tv Power Lunch CNBC November 19, 2015 1:00pm-3:01pm EST
>> stay diversified. stay diversified. >> what's the most attractive area right now? >> you know, jeffrey was on the tape talking about a particular breed of investments which i think is very interesting, closed in funds. certainly they're trading a the a discount. you have some cushion there because of that in the case of a rate rise, but as a manager with closed in funds that are invested in credit -- >> right. >> -- a rising rate may hurt your net asset value but it helps investment managers reinvest the proceeds at higher levels. >> thank you for being here. "power" begins right now. scott, thank you so much. welcome, everybody, to "power lunch" along with mandy drury, i'm tyler mathisen. a big blow for obamacare. one of the nation's largest health insurers threatens to pull out of the public exchanges. the news taking down health care stocks. what now for the affordable health care act and what about
the sector? >> it is one of the biggest hedge funds in the world. a rare and exclusive look inside citadel's super secret risk center. and this is a shocking story you need to hear. isis setting up, yes, a 24-hour i.t. help desk for terrorists. how far reaching it is and the role of social media in the war on terror. we do begin with what could be a major setback for obamacare. united health shares are down about 5% as we speak with the insurance giant slashing its outlook and warning it may stop offering health plans to individuals through public exchanges established by the affordable care act. united health says it may exit the public exchanges by 2017 blaming continuing deterioration in the financial prospects of these individual plans. united health currently offers individual plans in 24 states covering more than half a million americans. well, as ty said in the headlines, this news is dragging
the other health insurers to the downside. >> let's get bertha coombs in on this story for more context. the question i would have is, is this a pricing problem for united? >> speedometer people might say it is. united health actually had sat out 2014 wanting to see what the market was like. today on the call they said they would have been better off if they'd never offered plans at all on the aca exchanges. robert is the president of health policy and strategy associates joins me from washington with reaction. bob, how big a problem is it for these individual exchange markets if united health pulls out because they can't make money? is this a question about united health not understanding this market or is it the market itself? >> this is not a problem with united health understanding the market. united health actually came into the marketplace a year late and waited for the blue cross plans and so forth to take the first wave of sick people, and united came in the second year hoping to pick up the healthy people that were left and they're getting killed, they're losing
their shirts. this is fundamentally about the business model and the insurance exchanges for obamacare. it is clearly not working. bertha, we've had half the co-ops go broke. there's a report from goldman sachs reported in "the wall street journal" this morning that says the not for profit blue cross plans by the end of the year will all be in the red because of obamacare. this is across the board in the industry. this is consistent with what i'm hearing from my sources in the health insurance industry. obamacare is just a big loser because the business model doesn't work. >> part of the issue, of course, is the fact that they have regulation to just how much they have to offer with these plans, how much they can spend on marketing them, the costs are higher than they expected. a number of insurance executives have said, listen, we want to talk and let's rejigger these plans. what really can the administration do to take off some of those regulations given that they're built into the law?
>> well, rejiggering isn't going to be enough. i think the first thing the obama administration has to do is to stop spinning this as a success. i mean, we've got the whole litany of problems now. it is clear the business model doesn't work. the administration has got to get out a public denial and say we've got some serious problems here and we have to fix it. just like when the system crashed when this thing launched, when the information systems crashed early, they have to admit this is crashing now and it's got to be fixed. there are some things the obama administration can do with regulation, and i am sure that one of the reasons united and a number of other companies are making noise now is because they want them to deal with this before the 2017 plans are done. so i think we're going to see some negotiation and easing the regulations, but that's going to be jiggering around at the edges. we're going to need some fundamental changes to obamacare to make it a sustainable system. >> all right, bob, thank you so much for joining us. mandy? >> thank you very much, bertha coombs. despite today's big drop, united health shares are still up about 9% this year.
joining us now is sara james. sara, you remain very bullish on the stock. you see about 30% upside from here. why are you not concerned about today's news? >> i think about the exchange issue as being more small tailed in nature. there are certain things they could do and that the government could do even within a few months that could improve the situation. they could cut back on how easily waivers are being given out. they could look at enforcing the individual mandate, and also insurers are starting to provide new data that will help them have conversations about how to improve the mix of the exchanges as well as making sure people are paying a full year of premiums for getting a full year's worth of health benefit. on the united side they have other positive aspects going. they have improved how they've priced medicare advantage. their i.t. business is growing in top line and margins. part of that is from the phase
in of icd-10. part of it is a recent acquisition and they're seeing a lot of growth in the international business where they have put in a new pricing policy and are continuing to see margins growth. there's still a lot of room for united to grow and the exchange issue is one with the government's help could be adjusted to some degree in 2016 and haem can be addressed further by the company in 2017. >> do you see any implications on the broader sector, some of the other insurers such as aetna, anthem, humana, cigna, might any of those start to talk about exiting the public exchanges in 2017? >> we've started to hear other companies talk about pulling back their marketing efforts, broker commissions, and rethinking how they're going to approach 2017. i think it's a broader market issue, the fact that there's too high of a mix in the exchanges is really something impacting everybody, but i think there's a couple companies that really have been hit too hard today. while they have some exchange
exposure their mix is a little different. they're higher subsidy. they don't have the platinum plan where some of the issues have been happening. so when i look across the board, we do think that there's potential risk for aetna and anthem. >> thank you very much, sarah, for joining us today. great stuff. over to you, ty. >> thanks, mandy. shares of square up 47% on their debut this day. the mobile payment company pricing well below the ipo price range. square's ceo jack dorsey on "squawk on the street" earlier today kind of evading questions about tech valuations right now. you be the judge.ifications for? >> i don't know. >> you'll admit you're a test, yes? >> i don't know. i'm not an economist. we have an economist on our board, larry summers. you should ask him. bring him on. >> all right. maybe we will. so just how important is square for the other so-called uniforms? carl's question there, those billion dollar tech startups
looking to go public. bob pisani with some thoughts. >> jack dorsey might not have wanted to answer the question about whether square was the canary in the coal mine but i'll answer it. heck, yes, it was. and there's a big sigh of relief. look what's going on. remember, the price talk was $12 for square. they priced it at $9, a 25% discount. it opened at $11.20, currently trading at $13. tyler, if this stock would have opened at $8 instead of $11.20, you would have heard bodies dropping and cranes stopping all throughout silicon valley because other unicorns were watching very carefully about valuation. i'm talking about companies like pinterest, for example, snapchat, dropbox, airbnb, even uber potentially. they're sitting out there for 2016 considering the possibility of an ipo. if this would have been a failed
ipo, not just pricing at $9 but opening at $8 and moving to the downside, there would have been a lot of reverberations. so far that's not happening. we had some other ipos. match is not quite the intensity because it's a spinoff but they did price and price at the low end of the trading talk, $12, $12 to $14 was the discussion. finally i want to tell you something. remember twitter the first day? it was up 72%. so it broke its ipo price a number of times since then. so one day does not an ipo make, but so far at least looking very good. back to you. >> bob, thank you very much. officials now say the mastermind behind the paris attack is dead, killed yesterday in that raid in st. deny, and new raids on terror suspects have taken place today in belgium. we'll go live to paris for the latest news from there. plus, this is an incredible story you need to hear.
isis setting up 24-hour help desks for terrorists. how far reaching is it? the role of social media, we will explore that. you're watching cnbc, first in business worldwide. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours.
suicide bomber who blew herself up yesterday during that raid on the paris suburb st. deny. michelle caruso-cabrera is live in paris with the latest. hi, michelle. >> reporter: high, tyler. we know her name, her age, and what her alleged relationship is with the attackers from friday night. she is 27 years old. the associated press says she's the cousin of the man who police believe organized friday's attacks. belgium media says she posted this photo on social media. we also have audio of her voice which was recorded by a neighbor during yesterday's massive s.w.a.t. team raid. listen to her as she has an exchange with the police.
that piece of video was obtained by french tv station tf1 soon after this exchange, she he detonated a vest loaded with explosives. we have learned some of the horrible and horrific details in french media. french newspaper la figaro quoting one of the members of the s.w.a.t. team raid said after she exploded the bomb, her spine landed on the police car in front of the building, and that's why it's taken them so long to i.d. the dead bodies that were in there, because it was so violent a situation. guys, back to you. >> all right, michelle. really a horrific story and obviously an incredibly violent assault yesterday involving some 5,000 rounds of ammunition and obviously heavy ordnance as well. isis using a high-tech tactic to recruit more
followers, launch attacks, communicate. it's a so-called 24-hour jihadi help desk. everything from using encryption for secure communications to changing location data for online postings. joining us is someone who has been researching this jihadi help desk for the past year. aaron brantley is a counter terrorist analyst at west point's combatting terrorism center. mr. brantley, dr. brantley, welcome. good to have you with us. tell us about this so-called help desk. does it exist in one place? who are these people and how are they doing what they do and why don't we shut them down? >> well, it's not just one help desk per se. it's a decentralized series of platforms around the world using multiple different types of platforms, multiple difference types of encrypted programs, multiple open programs and it's run by a large number of people around the world in a very decentralized fashion. >> how do we know it's around the world and not just in raqqah, syria. >> we can see the times in which they log on, the times in which
they sign off. a lot of their comments and things indicate different locales and different locations and my co-author and i have spent a year researching and being involved in passively watching how they engage in these operations. >> why can't we shut them down? >> it's a little bit more difficult than just shutting them down. we are literally watching multiple different systems go on at the same time, so it's kind of like a whack a mole game. when we develop a capability to shut down one, they move to the next. >> how do the terrorists in the field in brussels, in st. deny, how do they know the addresses, where to go to find these help desks? >> so essentially it works by a funneling process. you start with social media and start funneling people into specific forums and from the forums they get funneled into more privatized chat groups, and from there they get into more invitational peer-to-peer
encrypted communications and along the way they get enhanced cyber security training in a variety of platforms. >> it appears -- let's state the obvious -- that terrorists have gotten a heck of a lot better in the past couple of years at what you might describe as operational security and basically i would describe that as going about their business, their lethal business, undetected. how much better are they than they were two years ago, and have we kept up, been able to keep up, and if not, why not? >> so i think they definitely have shown a willingness to innovate and educate themselves over the last year. we've seen a progressive development in their skills and capabilities, and at the same time we also keep up with them quite well as you can see that our report is basically done through open source collections. we've done a lot of time laborious efforts to get into their communication streams. so there is definitely a way to get in without breaking encryption or doing a lot of the
other things. >> we just showed some of the popular questions that are asked, can i run skype through tor? what's fotor? >> it's a series of protocols that is most commonly referred to as the dark web, also known as the onion network, a series of layers. as you enter this, your ip can be changed, your traffic is routed through different nodes and you can change various identifiers of your computer. >> i know we'll want to come back to you soon, i hope you will be available to us. we appreciate it. >> yes, sir. >> we thank you. >> fascinating and chilling at the same time. thank you. it's one of the biggest huge fun hedge funds in the world. kat kelly is live at citadel's super secret risk center. >> thanks. i am in chicago with paul hamel, the head of the fixed income business at citadel securities. he was hired in january.
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welcome back to "power lunch," everyone. i'm sue herera with this news alert. a judge has sentenced former subway pitchman jared fogel to 15 years and about 8 months in prison for trading in child pornography and having sex with underage prostitutes. he agreed to a plea deal back in august after authorities raided his suburban indianapolis home
in july. the 38-year-old admitted paying for sex with girls as young as 16 and receiving child pornography produced by his charitable foundation's former director. so once again jared fogel, the former subway pitchman, sentenced to a little bit more than 15 years and 8 months in prison. mandy, back to you. we'll have more on this in the news update in a few minutes. >> thank you. well, the chicago firm citadel is best known for its $25 billion hedge fund, but it also runs a huge market business. here to talk about the newest developments there is paul hamill who runs the bod's trand trading arm. kate kelly is live at the hq in chicago. tell us more, kate. >> thanks so much, mandy. we're here in the risk center where they monitor markets and their own exposure in real time. i'm here with a man focused on issues like this with his fixed income business relatively newly
created. we've seen a number of disruptions in the last couple years to stock trading and even treasury trading in electronic markets. that redates your involvement as a market maker but nonetheless, what's going on here? is this something broken with the liquidity or the structure itself? >> i wouldn't say anything is broken. markets overall are undergoing major structural changes. they have been for several years. the derivatives market in particular post-crisis we have seen a number of reforms aimed at reducing systemic risk, reducing complexity, and increasing transparency. thoet reforms are healthy but they're big and impactful and they require adaptation. in addition to that, we've seen a lot of the traditional -- a handful of banks for most fixed income products pull back from the product. there's a lot of new engines coming into the market. that transition isn't always smooth. there's a lot of change happening this in market. >> in terms of citadel's involvement, you started in
earnest earlier this year. you're number one in interest rate swaps. how did you do it so quickly? >> we have a very, you know, strong, credibility background in market making. we're a large market maker in retail equities, equity options, futures, treasures. so by no means is this our first outing in market making. the market has changed. things like central clearing are incredibly important but it's also important to realize this market you still have to compete along the same basic terms of any commercial business. we've had to find a way to differentiate ourselves. there is clearly a huge demand for new sources of liquidity and to feed liquidity into that we looked at ways we could differentiate ourselves. we're the first to provide 100% live liquidity. that's unheard of in this market and it's a revolutionary experience. we're the first to stay on the screen with live markets in all market conditions. so, again, that's a very
differentiating feature. most investors are used to a swap market where in active markets and fomc, prices fall off the screens and it's hard to trade. >> speaking of that, is the market prepared for a rate hike in december technically? is that something we can do without another major disruption? >> yeah, i think the rate hike has been well telegraphed. we had a number of volatile days through the course of the year. june 3rd, september 18th was one, where i think the market structure has been battle tested. i do think, you know, two-way flow, increased volumes is are what flow market makers want. we will step up and do what we do best in that market. i think others will, too. i think some investors will realize that the sources of liquidity that they traditionally expected to be there have shifted and they're no longer necessarily there, but overall in the market i think the supply of liquidity required will be available. >> paul, i'm afraid we have to stop there. thank you so much for joining us. back to you, tyler and mandy. >> thank you very much. we're going to bring it right back to chicago where rick santelli is tracking the bond
action at the cme. hi, rick. >> hi. and the action isn't aggressive but maybe a little range change going on. two-day of 10s clearly shows the more work we do under yesterday's settlement, the better chance we have to not make this in the fifth day we're in a closing range of 224 to 237. 10s are down 2, 30s are down 4. it highlights how the 30-year has been a big part of the flattening of the yield curve against 5s especially. if you look at a 2-day of 30s, a couple things should jump out. first is we're about to maybe close under 3%. last time we did that was wednesday the 4th of november, so a little shy of two weeks, and if we continue to monitor what's going on in the dollar, nothing sums up the activity more than how it didn't make a stab at 100. tyler, mandy, back to you. >> thank you very much, ricky. remember all those fears about russia? well, russian stocks have now
hello, everyone. i'm sue herera, here is your cnbc news update at this hour. as we told you, ex-subway spokesman jerald jared fogle has been sentenced to 15 years and 8 months. he also agreed to pay his 14 victims $100,000 each in restitution. a study by pew research centers finds more mexia iaia i leaving the united states than coming in. more than 1 million mexicans left the u.s. for mexico from the years 2009 to 2014 while
only 870,000 came into the u.s. reuniting with their families and the sluggish u.s. economy the major reasons why. the fda says genetically modified salmon is safe to eat and can be sold in the u.s. it approved aqua bounty technology's application for its salmon which is engineered to grow faster than usual. and parisians are refusing to allow the attacks from interfering with one tradition. the beaujolais region says this year's product is the best yet this century. thanks to excellent grape-growing weather. on that note, that's the cnbc news update at this hour. ty, back to you. they are raising their glasses in defiance of terrorism. >> good for them. let's go to julia boorstin now for a quick news alert about
ade adele. i will say hello, julia. >> that's right, tyler. you won't be able to stream one of the hottest new albums of the year on spotify. it's adele's first release in nearly five years. a source close to the situation telling me adele's representation has reached out to digital services to say the new album will not be available for streaming. only for purchase, for downloads. adele follows taylor swift who pulled her muse friri music fro last year. leverage their direct relationship with their loyal fans. this follows the first single from the album selling a record, more than 1.1 million copies in the u.s. in its first week and the video drawing more than 400 million video views since its launch last month. billboard reports the album is expected to sell about 2.5 million copies in the first week. that would make it the biggest first week for any new album in 15 years since 'n sync.
few artists have the fan base to pull away from popular streaming services. we reached out to columbia records which is releasing the album in the u.s. and they said no comment. >> she sure does have clout. thank you very much, julia. let's take a look at what russian stocks are up to. moving to a new six-month high. seema mody joins us with that story, just quietly been off the radar and then, boom, look at the rally so far this year. >> it's really incredible. a strong rally in russian markets this week has been driven by this growing possibility of much closer cooperation between russia and the west to solve the ongoing conflict in syria. more cooperation could lead to an easing of punishing sanctions along with plummeting oil prices have crippled the economy. stribss s strategists say if the western leaders along with putin can find a common sanctions could be
lifted. russia may be upgraded if economic and financial developments would improve. and some of the metrics have. fx reserves have stabilized in the past six months and total external debt has fallen $200 billion since mid-2014. but an improved political situation alone will not be enough to turn around the economy if the price of oil does not turn around hovering around $40 as we speak. >> stoux are positicks are posi month of november, where should you put your money? joining us is jeff carbone and mark travis. gentlemen, thank you very much for joining us. you know, if you look at the year-to-date tally for the three indices, it's pretty uninspiring, isn't it? i guess you have to dig deeper to get opportunities. jeff, within the large cap growth names, where are you
finding that opportunity? >> yeah, right now for us at cornerstone we're really looking for large cap financials, health care, consumer discretionary, and technology are our four favorite spots. especially as we know, as we're pretty goes to liftoff with the fed reserve as we see in december, financials, and insurance companies should do well, but also consumer discretionary as consumers are out. december tends to be a great month in the fourth quarter, and also health care. we're finding some great values in all those sectors. >> jeff, i would imagine the financials would be pretty disappointed if the fed does not lift off in december. would you also argue that the entire market now that it seems to have just suggested the fact we're about to have liftoff and taking it in stride, would the entire market be disappointed if there is no hike, that maybe it's a signal things are not as good as we had hoped? >> i think we'd be damned if you do, damned if you don't situation that many are talking
about. because we've seen in september when the fed did not give us liftoff as we were hoping, market reacted negatively into the month end and then october positive came. so i think the december fed meeting, if we don't get it, i think we're going to see disappointed investors. and the market is pricing nicely with the expectation of a fed hike. >> mark, you like the small value companies. first question is why and secondly how hard is it to find value at the moment? >> mandy, i sometimes ask my question why as well. mothers don't let your sons and daughters grow up to be small cap contrarian investors. all kidding aside, i think there are interesting businesses with very defensible balance sheets. as rates rise, it definitely will stress businesses that are levered, and two of the names i'm looking at that we own today, american science and engineering has about 30%
capital structures and cash as well as fiber net. american science and engineering is certainly going to be more popular with what's unfoferl happening in paris and around the world. their backscan technology is great looking at cargo, vehicles, trying to detect people coming in mexico. i find it interesting they're actually leaving to go back. >> right. >> shows you kind of the state of our economy i think. and then fabrinet is an optical outsourcer in thailand. they've done well as far as their share price. a lot of cash and investments in both cases and no leverage. >> still a deep valuation even after a 30% run to the upside? >> not as much. it's not what you make but what you keep. so as a large fund shareholder in our fund complexes, i don't like to pay taxes so i'm trying to be mindful of that, and it's
got a few bucks to go in my opinion before it reaches valuation. it has done well this year and american science and engineering not as well but y're paid to wait with a 4.9% dividend. >> sure. >> so i think that those are things that will endure whatever environment we have. we obviously i think the tail end of a long bull market, almost seven years. we'll see. >> getting long in the tooth, isn't it? american science and engineering for the record is down 20% year-to-date. thank you very much to both of you for joining us today. you can go to powerlunch.cnbc.com to see more picks from jeff and mark. tyler, over to you. >> mandy, oil prices set to close in less than an hour. right now oil is still hovering right around $40 a barrel. so will that price hold? plus, the "power house." >> the city in today's "power house" is home of the sixth busiest airport in the world. it boasts more than 300 museums
and 113 accredited colleges and universities. can you name that city? i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.
welcome back to "power lunch." household debt rises to its highest level since 2010. that's according to new numbers out this morning. steve liesman is here and joins us with more on what does this mean for the economy? >> well, it is potentially a good sign. people are feeling more comfortable to borrow, but i want to look inside the details of the borrowing to show people where there's signs of green looks good, yellow, caution, and maybe red some real problems that are brewing. let's look at what mandy was talking about, household debt is at the highest level since 2010. we've come way off the peak and we're rising again. you know that the population has grown in this time so per capita debt is pretty much flat, about 2006 levels. let's take a look at the three areas we care most, housing, autos, and student loans. housing looks pretty good. we had a surge in mortgage
originations. total debt is up $144 billion but look at the delinquency rate, 90 days-plus, 2.3% and falling compared to the second quarter. this is third quarter data, by the way. that looks pretty good and a decent sign, mandy asked about the overall economy, a pretty good sign for housing. here we go autos. above a trillion dollars again for the second straight quarter. up $39 billion. i make this in yellow because it's something to watch for. it doesn't look like we have a huge problem with default rates. you can see -- delinquency rates. a little bigger than housing and no change from the prior quarter. something worth watching and then that perennial problem area here, student loans. up $1.2 trillion, now up $13 billion. pretty much average strong growth that we've had in there, but look at the default rate, 11.6% and rising. so three areas, the housing numbers look pretty good to me. i think it's a good sign for the
economy. people feel -- and these mortgage originations are good. the auto loans, they're selling a lot of cars. we don't have a big problem with the default rates but the numbers look like they're getting to a place that something needs to be at least monitored and the student loan is the perennial problem here where that the default rate is very high and rising. >> are those numbers total outstanding debt? >> that's the total debt level and the change underneath it and the 90-day plus delinquency rate, sir. >> thank you very much, steve. time for "the power house" home to the sixth busiest airport in the world, we're talking about los angeles. with us josh altman. we're not going to show you anything at the median. 490 grand is the median. inventory 3.7 months. average days on the market about 6 weeks, 42 days. first listing, let's go to 100534 a encanto drive.
four beds, four baths, 3500 square feet of living space in sherman oaks which is where? up in the valley? where? >> yeah so this is in the valley south of the boulevard. this is low-end for what we're handling. priced that at $500 a foot which a lot of people start on the l.a. side and they realize for a million and a half, $2 million i can't get much. let's start looking in sherman oaks, encino, tarzana and get more bang for your buck. >> and this is obviously a brand new -- it's a contemporary home it would appear. lots of glass, lot of very brand new modern finishes. let's move to our second listing at 8650 franklin avenue, another contemporary. this will cost you $6.995 million. taxes about 69 grand. four beds, four baths. a little bigger in square footage. tell me where this one is and why you like it. >> yeah, so this is in the hollywood hills. this is one of my buy it if i cd it. it's got a postcard view of
downtown. it's on a double lot, beautiful pool. this is newer construction. state of the art everything. and this is really something that, you know, a guy in a movie who just made a big paycheck wants to buy, a nice bachelor pad. four bedrooms completely tricked out. everything that you would expect in the hollywood hills. real sexy house. >> that looks like that shot they always take this all the movies and tv shows looking down from the hills on the skyline of l.a. all right, folks. you want to get green with envy, a little real estate porn here, 9200 swallow drive listed for $22 million. 219 -- the real estate taxes are 219 grand. seven beds, eight baths, 8300 square feet. that is a showpiece, josh. >> yeah. so we don't worry about taxes when you're buying a $22 million home because you have so much money you just don't care. you see this year over $20 million there's been about 30
sales. really strong. actually lots of americans looking at this house, and then behind them you got the chinese, but this is the best of the best. this is 8300 square feet. i priced this at $2,700 a foot which is going to be the higher end that you're going to see anywhere in los angeles. but, look, this is when you are a mega, mega select, you want 14-foot ceilings, gym, movie theater, this is what you're buying. call me up. this is for sale and it can be yours. >> it can't be mine, i guarantee you that, josh. but it looks awfully nice. josh altman of the altman brothers. folks, it's been a great 2015 for the automakers as far as sales go, but that's not reflected in ford's stock price. so what is the company planning for 2016? there's a big union vote out there looming, too. we'll tell but it next.
2015 has been a very strong year for auto sales but shares of ford are still down 5% so far in 2015. now the company is showing off the new version of its popular escape. phil lebeau joins us now. hi, phil. >> hi, tyler. when you look at north america, things could not be any better for ford in terms of profitability and in terms of
sales and a big reason why is the escape, and now the company has a new version of the popular crossover coming out. we had a chance to look at it this morning on "squawk box." they're increasing production at their louisville plant. get this, that plant will build only the escape in the future. sales this year up 1%. doesn't sound like a lot but they're constrained by capacity. this is now the second best selling model in the ford lineup and in the new one they're adding even more tech knee tours. >> it has sync connect. on your smartphone now you can smart it, unlock it, lock it, locate it, check the fuel, do all kinds of things remotely. >> that's not just with the escape. you will see it with more vehicles from ford and other automakers in the foo you tour. by the way, ford's uaw contract has a tentative graeme approved by the leadership but the rank and file at the current way the vote is going it's on schedule to be rejected. the vote, however, does go through saturday. there's a possibility it could be approved but as of right now it's heading towards a defeat
and again take a look at shares of ford and even though they have had a great year in terms of profit margin and in terms of sales in north america, the stock just has not gone anywhere. guys, this is one of two important stories. the other one coming up in the next hour of "power lunch." do you not want to miss this, a first on cnbc interview with alex dejuniac with air france. we'll be talking to him about the challenges they're facing right now coming up next hour of "power lunch." >> 2:15 p.m. eastern. let's get to eamon javers with breaking news. >> let me give you -- bring you up to speed here on the syrian and iraqi refugee bill. they're voting in the house of representatives. they do have enough votes to pass this bill. this would require a halt in effect in the syrian refugee
program unless the heads of u.s. intelligence agencies and u.s. security agencies can certify that each individual immigrant is not a security risk to the united states. right now the vote stands at 283-129. that is well more than they need to pass this. interestingly, 46 democrats have crossed party lines to vote with republicans and just three republicans have crossed party lines to vote with the democrats. so right now 285-130 is that vote. it's likely to be defeated in the senate but we'll keep an eye on that as well. now we're going to go to a quick break so more "power lunch" right after this.
hey, everybody, i'm brian sullivan. coming up in the next hour, is obamacare in big trouble? one of america's biggest health insurers may be about to make a bold move. plus, what one big hedge fund is trying to do to force yahoo! to get a better shareholder return. and do you think oil is low now? you won't believe what goldman sachs is saying could happen to crude? all that is coming up as we're live from the nasdaq for a big second hour of "power lunch." >> you get around. let's look at what the markets are up. a bit of a blah day. the nasdaq is marginally higher
by nine points. the dow is also just marginally to the upside. not a huge amount of activity going on. energy is lagging, crude is down by 0.7%. we'll bring you the crude close in about 35 minutes' time from now, and wednesday's gains, so yesterday's gains put the dow and s&p and nasdaq into positive territory for november so on top of that, marginally we're still, of course, holding a positive month to date. let's take a look at gold see what that one is up to. the dollar is a little on the back foot today, but let's see whether or not it's helping gold. at the margins it is. up by 1% at $1,078. it's up by 10 bucks. we're also only about a week away from black friday, so we'll be watching what's happening with the are he tail stocks there. do we have any other boards for us? let's take a look. let's get to dom chu and find out more about what's happening just one week away from black friday and which stocks maybe you want to buy with hopes of
having a little extra shopping money in your pocket. dom chu, which retailers are we watching? >> we're looking at historical data over the last ten shopping seasons. we're liking at the five days leading up to what's happening with black friday. now, on average you can see here, we looked at members of the etf that tracks these retail names, the spdr retail etf, the ticker xrt there. if you look at the average returns during those periods, shares of tiffany you can see there have traded up 90% of the time. that means 9 out of the last 10 holiday shopping seasons leading up to black friday. those five days tiffany wins here. 90% of the time up about 3.5%. also check out shares of amazon.com, up by about 4%, and they're up 8 out of the last 10 holiday shopping season leadups and then expedia and costco also outperformers as well. as you look at what's happening with the retailers overall, some
of these have experienced some seasonality in just the five trading days leading up to black friday. it's one of those indications that perhaps some traders will look at if they think history is going to repeat themselves because if you take a look at those retail stocks, we know this is going to be a big part of the holiday shopping season. we know that this is going to be one of those occasions where retailers will be in focus for traders and investors, especially during this busy holiday shopping season. that's one of the reasons why many traders will be keeping a close eye at least on what's happening with many of these types of stocks, especially the likes of tiffany, again, costco, some of the names that really outperform and have done so consistently at least over the last ten years. of course, we know history is no guarantee of what's going to happen in the future. still, for those looking for patterns and historical backup, those are some of the companies that could be among the winners if this holiday shopping season plays out like it has over the last ten years, guys. back over to you. >> i don't know whether you have heard or seen any commentary to the effect because of the heightened consciousness of a potential future terror attacks,
dom, whether or not there might be the impact on mall traffic, places of congregation of a lot of people. >> there could be. there will be studies coming out whether or not that kind of affects things. right now there's already an expectation for many people about perhaps this shopping season may not be as robust. we heard some of that news this morning out of best buy saying perhaps this quarter's results saleswise may be a little below what they were last year, but really the mall traffic pattern will play out over the next few weeks. what's going to be a big data point is what's going to happen this coming week with black friday and whether or not that foot traffic and those sales patterns kick things off the right way or whether or not they set a bit of a more negative precedent for the rest of the season. >> dominick, thank you very much. that will do it for the first hour of "power lunch." >> we'll head over to manhattan and all the way into times square and the nasdaq where we find brian and melissa for the second hour of the show. brian? >> all right, mandy and tyler, thank you very much. just about 11:00 a.m. in hollywood, california, and 2:00
in times square. dow is struggle to find direction. goldman sack making a very bold call on oil. hi, everybody. me melissa lee was nice enough to let us in her house today. >> welcome to the nasdaq. now you know what the digs are like here. there's a lot of tech news today whether it be yahoo! or the listing of match and we have a lot of big tech movers on the indices, apple, microsoft. >> and qualcomm, we'll dig into that because that's been a piece of not good news. >> yeah. >> since we're at the nasdaq, would not start with one of the biggest technology companies in the world, although smaller than it used to be, and that is yahoo!. under pressure after a letter was sent to yahoo! urging it to cancel the planned spinoff of alibaba. it adds to the mounting pressures on ceo marissa mayer. the stock a big underperformer this year down 35% and it's been a soap opera of drama for the company this year. they undergo what's a bit of a
brain drain. several key executives announcing their departure in the last couple months. yahoo! also hiring mckinsey as it reportedly mu lly mulls a ma reorganization. yahoo! stock has more than doubled since meier toy maier t he helm. >> let's bring in collin gilles and our very own jon fortt. what would the cost be if this doesn't do tax free and yahoo! proceeds with the spin. >> we need to have this spin happen one way or the other to get the core value of yahoo! to surface. what would happen in terms of the tax implications is anywhere from 45% of the al ibaba stake.
>> very important in this whole thing is the role of starboard. it had been important in the actual spin plan and now it's raising some questions about it. i'm wondering according to your reporting how important is it that this major shareholder is actually saying hold off. let's look at other ways. >> well, it's not clear, melissa, how much power starboard has at this point to influence the outcome yahoo! management arguably outmaneuvered them by getting them not to pursue a seat on the board. it's interesting what they're asking yahoo! to do is do the spin a different way. it's like they're having trouble separating siamese twins here trying to figure out how to do it with minimal damage. they're trying to get yahoo! to spin off the core business instead of the asian assets. now, collin argues it's too late for that.
i'm curious what the mechanics would be. i'm no expert in canceling a spinoff and trying to do it a different sort of way, but if anything, it highlights the pressure that's on yahoo! after last quarter's earnings which didn't show the needle moving to the degree that investors wanted. that display advertising business which is under pressure in the programatic atmosphere. growth from mobile, from video, from some of that native advertising that that surprises that strategy, that growth is slowing down, guys. >> the maven strategy. collin, you said unlock the core value of yahoo!. what is the core value of yahoo!? >> and so the thing is two years ago you could have taken the yahoo! assets and spun that into aol. that's something that made a lot of sense. they're really the exact same companies, display advertising
company. that option is obviously gone now with the verizon acquisition of aol. what you want to do is you've got a fairness letter opinion from a top lawyer. keep going down this train. get rid of that alibaba asset, spin that out, and then the fair value of the business, i mean, we put a four multiple on it and we we have about $4 billion of ebitda. there's ample room for that to increase and that's the bit that will become exciting in 2016 but i'm not sure if this is the management team -- >> bottom line collin, before we go, is it a buy or sell or hold? >> it's still a buy. >> collin, thank you. jon fortt, good to see you. united health group shocking everybody saying it's evaluating the viability of the insurance exchange product segment, end quote. cutting their profit guidance as well in part because it is claiming it cannot make money under the president's health
care law. this as more customers are claiming deductibles are becoming so expensive they cannot pay them. steve, do we know why united health seemingly can't make money under the affordable health care act? >> yes. the real issue is the utilization of the membership from that risk pool, and united is not alone in this. we've seen other cautious statements from other managed care companies, and we've also seen the failure of a lot of the health insurance co-ops that were formulated around the affordable care act. united is not alone in these problems. >> you know, united has the luxury of being able to say we might not want to be part of this anymore, but the others, steve, do they have that luxury given that they want their deals to go through, anthem, cigna, aetna, humana, are they locked into accepting these losses on aca exchanges at least for the time being until their deals clear? >> interestingly enough, if you're losing money, it could create a scenario where the
regulators say, well, let's approve these deals, let them go forward because the industry is struggling anyway. relative to united, they haven't been a big participant in the consolidation of the health insurance industry. they have been more focused on acquiring different assets to diversify away from insurance, 40% of their operating profit is now from the optum segment so unite sd sort of above the fray in terms of consolidation. the other companies will be more impacted by that. ju >> let's say they leave obamacare. well, that puts more people on to other companies. so those people are unprofitable and they will now go into a fewer and fewer number of companies. will it be a downward spiral in terms of at least profitability for some of the ones that do not leave obamacare? >> it's a great question, and i think what has to happen is that the industry broadly defined needs to engage with the government and decide how to
provide the correct incentives for the insurance companies to participate in this -- in the exchanges because right now the for-profit companies won't participate unless there's an adequate return. they can take their capital and deploy it elsewhere in order to drive earnings and return to shareholders. >> so, steve, $500 million in losses in 2016 is what unh is projecting. based on that number, are you going to change your estimates for this year or next year for some of the other insurers? >> sure. we brought our numbers down today for united. we have not changed any of our estimates yet for the other companies with the exception of anthem which on their earnings call about a month ago did talk down some of the outlook, you know, for their exchange business, but keep in mind these insurance companies are very, very big and it's a mosaic in terms of how they put together their earnings growth for 2016. united will have a little bit of a headwind and by 2017 the
management team is committed to not lose money in this area. >> steven, we appreciate your time. thank you. >> my pleasure. thank you. >> everybody in silicon valley breathing a bit of a sigh of relief and probably some investment banks, too because mobile payment company square's ipo is popping. the question now, will square hold onto those sizable gains up 44% right now into the close. kayla tausche is live for us at the new york stock exchange. tay la? >> hey, brian. a lot of that relief is coming because there is so much green on that screen for square as it prices -- trades its ipo today. because the company priced its ipo below the expected range. that allowed the stock to rise and had the company priced the ipo in the range where demand from big mutual funds was weak and they had opened down and the selling would have continued from there but it's up and sharply up. i'm told they're focused on building a book of institutional investors. at higher price it is would have run the risk of having a hedge
fund heavy book that ended up flipping the stock. retail investors did get a shmal portion of the shares. about $243 million in proceeds bringing its cash space to about $400 million which ceo jack dorsey told us will be used to accelerate growth. he said he doesn't really see square as a bell wlwether for or unicorns but the fact is undeniable, companies may have misjudged what public investors may pay for their growth and their companies. the question for today, can square close above that ipo price? so far barring a big block sale, it looks like a good bet, brian. back to you. >> kayla tausche on square. we have an hour and a half left to go here. we'll find out how it trades. thank you. on deck, the latest from the ground in paris. plus, goldman sachs' big call on oil. wait until you hear how low they say oil could go and also why. and if the fed raises rates
next month, could the u.s. dollar actually fall? and guess what? since we're at the nasdaq, we have a mystery chart for you on this thursday. and it is a rather ugly one. stock down 34% this year. there's your chart. send your guesses to @melissaleecnbc only. we're back after this. 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.
to keep your monthly bill down and your energy savings up. don't let your neighbor enjoy all the savings. take the free home energy checkup. honey, we need a new refrigerator. visit pge.com/checkup and get started today. announcer: if you'd give thanks for a bette[barks]'s sleep... sleep train has just the ticket. [train horn blares] during sleep train's "thanksgifting" sale save up to $300 on beautyrest, posturepedic, serta, even tempur-pedic! get up to three years interest-free financing! plus, choose a free gift with selected mattress sets! but hurry, sleep train's "thanksgifting" sale won't last! ♪ sleep train [train horn] ♪ your ticket to a better night's sleep ♪ welcome back to "power lunch." an uneasy calm settling over paris as the city of light
begins to heal. let's get more on the story and the mood of paris with michelle caruso-cabrera. michelle? >> reporter: brian, i say the mood is a combination of somberness, defiance, fear in the wake of friday's attacks. let's start with fear. one example, french journalist last night riding the subway at 7:00 p.m. tweets out a photo and says i have never seen line 13 of the metro so empty on a wednesday at 7:00 p.m. normally line 13 we're told by parisian is packed like sardines but nobody was riding last night. parisians tell us they think there's a lot more above-ground task. they believe people have shifted their behavior, perhaps fearful of being in a crowded subway underground and have decided to move above ground. part of that could be because of what's being said in the national assembly today where they have been debating extending the state of emergency law which, by the way, prohibits crowds and people massing in
large spaces. for example the prime minister said we don't want to scare anybody, but we have gotten reports that they have the capability of biological and chemical weapons as well. so that could be leading to fear at the same time. now, that being said, there are people who are defiant and determined to go on. for example, today they continue to hold the celebrations for the bu ja lay nouveau. it's an incredibly big deal. and we interviewed the gentleman in charge of the launch and he said they were determined to go on. >> we decided to maintain the festivities because what happened on friday in paris in a way was an attack on french culture, on the french way of life, and we felt that the best way to restore from the terrorist attack is to show they will not change our way of life,
they won't change our values. >> reporter: what was a wonderfully heartwarming experience was to see the tourists out taking pictures of the eiffel tower as if nothing had happened. we've been here at the eiffel tower all day and we've been watching it all day, taking selfies. so in some ways things haven't changed. back to you. >> thank you, michelle, for that uplifting report. michelle caruso-cabrera in paris. tensions remain high across europe though following last week's attacks on paris, so what impact, if any, is it having on the travel and tourism industry. phil lebeau is live with one of europe's biggest airline operators. >> thank you. let's bring in alexandre de juniac. i think a lot of people are w wondering how much of an impact have the terrorist attacks had in terms of traffic you're seeing not only into paris but around europe? >> first of all, it has been a terrible event, and i want to
take advantage of this minute to thank all the american people who stand firm beside the french. thank you very much for everyone. these events will undoubtedly have an impact. it's a bit early to know and to have a precise estimate of this impact on our activity. what we see up to now is that we have more cancellation of bookings than new bookings, but we still have new bookings, and these reductions are true on air france but not true on klm, so it means there are still some reluctance to come to paris, but probably in the coming weeks it will fade away and we will recover and people will come again and as you were saying in your previous show, the main concern will be to know which wine you will choose probably. >> hopefully that's what people will be thinking about in a
couple of weeks. let me ask you about a couple incidents here in the united states earlier this week. you had two air france flights, bomb threats were called in. the flights were diverted. ultimately there were no bombs found on those flights. those people continued on their flight eventually. have you seen an increase in the number of bomb threats not only over the last month or two but let's say over the last year or so? >> no. in the last years we haven't seen any increase of significance in this type of threat. i'm not surprised a few days after this terrible attacks there are some people who are sending these kind of message. we cannot afford, you know, when you run an airline, when you run a business like that, not to take that into account and to take the appropriate safety and security measures. it's what we did with the two aircraft that had been diverted over the u.s. one to salt lake city and the
other one to halifax. >> earlier this year you were talking about and you proposed a dramatic restructuring. when that was announced to a number of your frank and file employees, the reaction from them where they came out and attacked some of your executives. these were dramatic pictures people were looking at. it raises two questions. first of all, does that restructuring need to be increased or become even more dramatic because of losses potentially increasing after these events and the slowdown in traffic, and, two, what is the status of that restructuring right now? >> first of all, for this year, for 2015, air france/klm will be profitable, and both air france and klm will be profitable, first of all. but it is not enough, and so the reason why we have launched a plan which is not only a restructuring plan, i would just like to confirm, it's a growth plan bplus savings. we have to make savings to ensure that the company will
grow on a growing market and will be able to develop many routes and destinations to eye sh asia, to north america, to africa. we are number one in terms of international network from europe and to europe, and so our future is to grow our network and to grow this network, we have to make savings. the reason why, we have a purpose. at the same time we are chasing growth everywhere on the planet. so second point, do we have to do these type of measures and does it trigger some difficult reactions? yes, it did. it is not the majority of air france employees. it's a very small minority of people who have done this
actions, this detrimental actions to the image of air france and to the image of france, and these people will be sanctioned, but they are a few. it's a handful. not more than four plus 11. so it's 15 people, and we are a group of 100,000 employees. so it's a very small minority, so i don't want anyone to draw definite conclusions on the way we are reforming our company. these reforms are going on. it's a difficult negotiation but we will make it and i'm sure our employees will be responsible for that. >> alexandre de juniac, thank you for joining us on cnn. they are noticing a decrease in traffic at least initially but he believes over time that traffic will increase. >> we have seen that trend in the past before. thank you very much. up next, forget square the
company, we're talking about a big upgrade for square hamburgers. that plus the other four big stock calls you need to know about today. we call it "street talk." it's on the way. and as we head out to break since we're here at the nasdaq, let's look at some of the most actives here. microsoft, facebook, and the power shares triple q. we're back after this.
all right. time now for "street talk," our daily dive into key analyst calls we think you need to know about. it's kind of fun to be here. >> nice digs. >> you can reach out and punch me. >> i can kick you under the table. >> qep resources. goldman sachs upgrading to a buy from a neutral. they say the stock will outperform because of improved
assets that will drive growth. they say they're spending within cash flow, a novel concept now. $19 target, melissa, about a 30% return. >> that's all great but this is a sector that's been beleaguered by lower oil prices and so the stock is down 26% year-to-date. we'll see if the call turns it around. stock number two also in the oil patch, sunoco. the price target goes to $57 from $49. sun and energy transfer on monday announced more than $2 billion drop down in epp's ownership stake. sunoco does not need any additional financing next year. i think it's sunoco. >> it is. if you're a nascar viewer, you know what i'm talking about. i feel good about this because kelcey warren, we had him on, i asked him, i said is your ownership structure too complicated?
he hemmed and hawed but they did some work. stock number three, general dynamics, upgraded from a buy to a hold. they see 10% upside in the next 12 months. there's a couple reasons for the upgrade but in a big way it's a vaulg ca valuation call. the analyst says that the valuation is simply more attractive now. >> of course, a lot of defense companies recently on the paris attacks have gained a bit and you know, brian, i know you know this, saudi arabia being one of the biggest buyers of u.s. weapons. that's where a lot of new orders are coming from these days. stock number four, wendy's. goldman's says this is a square burger, upgrading from a neutral to a buy. there's been concern mcdonald's gains could be wendy's losses but it's not a zero sum game. there has been acceleration in comps after the four for $4 promotion. that sounds like a deal. google search trends are encouraging.
i thought that was interesting, that aspect of the channel check. >>end wendy's has quietly outperformed moves of its competitors for a long, long time. wendy's has done pretty well. sometimes nothing beats a frosty and a square burger. the last stock always your smaller cap name. today it's prothema corp. the headquarters are technically in ireland. maybe a tax deal there. rbc capital markets raising target price to $95 from $75. the analyst assigns a 75% probability that prothena could become a $1 million valuation. this company doesn't get enough wall street love because there's not enough analysts covering it to really push the story and he's optimistic about drug trials.
kroo this is one of the hot immunotherapy companies. the key are results presented in december at the ash conference, the eaamerican society of hematology. jooinl guessing meg terrell will be there. >> sure. >> just guessing. stroo we're not completely done yet. we have a mystery chart for you as well today. here is another look and a hint. there's your chart. it look bad. it's going down. the stock has lost a third of its value over the past six months despite having more than 100,000 patents around the world. do you know what it is? hit up @sullycnbc on twitter. goldman sachs making another big call on oil. they have been bearish before. are they changing their tune? the final oil trades are crossing for the session. the crude close coming up on a rainy thursday when "power lunch" returns.
this comes despite a veto threat from president obama. many house democrats voted in favor of the bill. u.s. and iraqi intelligence say the islamic state is aggressively pursuing development of chemical weapons. they say it is setting up a branch dedicated to research and development with the help from scientists from iraq and syria. malaysia and the u.s. signing an agreement to boost cooperation to fight terrorism under the pact malaysia can access the u.s. database of known and suspected terrorists including 1.2 million fingerprints to prevent suspects from entering the country and using malaysia as a transit hub. and the american farm bureau says the average meal for ten this thanksgiving will cost about $50.11, up 70 cents from last year. the average cost of the dinner has remained pretty steady at $49 since 2011. this is the first time it's totaled more than $50.
i don't know if i could feed ten people on 50 bucks. >> you have to get one of the organic type turkeys that are $100 and are all leg. >> no. >> they're terrible. >> no, i just go to a local supermarket. that's it. >> there you go. sue, thank you very much. oil closing for the day, and now wti crude once again dipping below 40 bucks a barrel. second day in a row, folks, that has happened. it did rebound. we're closing at $40.55. in the meantime, goldman sachs out again this morning saying that oil could fall to as low as 20 bucks per barrel. here is what they wrote in a client note this morning. quote, mild winter weather over the coming months, a concerning risk given the el nino conditions, could see weak heating demand in the u.s. and europe and if this materializes, it would likely be the trigger for adjustments to the physical market pushing oil prices down to around $20 per barrel. wow. green capital's roberto
friedlander is joining us now. before we get other thoughts on commodities, your thoughts on that call. >> brian, not to disparage a firm like goldman sachs but i recall back in january 2013 they made a call. i agree with you, the weather forecast and we'll get an el nino effect with milder weather, that will create a more robust driving season that will be extended. gasoline demand has been robust domestically and internationally throughout 2015 and that's going to continue. if you look at what the refiners' focus has been, it's been on gasoline demand and because of price elasticity, the lower the price of gas goes, consumers have been buying higher octane gas leans. any excess gas demands will pick up excess crude supply. >> used to be the crb index, they changed the name. basically it's a basket of 17
commodities. in your morning note this morning, it caught our eye because you pointed out we know it's weak. that's not breaking news. you're pointing out exactly how weak it is. we're nearing historical badness for the commodities, are we not? >> absolutely. as a matter of fact, you know, if you look at the cci was the old crb index and you look at it from last summer when we had real concerns of a hard landing in china hit, we have now had 345 days below the 200-day moving average since last july. that's one of the longest stretches we've had since the index has been around. it's very similar to a stretch we saw back in 1999 where the index was 40% below it's all-time highs. here we're 45% below all-time highs and in '99 it was a similar stretch below the 200-day moving average. what happened was the commodity index and commodity complex bottomed in '99 and went on to go up 10% over the next 12 months. >> last question, is there anything that looks good to your
firm? >> yes. you know what? to myself, again, and i think could you have a commodities separate from the underlying stocks, but you stick with the kind of bigger name player, bhb, rios, great balance sheets, lower cost producer. if commodities struggle in the near term, they will still make money and become profitable. >> roberto, it was a real pleasure. we're going it get you back on very soon. >> if i could just quick plug for my charity. >> sure. >> board member of the john thiessen children's we have our gala to help thousands of sick kids, ill and terminally kids over the last 20-plus kids. a lot of great live auctions, long island, a lot of great sports guys there, too. it's a great time. >> and a great cause. >> and a great cause. >> and mulcahy's, it must be good with that kind of name. rober roberto, thank you very much. doing good work. the official numbers on october home sales are not out
until late next week. why are we talking about them? because the latest reports from firms like red fin and first american are out and they are not exactly painting a rosy picture. diana olick is live in washington with the latest on that. >> brian, red fin is reporting a sharp u-turn in october sales. flat in october compared to a year ago, and this is after september sales were higher by double digits. inventory which usually rises in the slower fall months fell over 4% from a year ago. so buyers are making more concessions to get the deal. red fin says the number of buyers waiving inspections has doubled from a year ago. i do not recommend this, folks. and two more reports, both from core logic for southern california and san francisco. both show big drops in october home sales from a year ago. that's the first annual drop in these places in over seven months. so cal sales nearly 15% below the october average going back to 1998 sales and san fran nearly 10% below that. yet another report from first american also shows demand
slowed in october. they are pointing to weakening affordability, especially for first-time buyers. if that was too much too fast, it's on cnbc.com. >> thank goodness. the odds of a rate hike in december have increased to 76% after the fed's latest minutes out yesterday. joe lavorgna is chief u.s. economist at deutsche bank and a cnbc contributor and he joins us here at the nasdaq. the last time you were on "power lunch," you said march is it. march, march, march. so was it all about the minutes in your change to december? >> three things, melissa. one, the statement in october certainly raised the probability of a hike. then we got the very strong october employment numbers so kind of came out of left field. actually the strongest numbers of the year. and then we got the minutes. sometimes the statement doesn't fully reflect the views of the committee, but the minutes just really rehashed and reinforced the view the fed really wants to go and they've been able to convince the markets of it. the equity markets held up well,
and if they want to go, so be it. now they're going to race rates but i don't think it's the right thing but that's what they're going to do. >> it's funny because strategists, investors, economists alike cite the reaction of the u.s. stock market meaning that it's okay for yellen and company to go. if we see a pullback in the markets, would that put december in jeopardy in your view? >> if you had a substantial -- the fed used fancy words, exogenous negative drop. so a move like in august certainly would raise the possibility of a no move, but my guess is they're going to go because they've been so consistent now over the past few weeks and leaving that door open. and the equity markets traded really well. i don't know what would cause it now to move like it did in august unless there was an exogenous shock from overseas, china, something like that, which i don't foresee. the problem would be it's
december, markets are liquid. my guess is the fed is underestimating how markets might position themselves after a move. i'm not sure how well the fed will communicate or how much the market will believe they're going to go slowly which has been the message. the problem is if you look at the fed's forecast and where the markets are, there's still a big gap between the two. if you get market volatility and then have an equity response negative sharply after the move, maybe that delays them. >> slower path. >> you raise an interesting point, we are now effectively stock market forecasters. >> joe, thank you for joining us. brian? >> it's time for trading nation. we're going to do it even though we're at the nasdaq and let's talk about the nasdaq 100. funny how that happens. the large cap index. larry mcdonald with societe generale. rich roth technic with evercore isi. >> it is the big of the big cap text stocks driving it. what is driving the nasdaq 100
outperformance? >> we've hit a beautiful relief rally over the last couple months, and net net the markets are -- always remember the market is right now. we have to figure out where we're going to go from here. although tech has outperformed in terms of the nasdaq 100, if you look at oil and you look at commodities, you look at the dollar, there's a lot of oil -- all year long oil has been leading the market lower. so i think that in the short term oil will create another headache for the equity market because of all the debt that's tied to oil and commodities globally. >> but facebook or google is almost immune to that, is that your point? >> well, they weren't immune in -- from august 18th to september, you know, 30th. even the big names got dragged down, but they will outperform in a downdraft as they did in the fall. >> rich ross, chart it for us as you do, fine sir. can the nasdaq 100 keep running
higher? >> it can. the nasdaq benefits from strong seasonality and in the late stages of a bull market cycle where growth is hard to find the ndx 100 is where you can find it which is why it's up 10% year-to-date versus the 1% for the s&p 500. five stocks comprise 40% of that index. those top five stocks are up 44%. so clearly skewing it higher. when you look at the short-term chart you see the bullish breakout from the ascending triangle which has put us back in position to test the old highs. back above that mendoza line at the 200-day moving average. key support at 44 0 $0. absent a break below that you're still a buyer. let's look at the historical chart, brian. will you look at that? right back into the 2000 high. that's the top of the tech bubble right at $4,800. doesn't mean we stop and turn on a dime but once again the players may have changed, the game remains the time. you're buying technology. >> and some of the players vice president changed because i was
sanofi is launching a new drug company. meg terrell joins us with the former sanofi and managing partner. >> chris, thank you for coming to join us. >> great to be with you. >> i understand you're investing $600 million and with this be your first investment? >> our first major investment. >> tell us about the strategy with this new company, boston
pharmaceutica pharmaceuticals. you will be acquiring drugs and bringing them in. >> it's a drug development company. phase one, phase two are kind of the least sexy areas of drug development but phase two is critical because that's what sets you up for phase three. if you can get a strong proof of concept, you can reduce the attrition going into phase three and then you will massively impact return on investment in r & d which has been such a problem for us. we will acquire assets, medicines at a preclinical stage. we'll fund the phase one, phase two, and then either the company that provided it wants it back or we'll sell it on. we'll outsource everything and we're creating a team of 25 people with decades of experience in drug development. this will be a few model of a drug development company. >> tell me about the supply of these kind of assets right now because it has been a great environment for biotechs raising money. are there a lot of companies or assets lying around that just aren't getting funded, not getting into the clinics? >> actually it's proof that
actually there has been a real improvement in productivity and research and development. you got a biotech companies that are now multidisease platform companies. big pharma has seen a real increase in productivity, and this is an option for them to take some of those molecules and we can derisk them and we can show where the value proposition is and then they have then the option to go and develop them further or we'll give them so someone else. we'd like to be a provider of really high quality phase three-ready assets. >> how does the environment right now and especially the focus that's being paid to pricing influence the kind of assets you look for if at all? >> you know, in my 30 years in this business, i mean, we've seen an awful lot of issues on pricing. i can remember when roy came out with a cpi pledge because there was a lot of pressure on pricing. you know, the reality is i have always found if you develop a new medicine for an unmet need and you're better than whatever is available to patients, you know, you can make a business out of it. i think, you know, we're in the
middle of an electoral cycle. there's an awful lot of attention, but the fundamentals of this industry are really strong still. >> the cost of development in research and development are extremely high and there have been a number of attempts throughout the industry to try and offset that cost, remove that cost to another party. valeant tried to do that by just acquiring companies and not having its own in-house r & d. is this another way of attacking the model where you're addressing the need for money to develop these drugs that the drug companies may not necessarily have? >> what most people forget is that we take massive risks in this business. you have to spend an awful lot of money to figure out whether you've got a drug or not, and it can take years. and in some ways as an industry i think we took too much risk, and so people are now looking at ways of how do i offset some of that risk because the returns haven't necessarily justified that risk. so one way you can do that is effectively to say i'm going to do some things myself but i'm
also now going to work in partnership and that's where boston pharmaceuticals can play. we have a different source of capitals. we have long-term patient capital, some of that we can do it. sometimes it's not because of resource, sometimes it may not fit with their strategic direction. >> does america subsidize the rest of the world's drug costs? >> on new medicines, yes. on older medicines i would say no. >> but on a new pill, that pill is 500 here, 5 bucks in germany, they have the model but in effect we are paying for them, are we not? >> new medicines cost more and in the u.s. it's not that relationship than they do in europe, but europeans spend more on old medicine than we do here. the u.s. model drives you to innovation, you lose a patent here you're going to lose 90% of your business in six weeks. europe you can still have drugs around for a number of years. i think the u.s. model gives you an incentive to innovate, if you don't innovate you get crushed
because you will lose the patent protection. >> chris, thank you, meg, thank you. >> thank you. >> all right. how about another look at our mystery chart of the day. if you are on the radio it's just down a lot. in fact, it's lost 30% in the past six months, they have over 100,000 patents, here is an easy one, they are the name on the football stadium of my favorite team who also stinks. we are back after this. here at the td ameritrade trader group, they work all the time. sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this.
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sunedison stock continues under pressure today on reports that black sewn has denied rumors it has any intention of buying any debt of the company. l brands raising its guidance for the year although it's outlock comes in below street forecasts. the defense contractor will buy back shares from time to time at the company's discretion depending on market conditions. one last look at today's mystery chart, this is a head scratcher for a lot of you, some people got it on twitter. the stock has lost a third of its value over the past six months, one final hint, there is a pro sports stadium with the
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growth of the pc. are you convinced that area like data center are enough to offset declines in pc? >> i'm not that convinced. i think the stock is up today, the guidance is roughly in line with what expectations were. i think it's the capital expenditure guidance which has gotten the stock moving forward, spending $10.5 billion next year, lower that number is the best for cash flow, that's what's taking the stock up. in terms of revenue guidance i don't think anyone believes that pcs are a growth market anymore. the bull case rests on their ability to grow a data center. i think it's actually the best long-term number. i have yet [ inaudible ]. i think they have grown their target one time in 2014.
i'm questioning whether or not they can actually [ inaudible ]. >> stacy rasgon, i think you might be calling us through the holland tunnel. either way we will get you back. >> he is at the intel investor day but a cellphone connection that's not that great. >> your cellphone is not tv ready. we will get you back on again. time to reveal today's mystery chart. we said it's lost a third of its value over the past six months. it is qualcomm by the way and that's a clue they are qualcomm stayed joe where the san diego chargers play this year. i don't know what's going on with this company. when you look at the growth of mobile, look at all the segments they should be winning. >> chip sets are stabilizing but licensing revenues are coming in he can with a. one thing is going, the other stuff is offsetting it. >> tonight on fast, brian, take at this one chart. take is a look at the jardon
intraday chart. it's down 3.5%. why this chart may be the best tell on the u.s. economy. >> if you keep saying this chart they're not going to show it. >> they showed it. >> i think stacy was calling from inside a coleman cooler which is named by jardon. >> "closing bell" starts now. welcome to the "closing bell," everybody. i'm kelly evans here at the new york stock exchange. >> and i'm bill griffeth. the big action today is the ipo market, both square and match surged in their debuts. square priced well below expectations and ironically it trades now in the range that it originally was talking about. should investors still be looking at these stocks with a cautious eye? we will talk about that coming up. >> plus a warning from united healthcare sending a chill throughout the health insurance sector, the company says it could leave the obamacare exchanges within the next two