tv Power Lunch CNBC November 11, 2015 1:00pm-3:01pm EST
four weeks ago, the next week it was down 35%, the week after up 60-some-odd percent and then down another 32%. that's pretty outrageous in terms of being a holder of that name and watching that go on. >> definitely some good under the radar names. that does it for us. "power lunch" begins right now. thank you, michelle, and thank you very much for that. well, "power lunch" is starting right now. i'm mandy drury. welcome to the show. tyler will join us momentarily from the iconic conference, and he has a really great list of guests all lined up. on the agenda today, sacked. new york state says no to daily fantasy sports. what is next for the fast-growing business and companies like fan duel and draft kings? brawl at the mall. is jcpenney making a big move against macy's? and bubble.com, another sign
for investors that tech's big run may be running out of steam and fast. but we do begin with the world of daily fantasy sports under fire. the new york state attorney general ordering two of the biggest players in the space to stop accepting bets. >> mandy, whether or not you believe daily fantasy sports is gambling, eric schneiderman says it is and it's the illegal variety. now, as new york state's top law enforcement official, his word carries a lot of weight and like you said, he's demanded that fan duel and draft kings stop taking wagers within the state. now, this is the most important development in the daily fantasy saga so far just because according to sports economist patrick reich at washington louis st. louis, new york based players make up 10% of this billion dollar industry. snyderman's argument is daily fantasy sports or dfs meets the state's criteria for gambling
and it's not like traditional fantasy sports where there are weeks of commitment towards an end gold of winning your pool. you get some immediate payout on the daily fantasy side on a more frequent side, that instant gratification argument is used by some to define what gambling is. in response to the demands, draft kings issued a statement saying they're disappointed with the hasty action taken and that efforts weren't made to understand their business adding they're going to explore all legal options available. ultimately this could just be about the money and whether states will allow daily nafanta if they're regulated and taxed like lotteries are or horse racing or casino gamblingamblin. we did an informal twitter poll on whether or not the government should regulate daily fantasy. 62% of respond he is said let the games go on. 38% said it should be taxed and regulated. the reason it's a big deal is not because it's a grand scheme of things, it speaks very much
more about the regulatory and legal environment today as well as the fiscal condition taxation policies of many states. we should also note there's a fan duel press conference today 2:00 p.m. eastern time. we'll monitor and comcast nbc universal and nbc sports are investors in fan duel. tyler, back to you. >> dominick, thank you very much. from the iconic event here in washington, we're going to keep the conversation going on fantasy sports right now. david towel is a co-founder of maglin capital and a former bankruptcy attorney and he joins us now. mr. towel, welcome. good to have you with us. >> good afternoon. >> take apart the attorney general's allegations here. what do they rest upon? what are the pillars of them? >> well, there are three claims that are made in his letter. beyond the illegality of the enterprise and that goes to the point of whether we're talking about skill or luck as it relates to the investing or the betting, there's also claims of
false advertising and social economic harm that's being done on the public. so it's pretty extensive in terms of its allegations. >> which is the one that seems the most threatening to these fantasy sites? is there one that is more threatening than the others? >> clearly the first is. this is a very high-stakes game, no pun intended, that we're talking about here. just to give you a sense of context, casino gambling in this country takes in about $35 billion of revenue. legal sports betting takes in about $4 billion of revenue per year. but people estimate that the illegal market for sports betting is anywhere between $80 billion and $380 billion, and new york, as dominick pointed out, is the largest state for current customers of fan duel and draft kings, and so,
therefore, many other states are looking at what's going on in new york to see how they will proceed on this basis. >> you're a lawyer. is this gambling? >> i think that it is gambling because of the fact that it is based on very short-term events that are, frankly, outside of skill parameters and really anything can go ahead and happen, and so, therefore, i think that's where these allegations are able to go ahead and gain traction and i think the new york attorney general is going to be successful in this. >> all right. david, thank you very much. david tawil giving us his perspective on fantasy sports. another story we're watching, but we're not going to leave that one, my friend, and my friend is marcusly mow ne le. macy's shares are getting smacked. is this a bad sign for retail as we head into the crucial shopping season?
marcus lemonis knows about retail, has some thoughts about a lot of things, and we're here at iconic to talk. let's talk first about fantasy sports. you got a thought on it? >> well, it's the time that makes it feel like gambling. does that mean if it's a week or a month and you don't win your pool for a delayed peer eed per time -- >> it's less gambling? >> at the end of the day it's gambling. i'm afraid the states are now going to start to regulate websites. are they going to move offshore and the same thing will happen? if people want to spend their money doing that, that's their business. >> let's talk about retail, words from -- a report from macy's, jcpenney also. how are you seeing businesses across the country and the propensity of consumers to spend? >> i looked at some of macy's comments around why they think their top line is down. i don't know that i'm buying all of them. one is it's warmer outside to clothes aren't selling. another is intlt tourists aren't showing up.
the good news is that macy's is still offering profitability. i wish at some point in time the investment community would focus on the profitability and not just the top line. when you juxtapose it against jcpenney who is boasting year-over-year sales i don't want to diminish their efforts, the bar was set pretty low. and so i don't want to celebrate any sort of jcpenney's revolution just yet. >> what is your sense of where consumers are right now? >> i haven't seen any headwind in any business that i'm involved in at all, whether that's the auto sector or the food sector or the clothing sector. i think what consumers are looking for is an experience when it comes to retail. and so i think what macy's needs to do a little bit better if you go into any of their stores is they need to create a little more of an experiential shopping. if you look at the reits in the mall space or simon properties, a lot of them are struggling in their mall properties but doing well with their sort of street
sort of environment. so anything that's sort of open malls where there's restaurants and street atmospheres and there's activities, they're doing a lot better because they're able to lure families to more of a family atmosphere instead of just a box. >> one of the things we're talking about here at iconic, which is a program for entrepreneurs. you will be on stage in a couple of hours, and one of the sort battles that was joined this morning between kevin o'leary of "shark tank" and just moments ago kenneth cole of kenneth cole productions was the idea kenneth believes businesses need a soul, an inner purpose beyond merely making money. there's a smile on your face, mr. lemonis. that kevin doesn't see it that way. the purpose is to make money for shareholders and if it throws off money that you the owner wants to donate later, fine. >> you know how i feel about it. every business needs to have a culture about it, and the people
who work there need to know what they're working for, not just a paycheck and the overall business, particularly with millennials today, they want to buy from people that have purpose that are doing something good. and so we're going to see life is good later. we're going to meet a lot of other different companies while we're here. i think kevin o'leary really had it wrong and i have always told him this. he believes it's a dollars and cents zero sum game and that's it. i think kevin doesn't understand retail because the retail environment is very different. consumers want to walk into a store, they want to transact with somebody that has some sort of belief in what they're selling and a belief of the company that they're working for. you look in the upper sort of northeastern, you look at wegman's, just a grocery store, right? >> it's an experience. >> but it starts from danny wegman setting the culture. there's a reason that kip has a great company. he sets a culture. there's a reason that -- they set a culture. >> you just answered some questions. when we come back, you'll start
asking questions. i'm going to start asking. >> thank goodness you're here. great to have you here, marcus, as always. >> mandy, back to you. >> we'll get back to the iconic conference in a second. in the meantime, seema mody is joining us with a market flash. >> good afternoon. all eyes on the industrials. names like motorola, act vision blizzard and texas instruments all up 2% or so. xerox though leading the way. nearing session highs and looking for its best day since early september. for now, mandy, back to you. >> thank you very much, seema. turning to the overseas markets, global stocks are up as investors shift their focus to key economic indicators out of china. live from the conference in boston, william priest with $43 billion in assets. great to see you today, william. thank you very much for your
time. >> what do you think 2016 is going to be defined by? >> i think 2016 is going to be defined by an acceptance of the fact that you're going to have lower growth than people expect. 2% is 4% as far as the developed markets are concerned. it's probably the best real gdp growth you can hope for in the developed world. remember, the global gdp is a function of two things, growth in the workplace and growth in productivity. the sum of those two things are likely to sum to something 2% in the developed market and less so in other parts of the world. >> does lower growth economically speaking, william, have to mean lower stock market returns or potentially because of lower growth we might see the unleashing of further stimulus
in places like europe and japan and that might actually help global stock market returns? >> well, i actually think it has two things going for it. even though you have lower real growth, it doesn't mean cash flows are going to be that much lower, and at the end of the day there are only five things you can do with a dollar of free cash flow. you can pay a dividend, buy back stock, pay down debt, make an acquisition, or reinvest in your business. of those five choices, two are going to dominate. given the low growth, what you're going to see is very -- much less capital spending than one might have wished for but you're going to see a continuation of lots of m&a activity. by the same token, given that free cash flow levels are likely to stay pretty high in our view, you will also see a continued growth rate of what we call shareholder yield and that will be cash dividends, share buybacks and relevant debt pay downs.
remember, when you buy stocks, the stock yields have a growth rate associated with them. so stocks should beat bonds. you will have to live with more volatility but if you're holding period is measured in years, you'll be just fine. >> learn to live with more volatility. william, thank you very much for joining us with some interesting ideas. let's head back over to tyler mathisen, my good friend and colleague at iconic. ty? >> all right, mandy. thank you very much. in my hometown of washington, d.c., iconic, the third and final stop this year of the iconic tour with cnbc and inc. magazine. when we come back, we'll talk to an inspiring entrepreneur who has joined us prior occasions at iconic, burt jacobs. life is good, very good. you're watching cnbc, first in business worldwide. (vo) what does the world run on?
it runs on optimism. 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.
in the price target to $60 from $54. it's also maintaining its outperform rating with the firm saying the tone of microsoft businesses is the best it's been since the 1990s. and a big day for apple. it's larger ipad goes on sale and its music service is available for andrew devices. it's currently sitting flat with an upside buy at $117. let's get another market flash with seema. >> shares of sun edison are getting slammed for a second day down 15% after posting a bigger than expected quarterly loss yesterday prompting a slew of rating and price target cuts. solar city and first solar are also trading lower perhaps in sympathy, between 2% and 5%. >> thank you very much, seema. we'll get back to you shortly. in the meantime let's head further south down the east coast where tyler is joining us from the iconic conference. >> we have our own little music,
our own little stinger intro there. mandy, thank you very much. joined now by burt jacobs, one of the partners, one of the founders of life is good, an apparel company that does $100 million in sales, began from the back of a truck, a van, with what? a $200 stake? >> $78. >> $78 is how you started to $100 million in sales. we were just talking, marcus and i, about retail. how do you see retail this year? >> you know, it's tough. it's a tough market, and i think that too many retailers are talking about how to engage and create community but are still just hanging things in the window and hoping they have the right brands. so we really need to make changes and we're trying ourselves in that area as well. >> i think that speaks to what we just talked about, that in order for a retailer to separate themselves, they need to create some sort of experience, engage with people in the community. >> that's right. >> so that's really how you started your brand over the
years. talk to us a little bit about what you do differently to engage customers visually or other ways? >> sure. we didn't in the beginning, we didn't know any better. we didn't have any traditional advertising and we bumped into letters and e-mails from customers that were facing really difficult things. so we started a little local pumpkin festival and that became a series of national pumpkin festivals which led to life is good music festivals. hose have been as important to our company as anything. what we're trying to do now is bridge the gap from being apparel company that has some cool events to 365 being a hub of optimism, a place where people can go to get good news, to share good news, to share good stories, to feel good about being a human being. it's as much about mee yotiemotl wellness. >> did you ever feel like the company fell off the rails and kind of lost sight of that? i know you and your brother are
getting back in the van or getting back on the road. are you doing that because you felt like you lost your way for a minute? >> yes and no. so, no, we didn't lose what we were trying to do. from an execution standpoint we did. i think the growth just caused us to, you know, go through that phase in the last few years where we've been a typical kind of machine making a lot of t-shirts and putting the right messages on them. so the road trip we just did that you mentioned, it really put us back in touch directly with our customers and gave us a lot of ideas about how to grow the business and a lot of that has to do with dialogue, not a monologue, enabling our customers to design, to create. on the nonprofit side as well as the for profit size. on the fund-raising side we have crowd rise challenges out there. we're working with 100 different charities. it's great for the nonprofit side. it also amps up the touch points for the for-profit side. >> one of the things we see is
how do they create that culture for the long term. with you and your brother really being the face of the business, how do you think about succession planning and how to carry that brand for the next generation? how does that company survive? >> the good thing is while i think we've been good founders to get from "a" to "b," we're really not the operators to take this from $100 million to $1 billion-plus and tsimmes oth brand have little to do with my brother and i. they're values like simplicity -- they'll be worth a lot 100 years from now. >> we were talking about people like kevin o'leary who said i don't think that sort of purpose is necessary in business. >> but when you -- >> we welcome the openness on it. we just have different views. >> you say you may not be the guys to take it from $100 million to $1 billion, implicit in that is maybe there is someone who is. are you open to selling to a gap
or -- >> not really. that's not our strategy right now. our strategy is to bring in talent that's smarter, faster, more experienced than we are. we'll still play a role as the founders of the business and as creative talent on the team but we have no ego about being the one running the business. so we're looking for a president right now. it's an open position. we have a great friend who is an interim president. >> i tell you the reason i brought it up. in companies today and we've dealt with this, when is the right time for the founder to sort of step aside and know there's somebody better? so you see this sort of dichotomy between ego and longevity and ego usually ends up in the grave and the longevity is being able to be humble about it. telling investors or customers that we don't have all the answers. that i think it can work. more importantly i think it's necessary. i think about it even in my own business. >> at the same time, too, the president is going to come in and have a lot of autonomy but i don't want to make it seem like i want to step down --
>> no. >> he will have to report to me. >> we have to leave it there. bert, good to be with you. >> thanks, guys. >> marcus we'll be back with you in a minute. meanwhile, back to headquarters and mandy. >> thanks, ty. so where are individual investors right now in this market? the ceo of td ameritrade knows and he's joining us exclusively. plus -- >> up next, entrepreneurs rolling out a new service. >> speed weed provides at your door, on demand cannabis delivery. >> what are the top catastrophic legal risks that worry you. >> or nip it in the bud. >> you mentioned going to nasdaq in 2016. that is incredibly ambitious. >> stay tuned to find out.
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. one of them is the brand new metro. we had a modest forecast: 110,000 passengers per day in the first line. we are already over 200,000. our collaboration with citi has been very important from the very beginning. citi was our biggest supporter and our only private bank. we are not only being efficient in the way we are moving people now, we are also more amicable to the environment. people have more time for the family
and it's been one of the most rewarding experiences to hear people saying: "the metro has really changed my life." welcome to today's power pitch. the power pitch is where one couple has high hopes their startup has what it takes to be the next big thing. our dominic chu takes a look. >> hello, power play. i'm jen. >> and i'm a.j. we're two of the three founders of speed weed. >> we provide on demand at your door cannabis delivery. there have been ads promising this very thing but speed weed is very different. >> other companies will find the customer and take the order but they rely on retail outlets for product and delivery.
>> speed weed have been providing safe, legal medical cannabis delivery in the los angeles area for the last four years. >> now, patients can place an order online, over t mobile dev. in about 90 minutes a vetted driver arrives at your door easy and discrete. >> with ancillary security such as security and software consulting and cultivation, the speed weed family of caps is one to watch. >> 23 consecutive months of growth and $5.7 million to date, nasdaq 2016 is our goal. are you in? >> welcome to today's "power pitch". let's meted oet our panel. alicia syrett, a board member of the new york angels. she advises and invests in over two dozen startup companies. >> and from the bay area, troy dayton, he's the co-founder of
arcview group connecting marijuana startups with investors and to date those investors have pumped more than $49 million into 73 different companies. and from denver patrick rea, a co-founded canopy boulder. he's also a partner at the arcview group. a.j. and jen, you are in the hot seat. toy, first question. >> in the state of california to work with cannabis you have to be a not for profit. so how is it that you are structured and how is it that investors will invest into your company given that you actually touch the plant? >> we have a marketing and branding company that is an outside company that contracts with our collective and so investors can actually invest in that company. >> you mentioned additional sources of revenue and i'm wondering, does your core delivery business require these additional sources of revenue and is this a distraction from
what you're going to be doing for the years to come? >> what we do is find experts in each field and we support them. so our cultivation division is run by a top cultivator, a 12-time cannabis cut winner. he runs or genetics, the dna, our grow and produces amazing products. we just support him. we take our branding, our marketing, our software and wrap it around him. our security division the same way. our software we work with the best people and wrap our branding around them. >> what are the top potentially catastrophic legal risks that you worry about that keep you up at night and how do you prepare to address them? >> obviously the big one is that it's it's sold illegal federally. >> it is? >> right now we got a real blessing with an omnibus bill that passed last december and that defunded the doj and the de a as far as going after legal businesses in legal states.
so that helps us sleep a little better at night. >> we put a lot of resources into maintaining compliance. all of our employees are on the books. our books are absolutely transparent. >> you mentioned going to nasdaq in 2016. that is incredibly ambitious. do you have the revenue to support such a move? >> currently we don't. we're doing three raises this year. we did a seed round a year ago for $500,000. we're doing a private placement for $1.5 million. we have a reg guy plus coming in a few months for $5 million and then we're looking to dos-1 for about $30 million toward the end of the year. that should give us what we need to hit nasdaq. are we going to hit nasdaq? i don't know. >> okay. so we heard what a.j. and jen had to say. now we need to know if the panel is in or out. >> look, the cannabis industry is really big and it's growing incredibly fast but there's still tons of uncertainties when it comes to regulations and
differences between states. but that's also exactly why i give the team behind speed weed a lot of credit for delving in early. they're gaining crucial consumer insights in the early stages, generating millions in revenues and i actually really like we have a diversified revenue stream because it preserves their optionality going forward as the industry changes. i'm in. >> while the diversified revenue streams gives them optionality, it also spreads their focus and i feel like in a business of this size, you need to focus on one or two key strategies for victory and for that reason i'm out. >> patrick? >> i like they're in the largest market for cannabis in the country and i like the prospects for don't use legalization in 2016. so i'm going to be in. >> all right. so a.j., jen, two ins and one out. what's your reaction here? >> i like it. if troy is our only out, i know i can win him over. that's not going to be a
problem. he'll be in by the end of the day. >> thanks so a.j. and jen of speed weed and to our panel, alicia, troy, and patrick, and that's today's "power pitch." >> so what about you? are you in or out on speed weed? you can tweet us @powerpitch.cnbc.com or tweet me @mandycnbc. a wild ride for stocks this year. so where are mom and pop investors putting their money to work in the market. the ceo of td ameritrade is in the house and we'll tell us in a "power lunch" exclusive. that is next. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity
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to give you the best experience possible. because we should fit into your life. not the other way around. hello, everybody. i'm sue herera and here is your cnbc news update for this hour. israel's deputy foreign minister says his government will suspend a series of ongoing meetings with the european union to protest the eu's decision to begin labeling exports from west bank settlements. he says israel is sending a very
strong message of displeasure. bob dole is endorsing jeb bush for president. the 92-year-old dole says he likes all the candidates but jeb bush stands out as someone with experience. and speaking of candidates, donald trump campaigning in new hampshire appearing at a packed business breakfast. he said he's just fine really with eight candidates on the debate stage and wouldn't mind if a few more disappeared before the next one. he backed what he calls a deportation force to remove undocumented immigrants from the country. and president obama commemorating veterans day laying a wreath at the tomb of the unknowns at arlington national cemetery. he urged the nation to keep veterans in their thoughts and ensure they receive the medical care and benefits they have earned. and that's the cnbc news update this hour. mandy, back to you. >> thank you very much for that, sue herera. let's get to seema mody for a market flash.
>> act vision blizzard is on a tear, up about 2% as its latest call of duty black ops video game generated more than $550 million in worldwide sales in its first three days after launching. act vision is the third best performing stock this year up about 70% so far. >> thank you, seema. it's been a volatile year for the markets but with the recent stock rally over the past six weeks or so, what are individual investors doing with their money? here with me for a cnbc exclusive is fred tomvic president and ceo of td ameritrade. he just announced he is retiring after a decade with td. >> great to be here. >> before we get on with what you're going to do with the next phrase of your life, let's talk about the retail investor. they were net sellers in october, but it seems that they're now out there buying again and they're buying
retailers ahead of the holiday shopping season. is that a wise thing to do considering the news that we got from macy's today? >> well, i think what's happened is the retail investor basically -- we saw a correction in august or at least early september. the market has come all the way back. they're cautiously stepping back into the market. our investor movement index was slightly up. it was just more in terms of stretching for returns, but there have been net sellers, and going into right now -- they're definitely going into people like starbucks, walmart, and amazon, and i think they're anticipating a good holiday season of sales. >> and so they're net buyers now overall, not just retailers but overall they're net buyers. >> not in november but i think right now they're moving into the market no question. >> understood, understood. what do you think is the defining theme at the moment? because i understand when you first took over at td ameritrade as ceo it was sort of on the eve of the gfc and you did a ceo interview -- your first interview on cnbc as ceo and the
question was what is it like to take over as the world is falling apart. what should the question now be? >> i think the world has changed a lot. we're feeling better. back then no one knew where i was going. lehman was failing, merrill lynch was bailed out by bank of america. it was pretty tumultuous, we were all wondering if we were going into a depression and we came darn close. today i think people are looking at a little more bullish in where the world is going. a lot of disruption. you're seeing a lot of things from social media, mobile, data and analytics cloud computing are causing a lot of disruption in financial services. so i think they're really thinking about where this goes from here. >> is that why one of the reasons you chose tim as your successor? >> i knew him for 20 years. i was his mentor and sponsor for years when i was back att d.
he's a very technology oriented retail banker. he's going to learn the u.s. market and u.s. brokerage but he's a very capable guy with a strong technology background. >> do you think anything is going to change in terms of td ameritrade's clients and shareholders as a result of this change? >> i don't think so. i think the board went through quite a process and what was important to them is that we had to work through our strategy in the last year with the board and the management team. so we have a very clear strategy. we really like the culture of the company, so they wanted to bring in somebody they knew to carry on from where we got. i think going forward he may do some things differently than i might, but i think in terms of what we're trying to do, i think the strategy is pretty clear. >> hopefully you'll still come on cnbc again before you sort of disappear off into so-called retirement. we all know that no one really retires these days. what are you going to do? >> you know, i'll figure that out. i'm going to sit on two or three boards and keep my mind active and as i would mif tells me, i can't have you home all the time and i don't think i could mentally do that.
so i'll keep active in the business community and get a little more free time to do things i want to do. >> wonderful. best of luck and thank you for joining us, fred tomczyk. tyler, over to you at iconic. >> we're going to talk tech startup valuations with go daddy's ceo, bop parsons. a silicon valley in a bubble? mark cuban thinks so. listen. >> i think inside of silicon valley they're very insulated and i think they are going through a bubble. square is going on a down round. when going public is a down round, you know the valuations are out of whack. ading 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.
veteran. what did you learn in the marine corps that made you a better business person? >> first of all, before i went into the marine corps, i was pretty aimless. i failed the fifth grade. thad goii had that going for me. i was probably not going to graduate my senior year. i joined the marine corps in 1968, showed my teachers my orders and they all passed me. so i went to paris island in august and i was over to vietnam in march. what they taught me was, they taught me discipline. they taught me when you have a responsibility, you need to do it, and when you're responsible, you make a commitment to somebody else, you have to come through and honor it. that was the most important and, you know -- and everything i have ever accomplished in my life i owe to the marine corps.
i got out of the marine corps, went to college, graduated magna cum laude. everybody did. >> that wouldn't have happened. >> you know, when you think of the wealth you've accumulated founding go daddy and doing other things, what are you doing with your money to support your enthusiasm for veterans? >> i have always said if i have the time, the marine corps has a nickel. my wife and i have a foundation and that foundation this year, we put $10 million that if the marine corps semper fi fund can match that, whatever they can match, that's what we'll contribute. >> okay. >> last year we gave them $6 million. so we're stepping up and helping big time. >> how often in business are you finding -- you were mentioning earlier that the marine corps taught you to do what you say you're going to do. how often in business even today are you still finding that people are not doing what they say they're going to do? >> you know, that's something you always run into. >> right.
>> you just got to work around it. >> and are you finding that even with some of your new ventures? >> yeah, i am, but not as much when i hire a veteran. >> okay. >> when i hire a veteran, those guys know what it's like to have to work hard and have to work for just all sorts of hours and that sort of thing. >> and is there a directive in your company, a certain percentage of employees have to be veterans or some mandate your managers have to follow? >> no, what it is is as often as we can. my last two executives were retired marine corps colonels and i'll tell you what, i wouldn't trade these guys for anybody. >> your last two? did you shoot them both? where are they now? >> they're both -- one is running my construction operation and the other is running scottsdale national golf club. >> tell us about your golf club. you have a golf club company. >> we started a new company called bxg, parson's extreme
golf. what the idea was is i hired some really good engineers and i said you have no time constraints no, budget constraints, you have no complexity complainnstraints. your only constraint is performance. we have a break through that anybody that hits our club wants them. when you hit them they go from being a luxury to a necessity. >> i'm concerned about his enthusiasm to be honest. >> if he could get the energy -- >> let's talk about tech valuations. as you look at technology companies today, do they seem appropriately priced to you? >> well, the valuation of go daddy always seemed low to me. >> we're shocked by that. >> so beyond that, that's the only one i really pay attention to. >> there's no others in the marketplace you have looked at and said this really doesn't make sense to me. mark cuban talking about
valuations, a lot of people write being it today. do you scratch your head when you look at comps against go daddy. >> since i stepped out of go daddy and i'm now on the board, i invest in all low tech. i own shopping malts, i have a hard money lending operation, golf clubs, motorcycles, that sort of thing, advertising agency. that's where i direct my attention. >> are you a sports fan? >> yeah. >> what do you think about this whole fan duel/draft king thing? a lot of noise about it. >> i don't know a thing about it. i don't have time to do that. i take all my time and direct it into areas that are going to be profitable for me or helpful for other people. >> jif you're betting on the ravens, you're thinking you're not going to win. >> i'm not betting on the ravens, at least not this year. >> this is is guy who puts not only his money and his heart
where his mouth is but your left arm. show us that tattoo. >> harley-davidson of scottsdale. >> can we take a shot of that on the left bicep. there we go. wounded in vietnam you were. thank you for your service. thank you for your business. >> thank you for your service. >> we appreciate you being here today. >> great being here. >> we'll see you on stage at iconic in a couple minutes. >> okay. >> always a pleasure. >> mandy, take it away. >> thank you for your service. >> great guy. okay. shares of macy's down big today. the biggest drop in several years, in fact. it's now the time to go shopping for this stock? 15% discount just today. plus the cyber security etf is flat on the year. if we keep on getting hacked, why aren't stocks in the sector going up? we'll talk to the man behind the
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this is their home. don't touch marine life in tide pools. take away your trash and your happy memories. always enjoy and protect our marine habitats. tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. welcome back. bob pisani on the floor of the new york stock exchange. two problems, retailers and oil stocks. look at the department stores.
n macy's reported disappointing numbers and guided lower. kohl's is tomorrow. luxury stocks. the consumers are going to have a field day with lower prices over the holiday season. energy stocks, take a look, a lot of them down 4% to 8 pr%. big drops. what's the problem? there are several of them. put up the full screen. number one, oil is at the lowest level since august. there's a lot of warm weather out there, a big inventory build and big disappointment of anadarko/apache deal that never happened. "power lunch" will be right back.
stock debate. and why the growing fight over fan duel and draft king may have another victim, this one a publicly traded company you probably know well. all that straight ahead. back to you, mandy. >> stocks moving in and out of the red today as energy stock in particular are weighing on the market. the retailers aren't helping either. the nasdaq just slightly in the green as we speak. as you can see a very flat day. with me now, two jons, jon augustine and jon bale. jon augustine, not that the weakness is that pronounced, but over the course of the week the three indices are down. if we see volatility continue, might it stay the fed's hand come december? >> we don't think so. we think they have enough ammunition to go in december. in our view it's going to depend on what will be interesting is if they go for a point like 0.25% for the fed funds rate or
stay in a range. that's what we think will be interesting out of the fed, but, no, we don't think not this volatility. >> do you feel at this stage we want to get it over and done with? >> we want to start normalizing. >> the past six weeks have been very good, but to what degree, particularly s&p, has that been driven largely by m anda a. >> that's a good chunk of it. but it did not force analysts to cut their 2016 estimates. a lot of people thought maybe those estimates are too high, but it's good news they did not cut estimates. >> do you think the m&a will continue, jon, and to what degree do you see the market moving higher to the year end into a so-called santa claus rally which is the usual thing we see but this year is not that usual with the fed in play.
>> that's true. actually hadn't thought about that. yes, clearly the fourth quarter is usually a good quarter for stocks. i'm not really sure about m&a. seems to be in full blowout mode and that could push the market higher but we're not very comfortable with valuations now that the stock market is up quite a bit and we're more interested in japan and europe now than we were in the u.s. >> so looking overseas. what about you? are you staying here at home or would you prefer to cast your eye overseas as well? >> we'll stay at home right now. we'll stay the world is starved for capital investment. so our equity team is looking for capital investment. we're looking in the aerospace sector, looking in refinery sector. >> honeywell, phillips 66. >> lockheed martin and that infrastructure with cisco systems who just announced a partnership with ericsson. so at huntington, we're staying
home, we're looking for that theme, that capital investment theme. we haven't seen much of that this year. >> thank you very much to both of you for joining us. and on that note, brian, i'm going to hand it over to you. sorry, powerlunch.cnbc.com is the website you can check out as well. we always have to plug that, don't we, brian? that's what we do. >> been trumped by a web promo yet again. thank you, mandy. it is 2:00 p.m. at ft. bragg, 11:00 a.m. in if the pendleton. oil down again. hi, everybody. and a very special hello and thank you to all active duty and retired military personnel. we all owe you a ton. that includes my dad, nine years navy. thanks, dad. i'm brian sullivan. we begin with retail because shares of macy's are getting hit hard today. this follows disappointing guidance on their earnings call. as bad as it might be for macy's
could it be good for another well known retailer. matt, first to you, are you shocked by what macy's said last night because you did cut your price target by a pretty healthy amount. >> no, we're not shocked by the results. we put out a preview on monday, and it was probably the most negative that we've been on retail in the last couple years. i think you have an environment, you have excess inventory bill in the channel. you had a horrific weather environment for all of the retailers. promotional activity building. macy's results were not a total shock but what's surprising the market is the overhang. you have the excess inventory. you have promotional activity that's definitely going to be higher for the fourth quarter that macy's was talking about. ralph lauren has talked about it. so the question is where can you safely hide? >> jan, friend, let's talk about the weather. i get it. here is my problem with the weather. it was too nice apparently.
and i saw stores crowded because it was nice and people were walking around. is weather really macy's excuse this time? >> well, weather -- >> there were parkas but it was too warm yet more people appeared to be in the store because it wasn't pouring and icy rain. >> every retailer thinks weather is part of the story. >> every quarter retailers complain about the weather no matter what it is. >> and part of the story is a lot of business is going on the internet, and deflation in apparel is about 3% so it's hard to get your numbers up, but i like matt wasn't shocked at the numbers. i thought they were about 5% high in inventory and itches clo -- i was close. jen penn penney's weren't really shocking either. now these guys could be bid on at 50% higher than where they're trading -- >> macy's. >> and somebody could take them out. >> as a potential buyout target now? >> they're trading at $40 a
share. all those guys at your conference thought they were worth $60, $70, $80 -- >> and real estate value, matt. when you look at macy's and their real estate value, do you see macy's as a possible take out candidate? >> there is substantial value in the real estate, there's no question about that. that's why a lot of investors have been pushing for monetization. i think the issue that macy's has now is from a leverage standpoint you have leverage approaching three times debt to ebitda. that's a ceiling for most retailers you don't really want to go over given it's a cyclical business. i agree with macy's decision, the way they're prodressing with t with the real estate on their own. i think the issue across the entire space goes to what jan was just saying. you have fast fashion that's larger. you have online competitors coming out of the woodwork. thuf larger capacity issue.
that's why we'd rather make our bets in off price where you have an expanding pie environment or in the athletic sector where the nikes of the world, the footlockers, lu lu, underarmor, they cite their own demand. >> if i'm looking to buy s s a s handbag, i'm not going to walk into a macy's? i'm going to walk into a ko r's or buy it underline. >> i think it's a reinvention. they're going back to the box and trying to figure out how can we be the most relevant per every square foot in this box. that's the jewelry test they're talking about that they implemented on the west coast. it's pulling the best offering in the mall within the macy's box. it's what they've done with athletic footwear. they went out and couldn't get the top nik kib goods so they got finish line to put a shop within the macy's doors. that's what you have taking
place in the department stores. i think the entire sector does need to shrink. that's what you're seeing. that's why they're closing doors, both macy's and all of their competitors but i don't think that the concept is irrelevant. i think it can be reinvented. >> so, jan, with this wave potentially of department store closures or dispositions, so to speak, should we be concerned about the reits that have these stores as anchor tenants? is there a real ripple effect because there are some agreements for other retailers within a mall that says x, y, and ze will be an anchor tenant. if they go, what happens to the sflebt. >> i don't think that's going to happen. >> okay. i think the reits would like to get some of that space back and i think macy's would like to give some of that space back and i think there are some deals to be made there. i think matt is right, we will see macy's continue to monetize he will estate to the tune of maybe $5 billion with over the next five years. i'm not surprised at what they're doing. they have plenty of excess
space. all the malls want to take some of that space and make the stores -- make the mall more exciting. they want to put in more restaurants, more sperntion a experiential stuff and they need the space. that space may be worth more to the mall right now than it is to macy's. >> we have to go but matt quickly because i teased this, i want to get it in. is macy's loss jcpenney's gain? >> i don't necessarily think so. i think macy's, jcpenney, kohl's, all the department stores are battling for the same dollar out there and i think it's also across the space where you have the off prices taking share and a lot of the retailers are going at it on their own via internet and their own retail doors. >> that's the only place i disagree with matt. i think 40% overlap between macy's and penney's and penney's is gaining share and it has to be part of the issue of what we saw at macy's. >> it's still to be played out and i understand we have a relatively important shopping period in american history coming up. thank you very much.
>> thanks for having me. >> jon najarian joining me now. you noticed unusual activity in ralph lauren. >> we're starting to see a nasty kind of scenario play out, brian, where you have a gap that needs to be filled. so, for instance, you had a nice pop here where ralph lauren went from $113 a share all the way up here over -- >> the why ynew ceo that came f the gap. >> good earnings as well. then the stock has come all the way back down and broken under the initial -- it was $127 was where it opened the day after as the stock made the top to the upside. now it's under there. traded down to $125. so watch this level, basically $127, because there's nothing but air between here and $113, brian. you saw pv h which is calvin klein and kors and all these other guys having problems. they all distribute through macy's.
>> are you short ralph lauren? >> i'm short ralph. >> through the options or -- >> both. >> a double negative on rl. >> and i love the stock but, unfortunately, i think it's fed up to fill that gap right there, and when it does, i think it fills it really fast. >> okay. i think his ranch is called the doubler l b double rl but i'm not sure that's what he meant. >> express script just cut ties a specialty pharmacy. the move is sending horizon shares deep into the red. cnbc's meg terrell is with us. >> thank you so much. joining us now is the joe of horizon, tim wahlberg. thank you for joining us. so, tim, your stock obviously is reacting quite a bit today. can you tell us about the conversations you're having with your investors? what is spooking them so much? >> well, we don't believe it's an accurate representation of our business.
as we said in our comments we made publicly this morning, this action by express scripts for their own profit reasons will have less than a 5% impact if it actually goes into place on our business. we have a variety of pharmacies that work with us to help ensure the medicine a physician prescribes actually gets to their patients, and we don't see what is occurring in today's times where profiteer like express scripts can step in and practice medicine against the patient's own benefits. >> i know this is happening in the context of everything we've been seeing with valeant and one of the concerning is the idea of a captive pharmacy. express scripts said we removed the linden care pharmacy from the network and found it predominantly dispensed horizon drugs?
is it accurate? >> first of all, we don't have any captive -- so-called captive pharmacy relationships. we have no relationship, ownership, contracts with any of these pharmacies. we also don't know specifically the number of -- or the percentage of our medicines that make up linden care or any other pharmacy. that's their own proprietary tah-dah. wh no one makes up more than 13% of our prescriptions. our focus is to ensure when a physician righwrites a medicine that a patient gets it. >> tim, when you say that express scripts is profiteering, it's an interesting term that is so often thrown at drug companies. what do you mean by that? >> when you look at the last three to five years and the actual cost being passed down to patients, you're seeing a rapid increase in the out of pocket costs passed down to the patient and overall pharmacy costs or
drug costs in the united states over the last three to five years based on cms' own data has not increased and stays at a constant 10%. so what you're seeing is drug costs constant over the last three to five years. at the same time pbms like express scripts continuing to pass incremental costs to patients that appear to be coming from drug costs. it's really for their own profits. >> sir, it's melissa lee. i wanted to follow up on the comment about 13% of our prescriptions -- not more than 13% of prescriptions are dispensed by any one specialty pharmaceutical company. when you take a look at what's going on with linden care, 5% of sales are dispebsed through linden care. how does it jive with the 13% number and how can investors understand if another specialty pharma is cut off. what is the next step? another 5% of sales or 13% of prescriptions. that's managers are looking at
relationships and saying 5% of your sales will be jeopardized. >> in fact, it's potentially 5% of sales. it's not necessarily an accurate representation. if they're successful in these efforts. what we will do is continue to diversify and make sure that our medicines can be accessed at some of the 70,000 pharmacies around the united states. they don't have to go through the linden care. that's just what the physician chooses because, again, it's a way to ensure that the patient gets the medicine they prescribed. so we will continue to diversify, work with many more of those 70,000 pharmacies in the united states to have less of an impact on our business and assure the patient gets the medicine their patient wrote at the lowest out of pocket costs. we're not worried about this ability for us to continue to drive our prices and benefit these patients. >> so there are 70,000 pharmacies in the united states. how many specialty pharmacies do you deal with that could make up potentially 5% of sales? is it the bulk of the ones you deal with?
how can we understand how diversified you are right now? >> right now i would say that, again, there's only two that make up more than 10% and the rest is spread along those thousands of pharmacies in the united states. so when we look at the pharmacy that helps administer or program, to make it very clear, these pharmacies do not get involved in the prescribing decision. pharmacies simply ensure that the patient gets the medicine the physician prescribed. so we will continue to work with many more of them around the united states and ensure that the patient actually gets their medicine. >> tim, we got more questions for you but we've got to go unfortunately. thank you so much for joining us. >> all right. thanks so much for your time today. appreciate it. >> as you see there, horizon pharma shares down by almost 18%. brian, over to you. our next guest thinks the market will be pretty much blah over the last couple months which is why he's being very selective about his stock picks. live from the schwab impact conversation in boston, michael runs a $3.7 billion permanent
portfolio fund. you're grinning ear to ear. >> listening to you, brian. >> so nice and not true. apache corp is a stock you love, you brought it to us. down 8% but up 25% this quarter. are you using weakness to buy more? >> well, i mean, we're continuing to watch that story. generally speaking we're looking at areas that have been beaten down, that have been sold off, that are good long-term opportunities in terms of global growth. a lot of stocks that are in that space have really been sold off this year. apache in the chrenergy space f that bill. there's been a lot of noise around it lately. to us that's not a reason to own it, but if that's true it goes for a lot higher price than it's trading right now. we're continuing to watch that story and we'll add to it as well as other names in the areas we think are beaten down as we
see fit. >> illinois toolworks, what makes this company so attractive. >> similar story. you know, it's an industrial name, very global player and in an area that's been sold off in this marketplace and like i said, we're playing with a long-term three to five-year horizon in our view trading at a reasonable price. it's not cheap, it's not expensive, it's reasonable. dividend yield very solid at 2.5%. in the long-term we think it's a good growth story at a price that's a very reasonable price to pay. >> then you look at another company called like parker. you bring us names, not the apples and amazons we hear so much of. what is ph bringing to your portfolio? it's had a tough year. >> it has. it's a similar story as illinois tool in a sense in that it's an industrial name. i mean, both these names have been hurt by stronger dollar in terms of foreign sales. there's a reason they sold off but in the long term we think they present valuable longer
term opportunities for, again, patient investors, solid dividend yield so you get paid to wait. if you're buying into the fact that the fed is going to be raising rates at some point whether it's december or any other point, they'd be raising rates because in theory economic growth is improving and gradualgradual ly risiing rates are an indicatr of a growing environment. that's why they're interesting names and admittedly not the ones you're typically hearing in the marketplace right now. >> apache, illinois tool works. how is the weather, mike? >> it's a little rainy today actually. it's cold and rainy. so i'm perfect. being from san francisco, we're getting sunny weather so it's a little different here. >> michael, we'll see you tomorrow then. thank you very much. that is the reason that we asked about the weather. be sure to catch a very special "power lunch" tomorrow. we are going to be live at that conference up in boston.
a big lineup on tap for you. lineup so big we're not going to tell you. you just have to tune in tomorrow to figure it out. let's get back to right now. still ahead, a new reality for daily fantasy sports or maybe no reality at all. are all bets off for the future of this billion dollar business? we're digging in. plus insurance claims, more on those names today. plus we'll meet a man who is on a mission to hire our heroes every day of the year. he has an incredible personal story as well. you will meet him as we salute our veterans. stick around. [ male announcer ] eligible for medicare? that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans,
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ch unemployment for veterans is at the lowest level in seven years. the bad news, there are still many veterans looking for jobs. drexel hamilton is committed to trying to change that. they train and hire veterans. nearly half of them served in the armed forces. joining us is john, managing director at drexel hamilton. john was a decorated captain with the u.s. army serving seven tours in iraq and afghanistan. thank you for coming in and thank you for your service. >> thank you for having me. >> we were talking before the show started in the green room. off hell of a story. you were on the front lines of afghanistan and in the mountains. tell us briefly about your history in the army. >> that is true. i graduated from west point and
then the towers were vstruck soi found myself straight into combat and deployed seven types. >> thank you. incredible stuff. how did you find your way from that to a financial markets professional. you were with credit suisse and drexel hamilton. >> the transition was quite difficult. just like many veterans, it's the ability to sell yourself to a hiring manager and a lot of our veterans face the same challenges today to get their point across to the hiring manager for employment. >> you know, and i think you just nailed it. you look at somebody that serves in the armed forces, man or woman, it doesn't matter. it doesn't matter what branch. they come out, they're impressive. you know this person is focused and disciplined and has maybe put their life on the line, but when they try to ex plplain the exact skill set it can be difficult. >> the skill set is hard to get across the table but what i noticed since i left the service
until today, the ability of wall street has really come together. some of the initiatives in hiring veterans. and they're starting to learn the skill sets of the veterans. we know that veterans make good leaders. they work well in teams. they faced adversity overseas in combat and had to adapt and overcome and they're men and women of integrity and that makes an excellent employee. >> so how do you guys help at drexel hamilton? what do you do? a veteran says i'd like to become a financial professional. what do you say? >> obviously they're not licensed but they come to us. we put them on our platform. we have a training program they rotate to the different wall street professionals we have at our firm helping us build our business and once they're licensed, we've been so successful at training these veterans, that once they do start to help us and become -- start to learn the business, they're starting to cherry pick
some of the global macro hedge funds. >> and you're away with that? >> we are. >> you don't want to lose good people but you want them to accomplish their goals? >> drexel hamilton is up to 65 veterans hired all time. on our platform we can only handle so many. we'd like to hire them all. we hope there's ten firms like ours but after we get them through the pipeline and they get hired away, we applaud that effort. >> three bronze stars. >> that's correct. >> thank you. >> it's a privilege to serve and we have to thank all our veterans on veterans day. >> absolutely. up next, the world has a new fourth richest man. the reason his stock is more than doubled in the past year. it's hitting new highs right now. the man, the name, the company all ahead, about you first we're entering some dangerous waters apparently. tyler mathisen is live at the iconic d.c. conference. tyler? >> want to swim with the shark? we have a shark here. i'll be joined by kevin, mr. wonderful, after this.
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tank" investor kevin o'leary. good to be with you. we had fun on stage earlier. we didn't get really to this topic, but i know it's one that is front of mind for you, and that is the valuations that you're seeing in the market, especially for some of those stocks that we call unicorns, the airbnbs, the ubers and so forth. >> here is my thought on it. jen time you talk to one of these jefeinvestors, they claim chance of dilution is negligible, if it's a down round or comes public lower value they're protected. here is my thinking. if you take all of these deals and i don't want to be a skeptic, and you said tomorrow we have to clear the market of all of them. in other words, they all have to go public at the same time, the uber, the snapchat. any of these deals raising money as if they were public already and yet they're private deals i think we're going to have a really big problem. >> there's not enough capital to
chase those valuations. >> well, it's a different problem. and here is what i think is happening. i'll give you something you can test, tyler. you remember cyber security as a category was extremely hot last year, and the companies involved that were public that we can measure every day traded at as tro nomcle pes. so the many companies are doing the same thing, i don't want to pay 80p. how about 50p? that whole sector has taken a massive correction. when we start to take snapchat and uber public at the same time and try to figure out if investors want to pay those multiples, we're going to be -- >> how about the vulnerability of some of those companies? is uber impregnable? it seems to me that they could get ripped off pretty easily. there's lyft, there are others. >> i'm an uber customer.
i don't own the stock. i would never pay these valuations for it because i'm more disciplined on volatility and yield i care about, but just recently when i was in the city and often you get a surge and the doorman was there. i was calling an uber and i got a surge and he said why don't you just get lyft. i didn't even know what lyft was. i downloaded it in a minute and a half. i was agnostic. i didn't care i had a lyft guy picking me up or uber guy. i thought to myself, whoa, whoa, whoa, i'm not brand loyal. i just need a car. so in every city i can see one or two or three competitors coming in. i'm not saying uber won't be rock stars in terms of earnings but why would you pay $80, 90, 100 years worth of earnings and not have a return on capital. >> let's go go to your preference for buying stocks that pay dividends. why? >> what i have learned as an investor now for 30 years and
experiencing this myself, a new element has come into my equation in the way i look at the world and it's called volatility. i have lived through '08, '09, watching 30%, 40% declines in my assets in bonds and stocks. now i covet stability or low vol volatility. if you look at the whole s&p an you only buy the dividend payers agnostic to sector, you have % 20% -- you can't sell me a stock that doesn't pay a dividend. now i'm putting tests on the balance sheet. i'm agnostic to sector. one of my biggest p esgest posi m mobile. i'm going to play it for recovery. for example, i just exited apple. a company i have owned forever when i started to see deterioration on the balance sheet. instead i went into microsoft and have been rewarded heavily for that because my rules have no emotion. that's why --
>> you have to have that discipline. knowing what and when to sell is probably more important than knowing what to buy. >> if you partner with an index, they set the rules, there's no emotion, the decisions are made. >> great to see you. >> always a pleasure. >> thank you. enjoyed that line last night. o'leary wine. great irish wine. >> that shameless self promowing, thanks, tyler. >> it's shocking kevin has a wine named after him. i just randomly found it on shore shelves. amazing how that happens. tyler and kevin, thank you. >> and it is good. >> thank you. all right. the oil market set to close for the day. let's go to jackie deangelis at the nymex. how are we looking? >> good afternoon to you, brian. a 3% drop in oil prices on the day. we closed at $42.93 off the session lows but the main issue was that inventory number from the api last night. 6.3 million barrel build setting us up for the report tomorrow.
the five-year average shows at this time we should be seeing a slight drawdown. that's why the 6.3 million number really rattled the market today. pricewise, we're testing the low end of the band that we've been in. if crude starts going lower, making lower lows, we could see the 30s again. people are talking about it. the strong dollar certainly not helping. a little lower today but the dollar index still over 99, brian. >> all right, jackie d., thank you very much. let's go to sue herera with your cnbc news update. >> thank you very much, brian. here is what's happening at this hour. thousands of people marching through kabul to protest the killing of seven ethnics reportedly by the taliban. protesters chanted death to the taliban and called on afghanistan's president to resign. the victims were found partially behe beheaded. india celebrating the festival of lights today, one of the most important festivals in the hindu calendar. that symbolizes the triumph of good over evil and is celebrated
by setting off firecrackers and lighting lamps around the home. a storm system that dropped a foot of snow in the rockies and five inches in denver is making travel hazardous as it heads east on wednesday. it's expected to affect more than 36.5 million people from colorado through ohio and from texas through michigan. and stephen colbert has landed the coveted post super bowl time slot on cnbc this i went -- cbs this winter. the first time that distinction has gone to a late night show. and that's the cnbc news update. coming up on "power lunch," the bull run catapulting one tech ceo into the world's fourth richest man. that story when "power" returns. the only way to get better is to challenge yourself,
we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. if you like lists and i'm told everybody does, if you're following the list of the world's richest person, the fourth richest person is a guy everybody knows thanks to the bull market. >> earlier this year jeff bezos ranked a low le 15th on the global list of billions but over the past six months he's added $28 billion to his wealth. he passed michael bloomberg and
every member of the walton family, the koch brothers and eventually even larry ellefson. now jeff bezos has a net wort of $58 billion and he's the fourth richest man in the world according to bloomberg. forbes still has him behind carlos slim. they say slim is worth $59 billion. the top three hasn't changed, bill gates still number one, 2308d by ortega and buffett at number three but bezos has made more in the past six months than the entire net worth of carl icahn and jack ma. >> try to do the math. $58 billion. call that $5 billion a month, $1.25 billion a week. $250 million a day. do you remember the richard pryor movie "brewster's millions" and he had to spend the money but he couldn't. >> he likes building rocket ships and weird clocks that tell time for 3,000 years.
>> that money will never go away. you put that in a 2% bond and you're going to get hundreds of millions a year in relatively low taxes. >> it's all on paper. and it will probably all go to charity eventually. >> and then we'll all just keep buying like paper towels on amazon prime. robert frank, thank you very much. >> that list got us thinking how much richer could jeff bezos get or can amazon's stock get much higher from today's levels which in today's session hit a new high. aaron kessler joins us now. aaron, great to have you with us. you are bullish. off strong buy rating, $745 price target. if we are to sort of break up the company into amazon web services which is the faster growing component and then the retail, what sort of multiple should we assign these two parts of the business? >> yeah, so we have given the combined retail business about 2.5 times revenues on our 2016 estimates. on the aws space, eight times revenues. net that all out we're kind of
at a midsingle digit revenue on amazon. $745 price target. our bull case is $870 which gives aws closer to ten times revenues. >> it sounds like aws is the crucial part of the story when it comes to amazon reaching these lofty heights. if we are to think about 745 and beyond, aws has to continue firing on all cylinders, correct? >> yeah. right now it represents about 30% of our valuation so roughly a third. and in terms of operating profits, it's about 40% of our 2016 operating profits is aws as well. clearly it's driven the profitability over the last couple quarters and shown an improvement in the margins. >> at what point, aaron, do you think aws will be equal to the retail portion of the business in terms of revenues? >> yeah. revenues i think it will be a very long time. just the way revenues recognize obviously in gross versus net.
in terms of profitability, i think we could see profits on aws equal to the core business over the next two years. that said, the core business, core margins are still under represented. we think long-term margins for the core retail business could roughly double as well. >> thank you for your time, aaron. $745 price target on this stock. brian? >> well, if you want to know where stock prices are often headed, you should look at the high yield bond market. i know, it's a little bit wonky. but it often gives us a road map which means we could have a problem because prices from junk bonds have been falling. larry mcdonald from societe generale with us. you have been talking about this. what is the high yield bond market telling you about the state of the credit market and maybe about the direction of stocks? >> well, more telling than the high yield bond market itself is the high yield issuance market in terms of new issues versus investment grade. what we're seeing, and this is
the new issue market for selling bonds, what we're seeing is the biggest divergence we have seen since 2007 in terms of the investment grade market is wide open, and the high yield market is down 25% year-to-date and it's very, very tight. we heard a lot last year about covenant light loans and those are bonds issued with favorable conditions to the companies, and now the buyers, the buyers of the bonds are having more power. so that divergence between the investment grade market and the high yield market is very worrisome for u.s. equities because typically this happens just before a big drop in the equity market as well. >> do you think that's what we're seeing in the high yield market doing the same thing and signaling a future drop in stocks? >> you and i spoke and we saw this in terms of the bond trading in august, and defaults were on the rise.
bond -- the trading of high yield bonds was much weaker than equities. now, this rally in equities from the recent lows has been brilliant 13%, but if you look at the j & k etf or the hyg, those have materially rolled over in recent days and the same thing happened in the summer. we had the equity market was flying high, and really whistling by the graveyard and the high yield market was rolling over. yes, i think it spells trouble over the next 60 days for the equity market. the equity market may test the fed, in other words come up with some volatility and really put a test on that december fed meeting. >> is the junk bond market getting spooked because of oil and gas company woes or is there something else out there? >> well, the oil and gas companies, the dollar has made this vicious surge, 18% over the last year and over the last couple months -- over the last say 60 days it's up substantially again, up to 94 and 99 and around the world that
weakens emerging market economies and it's like a feedback loop. outside the united states there's $60 trillion in gdp. inside the united states there's $18 trillion. so as the global economy weakens, it comes back to the u.s. and that sets up a problem for the u.s. economy, that sets up a problem for high yield. >> larry mcdonald,s ocgen, thank you very much. appreciate it. >> it's been a tough quarter for the pure fund cyber security hack down over 11% over the past three months. we're talking to pure funds ceo about why the etf is lagging despite constant reports of cyber attacks against u.s. businesses. you're watching cnbc, we're first in business worldwide. 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.
welcome back to "power lunch." i'm melissa lee. tomorrow mark it's the one-year anniversary since the launch of the cyber security etf ticker symbol hack. they've gained 5% but year-to-date it's turning to the downside. the ceo of hack joins us now. andrew, great to have you with us. i'm wondering if you think -- if this etf is actually representative or well representative of the cyber security space? when i took a look at some of the holdings of your etf, for instance, juniper was the number one holding. how does juniper primarily a
networking company become the number one holding of the cyber security etf? >> well, the current holdings, once we rebalance the fund every quarter, it's based on the performance thereafter, so we're not rebalancing it currently every day. juniper wasn't the largest holding after the last rebalance which is quarterly, but the index is looking for companies that derive a high percentage of revenues from cyber security and are fair lly liquid themselves. >> what percentage of revenues would that be? what number? >> there's not a set percent for that but they do screen and they'll work with the investor relayings companies to find out and dig through the things that aren't necessarily in the earnings reports yet. >> what's going on within the space. there are clear winners and losers. when you look at the companies that primarily deal with cyber security, fireeye for instance is down 33%. that's way down in terms of the weighting within the etf. but then you have a palo alto networks up 44% over the past 12
months. there's some commentary within the fireeye conference call that there weren't that many emergency breaches in the quarter and that companies were moving more towards normalized security rather than just dealing with the habicks as the come. >> i think there's a lot of excitement going into cyber security especially around the time of our launch, the sony attack. each kind of major attack incident when it becomes public news, we do tend to see a lot of excitement into the space. but if you look back even two, three years, it's been a really strong industry, so we have seen some of those names pull back, and like you said, fireeye has pulled back but palo alto has done well. i think it's very difficult to pick in advance two these winners are going to be and the ability to use the diversified basket of 30-plus companies focusing on cyber security from around the globe, it's an interesting way to play this constantly evolving tri. >> we're going to leave it there. thank you for your time.
andrew channin of the hack etf. the new york state attorney general coming down hard on daily fantasy sports and a multimillion dollar market hangs in the balance. is daily sports fantasy gambling? that's a mouthful. we'll debate that ahead. plus, there's gold in the skies. there's also silver, iron, and tungst tungsten. new rules on, yes, mining asteroids. how could you not stick around for that? tanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.
welcome back to "power lunch." square has just wrapped up a lunch for about 200 would-be investors here in midtown. a hannah montana of them filing out with square-shaped booklets. we talked to a wide variety of investors, some who had questions. others who were going into today's meeting with the eye to short the stock, but at least one of those people told us he changed his mind. we spoke to others who wanted to lend their money to square merchants through square capital, which is their lending arm. we're told he did leave the presentation.
the company's cfo had a product there as well. there were no questions, though, about dorsey. there were no comments about the valuation, the lowball valuation of the company, although i'm told that those two might be related to questions. the company's path to profitability and on that latter topic, they did lay out a 35% target that they hoped to hit in the next five to ten years. >> thank you for bringing us that news. a big setback for daily fantasy sports. in fact, setback may be too soft a word. eric sneiderman ordering draft king and fan duel to cease business in the state. given that new york state is fan duel's cyclical biggest market, this is a gigantic blow. >> that's right.
it is their biggest market. they do 10% of their business here in the state. you bring up the right question. if daily fantasy is blocked, then what really is gambling? casinos say it's gambling because there is chance involved. they say this is a skill-based game. but skill versus chance doesn't matter. you can have one, you can have the other, you can have both and still be gambling or not. look at online poker. it has both skill and chance, but the country has brud lbroad defined it as gambling. i know you've got some opinions on this. >> i mean, listen, i play fantasy football like trillions of other people in the world. if you're on fan duel or draft kings and it truly is just a skill game, limit everybody to one lineup. the people i know that play it, they put like five or ten
lineups in. you know what that's called? guessing. >> well, they put in 200 lineups. there's a stat that says 1% of all the players are winning the vast majority of the products, but that's because they're putting in the vast majority of the entries. on a per entry basis, they don't have that much more skill than the average joe. they just have a lot of action in the game. >> maybe yahoo, eric. yahoo has been trying to build this business out, right? >> exactly. you see these yahoo commercials. they see how much money is going into fan duel and draft kings. they're thinking this is a billion-dollar valuation. think about how much a billion-dollar valuation would do for yahoo's stock. >> it's a big fight. it's beginning to be interesting to watch. fan duel's ceo out a few minutes ago saying we think the courts will agree with us. maybe the judge has a fan duel lineup. >> who knows? martha coakley, she ran for office in senate in
massachusetts. she lost. we'll see what happens. >> thank you very much. appreciate it, buddy. next, how do you stake your mining claim when your claim is zooming across the galaxy at 28,000 miles per hour? this is not a new "star wars" trailer. this is mining asteroid news. stick around. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason?
companies like plantory resource out of seattle build towards the goal of mining asteroids for precious metals, maybe frozen water. however, they cannot own the whole asteroid because that would violate international treaties. bigelow also launched legislation, though, for the moon that protects rights and provides boundaries. and speaking of asteroids, some people thought this may be an asteroid last week, and it was an unarmed try tan missile being launched from a submarine being tested by the navy. turns out the navy did two tests of two try dents. lockheed says the tests are part
of a -- demonstration and shakedown operation. commonly used to make sure a submarine is good to go and is deployed after an overhaul. lockheed is also providing nasa with the spacecraft which nasa hopes in about ten years to send astronauts to capture an asteroid, put it in lieu nunar . brian? >> jane "star wars" wells. thank you. "closing bell" starts now. hi, everybody. on this veterans day, welcome to "the closing bell." i'm kelly evans. >> we thank all of those in the armed forces for their service. you'll be seeing more of that later here at the new york stock exchange. retail stocks getting slammed today. poor revenue and guidance from macy's has dragged the entire sector down. we're going to discusshe