. and then the other point i would make, that starting in 1999-2000, which was the start of the next secular bear market that occurred for equities, we started seeing the energy sector and also basic materials begin to work. the energy sector had been a relative outperformer from 1999 all the way into about 2011, 2012 where once again we're seeing the energy sectors relative performance roll over. the point i'm trying to make to people and it's one of the biggest questions i get from institutional clients, brian, is what is happening with the energy sector? should we still continue to add to positions here and our answer is no. if history does rhyme or repeat, this is a sector that's going to be a relative laggard for a long time and there's a lot of other
2:32 pm
better places to put your money to work. >> you know, people argue that the fundamental support perhaps, a bullish oil tilt next year, rig counts have come down, we should see supply and demand coming into balance, we also talked about that at dinner because you do documefundamenta as well, you said this is a technically driven market in a lot of ways. >> absolutely. the entire market is technically driven. we had been in a secular bear market from 2000 to 2013. finally broke out above the '00 and '07 highs and now we're starting a new secular bull market. any sort of corrections like we've seen over the last month or two really are a great tungt to be buying stocks, looking out 12 and 24 months because we think the economy is getting better, 2.5% gnd thdp this year% next year. we want to own stocks but energy stocks, we don't want to own those. we'd rather own health care,
2:33 pm
consumer cyclicals and the financial sect nor. >> great stuff. thank you. >> thank you, brian. an update on the big outrage of the week. of course we're talking pill prices. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. excellent looking below the surface, researching a hunch... and making a decision you are type e*.
2:34 pm
time for a change of menu. research and invest from any website. with e*trade's browser trading. e*trade. opportunity is everywhere. ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.
2:35 pm
2:36 pm
i'm sue her hara. here is your cnbc news update. the steinbrenner family reacting to the death of yogi berra. in a statement hall steinbrenner said his legacy transcends baseball. it goes on to say that his wit and wisdom brought out the best in generations of yankees. berra died yesterday at his new jersey home. evers 90 years old. another body has been found in a burned out home in northern california bringing the total to six. in two of that state's most destructive wildfires. they are now under control but not before destroying more than 2,000 homes and structures. the pope has finished up his afternoon prayers with bishops in d.c. he told them the offenses of the catholic church's sex abuse scandal must never be repeated. later this afternoon he will celebrate mass at the basilica of the national shrine of the immaculate conception. and talk about scary, the national retail federation says
2:37 pm
the average person celebrating halloween will spend $74.34 on fun. sounds like a lot, but it's actually down about 3 bucks from last year. total spending is expected to reach about $7 billion. second biggest retail holiday. that's the cnbc news update this hour. brian and melissa, back to you. >> my mom used to make me my costume. we didn't spend a dime except on candy to give up. >> you know what? your mom is a lot more talented than me. i'm at party city at the last minute saying don't you want to be pocahontas, don't you want to be a pirate? whatever i can get them to do. >> i don't want to be a pirate. >> i thought you were going to say you want to be pocahontas, brian. there's nothing wrong with that? >> i look great in deer skin. i'm sure you do, brian. i'm going to move on though. >> i think it would be wise, melissa. >> thank you, sue. now, a big update on a story we've been bringing you all week. turing pharmaceuticals bowing to public outraj after the company
2:38 pm
jacked up the price of one life-saving medication. meg terrell has been working this story from the beginning. what a dramatic reversal. >> that's right. it was just 48 hours ago on this program that the ceo at the heart of this whole controversy gave me some very definitive one-word answer when we asked him if he would lower the price of the drug. he said no. last night he comes out reversing that saying he's going to lower the price of the drug in response to the outcry. said he would get to break even or turning a small profit. we'll have to see where that shakes out. the biotech industry is really trying to distance itself from that guy. we heard this morning a ceo saying this is not what we do in the biotech industry. >> we've invested over $1 billion in what we do for research and we think we can make an enormous difference in people's lives. we're not bringing forward medicines that were invented in the '50s. we're bringing forward medicines invented in the 21st century. that's where the difference will emerge for patients at the end
2:39 pm
of the day. >> some pretty pointed comments there from john maraganore. hillary clinton's campaign, which, of course, knocked the biotech industry quite a bit earlier this week coming out on twitter supporting the move and saying that her plan will combat price gouging. however, biotechs are really taking it hard. according to our data team, the industry is on track to post its first quarterly loss in 11 breaking a 10-quarter winning streak. >> meg, thank you very much. it is time now for "trading nation". let's take a look at utilities. the boring but positive sector. the only one up by the way on the quarter. is it still a buy. we have larry mcdonald and todd gordon. larry, i mean, there's not a sector that's probably more boring and dull and awful to talk about than the utilities but the lights must go on and
2:40 pm
it's actually the only sector up so far this quarter. do you think this run will continue? >> well, brian, as we've said over this summer, we've made the point on this program that when you look at fed policy, there's a global economic component, a global risk component, and a u.s. economic component. the global risk in economics is driving the bus right now, and if you look over the last year when we've pushed out the fed rate hikes, in the past utilities have done quite well. that's the first point. the second point is you have billionaires around the world, mr. dalio at bridgewater, mr. burbank at passport, and you have very highly respected people starting to talk about the chances of qe 4 and that's government bond buying, a very dovish position coming out of the fed. so those two scenarios are very good for utilities and if you're dovish, you want to be in utilities. >> todd, let's take a look at the technicals.
2:41 pm
that's what you do, the xlu. does it look like there's continued strength? >> if you must hide out somewhere, there is strength here. on a trailing three month basis it's barely positive where every other sector spyder is negative. treasuries have put in a higher low compared to the summer. we're seeing a flight to quality which has put the treasury market up. prices up corresponds to yields down. if you compare that to the xlu which by the way has a 53% correlation, the xlu has retested those summer lows. so from a comparison intermarket perspective, xlu is undervalued. should those treasuries continue higher, xlu could move higher. >> could, not exactly -- >> it's a boring trade, as you said. >> also, you have no conviction. could move higher. >> with every other sect yoror >> with every other sect yoro bw
2:42 pm
the average. >> thank you very much. for more trading nation, head to our website tradingnation cnbc.com. brian, the leaves are turning, football season is in full swing. time to bust out the playbook for the final quarter of 2015. we will tell where you managers are finding value as we head toward the holidays. plus, the an lialystnalysts' ta hot stocks of the day. it is "street talk" and it's up next.
2:43 pm
the e-class has 11 intelligent driver-assist systems. it recognizes pedestrians and alerts you. warns you about incoming cross-traffic. cameras and radar detect dangers you don't. and it can even stop by itself.
2:44 pm
so in this crash test, one thing's missing: a crash. the 2016 e-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. hi mi'm raph. tom. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom. legal help is here. want bladder leak underwear that try always discreet underwear and wiggle, giggle, swerve and curve. with soft dual leak guard barriers and a discreet fit that hugs your curves. so bladder leaks can feel like no big deal. get your free pair and valuable coupons at always discreet.com
2:45 pm
we do it every day. quti" "street talk." first stock, raytheon. upgraded to outperform from market perform by sanford bernstein. they see improvement in potential business outside of america and note after five years of declines, revenues are set to rise again. their target goes to 132 from 114. >> stock number two, auto zone.
2:46 pm
the target is now 855 from 795. the analyst maintains a strong buy rating as it cease a secular uptrend. it's growing its commercial market share as well as its after market sector. that's got the strongest fundamentals of hardline retail. a name that probably could have been our under the radar name, a.o. smith. this milwaukee based hot water heating company with a by. they have an $80 target that implies 17% upside. not the only bullish call recently. william blair just started coverage with this name two weeks ago with also an $80 target and an outperform. >> the china story intact actually. that's a key part of it. a fourth stock, finish line gets an upgrade ahead ever earnings on friday. rating to an outperform. price target goes up two bucks to $30. giving the timing and nike earnings, you have to give some kudos to this an libs because it's a bold call. >> you like it. not after the quarter when everybody knows. >> before the quarter.
2:47 pm
>> bet before the horses leave -- >> the barn. >> the barn. there you go. whatever that thing is, the gate. final stock, biomed realty. this is our under the radar name. it is a san diego based real estate investment trust that owns and leases out lab space all over america. it does pay a 5.4% dividend yield as well. upgraded to a buy from a hold. target goes to $23 from $21. do note this was a $25 stock back in january. also some reports yesterday, this company could be bought out perhaps by private equity firm. that's it for "street talk." that's it. done. all right. believe it or not, we are already heading into the christmas shopping season. i know. the make or break time for retailers. so which ones are looking strong heading into fall? we're going to let you know. that's our new fed wall. the fed wall has been replaced by the christmas wall. back after this. ♪ [ radio chatter ] ♪ [ male announcer ] andrew.
2:48 pm
rita. sandy. ♪ meet chris jackie joe. minor damage, or major disaster, when you need us most, we're there. state farm. we're a force of nature, too. ♪ but what if you could see more of what you wanted to know?
2:49 pm
with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running.
2:50 pm
welcome back to "power lunch." i'm phil lebeau with an update on a story that's been developing over the past couple of weeks and has now officially been announced. boeing and china striking a deal where boeing will be selling 300 aircraft to airlines and lessors
2:51 pm
in china. the list price of the airplanes that boeing will be selling, $38 billion. that's the list price. the actual transaction price will be substantially lower. this is part of president xi's trip. boeing selling 300 airplanes to airlines and lessors in china, list price $38 billion. >> wow. >> back to you. >> you know, if there's one sales guy handling that, that's not a bad day. >> absolutely. >> what's the commission on $38 billion? phil lebeau, thank you very much. only 92 days left until christmas, but two new reports are out. not exactly spreading the holiday cheer. it would be less of a gain than last year. also partners saying this holiday season could be the weakest since the great recession. let's bring in two contributors.
2:52 pm
jan, first to you, what do you make of this? seems like every year, people put out dire predictions and the american consumer always spends more than we think. >> althey take the first half of the year, they see what it was, they project that forward, assume it will be the back half of the year. given the way the world works, it's been pretty darn accurate. if i was making a guess of who might be right, they seem to have had a really good track record. on the other hand, it's hard to imagine this year's not going to be better than last year. we don't have a strike. we have more people working. we have more disposed personal income. and we have better energy prices. you would think that would translate into the lower end retailer getting some help. >> jan's points are well noted.
2:53 pm
it might steal some sales from others, no? >> absolutely. so some of these surveys exclude the all-important autos, as you say. and also, i would say i'm less worried about the top line and more worried about the bottom line. we know that health care costs are going up. wages are going up. and, you know, the consumer is not quite out there spending robustly. so i think you really have to worry about the bottom line. you have your black friday pot. it started in july this year with prime day at amazon. it's coming earlier. the consumer is becoming more and more spoiled. they want everything. they want it free. they want free shipping. they want sales. so that's really my concern for this holiday. >> i feel just the opposite. i feel the top line may struggle a little bit. i'm feeling pretty good about the bottom line. i think that's because retailers are more prepared.
2:54 pm
a lot of it hurt them last year. i think even though we may see slightly less than last year, i think we'll bring more to the bottom line on the sales. >> go ahead, stacy, last word quickly. >> i was just beginning to say i think we know that when sales -- they press that panic button and the bottom line falls out from under us. that's sort of my theme looking forward to holiday. >> good debate. i'm sure we'll have many more christmas and holiday retail sales discussions between now and the christmas holidays. thank you very much. >> looking forward to it. >> we're beginning to go more retail tonight. nike's reported earnings tomorrow after the bell. it has been an outperformer in the retail index, but could nike be the disney of the retailers? that's tonight at 5:00. some hot stocks as the weather gets cold. we're going to talk about those next on "power lunch."
2:55 pm
awe believe active management can protect capital long term. active management can tap global insights. active management can take calculated risks. active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management.
2:56 pm
we heard you got a job as a developer!!!!! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"! you're not gonna develop stuff anymore? no i am... do you know what ge is? to folks out there whose diabetic nerve pain... shoots and burns its way into your day, i hear you. to everyone with this pain that makes ordinary tasks extraordinarily painful, i hear you. make sure your doctor hears you too! i hear you because i was there when my dad suffered with diabetic nerve pain.
2:57 pm
if you have diabetes and burning, shooting pain in your feet or hands, don't suffer in silence! step on up and ask your doctor about diabetic nerve pain. tell 'em cedric sent you. today marks the first full day of fall, so we're breaking out our autumn playbook. portfolio of the hodges smart fund, and byrnes mckinney. craig, starting off with you, jcpenney has been a retail standout. it is choosing today to change its chief merchandising officer ahead of the holiday season. is that a risky move or is that
2:58 pm
all going well for jcp? >> i think it's good. they've been making all the right choice after the disastrous moves they made two or three years ago. but jcpenney, you're seeing all the right things. even in other companies like kohl's and macy's, they're losing share. it's obvious to me that jcpenney is the one that's taking that share. jcpenney is not a cheap stock where it is, but within the next 18 months will earn 50 cents a share and they've got the potential to earn as much as $2 a share. so at $10, or $9 where the stock is now, you've got some big upside if those things come to fruition. and i believe they will. they're doing the right things. >> i've got to talk to you about procter & gamble. take we're talking a lot about brazil. it is well-known that brazil's economy is in dire straits. the ten-year yield is somewhere
2:59 pm
around 16%. it's basically telling you that there's more trouble to come. are you concerned about procter & gamble and whether or not their estimates might have to be ratcheted down? >> that's one of the reasons why procter & gamble is really right now being priced at historic levels. they have about 60% of their sales coming from outside of the united states and that's something that will be acting as a headwind. we look at p and g and you have one of the world's premier consumer products companies. typically you play a premium for that. it's trading cheaper than it historically has. it's really nearly 4%. our firm's been around for 25 years. they've raised that video by 9% per year. it's gone up each of the last 50 years for a company that's one of the top defensive staples. so we feel that a lot of that
3:00 pm
news with respect to brazil in the emerging markets is largely priced. >> thanks so much for joining us. we do appreciate it. >> tomorrow, i'm going to be in a spot i haven't been in over 20 years. >> wow. >> how's that for a tease? >> can't wait to find out. >> "closing bell" starts right now. >> and welcome to the closing bell, everybody. i'm kelly evans. and i'm bill griffeth. volkswagen ceo stepping down today. the story is far from over. we have more on the fallout for volkswagen itself, for the other automakers and for the european economy. there is a lot to talk about coming up. bill gross has a new message for the fed. and it's get off zero now. we'll

55 Views

info Stream Only

Uploaded by TV Archive on