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tv   Power Lunch  CNBC  October 22, 2015 1:00pm-3:01pm EDT

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entire rally in the overall market. i think mcdonald's served that role today, quite frankly. i think that got the wheels in moths amotion all across the ara in areas that have nothing to do with burgers. >> thanks. thanks for watching. we'll see you tomorrow. "power lunch" begins now. scott, gentlemen, thank you very much, and welcome to "power lunch." along with mandy drury, i'm tyler mathisen. the bulls are large and in charge. a big rally right now. sgroo shar >> shares of valeant pharmaceutical tanking for a second straight day. now some of the top analysts on wall street that cover the stock are also raising concerns. what they are saying. we'll tell you. and forget the debate over rising interest rates. is the u.s. actually headed for negative rates? what's happening in the u.s.
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treasury markets lately. but we begin with that big rally on wall street right now. earnings and comments from ecb president mario draghi about the possibility of expanding qe in europe fueling the gains. let's look at the numbers. the dow is up by nearly 300 points. the s&p is up by 33, and the nasdaq gaining by 79, all of them more than 1.5% to the upside. bob pisani joins me from the floor of the stock exchange. bob? >> draghi was the main catalyst, however, there's a slightly different way of looking at some of the earnings reports that i think is impacting things. let's look at the markets today and i agree with mandy and i usually do that draghi did help stocks. we did see a nice move up preopen in the futures as draghi had a very dovish tone. new highs are expanding modestly. the breadth is accident, 5 to 1 advancing to declining. we look at big industrial companies, 3m, caterpillar, dow chemical. they did well on the bottom
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line, but top line was on the light side. this is very interesting. we've been talking about revenue shortfalls but a lot of traders and analysts are now saying, look, the strong dollar has really hurt the revenue side, and some of them are starting to get a little bit of a pass on this. i think that is a very interesting way to interpret that. it's true, although i still see revenue declines even independent of the dollar. but that's a changing scenario that we're seeing. meantime, modest expansion of two news. look at consumer stocks. mcdonald's, excellent report. $1.40, $1.25 was the estimate. global comp store sales up 4%. the turnaround in mcdonald's is under way there. dr. pepper, pepsi, kimberly clark, kellogg. a lot of consumer names at new highs. look at some of the industrials. small group of industrials. we have some historic highs. northrop grumman and lockheed martin, even general electric strong today.
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one other stock historic high, nasdaq. an excellent earnings report. strong buybacks and they're buying second markets, expanding their investments. that's a historic high for nasdaq. >> thank you very much. shares of valeant tanking double digits for a second straight day. the stock is now down about 40% over the past week, and some of wall street's top analysts, ones that cover the stock, are now raising deeper questions about it. meg terrell is here with the latest. this has all the makings of a real soap opera. >> even the staunchest defenders coming out with questions about the viability of the stock. saying they can't defend the special pharmacy structure. an analyst wrote valeant's struck titure may not be illegat we find it aggressive and questionable. investors didn't know about the relationship with the philidor
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specialty pharmacy and asks what else is there we don't know about. the existence of a questionable not fully disclosed business practice raising the question of others. mizuho says it can't dispute the allegations but says it almost doesn't matter as the stock appears broken and management will have to defend the story. another analyst adding she's concerned with manage am departures saying it's difficult to identify an attractive entry point until the smoke clears. some still see a potential silver lining. morgan stanley writes if the allegations are wrong depressed shares appear to present a buying opportunity. >> thank you very much. let's move over to seema mody for a market flash. >> shares of community health systems sinking over 30% today. the hospital operator reported third quarter result well below analyst protections and cut its outlook for the year citing a decline in admissions.
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other hospital operators, tenet, lifepoint, and hca holdings also taking a hit. >> thank you very much. what does valeant need to do to right the ship? let's bring in bill george, cnbc contributor and former medtronic ceo. thank you for joining us once again, bill. to what degree is valeant facing a major leadership crisis right now and can the ceo survive that crisis? >> mandy, i think we need a total leadership turnover. they've positioned this more as a financial play than they have as a health care company. the board is almost entirely financial people, only one health care person on the board. i don't think mike pearson, the ceo, can or should survive this. it's a house of cards he's created. the first card fell when he took down pricing or took up pricing 500%, 800% and it hurt a lot of people, and the investigators came in. those investigations will go on
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for a long time. on monday he said he was abandoning his business model and going back to research. that's a 10 to 12 year challenge and he's spending less than 3%. he can't get there to catch up with pharma companies in the 20s. and this third thing with the citron report and the questions about the distribution model and they're challenging valeant's lack of transparency on the revenue recognition. that will take a long time. i think the only solution here and i think it could happen before the end of the year is that we're going to have to have a new ceo of valeant and somebody who really understands health care and create a business model based on health care, not just pleasing all the hedge fund and activist investors which account for over 30% of the stock. >> that was going to be my question. the new ceo, should it be someone from the medical world considering, as you say, the board is almost entirely of financial people? >> i think it has to be. pearson came from 29 years of consulting. he's not a medical expert.
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i think you need that expertise on the board. i think you're going to see lots of leadership turnover. they already had. they lost their head of diagnostics, they lost their cfo and pearson is not somebody -- people i have talked to are willing to work for giving his values and ethics. i think we need a complete turnover if the leadership of valeant is going to survive and not just be gobbled up by somebody else. >> thu very muthank you very mu your advice as always. >> thank you. changing gears to housing and sales of existing homes jumping to unexpected highs. diana olick, what has been driving these sales? >> well, mandy, first, it was a nice beat for sure. sales jumping 4.7% for the month and nearly 9% from a year ago. these closings in september represent contracts signed in july and august, so it's really that nice end to the spring and summer season. but that said, i want to look at who is buying what. the median home price is up 6%
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from a year ago but sales were strongest for homes priced above that median, above 250k. sales were up 22% from a year ago. but sales of homes priced below $100,000 down 5%. that's because there's so little supply on the low end, and you can see that clearly in the drop in first-time home buyers. down from august to just 29%. normally this time of year first-time buyers are aren't 40%. total inventory is dropping, too, down 3% from a year ago and it shouldn't be this time of year. i know i said sales were up in september, but that's seasonally adjusted, and we are now in the slow season. so if you take out that adjustment, sales actually fell 6%. so with sales falling, we should be seeing inventory rising, and yet it is not. the realtors say if this trend continues, spring buyers will see a very tough, tight market. they keep looking to the home builders but the builders are looking to the high end and we're going to talk about that coming up in the next hour of
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"power." >> thank you very much, diana. let's get to seema mody for a market flash. >> mandy, also on the housing front, pulte group down 6% on track for one of its worst days of the year. it sold fewer homes in the third quarter resulting in an earnings and revenue miss. that stock dragging down lennar, d.r. horton, and kb home. xhb is underperforming the broader market rally. >> thank you very much. democratic presidential candidate hillary clinton testifying today, right now in fact, in front of a house committee looking into the assault on benghazi, the u.s. facility there. eamon javers is live in washington with the latest. eamon? >> hi, tyler. what we're seeing right now in the hearing is a fairly tense exchange between hillary clinton and trey gowdy. he's the republican chairman of this committee. he's really digging in now into the relationship between hillary clinton and sidney blumenthal, the outside, nongovernmental
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adviser who was apparently peppering hillary clinton with intelligence and advice about libya during the run up to this libya incident in benghazi. that's what's going on right now. we've seen a fairly heated exchange between hillary clinton and congressman jim jordan over this whole question of whether or not this entire attack was provoked by a video. take a listen to that exchange. >> i clearly said that it was an attack and i also said that there were some who tried to just -- >> secretary clinton -- >> -- on the basis of the video, congressman -- >> but, real quick, calling it an attack is like saying the sky is blue. of course it was an attack. >> well -- >> we want to know the truth. the statement you sent out was a statement on ben za give and you say vicious behavior as a result of inflammatory behavior on the internet. if that doesn't point to the motive being a video, i don't know what is. that's certainly how the american people saw it. >> well, congressman, there was a lot of conflicting information that we were trying to make
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sense of. >> tyler, we're expecting they might actually take the first break of the day here anytime now as soon as this exchange between clinton and gowdy is over with. but this is not over for the day. we're expecting to see more testimony straight throughout the afternoon and maybe into the evening as well. >> eamon, thank you very much. eamon javers covering the store for us from washington. big day for earnings. mcdonald's reporting very strong numbers. amazon and the company formerly known as google, now known not as prince but alphabet getting to report their numbers. our earnings squad will break down what investors need to know. plus, while all the talk is of when the fed will begin raising rates, is the u.s. actually headed towards negative interest rates? we'll discuss that. you're watching cnbc, first in business worldwide.
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it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. welcome back to "power lunch." i'm mandy drury. 3m shares are higher. the company beating profit estimates but revenue fell short. 3 misdemean 3m also hoeri lowering the top the forecast. the shares are up over 4%. dunkin brands beating on top and bottom line. calling its 1% same store sales increase disappointing. the shares are down by 3.4%. and stanley black & decker
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surging by 6.7%. the toolmaker comfortably beating profit estimates. it's also raising it's full year outlook despite currency pressures and economic volatility in a number of markets. let's get to seema mody once again for another market flash. >> one stock struggling to make gains is under armour despite posting its first ever billion dollar quarter. potential margin concerns are weighing on the stock. the company expects fourth quarter margins to decline blaming the higher dollar, rising freight costs. the stock is still an underperformer for the year at 37%. one of the busiest days of the earnings season is under way right now. 43 s&p companies are reporting. let's dig into some big names with our earnings squad, josh lipton on alphabet, he's in the soup, jon fortt on amazon, mary thompson on mcdonald's. mary, take it away. >> oh, tyler, let's start with
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the good news. the firm's global same-store sales rose more than expected 4% thanks to a rebound in its china business. its u.s. same-store sales rose for the first time in two years up 0.9%. ceo steve easterbrook saying the positive same-store sale trends should tonigcontinue. it reflect the turnaround strategy including specials like the recently introduced all day breakfast. earnings beating expectations by 13 cents. the bottom line helped in large part by a 5% decline in the number of shares outstanding and a much lower tax rate compared to last year. >> very happy about the all day breakfast, i must say. >> you're not the only one. >> i used to get there at 11:05 and it would have just shut down. amazon reports after the bell today. jon fortt, what do we expect? >> this isn't the huge quarter, of course. the holiday is.
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but we're going to get some hints toward that during this quarter. so setting that up, with e want see is amazon's base loyal. we had prime day, did it do well? also we'll be looking for amazon web services. amazon has begun breaking that unit out. analysts want to see a growth rate probably topping 70%. it was above 80% last quarter year-over-year and then holiday. how bullish is the guy going to be? amazon said their seasonal hiring will be up 25% year-over-year. they just expanded their same-day delivery in the new york area, chicago area, and bay area. there's a lot of spending there. >> and finally google's holding company alphabet reports earnings for the first time since it's formation. josh lipton, what can we expect? >> analysts looking for $17.21 on revenue of $18.5 billion. beyond the bottom and top three
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key metrics. one cost per click, what advertisers pay google when users click on an ad. expect to see cpcs decline 9% year-over-year. says investors want to see alphabet narrow that gap between what it can charge for desktop ads versus mebl ads. two, operating expenses. we know this is a company that likes to spend. those moon shots are not cheap. expecting cash operating expenses to be flat at $5 billion and finally cash. google had about $70 billion at the end of june. is the new cfo going to give investors any insight about returning some of that cash pile to shareholders. stock up nearly 30% so far this year. 90% of analysts say this one is a buy. we might have a better sense about whether they are right after the bell. tyler? >> josh, thank you very much. jon, mary, thank you all very much. mandy? >> earnings and the possibility of more stimulus from europe fueling a big rally on the
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street. 308 points to the good for the dow, a gain of 1.8%. plus, the race for house speaker is heating up. congressman paul ryan getting a boost from a key conservative group. we will speak with one of the founding members of that group. will he fully throw his support behind ryan? we'll find out next.
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surprise!!!!! 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? welcome back to "power lunch," everybody. i'm tyler mathisen. the house freedom caucus has voted by a two-thirds majority to back representative paul ryan
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for the position of house speaker. this basically assures that wisconsin congressman ryan will have the necessary support when the vote for speaker is held next week. joining me now from washington is congressman scott garrett, republican from new jersey, member of the house finance committee and a founding member of the freedom caucus. in the house freedom caucus -- welcome back i should say. let's get out of the way the thing that's on a lot of people's mind, which is the benghazi hearings. you have not been watching. i am not going to waste your time or mine asking you about it, but let's turn to paul ryan. in the vote you sided with paul ryan for speaker. why and what did he do to persuade you? >> so, as you know, all along what the house freedom caucus was talking about is not so much the person but the process. we were looking to do what the american public was asking for, to change the way some of the things operate down here so we can actually move bills along,
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get all parties involved from a bottom up sort of approach, and that's what we were trying for from the very beginning and i think that's what we're achieving here now. congressman paul ryan came in and met with our group and spoke with a number of us separately and as a whole group as well. did that on a couple of occasions, and during that time he did two things. he laid out his vision and most people who know paul ryan know what that conservative vision is for the country, but also laid out his ideas on some of the things that need to be changed as far as the process here in washington as well and we went forward. >> did he make any pledges to the freedom caucus that met their goals and that's question one, and question two is two-thirds majority. i realize there was another candidate who had gotten more than 80%. why some holdouts? >> so we have a process where a new group -- as you said i was a founder of this group. one of the things we decided from day one is you should have
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have a large polarity of the group in order to make any endorsements and to get to your point where some of the holdouts? i guess you have to go to them to ask them what they were looking for that wasn't in the pledge, if you will go, by paul ryan. that we did have another candidate, but at the end of the day i think the result is a positive one. it's that we will be able to begin the process -- we already began the process actually. this is a really interesting point i want to point out here. when people talk about the dysfunction in washington and what have you, they're often talking about the two sides, the conservatives and the liberals, the house freedom caucus, the tuesday group. you are seeing now i think more discussion, more collaboration, more working together as far as coming up with proposals to change some of the systems between all parties, all factions, if you will, than you ever have before, and i think that's really the good, positive takeaway from this. >> that's good to hear. i think we would all get alongside that idea.
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let's turn to an issue that is of personal importance to you as a member of the financial services committee, and that is a bill that you have either introduced or are ready to introduce that would restore what you call due process to proceedings involving the s.e.c. cases that have been heretofore heard bis.e.y s.e.c. internal p and you would allow some of those if someone wants to be moved to the federal courts. why? >> so what you don't want to have here is to allow in essence for the s.e.c. to be judge, jury, and executioner, and that's what you have seen and the statistics sort of point this out with them being able to dictate, mandate, force cases that they bring through administrative courts as opposed to the regular federal court system we set up under the constitution. so what our bill does is a couple things.
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it allows the defendants in these cases the option to either jump out of the system into the federal courts or to stay in, changes the burden of proof, takes it up a little bit if you still stay in, and the overall goal here is to provide fairness. we want to make sure that the guy who is doing things wrong is prosecuted and punished on the one hand. we also want to make sure your constitutional rights for everyone, the innocent included, are protected going into this thing. >> congressman garrett, thank you very much. we appreciate your time, as always. good to see you. >> thank you. appreciate it. >> don't forget, folks, cnbc will host the next republican presidential debate. it is in colorado in boulder, university of colorado, october 28th, the same day as the next fed meeting. that's wednesday. just spend your day with us. >> come on, step inside, we'll take you for a tour. gold prices are closing to the downside very slightly. we have a strong dollar today which is pressuring gold and various other commodities.
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it's sitting at $1,166. let's take a look at silver, copper, palladium, and platinum. they're all moving higher, in particular look at the gain in palladium. it's up by 1.2%. let's get to seema mody for a market flash. >> mandy, starwood hotels popping on a report. interval leisure group is in talks to buy starwood's time share business. the deal could be worth $1 billion to $1.5 billion and it could be announced as soon as next week. starwood announced plans owe spin off its time share unit. mandy? >> thank you. we have a rally on the street, folks. a 300-point gain there for the dow and the major averages are now on pace for a fourth straight week of gains for first time this year. also forget about the debate over raising rates. is the u.s. actually headed for negative rates? how that could happen. plus --
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hello, everyone. i'm sue herera and here is your news update for the hour. a masked man with a sword attacked a school in southern sweden killing a teacher and a
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student and seriously wounding another teacher and student. he was then shot dead by police. the attack took place in the school's cafe area. israeli police say two palestinians stabbed an israeli at a bus stap after they tried to board a bus taking children to school. police shot the two men, one of whom later died. the israeli man was moderately injured. hundreds of elderly koreans bidding farewell to family members they had just met for the first time in 60 years. the meeting marked the end of a three-day reunion in north korea. a second round of three-day reunions begins on saturday. mazda says it's recalling 1.2 million older cars and minivans in the u.s. because ignition switches could overheat and catch fire. you're up to date. that's the cnbc news update at this hour. back to you guys, mandy and tootooy. >> thank you very much.
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welcome back to "power lunch." i'm tyler mathisen but maybe you knew that because sue just said it. the dow is up 291 points. nasdaq at 4914 is up 74 points and the s&p 500 is up 33. bob pisani is covering it for us from the new york stock exchange. bob? >> we've got a rally, and it's not just today. we've got a rally going in an october in general and a lot of people were surprised because people thought october was going to be down. it's a global rally right across the board, s&p is up almost 7% in october. germany and china is having a good month and japan is having a good month. what is behind the global rally? i see a couple things, three or four things going on that's moving things forward. number one, the most important thing is a much lower probability of a fed rate hike. secondly, we're seeing the ecb today and china and japan central banks all indicating they're going to be dovish for a long time, maybe even get more dovish, and finally we've been concerned about revenue declines. a lot of these big industrials are clearly blaming the strong dollar and it's getting a little
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bit of a pass on that. that's a controversial issue, but you can clearly see it emerging in the markets. look at the s&p 500. do you know the current rally began on october 2nd. i have circled it. that was the day we had the disappointing nonfarm report for september, and look what's happened. the market has been up ever since that disappointing report. that's what i'm saying when i mean a lower probability of a fed rate hike and more dovish global federal reserves or central banks moving the markets here. finally, about that revenue miss. today we had three big industrials come out. good bottom line, all three missed on revenues, all three went out of their way to point out that the strong dollar was the majority of the reason that they missed on revenues. now, it's still a concern about the global slowdown. i'm concerned about it, but companies have clearly figured out a way to sort of put that revenue blame on the strong dollar. the important thing, tyler and mandy, is whether that narrative will be able to stick. for the moment for today it definitely is sticking.
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guys, back to you. >> just for today but point well taken about the payrolls, bad news on the economy equals good news for stocks, right? bad news is good. go figure. thanks a lot, bob. stocks are rallying today after mcdonald's reported better than expected earnings and as bob just mentioned after the ecb brez mario draghi hinted he may expand quantitative easing. joining us now matt whitbred and darren richards. gentlemen, before we get into comparisons of europe versus the u.s. as a place for your dollars, talk to me a little bit about consumer names first up, matt, because we have a lot of new highs, right? mcdonald's, kellogg, pepsi, a number of other names. should we still be bullish on the u.s. consumer and related names? >> yeah, well, you know, our opinion has been ant continues to be bullish on the consumer. that's the case within the u.s. as well as europe. we believe the growth story is
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very much geared towards the consumer base at this point. within our portfolios we still are overweight within the consumer discretionary sector. we understand it's getting to be a bit of a crowded trade at this point in time but there's a lot of tailwinds for the consumer at this point in the economy. the oil difficult devidend, inc lending, and the consumer seems to be on strong footing particularly from an improving labor market. it continues to improve within europe. so without getting into the u.s. versus europe discussion, we're still pretty bullish on the consumer. >> let's get into that discussion now, darren. if you were going to put your money on the back of a particular consumer, would you put it on an american consumer or a european consumer? >> well, both. how is that for hedging? we like -- just like matt, we like the u.s. consumer with the unemployment rate dropping, housing improving. things look really good, plus we have low inflation so the job opportunities i think are really, really robust and it
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helps keep the spending of the u.s. consumer up. on the other hand, if you look at europe, two recessions in the last seven years, they've kept their wallets in their back pocket. i think you will see as their economy starts to do better, some unleashing of demand. so i think they're both great areas. but i might hedge the european side just to make sure because i think if the euro were to decline, you don't want that to take away from your returns. >> matt, what about a japanese consumer? the boj might be on the brink of unleashing more easing. >> japan tends to be driven more towards the asian em manufacturing cycle. we saw a bit of a downdraft in japan. we still are bullish on japan. it's a very high beta type of market and we're bullish on global growth but still to that point global growth coming through should benefit japan. >> matt, dari n, we have done a
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quick tour of the world. thank you for joining us. go to ty? >> forget possible rising interest rates. could the u.s. be heading for negative interest rates? cnbc contributor ron insana has written a piece on it on you can go there later and check it out. watch this first. okay. so why do you say this is a possibility. and who would be paying whom for the right to hold my money? >> well, here is what we've seen recently. "wall street journal" pointed out over the last let's say seven years, the u.s. treasury has sold one month t-bills more than 40 times with the yield of zero. and in the last several months we've seen three-month t-bills go off at zero. right now rates are at zero at the very short end, where the u.s. treasury is borrowing. $1.17 trillion worth of borrowing at 0%. >> free. >> free. for the u.s. government.
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>> for the government. >> no debt burden financing. no financing burden. what can happen if the fed were concerned that the u.s. -- the global economy was still weakening and that could threaten not only the employment outlook but the inflation outlook further, they could stop paying interest on excess reserves that banks deposit at the federal reserve of which there are about $2.5 trillion. they could even start charging banks to hold their deposits in which case that money would go immediately back to the banks, possibly move out in the form of new loans and increase the velocity of money in order to move growth and inflation towards the fed's targets. >> in other words, the banks would say we're not going to take 0%. we're personal not going to pay you a quarter percent, mr. fed. we're taking the money back and we're going to put it to work in some other way, riskier way. >> yes, money-making way. >> what are the odds of this happening? >> we're getting close. the fact that t-billings are going off at zero. the fact that -- and the fed is probably on indefinite hold given the european central bank is going to ease more by december. it means the fed would have a
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tough time raising rates without having the dollar explode to the upside. china is going to ease, japan is going to ease. and then the real question is, you know, does the fed need to step on the pedal in order to ensure the recovery is durable. the u.s. looks fine. the rest of the world still does not. so this is where this comes into play. larry summers has been making this secular stagnation argument for quite some time. without any fiscal stimulus, the fed is the only game in town, so i think it's something we have to think about. i don't know how likely it is, but we're getting there already. and i think it's something that not everybody is set up for but hedge funds most definitively are beginning to talk about it. >> so not that we're expecting anything different, but the, quote, war on savers continues. >> and look, this is happening in other parts of the year. sweden and switzerland, they both have negative interest rates. you're paying the governments of those countries to hold your cash. i don't think it's inconceivable it happens here and it's just something we need to pay attention to. >> ron, thank you very much. and you can, of course, head to
1:40 pm to read ron's entire article. mandy? >> always a good read. let's get to seema mody for a market flash. >> there are a couple losers. perrigo, down about 5%. the drugmaker said it would cut 800 jobs and buy back $2 billion worth of common shares as it looks to stave off a hostile bid. stock down 11% this year. mandy? >> let's go to the bond market where rick santelli has been tracking the action at the cme. quite a bit of action with the dollar and i see the 10-year is niching closer and closer to 2% even. >> if inching closer and closer to 10% was a pastime, the 10-year note would be a champion. most of the real action is foreign exchange but also short maturities. look at a short maturities in the u.s. its yield dropped down dramatically, unlike the other maturities. it's really been aggressive. no 2-year auction due to debt
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ceiling. is it political, is it not political? many are questioning that but not questioning the whole notion of negative rates like you had in the piece with ron insana. look at a 2-year in europe. that's a one-year chart. they traded down to minus 32 basis points. maybe coming to a bank near you as was referenced in the last piece. back to currencies, look at the euro versus the dollar. listen, mario draghi would rather have it go down than up. why? look at the last chart, that's the dax. if you look at qe we've been there and done that but it certainly was the catalyst of not only the stock market going up in germany or in europe, but, of course, check out our own stock action today. tyler, back to you. >> rick, thank you very much. hillary clinton testifying today in front of a house committee on benghazi. the committee is in a break right now until 2:15 eastern time, but there were some fireworks as the committee headed into that break. eamon javers is live in washington. eamon? >> yeah, that's right, tyler. what we saw just ahead of this break we're in now at the
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benghazi hearings is trey gowdy really pounding on hillary clinton on the question of sidney blumenthal, the former clinton administration adviser who was sending her regular updates and e-mails about intelligence in libya. gowdy making the point that blumenthal was simply cutting and pasting this information from some other source, apparently a former cia official who was on the ground in libya himself and passing that along. secretary of state hillary clinton at the time not vetting it, not doing anything to determine what the source of that information was. damaging line of questioning for secretary of state hillary clinton, but after that moment what we saw is this hearing sort of dissolve into a bit of a shouting match here between gowdy, who is the chairman of the committee and a republican and elijah cummings, the ranking democrat who was upset about not being able to release transcripts of certain interviews the committee has already done. take a listen to this he can change between the top two
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members on this committee. >> if he'd bothered to answer the telephone calls of our committee, he wouldn't have needed a subpoena. >> would the gentleman yield? >> i'll be happy to but you need to make sure the entire record is correct. >> that's exactly what i want to do. >> then go ahead. >> about to tell you. i move that we put into the record the entire transcript of sidney blumenthal. we're going to release the e-mails, let's do the transcript. that way the world can see it. >> i second that motion. >> we didn't -- >> motion has been seconded. >> well, we're not going to tyke th take that up at a hearing. >> a fiery moment. they're in break right now. we expect they're going to resume. when they come back at 2:15 p.m. eastern time, tyler. chairman gowdy here has said they're going to start right where they left off with questions about sidney blumenthal's role as an outside adviser to hillary clinton. >> thank you very much, eamon javers. switching gears, mcdonald's is up over 7% after a big beat
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on earnings. it's currently sitting around new highs, so is that all day breakfast that tyler loves so much part of the blame for the sun rising on mcdonald's stock? plus the market is making a big move to the upsooind with the key levels you need to watch from here coming your way. "power lunch" is back in two. in panama, which is a city of roughly 2 million people, we are having 5,000 new cars being sold every month. this is a very big problem for us with respect to fast and efficient transportation. it's kind of a losing proposition to keep going this way. we are trying to tackle the problem with several different modes.
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so why would you invest without checking brokercheck? check your broker with brokercheck. welcome back to "power lunch." i'm tyler mathisen. southwest beating estimates by 2 cents. southwest results were helped by an increase in profit margins spurred by lower fuel prices. visa higher by almost 2% after raising dividends 17%, increasing it to 14 cents a share. last year the credit card company boosted payouts by 20%. and yahoo! has cut the price of advertising for the first ever web streamed nfl game this coming sunday. according to reuters, the price is now said to be less than
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$100,000 from the initial 200 grand. mandy? the market is in the midst of a rally. the dow is up by triple digits. the s&p doing nicely as well. the nasdaq gaining by 1.4%. the one that's lagging is the russell 2000, the snowfall caps. let's bring in ben willis and steven guilfoyle. gentlemen, good to see you. ben, we're currently sitting around two-month highs for the dow and the s&p. did draghi just throw a little more fuel on the fire for goebel markets? >> absolutely. you have to give credit to the chinese as well which also had a little stimulus before we came in that helped, but then you have draghi. so basically this is a market rally based on central banks continuing to try and stimulate or devalue their currencies. dow jones industrial average, the s&p 500 up about 7% in the month of october. it's usually a very good month.
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this is an extraordinary month. >> so do you think this is a global rally that has further legs or is it just a bounce from oversold levels? >> we certainly bounced from oversold levels but we have some legs here. i'm thrilled with the price action. i'm thrilled with the improved volume. i'd like to see us hold onto 2047 on the s&p 500 and make yore run at 2058. if we get to the 58 level and crack it, i'll give you a few more points. >> what levels are you watching, ben? >> well, unfortunately, i use sarge's levels all the time. i was telling brian sullivan the other day, we had our foot nailed to 2030 on the cash on the s&p. we were going around and around for several days. we got to break above that today which i think is the continuation. this looks pretty much like a real good short squeeze, but there's some real investing behind it. the market seemed to stall at 9:45 as shorts decided whether they could hold longer. they couldn't so we're seeing some significant short covering.
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>> what in particular do you think is going to get left behind? and we've seen a bit of underperformance in the small caps. is there anything else you think that potentially might not move with all tides so to speak? >> certainly. you're seeing a rotation out of health care now for about a month and today. you're seeing almost equal participation in the other nine sectors except for that one sector and that's with the problems we're seeing with obamacare, i expect that to continue. >> got it, guys. thank you very much for joining us. >> thank you. >> take a look at valeant talking about underperformance. it's still down near its lows after yesterday's fall of around 30% you might recall. we're going to be talking to a long-term stockholder of valeant who is going to tell us why he thinks valeant still deserves a place in his portfolio. today it is down by 17%, but very interesting issue. make sure you stay tuned to "power lunch." we're back in two. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done?
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welcome back to "power lunch." number one, stocks are rallying today just under session highs with the dow up more than 250 points. shares of perrigo are down after they announced plans to cut 800 jobs and buy back $2 billion worth of common shares to stave off a hostile bid.
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and under armour is falling as margin concerns are weighing on that stock but it has been a good performer so far this year. >> it seems like the news out of china lately has been nothing but red flags. why china may not be as bad off as you think. we'll tackle that one next. i'm here at the td ameritrade trader offices.
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burgers are hot, tractors are cold, and the market shaving a few more billion off yesterday's disaster stock. all of that ahead. plus, what does housing now and housing in the 1980s have in common? well, there is something. we'll let you know whats that and why your guest says he could care less about's earnings tonight, but what he is watching, guys, a lot more closely. i don't know if you have heard this, the market is rallying. >> i hadn't heard. >> breaking news. >> 300 points. >> we'll go to the breaking news look. thank you. china's market struggles have played a role in volatility. our next guest says don't take this number at face value and
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that china is in better shape than you might think. or at least as the popular view is. dennis is an international lawyer who has been to china scores of times. welcome back to "power lunch." >> thanks for having me back. >> why do you say china is better off than the popular perception? >> let's put it in perspective, since 2009 to today, the chinese economy has doubled in size. when people say it's only 6.9% growth, that's ridiculous. you would all be dancing in the streets at cnbc if we had 3.5% growth this year. so china will at least be twice, probably two times what we are doing in the united states. so i think we need perspective. >> but, you know, considering how politically charged the economic numbers are and, in fact, the economic numbers have to be signed off by the premier himself, don't you think it would always be better than worse? >> even if they're off by 1%, it's still 5%, 5.5%.
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what is driving the world today? the u.s. economy and china at twice that amount. europe is a disaster area. i don't know if i'm allowed to say that, but it is. that's really what we're going to look at. how is china going to drive the continuing growth of the world? the new normal is 5.5% to 7%. if you're looking for between 8% and 12%, it's not going to happen anymore but that's where we are today. >> but 5.5% to 7% or thereabouts on a much larger economic base, that is an economic engine. you point to two things you think are important, that is the vast bulk of foreign currency reserves that the chinese have. what are they going to do with it and the other thing you point to is the really unprecedented power that the chairman has. >> two things quickly. china is sitting on $3.6 trillion in foreign currency reserves. >> where is it going to go? >> it's going to go maybe to the u.s. if we're open.
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yesterday they were in london saying i'm giving you $60 billion worth of investment. the u.s. has to be more open to the chinese investment. the second thing is this guy is the second most powerful chinese leader ever. forget about mao. he controls the political party, the economy, and the military because in that country you need those three and he has the trifecta. he's very powerful and a serious leader. >> and he's going to be around a while. >> at least seven more years. >> you are the keynote speaker coming up. what's your reading on commodities? >> my reading on commodities is i think we've hit the bottom. if you're looking for an infrastructure growth, it's going to be slower -- >> well it should be because they're like ghost towns. >> but it's coming back. i think we've hit the bottom in china. if you're looking for a story, watch china the next 18 months. >> okay. >> dennis, thank you very much. >> thank you for having me. >> appreciate you being here
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with us. and that, folks, i'm going to fall over here -- you almost knocked me over, dennis. >> you have to end on a poem. >> i got no poems. >> that's the first hour. >> roses are red, violets are blue, your show is over, let's move on to the two. >> good stuff. >> what? >> thank you, dennis. that was really great. >> there once was a man from teaneck. it is 2:00 p.m. on wall street, 1:00 in baton rouge. the dow is flying as valeant continues its crash. i'm bryan sullivan, melissa lee also a poet at the nasdaq. stocks are shooting higher. you are looking at all dow 30 stocks. 26 green, 4 red. the clear winner today is mcdonald's. that stock, believe it or not, hitting an all-time high after posting a big earnings beat and that is where we start. for first time in a very long
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time, some investors are beginning to feel that maybe, just maybe, mcdonald's problems are indeed behind it. lets bring in matt defrisco, he has a $125 price target on the name. same-store sales up in america for first time in a couple years. is this turnaround really real? >> i think so. i mean, they've already done the positive comp and now we're -- october was the rollout of 24/7 breakfast. breakfast will only be incremental on top of what is appearing to be a positive comp trend. they're narrowing the gap against their peers. several months ago it was 6% they were lagging their pierce, now it's only 3%. >> if i go into mcdonald's in the afternoon and i order an egg mcmuffin instead of a six-piece chicken mcnugget or burger, doesn't that cannibalize what had been a higher price item on the menu? >> well, i think that's sort of
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an eclectic consumer. i don't think the person who is going to eat off the dollar menu or have a mcmuffin in the middle of the day is going to -- is going in there now and getting a quarter pounder. so obviously they're thinking they don't have something for -- >> hold on, matt. but that means that all the excitement generated around all-day breakfast, if you think that consumer is eclectic and sort of out of the norm, then why are we so excited about all-day breakfast? >> who is excited, melissa? who is excited? >> the analyst community, the stock is excited about it. >> i think we're missing the point they're back in the news. no one is talking about millennials saying they don't resonate well with mcdonald's or mcdonald's doesn't resonate well with millennials. rather, they're back in the news, top of mind, something new out there. if 1 in 4 of your party want to get the breakfast saund witch, the other three will probably get a premium burger. they just called out our chicken sand which which was something you might see at a higher end chicken place.
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>> that's whoo wha i don't understand. to melissa's point, six months ago we were saying nobody wants to eat at mcdonald's anymore. six months later everything is fine at mcdonald's. i'm sorry, i just don't buy the fact that hot cakes all day has turned that ship around. >> well, you've just seen a turnaround in the numbers and it wasn't hot cakes all day in that time. the third quarter didn't have any benefit from the breakfast, you're just seeing it now. six months ago not all of us were saying mcdonald's is dead in the water. and new management key to it turned it around -- >> that's it. new ceo. >> definitely. he's reinvigorated the franchise base. let's not miss the point they i simplified the menu. that's a buzz word -- it means takes cost out of the model. franchisees, you buy their trust if you give them back more cash flow. >> you called it back for your clients on mcdonald's. now your name is matt mcgriddle
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difrisco. it's sticking. >> thanks. >> that was a good call so you get a nickname. from mcdonald's beat to caterpillar's miss let's bring in eli with a neutral rating on cat. great to have you with us. why do you think the stock is reacting the way it is. it's up so strongly today. >> a couple things. first of all, they preannounced in september, the numbers came out, were consistent, not any worse. they are restructuring the company to a new reality and numerous times you heard the diffident is priority and it's a 4.4% yield. it's not the worst package in the world. >> even if the wor scattered showers -- worst is behind caterpillar are we expected a turn or do we really need to see a clear bottom to the commodity cycle and an uptrend in commodity prices? >> you need to see a turn.
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it's a resizing comparing it for the new normal for the commodity related markets. that's going to take time and they already told you that 2016 numbers are going to be materially lower than 2015. so you got time to work through. you'll get a dividend to help pay for it during the period but it's going to be a while before there's a real turn. but the market will anticipate it. it just wants to make sure that things don't get any worse. >> are you just, eli, riding this copper and gold trade for caterpillar. what if they never turn around. what if we go five years of a consistent deflationary environment, what is the turn scenario for cat then? >> the first step is resizing the company for the new reality. copper and gold is not the problem. coal is killing you. they're taking 20 more plants out, changing the footprint, reducing the workforce, getting their cost in line. that will give you improved profitability. there is a normalization process when you go from 1500 to 200
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mining trucks, you may not go back in our lifetime to 1500 but there is a new normal for replacement. things will slowly get better as you go further out in the future. you want to make sure you're prepared for it and the profitability is there that the company can leverage it when it does occur. >> eli, thanks for joining us. eli lustgarten. housing. shares of pulte group getting hammered after they missed expectations. let's bring in diana olick with more on pulte's problems. we hear about how good house something doing. what happened to pulte? >> pulte missed by 10 cents, but the new orders were still pretty good, and the miss really was more about trouble getting homes finished and closed. so q3 eps came in at 33 cents a share, closing volumes down 6% from a year ago was a lot of it. also higher sg & a expenses. orders were in line with expectations, up 8% from a year
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ago, and that's the best order print in almost three years. the average order price way up. 8% beating estimates. so you ask what happened? labor and weather. it's taking builders longer to convert their backlogs into closings. there's just not enough labor to go around to get the homes built. also, a lot of heavy rain in the south during the spring delayed some construction. as for prices, land is expensive. so builders are having trouble putting up that affordable product. pulte is, therefore, going after the more affluent first-time buyer. this is interesting. that's the buyer who has been renting but does have the funds to pay over $300,000 for that first home. so now there's this widening divide today between first-time buyer and entry level buyer and i bet that's only going to grow, brian. >> diana, thank you very much. the housing market now and the housing market in the 1980s aren't often mentioned together. there aren't many similarities but there is actually one big thing two have in common.
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vacancy rates. ken rosen joining us now. ken, what is the fact that vacancy rates are around the levels of the '80s telling but the housing market? >> we're talking about rental housing and rental house something red hot, hottest it's been in 30 years. vacancy rates are lowest they've been in 30 years. rents are growing between 4% and 12%. it's the hottest thing we've seen and that multifamily rental house something red hot. single family is doing better but isn't quite as hot. it's just moderately recovering. >> you get to a point where rents get so expensive the people diana just talked about say forget this, let's just hold our nose and overpay for a house even because at least the money is going to us rather than somebody else. are we nearing that point which could set off a wave of home purchases? >> certainly mortgage rates are very attractive today so it's a great time to be a home
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purchaser if you can afford the down payment and get the loan. it's still very difficult for potential first-time entry buyers to get a loan. and so that is really constraining the market. but there's also a structural shift. i think more people of the millennial generation want to live in cities, delaying marriage, delaying child birth and living in urban centers. there's maybe a longer run shift to more rentership than home ownership for the millennial generation. >> i know a lot of home builders are hoping that happens. ken, we have to leave it there. thank you very much, buddy. we've got a news alert with meg terrell. >> brian, some news updates on turing pharmaceuticals. that company that raised the price of its drug by 5,000%. the ceo said they were going to lower the price of the drug after a national outcry. however, they have yet to do so. now 150-plus health organize organizations coming out in an
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open appeal asking the company to lower the price to where it was before that 5000% increase or close to it saying that this has not been reduced and the distribution issues have also not been sufficiently addressed in the last month. quotes from a number of doctors here laying out just how difficult it is for their patients to get access to this drug which is used for patients with a rare parasitic infection often in aids patients, cancer patients, pregnant women laying out they can't get this drug when they need them because of the cost and because of how difficult it is to access. we have reached out to the company. the ceo wrote me back something i won't say on air hoping that we'll get a real response from the company very soon, brian. >> whoa, whoa, whoa. let's be -- i'm not letting you off the hook. you wrote martin or called him. he sent you back an e-mail with an unprintable word? >> no, it's just not a statement worth using. i think we should wait for a real statement from the company. >> did he insult you?
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>> yes. >> then he's got to answer to all of us here, meg, because you're the nicest person here. skreli, dirtbag move if you're out there. >> and a fine reporter, these key here. >> thanks for letting me know what's key. i was ju saying that meg was nice. >> to not comment to a top reporter in this space really speaks volumes. >> and i was just being nice to meg. >> me, too. >> meg, we're sorry. we like you. meg terrell. >> i like you too. thanks. >> lots more ahead on "power lunch" including a big disaster du jour in biotech that is not named valeant pharmaceuticals. plus, three big tech companies reporting earnings after the bell. some ideas on how to trade the tech trifecta. and later on the one thing that's happening to small caps that could be a big warnings for your money. you're watching "power lunch," where kate kelly is chuckling to herself off to the side. we're back after this. [female announcer] if the most challenging part of your day
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. this is your disaster du jour, relypsa pharmaceuticals. the company won fda approval for a drug to treat high levels of potassium. the stock is sinking because of a warning label the government will force them to put on the drug warning people to take it six hours away from other drugs. let's get to sue herera with a news alert. >> and this concerns gnc and the
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stock has been under pressure for most of the day. the oregon attorney general has filed a lawsuit against gnc for selling nutritional supplements with ingredients not approved in the u.s., specifically it's alleged that gnc sold drug spiked, if you will, dietary supplements, which was revealed by "usa today." the supplements not approved are considered illegal. it is not labeled on the dietary supplements that gnc sells. once again oregon's attorney general filing suit against gnc for selling nutrition aal supplements with ingredients not approved in the u.s. shares of val antibioteant to plunge a day after citron
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called it the pharmaceutical enron. peter anderson is the cio of congress wealth management and he's sticking with it. you own 76,000 shares of valeant as of the end of september. i think the bmo downgrade, there's one sentence that really sort of crystallized the issue for investors, peter. they write, investors did not know about philidor. what other questionable practices do we not know about? how comfortable are you with the story when it comes to the specialty pharmacies and the relationships that valeant may or may not have with them? >> well, you know, i think we're all really uncomfortable with the current state of events, and let me just preface this by saying this stock isn't for everybody. it is pretty speculative now and it is not the same company that it was even a year ago. i have held this stock for over two years and watched it transform. i would say this is the third transformation and it's probably a negative transformation that we're seeing now, but until all the facts are out, it's very
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difficult. for instance, with he could spend 15 minutes talking about my opinion of the relationship between the company and the various specialty pharmaceuticals, but i tell you, the simple way to get this problem totally eliminated and get the stock price possibly back up is to have the board of directors and mr. pearson either come on this show or talk publicly and explain exactly what's going on. that would simplify everything. and then i don't think we would have many questions, but as it stands, time is their enemy. if they keep waiting and letting the rest of us try to figure out and read these tea leaves, it's very threatening to the stock, isn't it? >> it certainly is, and we certainly would welcome mr. pearson on the show or the network at any time. taking a step back, there are certain unknowns about it, whether or not it be drug pricing policy in the united states or what's going on with their specialty pharmas, but even if you take a look at the
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fundamentals of the company, peter, fundamentally changed their business strategy that you invested in two years ago. they're backing away from aggressive acquisitions. they're going to spend a lot more on research and development. these are real departures from what had been the core of valeant. why are you even comfortable with that? >> well, you know, you're exactly right, and we were very excited, although there were a lot of critics out there at the time when they used to lever up, buy a company, delever, and repeat that cycle. but we watched the bond market through all that process, and the bond analysts and the bonds themselves, they were very supportive of that psycyclical development. whatever happens, valeant will become a different company. what we're thinking is the possibility, say this is all put behind them, then i think this company will be morphed more into a reasonably growing company, not a hair on fire growth company the way it has been, and it will probably start
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to delever, make the bondholders more happy and predictable in terms of cash flows, gain on market share, and be a reasonably growing company, perhaps anywhere on the order of say 10% to 20%. that's the best thing that can happen, the best scenario. but as i said, as it stands now, it is quite a fluid situation and until we get the board of directors or some representative from valeant to actually detail their rebuttal of what is allegedly occurring, then i think we're a little bit in limbo, but i'm willing for some clients who have the tolerance for this risk, i think there is potential for upside if they hang in there. >> yeah, and i just want to jump in for a second and alert our viewers the hillary clinton benghazi hearings have resumed. they had a lunch break. we'll stay on business news. if there's major headlines that come from you, you will be the first to know. we are monitoring the hearings but let us now get back. peter, people buy stocks for a simple reason, right?
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forget all the other stuff. they think they understand the business and they think the stock can make them money. that's it. you obviously think the stock can make you money. do you feel like you really understand the business? >> well, here is the thing. when you look at -- i have to refine what you're saying. you buy stocks and along a spectrum, right? you have spectrum of risk. some are very reliable and dependable. last time i was on here we were talking about coca-cola, for instance, very reliable. but along that spectrum then you get more speculative, and with more speculative stocks, you may take on more risk and there's various forms of risk, right? some of them are informational risk. you might not understand exactly the operations of the company -- >> but that sounds like -- what you're describing is gambling, right? if you buy valeant are you gambling? >> it sounds like every risk box is ticked off. we don't know what the accounting risk is, we don't know what the business is going to be in a year or two years because they're transforming themselves, we really don't --
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do you have a handle on what this company is going to look like in a year? >> well, first let's go back to the term gambling. you know, again, there's a spectrum on how much you can assume. for instance, let's just talk a little bit about how they are booking their revenues. so valeant did come out and say i think it was yesterday actually that their revenues are booked at the time that the prescriptions are filled. so to some people that would be adequate. but i can see in this environment perhaps they would actually like to know kind of tongue in cheek, maybe it's not until the prescriptions are actually ingested by the patient before we can actually book those as revenues. so, you know, i take a little bit of odds against you with calling it gambling. it's all where you lie on -- where your happy with the information you have or how much further do you have to go. and i think the circumstances right now are pushing us to the
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level of i wouldn't say paranoia, but to a level where we really want to cross all those "t"s and dot the "i"s which is the objective of analysts but sometimes you run up against a road block and the road block is usually broken up for you by management, and so once again i think if management can come in here and clearly define these things, it would be a clearer road. >> peter andersen, we agree with you. we think pearson needs to come on the show and we will let him speak and ask some tough quesons. thank you for that. good interview, laid it out. some noted hedge funds are taking a big hit on this big drop. let's bring in kate kelly. >> some of the biggest names in the hedge fund business, among them pershing square, valueact and paulson and company are all active in the name with an estimated 21 million shares including what we reported yesterday around ackman's 2 million share purchase. 16 million and 9 million
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respectively. but they're all hurting today and yesterday for sure with the stock down a combined 40% on concerns about their specialty pharma business and specifically a short selling report that compared valeant to enron. it's all part and parcel of a crowd mentality in the hedge funds -- in many hedge funds in today's stock market where popular vemeninvestments have r been flooded with big hedge fund buying. it's a trend that can enhance upside in good time when your colleagues or rivals pile into the same name but also spread the pain around industrywide at bad times. consider the goldman sachs very important position index which tracks the most popular 50 hedge fund stocks in any given quarter. that index is down nearly 5% versus the s&p that's roughly flat. one skeptical hedgy told me shorting that index has been his most lucrative position lately. this is not as up to date as my s&p figure but close.
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valeant is not the only recent dog in the index. other big users including yahoo! down 37% year-to-date, cheniere down 34% and american airlines down 15%. >> the person who says they're shorting that index, that is fantastic. >> yes. >> because what that person is saying is that despite the fact that we're going to pay hedge fund managers billions or millions of dollars, that they are no better at investing than the monkey with the dart in some cases because if you're -- literally the guy's strategy is betting against the other 50 smartest people on wall street. >> i hear your point. >> and he's winning by betting against them. >> i hear your point. two things. one is actually if you look at the figures, the average hurnd hur hedge fund is about in line with the average s&p. there are years the hedge fund underperforms and this isn't one of them. the last couple months in
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particular have been just brutal. part of it is this crowd mentality, part of it is the volatility in the market. i'm not defending hedge funds but a bit of landscape. >> and i'm just adding a bit of my je ne sais quoi just to add problems. up next, are the small caps sending a big warning? the one chart you have to see. we're back after this. i've read all of your lyrics. you've read all of my lyrics? i can read 800 million pages per second. that's fast. my analysis shows your major themes are that time passes. and love fades. that sounds about right. i have never known love. maybe we should write a song together. i can sing. you can sing? do be bop. be bop do. do be do be do. do do do be do. or the freedom to choose what doctor you want to see.
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welcome back to "power lunch." i'm dominic chu. gnc shares, we want to call your attention. they're sinking 8% near session lows on news oregon's attorney general is suing them for in what they say allegedly knowingly selling fat burning supplement products spiked with possibly synthetic drugs. those shares down sharply on that bit of news. we should say they've traded up 4.3 million shares so far on average over the last ten days they have traded a million on average. more coming up on "power lunch." keep it right here. we'll be back after the break. at mfs investment management,
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i'm sue herera. here is your cnbc news update this hour. the largest group of conservatives in the house, the republican study committee, says it is backing paul ryan for house speaker. the committee has more than 170 members comprising more than two-thirds of house republicans. he now has support of all three caucuses he said he needed to run for speaker. the russian military releasing videos show fighter jets operating from a syrian air base. it's located in a province in western syria which borders turkey. best buy says it will drop restrictions for all free shipping for the holiday season. the company typically requires consumers to spend at least $35 to get free service and shipping. starting sunday that restriction will be removed. los angeles dodgers and their manager don mattingly have agreed to part ways. the team offering him a contract extension but mattingly declined saying he wanted to move on.
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the team was beaten by the new york mets in this year's division series. you're up to date. that's the cnbc news update this hour. brian, back to you. >> sue, thank you very much. oil is closing right now -- actually closed a couple minutes ago but not a big move. a rare day for oil where we didn't see a lot of volatility. oil up 22 cents, still down so far this week. just a reminder, folks b this gnc news, it's taken the next leg. the shares of gnc and sue broke the news 15 minutes ago for you, that oregon's attorney general had filed a suit for allegedly putting some illegal or inappropriate items in supplements. that stock is now halted. down 13%. gnc is halted. melissa, you point out also i saw on twitter, there's also a subsequent trade pain going on. >> look at vitamin shoppe. just when the news broke, we saw that intraday decline pick up
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steam and now vitamin shoppe is down more than 4%. this is an interesting story unfolding right now. >> and gnc is no longer unfolding as a trade because it's halted. i have a feel it may a topic on -- >> ""fast money." >> time now for "street talk." stock one, community health systems. awful quarter, stock crushed, many down grades. they announce eps, it was like 56 cents, the consensus was 89. stern ag reiterating a buy saying when one cannot find a compelling near-term reason to hold on, that is exactly when shares often form a base of support, end quote. they keep their $83 target on. so, yeah, anyway. long way to go. >> check out some of the other hospital operators, hca, the entire sector across the board,
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lots of double digit percent declines. kinder morgan credit suisse downgrading the price target to $39. management backed off. credit suisse does not recall management ever having to reduce guidance. now, so far kmi has missed on earnings every quarter this year. will likely come in below the full year. >> there's actually about 30m lp and pipeline companies trading and only five of them are up year-to-date, if anybody cares. holly energy partners, hep, the best performer up 13%. up next citrix, company named an interim ceo. they think is has levers for additional value creation. it's a top pick for them in the software group. >> not only a nice quarter but a beat and a raise in terms of guidance. so this is a new high in the stock today.
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fourth stock is a stock we often talk about, polaris industries. yesterday the stock punished 10% on weak earnings. wells fargo moving to the sidelines cutting its valuation range to $105 to $110 and that's from as high as $154. recent execution issues, slowing of off-road speak trends have impaired the near term outlook for investors and maybe it's a sector issue because this morning we did get our earnings from arctic cat. it's a small market company company but it had terrible earnings and is getting punished in today's session. >> you remember the other day we talked about harley-davidson and their terrible quarter. we had an analyst who said polaris because they own the indian motorcycle brand was eating share. motorcycle sales were up 153% year over year for polaris. so indian, the motorcycle business, starting to do pretty well. lastly from motorcycles to cars, asbury automotive. georgia based auto dealer. got some positive comments from bank of america and stifel
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nicolaus. up graded from a buy to a neutral. raising estimates for the quarter. saying more questions than answers as to why in stock has recently sold off. the average target is only 84 bucks. so b of a very bullish on that name. >> what a sell-off it has been. in july it was a $95 stock. the stock is down 17% since then. wow. big decline. >> gnc has just started -- wow. gnc has just started trading again after a brief halt and it is getting walloped. gnc stock is down 19%. that -- just watching it folks because it is fluid. $7.40 decline on a $33 stock right now. if you're just joining us, the news is the oregon attorney general filing a suit against gnc alleging there is inappropriate or illegal ingredients in some of their over the counter supplements. a bad summation but that's basically the news. down about 18% right now and as
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melissa pointed out, watch vitamin shoppe, kind of seen as also a proxy. no news on vsi. gnc is where the news is, but vsi down 5% perhaps on sympathy for that news. a story we will continue to watch for you. well, european stocks jumping after ecb president mario draghi hinted more stimulus could be ahead in europe. is it time to buy? maybe. but buy what? let's ask the "trading nation" team. larry mcdonald is with societe generale. larry, what do you make of the move? a huge drop in the euro. a cheap time to go to europe but what benefits do you see? >> when you're watching the trades develop over the last year you have to be aware of the crowded trade. a year ago 90% of analysts told us the u.s. was going to hike rates between june and september. and now between now and next june, 93% of analysts are telling us that the ecb will do more qe.
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so a lot is priced in here. if 92%, 93% of analysts expect the qe between now and next june, and that's the case, then you have to ask yourselves how much is priced in here and what's -- how much meat is left on the bone in this trade. >> well, let's find out. andrew burkly, would you buy any of these european etfs? >> we like europe and we like developed equities. basically for three reasons. one is the additional quantitative easing that's potentially coming down the line. but just the divergence in monetary policy that's out there right now. and the second is they're just easterly ierier in the recovery in the profit cycle. there's a lot more catch-up. when it comes to hedge versus unhedge, if you want to look at kind of a hedged etf, that's up about 6% year-to-date where if you didn't hedge, you're up basically break even, about zero so far this year. we probably would look to hedge that exposure a little bit if the euro would weaken a little
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further. >> andrew, larry, thank you very much. >> thars thanks, brian. >> you want more of this stuff go to stocks are rallying today. overall we have the nasdaq up more than 1%. the dow is soaring. we have got three huge companies reporting their results after the bell. microsoft, amazon, and the company formerly known as google, alphabet. will those reports keep the rally going or slam the brakes on? we'll find out when "power lunch" rolls on. stick around. >> the latest from and a word from our sponsor.
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check out shares of val antibiot aent. just announcing they will hold a conference call on monday morning at 8:00 a.m. eastern. participating will be the ceo, thec fo, the general counsel,
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members of the audit and risk committee, as well as controller of the company and many others on this conference call but specifically i'm going to read off the press release on the valeant website. the purp is to lay out the facts including allegations made against our company regarding our relationship with philidor and r&o and unsupported speculation and incorrect speculation of facts and circumstances to the detriment of shareholders of the company. so the stock is down 15%. should be a very interesting call. again, that's monday morning 8:00 a.m. eastern time. >> my initial reaction, melissa, i don't know if you agree with this or not, why wait? you want to give people notice, 24 hours is fine. why wait four days to do this? >> i agree, the four days is a long time period. they say they're going to have a live webcast along with a slide presentation. so it is possible that they want to get those slides exactly right. those slides, brian, were used against them in the citron research report. so it is going to be imperative
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at this point to really get that story, to really nail it and hit a home run. >> fair enough. i just don't know if you need to spend four days making slides to defend your business. if you know your business, the slides should be ready to go. anyway, that's going to be a hell of a call. cool, october 26th. three big tech stocks reporting earnings after the bell. it's a busy one for melissa and the best of the "fast money" team. you got amazon, microsoft, and the formally known company as google alphabet. josh lipton joins us with a preview. >> let's start with alphabet. analysts expecting eps of 7.21. they want to narrow the gap for what it can charge desktop ads versus mobile. amazon, cantor fitzgerald says
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an important aspect to watch the company cloud computing business. looking to post $2 billion in revenue, a jump of over 70%. and finally there is microsoft where analysts predict eps of 59 cents on revenue of $21 billion. fbr says watch the cloud computing business there as well. it's on an $8 billion run rate. investors want to see the momentum continue in that division. three big tech names right after the bell. it is going to get busy, so stay tuned. melissa, back to you. >> certainly will be, josh. rest up before that. for more on this tech earnings trifecta, let's bring in paul meets. his firm owns alphabet, amazon, and microsoft. you're most focused on amazon because they have announced a number of initiatives in the aws line of the business that takes direct aim at oracle. to the point where analysts were actually downgrading oracle, what are you looking for? >> well, the key thing with
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amazon and i have been following this company since they went public in a'97 and their guidane for each and every quarter has been we're going to reinvest in the business, we're going to be plus or minus break even with 20% revenue growth. the thing i'm looking for most closely is just as josh said, amazon web services, and i will like to see a revenue print of at least $2 billion. >> okay. and then for google, this would be the first conference call with the ceo. what are you looking for? we're still not going to get the breakout of the business that is so highly anticipated until january. >> that's right. with alphabet, i'm looking at more conversation from relatively new cfo about being prudent with cost, which had not been the case before she arrived, and also maybe some further hints about returning some of this cash horde to share
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olders. >> and microsoft, you're worried about the pc business. how many quarters have not been worried about the pc business? zero? >> this is the third fiscal year in a row that the company does $2.60 in earnings. i want to see some indications of some growth for next fiscal year. hopefully windows 10's launch, though it might be too early to tell with this conference call, is going to drive some pc volumes because that market has been in very rough shape, and just like the amazon and google calls, i would like to see what they're doing and how much acceleration they have seen in their commercial cloud products. >> paul, great to get your analysis. paul meeks. we will have full coverage of all of those conversation calls tonight 5:00 p.m. eastern time on "fast money." meantime, the russell 2000 bouncing back today, up right here about a half a percent but is there something about the small caps that's a big warning sign for the markets? our next guest says yes. stay with "power lunch" to find out why.
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our next guest says yes. ♪ ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] ♪ my mom makes hospitals you can hold in your hand. ♪ my mom can print amazing things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ]
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. shares of gnc have come back a little bit, down nearly 14%. the news the oregon attorney general suing the company over allegedly them putting illegal ingredients into the supplements. that stock briefly halted but down 13.5%. >> are small cap stocks
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signaling a big time problem to come. matt mealy says maybe. you sort of caught us -- caught our attention what you wrote. what are you seeing that has you a little bit worried? >> well, the thing about -- well, we're really watching the chart on the russell 2,0000 ind. it has been a key leader for the stock market all year, especially this summer. it began to lag in july and when the s&p tested its old high in mid-july the russell 2,000 did not and it rolled back, so it was lagging at that point, when this rolled back over and we know what happened after that, we saw the market correction. we are seeing a similar thing right now, the russell 2000 it actually made a lower low in september and then when it rallied back it has not rallied back anywhere nearly as strongly as the s&p. so on a technical basis i'm worried if this thing rolls over
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again it could cause more problems. >> mat, are you surprised, though, by the strength in this market? i mean, the stock market for the last six weeks has looked like the patriots. you're welcome. >> exactly. how about those red sox. oh, never mind. but, yes, the market is acting very well, the s&p in particular, but the concern is that, you know, again, we had this key leadership sector on the market not acting quite as well and we also have some of the areas of the credit market which haven't rallied back quite as strongly. back in august when the market was flat on its back we had some people say let's step back and take a look at this and i'm saying the same thing here. the market has acted well but let's step back and look at it. a lot of the things that caused the correction back in august are still with us, the stimulus issues and liquidity is a little better but a lot of the other things are still a problem. >> we have enough problems today, let's forget about the problems of yesterday that still exist. we will talk about them
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tomorrow. did you follow that? i didn't, either. thank you very much. tonight on cnbc, a special behind the scenes look at how pit bull became a music mogul. we will get a preview with michelle caruso-cabrera who pulled this off when "power lunch" returns. technology empowers us to achieve more.
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a very cool program on cnbc tonight. pitbull, fame and fortune, 10:00 p.m. eastern time. michelle caruso-cabrera goes back stage with the music mogul and business mogul and joins
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with us a preview. >> rap sensation, he has become a worldwide sensation but he actually really sees himself much more as a businessman than musician. who does he look up to in the world of wall street and does he have what it takes to reach his goal? this is what he told me. >> the 34-year-old who spent his youth hustling in the streets of miami is on a passionate mission to turn his brand into a billion dollar empire. >> i think all celebrities but all people can learn from pitbull that parks matters. parks is the genesis of genius. i mean, this man is pure parks. >> one, two, three, go. >> motivational speaker tony robbins a pitbull, mentor, fan and friend. >> he's got guts, whatever you want to call it. >> it helps that he takes hips trigger points from business titans. >> i love warren buffet, he sticks to the script, he listens to his gut. for many years he has listen to his gut look where it's got him. i have a lot of respect for
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carlos slim, we have a great relationship with the sun, so we are constantly being updated on what they got going on and what they're looking at. >> he has put that valuable information to work. >> i think he's really the ultimate success story. he says he is a prime example of the american dream. >> you can catch the premiere of pitbull fame and fortune tonight at 10:00 p.m. on cnbc. he said, listen, the music business is 10% talent, 90% talent and you have to be good at business or you will get taken advantage of. he has taken that to heart to make sure he controls his empire. >> what was the most surprising thing do you about him or his business. >> i was surprised he knew who warren buffett was. and he absolutely d he was quite familiar with his investing style, et cetera, and that he was getting more involved in the stock market. >> although i would say as successful as he is,outs are a giant waste of money. they are a hole in the water you throw money into. >> he rents most things. he doesn't own. >> okay.
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>> he owns homes, but there is another segment within the show where he says, look, i don't buy cars, i don't buy planes, i don't buy jewelry snees a leaser. he is a renter. >> yes, exactly, claims not to be a big spender. >> pitbull is asset light. >> absolutely. >> but cash flow heavy apparently. >> that's what he's trying to work on. he dreams of being worth a billion dollars. wears his ambition on his sleeve. a true hero of aptlism. >> he is on his way thanks to music and doctor pepper. >> he's got tons of endorsements, not just dr. pepper, budweiser, he has dozens of them. playboy. >> 10:00 eastern time pitbull fame and fortune. michelle, look forward to it. all right, folks, we have a little time left. we have to review the two big stock stories of the day. valeant, the huge story yesterday that stock still getting whacked. melissa, i don't know, conference call on monday. >> you see the rise in the stock and this after news crossed that it will have this conference call on monday, 8:00 a.m., the whole management team is essentially going to be on this conference call. it is unclear as to whether or
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not analysts or investors will be able to ask questions. that we have to find out. >> yeah, and three big earnings, which one are you looking forward to the most tonight. >> >> all of them. all the action tonight at 5:00. >> all right, melissa, thanks very much. busy day, "closing bell" starts right now. hi, everybody, welcome to the "closing bell" i'm kelly evans at the new york stock em changes. >> i'm scott walker in for bill griffeth. valeant getting crushed for the second day in a row and community health sinking on separate news. we will break down both stories, talk to the analyst who downgraded the healthcare sector last week and find out what she's watching now. >> take a look at this dow, though, a nice rally in stocks today and mcdonald's lifting the blue chips after a strong earnings report this morning and optimism over their all day breakfast endeavor. apparently they're u


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