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tv   Power Lunch  CNBC  January 8, 2016 1:00pm-3:01pm EST

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announce, there will be a big move up or down and if you're a trader that's great for you. >> if we end up in the red today, that's a big negative. >> i want to see china coming out with something meaningful. >> also go bucks. we should get that in there. >> milwaukee bucks. see you soon. "power lunch" starts now. scott, thank you very much. welcome, everybody, to "power lunch." along with mandy drury, i'm tyler mathisen. a wild week for investors. the focus shifting to china and jobs right here in america. >> strong employment growth, but at the same time weak economic growth. what is behind this and what does it all mean for the american economy overall? steve liesman, we know you've been taking a very close look at this conundrum. >> forget china, mandy. the united states is confusing enough. two data points highlighting that confusing economic outlook for investors, jobs surging and soaring. growth weak and weakening. let's talk about growth first.
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cnbc rapid update shows a bigger than expected decline in inventory, prompts another mark down in estimates for the fourth quarter. q4 down 0.2%. the range 0.1% to 2.3%. morgan stanley was 0.1% growth. it's the fourth markdown in a row. 22 data points go into the rapid update. 8 have been negative and just one to the upside. we started the quarter with a 2.5% estimate from economists. so more than a percentage point of growth has evaporated. the opposite though happening with jobs. three-month average now 284,000. that's up from 218,000. we got a big number today, 292. october, november revisions to the upside. unemployment rate unchanged at 5%. labor force participation ticking up a bit but no wage growth to speak of unchanged. are the jobs number wrong?
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is the growth number wrong? how should investors figure it out? jpmorgan says when confronted with such a sharp divergence between the labor market and gdp data we tend to see the labor market data as more informative for future developments. two fed officials have now spoken since the jobs report came out this morning. both say the fed is on track to hike rates four times if the data cooperate. john williams says that's consistent with a gradual path. he said it could take three years to reach a stable funds rate and a new low interest rate is the new normal for rates. it could take six years to normalize the balance sheet. it was jeffrey lacker who repeated his speech from yesterday. he then cited a strong job market and said the case for higher rates is clear. so the fed does not overly bother itself with china these days or lower gdp. they could turn tail but so far
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they seem to be voting firmly that the jobs data, not the gdp data, are telling the real growth story. >> let's take a look at what's happening in the stock market on the back of all this. stocks are higher but giving up a lot of the earlier gains. we're currently sitting to the upside by 45 points on the dow at 16,560. let's get more on what's happening with bob pisani from the nyse floor. do you feel, bob, that there's just not a whole lot of conviction amongst traders that the volatility is over? >> that's exactly what's going on here. if you're a bull you'll be disappointed by the response to the markets. take a look at the s&p 500. we did gap up at the open. futures were higher early on going into the jobs report. bottom line, gap open about 12 points on the s&p 500, but we essentially sold right into that. traders simply not believing the volatility would be over at this point. there's been an awful lot of cross currents in the market. the three big ones, the jobs report. there are concerns there will be
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more fed hikes, not less. china has walked back a number of issues that caused the volatility. they removed the circuit breakers and set the yuan midpoint higher. that's good news but stocks are very oversold and we haven't seen much of a bounce. i think that's a real disappointment for people who thought they'd see a little more. defensive tilt to the market so telecom and utilities and consumer staples leading the way. technology also modestly on the upside. financials, if you were hoping for a bounce, you're not getting it. morgan stanley down over 9% this week. no real bounce. jpmorgan also down 9%. no bounce there as well. exxonmobil, i have been mentioning, is the one big oil stock with a bit of a flight to safety all week. it's not doing much today but oil dropped and then has rallied a little bit in the middle of the day. exxon is down 3% this week. chevron is down 8%. finally just want to note the volatility index, the vix, still very elevated. that cash contract we mentioned higher than all the futures
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contracts and, mandy, that's a sign traders anticipate more volatility in the near term. back to you. >> all right, roberto. thank you very much. crude oil edging slightly higher. it's been a wild week. prices down 10% this week alone. crude and brent sitting around $33 a barrel but has oil hit a short-term bottom? we'll talk about that and more with larry mcdonald from societe generale and cnbc contributor ron insana. i want to pinpoint two things in my notes. you have a focus on the strong u.s. dollar. off focus on china. obviously the two are related, but on china what has concerned me the most as i look out over 2016 is the level of debt and exposure in that economy. there are a lot of state-owned enterprises with high debt, debt leverage always kills. >> the shadow banking system there is rather fragile. they have overcapacity in manufacturing, in real estate. unlike japan, and i think you could make some comparisons
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between japan in 1989 when it was beginning to come apart and china today, china is more linked into resource-related nations, having imported so many goods and now going the other way. that commodity super cycle is effectively over, and that has, i think, some broader implications. we thought japan was going to take the world apart when it crashed in the 1990s, it didn't. china has greater potential to affect other economies. >> you said 2016 was going to be the year of living dangerously. would you agree with that, larry? >> for the last 9 to 12 months, the street has been telling us that this dollar because of the fed exit would keep marching higher. what a lot of economists haven't been looking at is the credit risk around the world that's associated with the dollar. kyle bass brought it up brilliantly in the last segment. there's trillions of dollars of credit risk, especially in china, so as the dollar surges, you have a credit situation that gets exponentially worse in asia, and that has a negative
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effect back in the united states because at the end of the day -- >> that's the transmission mechanism. >> and guess what. in the '50s it wouldn't be such a big deal, but today we have $18 trillion of gdp in the united states and $60 trillion outside. so that's the problem. that dollar surge is creating some real international pain. >> we'll continue the zmution a second, but let's get to brian sullivan now because you have a news alert in the oil patch. >> you guys -- thanks. you guys were talking about oil just now. we saw a huge drop in rig counts. we're down 20 oil rigs last week according to baker hughes. that's the fifth or sixth drop in a week, but it is one of the biggest drops that we have seen since we have been hitting these numbers, guys. what i think is interesting is that we're not seeing a big reaction in the price of crude oil. very simple reason on all of our reporting says this, the market is focused right now on current production, which is too much, and not on the promise of future lower production. eventually some of these wells are going to get partly drained if we don't build new rigs, no
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new wells, that will bring down the global supply, but despite a big weekly drop in that baker hughes rig count number, no reaction in the price of oil. it's all about how much we're producing now and i think in technical terms, that is too much. too much. >> that's the fancy word they use. >> thank you very much for that, brian. and to that point, actually, larry, i know you're saying maybe we've hit a short-term bottom in oil because your capitulation model says buy the uso but that's just short term, isn't it? >> yes. these are classic bear market rallies. as you have seen with commodities owe over the last years, bear market rallies can be amazing. at socgen we have a strong etf business and equity derivatives business and the model we use that covers all the etfs is showing a strong capitulation sign in the uso which likely means you're going to get a buying opportunity here in the next 24 hours. >> let me come back to the strong u.s. dollar which larry
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points to persuasively i think, and, ron, you have also mentioned the fed isn't on the market's side anymore. >> or the market is not on the fed's side. stanley fischer came out and say the markets are good for two hikes, we're looking at four and that's in the ballpark. >> that means a stronger dollar also. >> absolutely it can. >> all other things being equal. >> interest rate -- >> that means u.s. corporate profits have a harder time. >> and exports have a harder time. >> so more of the same basically. >> yeah, but we're also maybe overestimating economic growth going into 2016. i mean, i think this may be not a recession but a growth recession, sub-2%, maybe even sub-1.5% when you net all this out. lower gasoline prices an lower oil are helpful to the consumer but higher rates are not. weaker economic growth overseas, not. we may have the third declining quarter in a row of declining s&p profits. there's maybe a tradeable bottom in oil. i think oil is going to $20, and i think -- >> you and goldman. >> not for the same reasons.
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i think oil is a disappearing commodity over the next 20 to 50 years. >> gentlemen, on that cheery note, thank you very much. let's go to kate kelly with some breaking news. >> hey there, tyler. a major development in the settlement of an s.e.c. case, a civil case, against steve cohen, the long-term hedge fund manager. the case is settled with a two-year supervisory bar for steve cohen essentially on managing outside funds at an investment adviser or similar entity. it means if steve cohen wanted to reopen a hund with outside capital he would have to wait until 2018. he neither admits or denies charges that he failed to supervise matthew mar tomah who was a trader who traited pharmaceutical stocks for s.a.c. and is now serving time in miami. i would say this is a win for cohen who has been waiting to undergo this case for a couple years now after the criminal case that was filed against s.a.c. settled and wept through
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some appeals processes. it's a relatively short supervisory bar, tyler, and typically with these things you see them open-ended. it's a supervisory bar that goes for an indefinite period. sometimes people reapply for reinstatement to manage outside money, but to know at the outset it's only going to be two years and to neither admit or deny means that he had a pretty successful outcome in my opinion. >> did i hear you say as i was moving over from our last location that this bar lasts only through 2018? >> 2018. that's correct. it's a two-year bar. i'll just give you a quick quote from the head of enforcement at the s.e.c. before cohen can handle outside money again, interesting implication there by the way that he does want to do that because he has not 15id that publicly, an independent consultant will ensure there are legally proficient mechanisms in place to detect and deter any insider trading. the strong combination of a two-year supervisory bar and additional oversight requirements achieve significant
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investor protection and it goes on in that vein. the s.e.c. clearly saying we're sending a message. we're proud of the settlement we've reached. on the other hand, i would say this strikes me based on my research as unusually kind to the defendant. >> thank you very much. kate kelly reporting. >> what a crazy week, folks, to kick off 2016. china fears taking down global markets. the country scrapping trading circuit breakers. and also, of course, making various moves to shore up their currency. so what is the state of china's economy. the former head of the imf's china division will be giving us his unique take. you're watching cnbc, first in business worldwide. stay with us here on "power lunch."
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movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. welcome back to "power lunch." i'm tyler mathisen. american eagle plunging about 15%. the teen retailer warning that holiday sales could miss wall street's estimates. kellogg getting a boost. jim cramer mentioned that the other day. the cerealmaker upgraded to outperform by csla. saying despite challenges ahead it expects earns to grow 7% to 8%. and at&t hanging up on two-year contracts. instead, customers will pay for their cell phone outright in full or on a monthly installment plan. that is the way it seems the business is going. mandy? >> certainly does. thanks very much, ty. china stock market and currency plunge is showing a major decrease in confidence of chinese policymaking making some
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wonder has china lost control? we are speaking with the senior professor of trade policy at cornell. it really seems that policymakers have bungled it and lost the confidence of the investing public. how do they get back that credibility? >> there has certainly been a series of missteps in the currency markets and liquidity markets and what we are seeing, mandy, is the effects of heavy-handed government intervention. the government is not willing to let markets work. the government moves in and out. so what's necessary to restore confidence is not the sort of measures they have been taking so far. they put the circuit breaker on, that created even more turmoil. they took it off. what is really necessary is to deal with the fundamental problem which is there needs to be a set of macroeconomic measures, monetary and fiscal policy to support the economy and some confidence building mesh slurs in terms of economic reforms, both institutional
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reforms to get the stock market working better and some real supply side reforms such as the state enterprise sector. without this broad set of reforms and measures, i don't think they're going to get the confidence back. >> the problem is a number -- the types of reforms you just mentioned take quite a long time to implement and also to take effect in the economy. it certainly feels like one of the reasons why they're being so heavy handed now is because they're trying to play catch up really quickly. perhaps they should have been faster with reforms earlier on. it feels like it's a bit of a catch-22. >> these are big reforms. they started talking about it a couple years ago and laid out a whole series of reforms. the problem is that while growth has been slowing, there's been very little in terms of reforms except in the financial markets where there has been some progress. so i think what is not needed is an overnight transformation of the chinese economic model but a strong statement from the government they are going to start put income place some of the reforms they have been talking about for a while and to
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add to that, like i said, a mix of macroeconomic measures to support the economy because one of the reasons we're seeing this turmoil is concern about the underlying state of the economy which i think is quite legitimate. >> we're certainly seeing a little desperation on the part of policymakers to devalue the currency to boost the export side of the economy. does that suggest to you sort of an admission of failure in their efforts to try and transition from an export dependent economy over to a more consumer-led economy? >> frankly, i don't think that's their driving reason behind what's been happening with the yuan in recent days or months. in august in the lead up to the imf's decision about whether to include the yuan in the sdr basket of the imf, china did announce it was moving to a more market determined currency. the problem was it was not a very good time to do that and over time given that there are huge pressures on the yuan, it's been floating down, and they're trying to actually intervene in markets to prevent the yuan from
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depreciating too rapidly. if the yuan depreciates more relative to the dollar, it would still be relatively stable compared to the other currencies the dollar has strengthened against. it would give them a bit of a boost in terms of exports but could worsen the capital outflow problems, makes it harder to internationalize the yuan. they're just trying to let market forces work but it's not working very well because of all the conflicting signals. >> they're having a lot of difficulty. thank you very much for joining us. very interesting stuff. let's get to dominic chu for a market flash. >> so, mandy, shares of viacom are cutting off their best levels of the day. the stock is up 5% after a reuters report saying the media company will allow investors possibly to vote in march on whether to extend voting rights to all shareholders. according to reuters, this comes really as concern grows over the health of the company's 92-year-old chairman sumner redstone. viacom will dispute shareholder
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proposal but the vote will test sentiment. the stock is down 40% over the last 12 months. back over to you. >> thank you. revving up customizing luxury cars. bob lutz and former fisker ceo unveiling their new flagship super car. we'll take you for a ride when "power lunch" returns in two minutes on cnbc.
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welcome back to "power lunch." rick santelli live on the floor of the cme. big jobs report, not necessarily a huge response in the marketplace. however, let's look at the intraday of tens. they sit at 95 basis points. unchanged on the day. down 10 basis points on the week. let's get to those 10s. down one on the day. down 13 on the week. 227 last week, close of the year. haven't seen it since. dollar index, it's all about foreign exchange. here we hover a whisker above 98.5. up on the day fairly close to unchanged on the week. all the turmoil in the marketplace still leaves treasuries rather calm. mandy, tyler, back to you. >> have a great weekend. thank you. it is the next stage of growth in luxury cars, customized superstars for the extremely wealthy. phil lebeau is in chicago with a cnbc exclusive. hi, phil. >> hi, tyler. let's go to auburn hills, michigan, where bob lutz, the
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ceo of vlf automotive and henrik fisker, the chief designer of vlf automotive is there. they are joining us and behind them, guys, i see that we have the new destino which you guys are selling customized. bob, let's start with you. tell us a little bit about the destino. >> well, the destino is a development -- a piston engine development of what used to be a very beautiful fisker karma design which was designed by henrik and gilbert villarreal, our third partner, who is manufacturing. we took out the electric drive train which a lot of people didn't like, replaced the whole thing with a 640 horsepower corvette drive train with six-speed automatic transmission, and thus are creating an american super sedan to rival the best of europe but
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made in the detroit area with the reliability of chevrolet components. >> bob, how much demand is there for these super cars? for a super sedan over $100,000. how much demand is there right now? >> well, we're going to be very conservative, and we think that if we do 100 cars in the first year, we'll be very happy, but don't forget, our aspirations are global. we'll be selling in not only the united states but basically all over the world. and i think we're fairly confident that with this car, which we will keep fresh, that's why we have henrik on board, the car will be kept fresh mechanically and aesthetically, we think 500 vehicles a year globally is not at all out of the question. >> okay. henrik, let's bring you in. you had the fisker brand which ultimately went bankrupt. you sold about 2,000 karmas. looking back, what went wrong there? was that simply a case you didn't have the right electric vehicle design for that market?
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>> well, you know, we were the first one to market, and we had a new battery that ovechkbviouse main issue we had at that time was the battery technology at that time. and as you know the battery company went bankrupt, and that actually meant we couldn't continue selling cars because we didn't have a battery. it takes 12 to 14 months to put a new battery into a car, and that's obviously time we didn't have having only one product in the market. >> henrik, you're in the process of suing aston martin claiming civil extortion over some designs and whether or not you should be able to use some of these designs in the future, et cetera. you've had a lot of moves in your career. is this the final one for the time being, this vlf automotive, for you? >> not necessarily. let's see what happens. i think we're going to have a lot of fun with vlf automotive. you know, we're going to show
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not only the destino on tuesday at 10:00 but also the force one which is a midengine, long hood -- sorry, front midengine long hood car with pushed out wheels which is a sort of proportion that dates back to the dawn of sports cars, and you will see how i have designed a new american super car on those proportions, so we're very excited about showing this car on tuesday at 10:00. >> henrik fisker, who is the chief designer, and bob lutz, who is the ceo of vlf automotive. there you have it, tyler, the destino. you can order one today, tyler. 100 grand is the base model. if you customize, could cost you up to $200,000. >> if i win powerball, i'll give them a call. 2016 is getting off to a wild start. this was the worst first session of the year for the dow sips
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hello, everyone. i'm sue herera. here is your cnbc news update for this hour. president obama vetoing legislation passed by the republican controlled congress that would have dismantled his signature health care law, the affordage care act. the president noting congressional republicans have tried over 50 times to repeal the legislation. tony couch arraigned in a courtroom. iraqi security forces have started clearing ramadi two weeks after retaking the city from isis, but their efforts are being slowed down by booby traps and isis snipers spread across the city. and a great white shark that had been accidentally caught in a net in southwestern japan about three days ago has died. it had been taken, as you can see, to an aquarium to try to
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keep it alive but it's extremely difficult to keep them in captivity because great whites need to swim constantly. and that is the cnbc news update this hour. back to you, mandy. >> thank you very much, sue. let's take a look at gold prices which are closing right now. gold, of course, has been quite the safe heche beneficiary of a lot of the market turmoil. it's sitting slightly to the downside and back below the $1,100 mark at 109 -- $1,098. we' >> we're watching shares of gap, near the lows, down by 14% after posting a 5% drop in comparable store sales for the month of december. its namesake brand stores all seeing sales declines. the stock is off by over 45% over the course of the last year but interesting, mandy, remember, banana republic and gap had been weak but old navy had been doing some decent work on its own as a brand.
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>> thank you very much for that, dom. stocks have currently given up all of today's gains after rallying earlier on the better than expected jobs report. you can see the dow and s&p are now slightly in the red. the nasdaq just holding onto that green line by literally a hair. with the market looking for any opportunity to sell these days, is it too risky to buy the dips? joining us now, burns mckinney, portfolio manager at nfj investment group and scott wren, senior global equity strategist at wells fargo investment institute. do you think buy the dip at least for the moment is dead? >> i actually think it's probably a very good opportunity to buy the dips. today's jobs report i think is one that the market has largely yawned at, but it's really important for a couple of reasons. one of which is you do have the turmoil in china that if you look at last year when you also saw volatility in china, jobs were clicking along at about 250,000 jobs a month, and suddenly you saw that. confidence went down, dipped down terrorly to 150.
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so between that, yeah, i think that suggests it is an important jobs number. really the number we saw today was kind of a best-case scenario because of the fact that gdp growth should be a little bit slower during the fourth quarter. there has been some concern we might be slipping into a recession and the very, very strong jobs number today really suggests we're not slipping into recession. normally you have about a one to two-year lag of behind a slowing momentum in the jobs before you have a recession. so it suggests we're not going to have a recession and the fact that the wages were a little bit muted suggest as well that the fed can really just sit on the sidelines and maybe move a little bit more slowly before they raise rates, which is kind of a best case scenario for the markets. >> what about you, scott? do you think that 2016, which certainly hasn't started off particularly well but that's not abnormal. the last three years have had rocky starts to the year, do you think 2016 will be better?
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>> mandy, i tell you, i think this has been an ugly start, but i think investors are going to be more happy in 2016 than they were in 2015. i think you have valuations working for you. they're not stretched. we would argue they weren't stretched at the may 2015 highs. i think that people are overreacting to the potential for a massive slowdown in chinese growth. we don't think it's going to happen. i think you're going to see better performance out of japan, out of the eurozone. you're going to see modest obviously but dependable growth here in the states. so i think the fed is going to move very, very slowly, and i think what we've been telling our clients is really not much different than what we've been telling them for the last five years, which is pullbacks are opportunities. retail investors are sitting on way too much cash. they're underinvested. you know, i have said we're in the seventh inning of this ball game using the baseball analogy. there's definitely some baseball to be played. it will play out over the next couple years, and we want our
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clients stepping in here looking at consumer discretionary, technology, industrials. cyclically sensitive sectors that are going to continue to benefit from this recovery here and abroad. >> certainly sounds like you both believe that the buy the dip old adage is alive and well. thank you very much, burns mckinney with nfj and scott wren with wells fargo investment institute. you can also go to our website which is powerlunch.cnbc.com to see how scott is playing geopolitical risk. there's quite a lot of that out there at the moment. that's powerlunch.cnbc.com. >> the shanghai composite nearly 2% higher after china's central bank boosted the yuan but it's been a nail-biter of a week. what should you do if you're interested in chinese stocks? martin schultz runs a five-star international equity fund. good to see you. it says in my notes you are cautiously optimistic on china right now given what you see
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there. if so, would you be buying shares in the shanghai market or playing china in a different way? >> tyler, good afternoon, great to see you again. yes, we are cautiously optimistic at pnc and i think one of the things we've been looking for, i have been going to china since 1987 and as our team visits there very regularly, we are seeing that obviously the slowdown is occurring, and to your question we're invested in primarily those companies on the eight share market in hong kong with exposure to china and really the ones on the services and consumer side that have the most to benefit from the changes occurring there. >> h shares are the hong kong shares. why, just quickly, why do you favor them over the shanghai shares. why do so many investors like you play it that way? >> well, part of it has to do with history and the fact we're very comfortable with those companies listed in hong kong. they have a little higher accounting ability, international accounting standards. more importantly it's the fact
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that the companies that are listed in hong kong are the ones that really are, as you just mentioned, highlighted and basically benefit from those investors internationally that like those type of companies. they're the ones we see that have that more global versatile -- a lot of the obviously state-run companies and smaller ones in shanghai and also obviously there's some trading costs involved as well, and as you know with the volatility going on right now, it's probably a little tougher place to pick and choose your points. >> so the graphic just showed 6% of your fund is in china right now. where do you see that going over the next 12 months and second question, if only 6% of your international fund is in china, 0% is in the u.s., where is the rest of your money? >> so the rest of our money is obviously spread around the world. this is an international fund, xus, a developed market focus, and so really the china exposure is, if you will, kind of an addition. we obviously look at the entire
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world as best we can, and from our perspective europe and as your previous guest mentioned, we actually like europe and japan as well, but from our perspective china is from a valuation perspective is looking interesting. obviously, the government there is under a lot of pressure. they've got some contradictory issues thaech gey've got to dea everything from liberalizing their capital markets to maintaining -- >> so back to my prior question, your 6% now or roughly in china. where do you see that going? >> my guess in the near term staying at that level and then probably rising over the near to longer term. >> rising to what percentage of your portfolio? what would be the max? >> the max for china for us is 10% because it's a market that's not within the specific index but at the same time it's one that's got a long-term growth prospects. >> thank you so much. we appreciate you being with us. have a great weekend. >> thank you. >> to sue herera with breaking
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news. >> we have two breaking stories for you right now. first of all, a suspect who has admitted shooting a philadelphia police officer yesterday has now admitted that he did that in the name of islam. that's according to the philadelphia police department, the commissioner, richard ross, who says after looking at the video, it's one of the scariest things he's ever seen. so that suspect who has confessed to the shooting said that he did it in the name of islam. secondly, nbc news has now confirmed that el chapo, the mexican drug lord otherwise known as joaquin guzman has been arrested. he's been apprehended. he's been the subject of an international manhunt for more than a year after breaking out of jail. he's actually broken out of jail twice, but nbc news now confirms that el chapo, joaquin guzman, the mexican drug lord, has been apprehended. >> hopefully this time they'll have a stronger jail, right? >> i'm sure that they will do their best. >> yes. thank you very much for the breaking news there, sue herera.
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top tech execs are meeting with the white house as the administration tries to persuade them to do more to stop terrorists from using the internet to recruit. eamon javers is live in d.c. what are the details, eamon? >> hi, mandy. that news that sue just brought you here on the apparent isis apparent affiliated attack in philadelphia is the context for the urgency that the white house and national security officials feel in this meeting in silicon valley. the philadelphia police department just within the past few minutes say that the gunman there who shot and tried to execute that police officer in philadelphia late last night has pledged allegiance to isis. that's exactly the kind of thing that law enforcement has been worried about. first, san bernardino, now apparently philadelphia. the meeting in silicon valley today is all about how the administration can encourage technology companies to cooperate to counteract isis propaganda, particularly on the internet. now, speaking at the white house just now, josh earnest, the
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white house press secretary, laid out some of the goals and confirmed the existence of this meeting, which we didn't even officially have confirmed until just a few minutes ago. here is what he had to say. >> i do think there is an opportunity for there to be a robust discussion about ways we can make it harder for terrorists to leverage the internet to recruit, radicalize, and mobilize supporters to carry out acts of violence. >> and they're using silicon valley-like language to talk about how they want to do this. they're talking about disrupting the isis recruitment process and the radicalization process. they want to hear ideas from these tech companies, and they say the national security officials have some ideas they'd like to give to the silicon valley officials who attend this meeting this afternoon. we'll have to wait and see if we get any kind of read out here from what was actually discussed in this meeting today, guy approximates. >> very important topic. thank you very much for that, eamon javers. let's get to kate kelly with a news alert. >> steve cohen of point72, the family office, who has just
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settled his civil case with the s.e.c. for failure to supervise one employee, weighing in on the settlement telling colleagues and staff in an internal e-mail at point72, his family office, he's pleased at the resolution of the case. a couple key points he makes in the memo. number one, his firm can now manage outside money again in january of 2018 if it chooses to. an independent monitor will continue to evaluate their internal compliance which they have significantly beefed up, and also that the focus will remain on returns, not on assets or collecting fees. he says, and i quote, resolving the case gives us certainty and opens a path to raising outside capital in the future if we believe that is in the best interest of the firm. now, interesting to note, cohen has not yet acknowledged until this moment that that might be in his game plan in the future partly i'm sure because of the legal uncertainty surrounding him. at the time he says managing outside money again is not a done deal. it's something they'll do if it makes sense but not necessarily a firm plan. >> all right.
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kate, thank you very much. kate kelly reporting. covering that story on steve cohen for us. the dow well off those session highs of the day. it was down -- it's been down 900 points this week. the good feelings from this morning's jobs report seem to have worn off just a bit. but there you see it. the dow up 29 points. we're going to talk more about the employment report with our friday jobs panel. stay with us. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade.
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hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony.
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you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you. stronger than expected jobs report out this morning. u.s. employers added 292,000 jobs in december. nonfarm payrolls revised higher for october and november while the unemployment rate held steady, he tried to say, at 5%. joining us now, mark moreial, former mayor of new orleans and joe watkins. gentlemen, welcome to both of you. >> great to see you. happy new year. one of our producers, jake
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novak, mentioned earlier today an interesting question. i pose it to you -- bless you over there whoever just sneezed. i'll get your response, too, mayor, and that is how do you have such a strong jobs market when you have such a relatively weak economy, one that may be slowing? is that sustainable or is there a disconnect there? joe, you first. >> well, you know, i don't know, you have to consider the fact that even though unemployment stays at 5% and we saw an increase in jobs, remember 73,000 of those new jobs created in december were in the business and professional services industry. not unusual at all for december, a month when people are spiking up because of the holiday, the holiday rush. so all the other numbers are pretty much the same that are -- and that are not very impressive. 9.9% for the underemployed workers. you've still got long-term unemployment numbers. if you look at the labor force
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participation rate, that's still at 62.6%. it spiked up just 5% maybe in the last month but that means that a lot of people still are not participating in the labor force. so we've got a lot of weakness still. >> by any standard though i think you have to agree, mayor, i think you will agree that it was a pretty doggone good year for jobs growth. it was one of the best years although tepid wage growth, 2.5% over the year compared to 4% or thereabouts over the 30 years prior to the last recession but back to the question, can you sustain this level of jobs growth if the economy is slowing and is running at a 2% or sub that rate? >> ty, there's no doubt that the news here is the consistency. 200,000 jobs per month for a sustained period, and the best 24-month period we've had since the 1990s. to continue the growth of the economy, it's going to require us boosting overall economic
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growth. one way to do it is to focus on increasing wages because wage increases drive consumer demand, and consumer demand is two-thirds to three-fourths of the american economy. so it's an important question. the question is do we have the will to do what is needed? but this report is strong for its consistency, but we always talk about the challenges ahead, and i would submit to you that stagnant wages are really i think the picture that we've got to confront -- >> so quickly because i want to get joe on this, too. you say if we do what we need to do on wages, what do we need to do on wages? >> i would say that an overall national increase in the minimum wage would i think be an important step that could be taken in order to do this. i also think that we've got to invest more in training people
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for the many higher skill jobs that continue to chase and have many, many vacancies. let's get -- >> we can -- >> i thought that might be your answer, mayor. so, joe, respond there and let me tee it up by asking why should there be a minimum wage in the first place? if an employer wants to pay "x" and the worker is willing to take "x," why not let them? >> right. at the end of the day, if you did something about corporate tax rates and you decreased regulation, you might have a shot to see some uptick in terms of wages. but as long as we have the continuing picture with the obsessive corporate tax rates that we see in the united states and excessive regulations on businesses, especially small businesses, it's going to be hard to see any movement on the wage picture. >> gentlemen, thank you very much. mayor, for the record, i love the scruff. >> thanks. >> all right, guys. thank you very much. mandy, over to you. >> he's got what we call the
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mathieson. okay. stocks are kind of steady as we speak now on the back of the jobs report but certainly not as good as they were. but we've all talked to a noted bear about how to make money when stocks are falling. "power" is back in two. so talked bear about how to make money when stocks are falling. "power" is back in two.
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welcome back to "power lunch." here are this hour's power points. stocks are steady on the back of the strong jobs report. telecom and utilities are leading the way with apple, the best dow performer. it's currently up more than 2%. and coming up, a noted bear tells us what he's bullish on right now. "power" is back in two.
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welcome back to "power lunch." i'm mandy drury. a rough start to 2016 for the dow. down about 5% this week. how do you make money while stocks are falling. joining me now is david tice. you previously made money as a market bear with the prudent bear fund. you stole that fund a few years ago. where do you stand on the market now? are you still bearish? >> yes, i'm still very bearish. i'm bearish on stocks. i still think we have a bubble. i'm a big believer of the austrian school of economics. we really have not worked off all the excesses. we've worked off some of them. we have had seven years after the fed ended up increasing its balance sheet to 4.5 trmds.
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we ended up -- really gdp growth has been nominal. we have stocks at 19 times earnings. i think we have currency wars around the world because essentially central banks around the world have done the same thing the fed has. what we love though in answer to that question is we love gold and gold stocks. >> right. >> gold stokcks have been down 80% to 90%. you really can make a lot of money historically if you can find an asset class down that far that still makes some sense. in this kind of environment where central banks are debasing their currencies, look what's going on in china today. look what's going on in europe, et cetera, central bank ease everywhere. this is an environment that gold and silver will do very, very well. >> let me pinpoint exactly which gold miners you like. can you name a few names? >> yes. we like new gold. we like agnico-eagle, gold corp. >> do you think -- how much do
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you think the market will decline if you are still bearish? >> i think this market could easily go down 30% or 40%. really we have currency wars around the world. i'm a believer in mark hart's thesis who talks about the facts that i think there's a big chance of a significant fall in the renminbi. >> 30% to 40% decline in the market. that's a huge fall, and in what time frame would you see that, happening very quickly or over a period of a number of years? >> it could happen over 6 to 18 months. people should go out and watch the big short, which is a great michael lewis adaptation of his great book, and look at how those bears were looked at as being flat out crazy when they saw what was developing. you know, i was one of those guys. i didn't make nearly as much money as those guys did by playing credit default swaps, but we saw the excesses, we saw
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the excesses in he wireal estat cetera. now we have excesses in this market. we have the federal reserve taking this balance sheet $4.5 trillion. we've never seen anything like this. we still have corrected some of the consumer debt excesses -- >> i think we're losing you. i'm getting a little bit of technical difficulty occurring here but thank you vch. if you can still hear us, thank you very much for joining us. incredibly bearish. >> it will take a big recession to make that happen but who knows. sometimes you don't see those things coming. that will do it for the first hour. >> brian, over to you. >> thank you very much. 2:00 on wall street, 11:00 a.m. in oakland, california. the dow struggling to move higher even as the jobs number comes in very strong. hi, everybody, and happy friday. i'm brian sullivan. melissa lee is at the nasdaq. your big friday headline, the december jobs report coming in better than nearly everybody expected. we added nearly 300,000 jobs
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last month. on the surface you think, well, that should be powering stocks higher, but once again oil is the big drag despite a big drop in the number of rigs that came online last week, crude oil down again. in fact, just a hair above 33 bucks a barrel. let us bring in halima kroft with rbc capital markets. we have got to stop meeting like this. >> i know. >> we were in houston, in miami. we had to go to miami to talk to oil ceos. everybody said we don't know where oil is going. b, 20s are highly likely. >> at this point there's not a lot of bullish catalysts out there in the near term and we're going into refinery maintain, we have iranian barrels coming back on the market, all the concerns about chinese demand. could we crash through $30? absolutely. do the fundamentals support oil in the 20s, probably not but macro headlines can take you anywhere. >> i'm sure melissa gets the same thing. i get all the time, sullivan,
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why do you keep talking about oil for more than a year. let me ask you a work question. >> yes. >> at your job, are you getting some of the equity folks now calling you up being like, helima, what is going on, people you had not heard from a year ago. >> i think the scale of the price decline, if you had said a year ago we'd be talking about this price environment, everybody wants to know where is the bottom. the middle east is blowing up and nobody cares. people keep saying how can everyone write this off. why is there no geopolitics. we're really in a very, very bear market right now of sentiment. >> helima, this sort of market, risk premium, is that a dead notion? >> risk premium, i think at this point you literally have to see almost a physical supply disruption out of the middle east. just torching the saudi embassy in tehran is not enough to get anyone excited right now. you literally have to see barrels off the market. isis showed up and lit up a bunch of libyan faciles. no one cared. we have to see something major
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out of saudi or iran to get people excited about oil. >> the biggest maybe story of the week that few have talked about is the possibility that saudi aramco may go public. it's a gigantic trading company. i say maybe because right now it's just sort of reports that they're thinking about it. if they do it, they're going to have a lot more capital than they already have. would that be negative for oil? >> i think it would for some people it would say, look, this is showing that saudi arabia is absolutely preparing to weather a lower for longer. also we don't think the upstream is in discussion at all, but people say, wow, if they did something involving the upstream, would saudi arabia ever be an effective player in opec again. >> what do you think? >> i think it's going to be petrochemicals and down stream. i think it's going to be up 5% on the local stock market but everyone is now going to the point of like, well, what if they put it all up there because
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saudi policy has been so unpredictable. no one could have forecasted we'd have a young 30-year-old talking about being the next margaret thatcher for saudi arabia. >> because they have ten times the reserves -- >> of exxonmobil. >> ten times the reserves. >> and people say why now. if you were going to do this, do this three years ago. >> at 100 bucks a barrel, not $30. >> does this speak to saudi arabia needing revenue. is it speaking to the fact reality is biting them in terms of the oil price. >> helima croft, could talk all hour but we have to let you go. >> thank you. >> have a great weekend. as you may have seen or heard the last few days we were live in houston and at the oil conference in miami and we had the opportunity speak with a number of oil ceos. oil producers, refineries, and those in the drilling business. we asked them all about what they expect from the price of oil. here is a quick montage of what they told us. >> we're probably grog to see $30 crude before we see $50 crude. >> we're hearing at this conference that commodity prices are going to go down to in the 20s. >> people will just churn
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dollars in the 40s and 50s but when you get into the 30s, you really can't even churn the dollars. you really can't afford to even drill anymore. >> the old-timers used to say the cure for low oil prices is low oil prices. >> now, oil people and entrepreneurs are known as some of the most bullish and optimistic business people in the world, so the fact that these oilmen were not saying everything is going to turn higher anytime soon i think speaks texas-sized volumes about how unsure everybody really is. moody's out with a report listing 58 companies that are on their liquidity watch list. the energy and commodities industry looks to have liquidity concerns, but are there other companies for other industries that are also on that list? a few names that stood out to us are, the energy company california resources, home builder hov namian, fairway group, and telecom company sprint. joining us is john puchla.
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tell our viewers in layman's terms what this list is and what it means. >> thanks for having me on, brian. moody's publishes liquidity ratings, so the liquidity stress index is the percentage of companies that have the weakest liquidity rating. it's an -- by liquidity what we mean is a company's ability to meet their cash obligations and comply with their financial kof nan kov nants over the next 12 months. >> you're not saying they're going to go bankrupt but you're saying things aren't great. >> well, liquidity is a primary driver of defaults and really this is an indication that they are -- the default risk is elevated. >> it's high. >> on average companies that have the weakest liquidity rating, the default rate over the course of a year is roughly 40% but not all of them go bankrupt. >> so of this -- every year you
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have posted this list, you have had 40% of the companies experience some kind of significant financial issue down the road. >> that's an average. >> that's the average. >> right. >> because companies can -- if they can, they can sell stock, get a private equity investment, they can sell themselves, they can maybe sell more debt although it sounds like it would be difficult. this is not some sort of a death letter, but it's just to put your clients on notice, hey, these companies have some problems financially. >> correct. it's an indication that they are at elevated risk of default. as you mentioned in periods like the last three or four years when credit market environment has been pretty good, they've had an ability to resolve liquidity issues by pushing out maturitie maturities, things like that. obviously with the backup in markets we've seen over the last three to four months, that's getting more challenging. >> i don't know, i want to hone in on sprint. that's probably one the viewers are invested in.
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your analyst points out sprint is under pressure because of promotional activity most likely from t-mobile which has been upping the ante in terms of promotions and free bandwidth, et cetera. soo so i'm wondering does this mean being on this list, does that mean there's going to be some sort of dilutive action? it's going to be difficult for them to issue debt or if they do it will be at high cost. does that necessarily mean a capital rate? should investors be fearful of that? >> i think what our analysts have said is that sprint needs to -- it does need to raise more capital. they are burning through a lot of cash because of operating issues and cap ex and so, yes, i think what they're saying is they need additional liquidity. >> so do we get any clues as to how they will raise that liquidity, whether it be through an issue, a bond issue, or through a stock issue which would be dilutive to shareholders? >> like any company, they have a range of options. they're, of course, going to look for the cheapest
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alternative. so obviously a big parent in softbank that maybe they could tap some funding there and, of course, credit markets are always available to them. equity tends to be the highest cost, so we think they're going to look for the cheapest alternative. >> john puchalla of moody's. appreciate you coming on. we reached out to all the main companies we just talked about with john. we have only heard back from one, hov nanian and they told us in anticipation that high yield market difficulties may persist, we entered in two separate land banking arrangements that would help provide us with $300 million of additional liquidity. furthermore, we have publicly discussed other liquidity levers that can be accessed which will provide us with additional liquidity in the future. the other ones have not responded. we will try to update you when and if they do. >> interesting list. a terrible first list for chinese stocks. the shanghai composite is down
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10%. the shenzhen down 16%. bart chilton was a commissioner on the u.s. commodities futueut trading commission. he knows about running a market. bart, you say china blew it. >> remember that movie "cop land," robert de niro tells sylvester stallone, you blew it, you blew it, you had the opportunity. the chinese regulators did the same thing. what they did is said shareholders cannot sell stock for six months, and so when shareholders thought they might be able to sell stock this week, other investors decided they were going to get out of the market, and the market wept nt a tear downwards, down 10% in week. and the circuit breakers they have in place, the price collars on the markets, up or down,
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those things were -- they kicked in and stopped the trading, as you said, melissa, only 29 minutes yesterday and just a pause almost 7%, which is the kick in on monday's trading. so they've really messed it up, i think, in china with a command and control type of regulation over there. >> i completely agree with you on the point of the ban on selling. when that ban was issued six months ago, i had asked every single china watcher that came on our air, don't you think that's just going to create selling ahead of the anticipated lifting of the ban six months from now and that's exactly what happened. but on the point of circuit breakers, this is the first time they impose market-wide circuit breakers, and you make the point yourself in your piece on cnbc.com which is posted right now that in 1987 here we had circuit breakers in place, and since then they've been continuously, continue actually -- continually refined. isn't that the same case in
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china? they recognized they didn't break and they dialed them back. >> two things and you got it exactly right. the reason we began circuit breakers was, you know, black monday in october 1987. they started to be implemented in 1989, but we're not perfect. we've learned by being burned, the flash crash in may of 2010, so the most recent time we recalibrated circuit breakers in the futures space and the equities space was 2012, and i think we got it right. so, for example, a 7% drop or a rise in our markets will pause markets, but 7% in china halts trading for the entire day. so what's crazy to me is that they didn't calibrate them correctly, and i understand a learning curve, but what they've done since it messed up yesterday is they say there are no circuit breakers. which is just crazy. it's like they're throwing things against the wall hoping something will stick. so don't get me wrong, i'm not
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saying we're perfect. we have the best markets in the world but we're not perfect and i get worried when i hear things like china-tizing markets with a financial transaction tax. by and large, we're the envy of the world, but we should be trying to ensure that we are ensuring investors are safe, not driving them away. >> -- your money in the domestic chinese stock market. >> right. who would want to trade there? you don't know what's going on. you don't know when you're going to be able to trade your stock, brian. >> so i'm assuming then, bart, that's a no. you would not invest your money in the domestic chinese stock market. >> brian, i was a government guy for 30 years. i don't have any money. >> well said. nothing i can say to that. bart, thank you. >> thanks. all right. bart just posted an op-ed to the website as melissa noted. go to powerlunch.cnbc.com to read it. it is worth a read. all right. much more to do here on "power lunch."
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up next, is it time to china-proof and oil-proof your portfolio? is that even possible? we have some investment ideas coming your way. plus, why this could be a triple tailwind win for retailers. and later on, the two stock that is stood out the most to melissa and i in this wild week, and "street talk" is back. a jam-packed "power lunch" rolls on after this quick break.
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plus, why this could be a granted, it is still super
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early in the year, but 2016 has been a pretty good one so far for walmart. it is the only dow stock higher this year, which got us kind of thinking. are the big retailers about to become beneficiaries of what we'll call a trifecta of tailwinds. consider the following. number one, gasoline prices continue to be low, maybe the consumer is starting to believe they are here to stay. it also helps reduce your trucking costs. two, china's pain may be retailers' gain because china's currency devaluation should reduce the import cost of so many of the goods that fill their stores that are made in the factories of china. and, three, as natural gas stays low, the cost of electricity, another huge cost for big stores, should go down as well. could all of these things, one, some, none, all, help revive retail margins. we don't know but our next guest does. steve, does our thesis hold any water or is it total crap? >> i think some elements of the
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thesis -- >> some elements. which ones? >> well, clearly the lower gas prices, whether it's natural gas or the price of oil and the gas pump is having a big impact? >> is it. we haven't seen this gasoline trickle through yet? >> yes, you have. >> where? at the gasoline convenience store? >> you're seeing it in all of the experiences, restaurants, hotels, travel. people are spending about 75 cents on the dollar. >> granted on that. i'm saying it hasn't seemed to have gone to macy's. >> no, no. that's a whole different thing. but i do think -- and the input prices, the supply chain will be reduced a little bit when you see the reduction in the price of the yuan. so i do see some benefit. i don't think that's going to be a big one relative to the retailers. i do think -- you used the macy's example. the retailers have gotten hammered. you saw the macy's results. the comps were down in the 5% range and they're doing some really good things relative to restructuring and getting costs out, but the reality is that the
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weather made a difference. i don't think anybody -- usually we never accept weather as an excuse. >> our viewers know i can't -- >> i hate that. >> thank you. >> for the first time i've actually seen it make a big difference. they talked about 80% of the impact on their earns were from the weather. if you believe that, their multiple is trading probably at a third less than their historic norms. if you believe -- and that's not just macy's. it's all the stocks. dick's sporting goods, nordstrom's. if you believe that's true and you're going to get back to some sense of normalcy, there's a big upside. >> do you think that -- okay. do you think investors are wildly overestimating the cost savings amazon might have over a macy's or a walmart because that last mile to get the package from the distribution center to your front door may be higher than we think it is? >> no, i don't think they're overestimating the amazon cost of delivery. what they're underestimating is the fact that these -- the
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macy's of the world are major internet players, too. macy's is the seventh largest internet player. walmart is a major internet player. we're talking about internet as being killing the retailers but the retailers are no longer just brick and mortar, they're internet as well. >> it's well said. steve, thank you very much for saying that some ever our thesis was not bad. appreciate it, steve. we'll see you soon. melissa? >> still to come, five analysts making five bold stock calls this friday. that's in "street talk." and there are green arrows at the nasdaq. vodafone, electronic arts, charter communications, viacom and marriott are all trading higher on this friday. stick with us. "power lunch" is right back.
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welcome back. i'm eamon javers in washington. we're getting our first reports now out of that meeting of silicon valley tech executives with high-level obama administration officials in san jose. the meeting was called by the white house in order to discuss ways in which the technology industry can cooperate with the administration, law enforcement, and national security officials on combatting isis and terrorism generally. first report now coming from "the washington post," just posted a story saying the obama
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administration is creating a new counterterrorism task force to combat online propaganda from the islamic state. "the post" reporting the new unit will be based at the u.s. department of homeland security. it is expected to be announced by the white house later on friday. josh earnest is briefing reporters right now over at the white house. he said just a few minutes ago one of the things that they hope to come out of this meeting is some way for the administration and the tech companies to work together to disrupt the radicalization process of isis recruits in the united states and around the world. that's one key priority going in. we'll see what they come out with at the end of the meeting later on this afternoon in san jose. back to you guys. >> all right. eamon javers in d.c. thank you very much. after a few days of travel and some market chaos in between, "street talk" is back. our check on the biggest analyst calls. first up, microsoft. bmo starting coverage with an outperform and a hefty $64 target. this is mostly a call on the
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enterprise, ie, the corporate side of the market. they think microsoft can leverage windows server to win over more corporate clients. and rather interestingly, the analyst says microsoft can, quote, become the next accenture. it implies 23%. >> i think that's a compliment. >> is it? >> i'm not sure. i think it was meant to be. the stock is down 5% this week so it's been a rough 2016 so far for microsoft but take a look at the entire tech sector. we've seen the biggest outflows in the tech sector in 19 weeks, this according to bank of america merrill lynch. it's really feeling the brunt of this market malaise. stock number two we're watching, sun edison getting an upgrade. the car is far from bullish. the stock goes from a hold to a sell since the downgrade to a sell the stock has sold off 32%. axiom said we're going to step ahead but it's sticking with a $2 price target and estimates. yesterday we saw massive
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sell-off after the company announced a debt reduction which would normally be good news but here is the fine print, sun edison also refinanced debt at shorter term mature and have sky hi borrowing costs, 10% above libor. we're seeing a bit of a bounce here. >> love gordon. he's made his clients a lot of money because he's been right on the mark with the names but why upgrade it to a hold when your price target is, whatever, a half drop from where the stock is already. the average price target on sun edison, melissa, is still $11.70. >> talk about behind the eight-ball here for the analysts. >> the stock is at $3.50. stock number three, tev a pharmaceuticals. a $100 target. they love the buy out of allergan's generic business. even more avenues for capital development. they love it. eva pharmaceuticals.
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they have a $100 price target on teva. this is not the sandal company. >> these teva. >> ones you like to wear with white socks. >> only on planes. >> you keep it classy, brian. you certainly do. i keep talking about so far this year ivb has really had a rough beginning to 2016 and, in fact, it's down 25% from its highs, it's 52-week highs. i'm only bringing this up because these are the kinds of stocks that will trade with the group. there's a negative sentiment when it comes to the biotech industry and you wonder if teva can buck that trend. next up apple. what's a day without talking about apple. we saw it tumble to flash crash lows. apple seeing a lot of price target cuts today. this one cutting the target to $132 from $142 and cutting the fiscal 2016 iphone estimates. they see the risk/reward positively and anticipated growth in the seventh cycle which should lift the stock in 2016. the seven being a 2017 event.
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>> i did not know how poorly it has done. it is not only the worst stock in the dow over the past month, melissa, it is the -- well, someone has got to be, but it's the worst stock by 6%. disney down 10%. apple is down 16%. so it's lagging by a lot. all right. and your under the radar name, huntington ingals, defense company. upgraded to an outperform raising the target to $150 from $135 saying one of the cheapest stocks trading at a discount in the defense space. the an lirs reminds investors the department of defense has a 12% funding raise in the new budget. they think management will be smart and not blow money by buying another company in a dumb deal. 25% upside to hii. >> this is interesting and you got to wonder if defense will be defense in this kind of market turmoil that we're seeing. >> i got that. the best defense is a good defense. >> exactly. >> or something.
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"street talk" sandaled up down on this friday. let's now turn to the oil market. the final crude trades crossing for the week. we are going live to the nymex where crude oil may close, may, below 33 bucks. we're going to find out. stick around. ates. ates. it's a fact. kind of like ordering wine equals pretending to know wine. pinot noir, which means peanut of the night.
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i'm in charge of it all. business expenses, so i've been snapping photos of my receipts and keeping track of them in quickbooks. now i'm on top of my expenses, and my bees. best 68,000 employees ever. that's how we own it.
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hello, everyone. i'm sue herera. here is your cnbc news update at this hour. reports of a shooting at an egyptian red sea resort frequented by foreigners. nbc news reporting three armed men stormed and injured two tourists. security shot and killed two of the armed men. we'll have more as the situation develops. mexico has arrested drug kingpin joaquin "el chapo "guzman who has been the subject of a manhunt since escaping from a prison six months ago. the mexican navy recaptured him. a gunman who ambushed a philadelphia police officer as he sat in his marked cruiser last night did it in the name of islam according to philadelphia police. the gunman fired 13 times at close range at officer jesse hartnett after waving the cruiser down on the street. hartnett is in the hospital recovering from surgery.
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the s.e.c. says hedge fund manager stephve steven co- -- steven cohen has been banned from supervising until 2018. cohen responded by saying the resolution of the case opens a path to raising outside capital in the future. and that is the cnbc news update at this hour. back to you, brian. >> all right, sue. thank you very much. the oil markets set to close for the day, and it looks like another week to forget for oil. let's go to jackie d. at the nymex. >> that's a mild way to put it. $33.16 is where wti finished the session. this was considered pretty calm on the day but, remember, down more than 10% this week, face-to-face straight days of losses. so definitely the momentum here is building to the downside. average oil prices for the last four years, a nine handle, brian. last year the average was a four handle.
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so a very significant drop here. is the two handle in sight? some are saying it is. they're making cases for it. $32.10 is really that mark to watch. it was the intraday low we saw this week. brian? >> jackie, thanks very much. on the back of oil and what jackie just talked about, another week to forget for many of the oil stocks as well. even some of the bigger companies out there not immune to rampant selling. look at these changes just this week. marathon oil, mro, down 19%. whiting petroleum, down 19%. apache, 19%. hess corp down 10%. those are just some of the bigger companies out there, none of them really immune from selling this week and based on our data just 11 of the 167 nonrefinery oil company stocks we follow lost their investors' money this week and just a personal note to all you ceos, that we and i have reached out for interviews who say no, your investors need to hear from you. losing a fifth of your value in a week if you're a major
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producer, wow. it should be clear by now little north korean's dictator's antics aside, the biggest risks to your money, china and the oil swoon. let's bring in dom chu and seema mody to talk about how you will oil proof and china proof your portfolio. >> there are two factors that have been working against companies that have high exposure to china. first, the economic decline. second, and perhaps the bigger reason, is the massive drop that we've been seeing in the chinese yuan. but, gentlemen, that doesn't mean you can't make money in china. there have been some winners including nike, adidas, under armour. these are some companies who have been generating sales in china. strategists say you just have to be selective. but if we continue to see a sharp depreciation in the yuan, which in other words means people's bank of china allows their currency to fall, analysts say there are three sectors that could get hurt. autos, luxury, and casinos because a further drop in the currency, the yuan, means their
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products become less competitive over seas and we've been seeing that play out in some of the big companies in these sectors. take a look at wynn resorts down over 9% this week. high exposure to china. in fact, makes about 60% of its sales in china with its exposure to macao, gambling revenue also on the decline. and in the luxury space take a look at burberry. bernstein analysts say this is a company that's most vulnerable to a sharp devaluation, and lastly daimler, german automaker mercedes-benz, down. >> they may want to sell or give back macao to the portuguese. >> good point. >> is there a way you can oil proof? >> you can. just don't buy oil stocks. i say that in jest but there are funds and products out there that take that kind of thing in account. xxx, that sort of thing. let's go through the big themes. first of all, yes, i jest a little bit avoid buying energy on the industrial side of things
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tied to oil. again, if you don't want to do it by yourself, there are certain funds out there, now, i will say this, a caveat, the next couple of exchange traded products i will talk about are very small in nature and don't trade very frequently, but still it gives you an idea of the concept. avoid buying energy stocks. check out this chart. this is the pro shares s&p 500 ex energy etf. it's down about 5% so far year-to-date. again, over the course of the past year slightly outperforming because of the energy nonexposure. let's talk about the other ones, tactical versus strategic moves. if you want to hedge certain places in your portfolio for the effects of oil's decline, there's another exchange traded product that does it. remember the u.s. oil fundu so? there's an opposite here. the dno. this is the opposite of the fund. it goes up when oil goes down. that particular fund again smaller -- >> that's a great ticker though because everybody we ask about oil, do you know what they say, i don't know? >> dno, there you go.
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the short oil exchange traded note. a caveat here it tracks daily movement so you have to be a more robust effective risk manager. you have to watch that on a daily basis. the last one among big themes, down stream versus upstream. exploration and production, that's upstream. refined products, gasoline, is down stream. if you want energy the place that has been shining in energy, believe it or not, there is one, and that's refiners. like brian said, those refiners have actually outperformed again over the course of the past year. you can see down this part year-to-date but certainly not as bad as other parts of the market. refiners have been the bright spot if you really do want energy exposure, that's the place that you had to be over the course of the past year. >> we'll see if it continues the next 12 months. oil proofing, dom. thank you. china proofing, seema, thank you. this week's market volatility may have led some of you investors out there to question your own strategy. the question then is how much
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money should the sort of average, middle age midrisk investor have no stocks right now? albert brenner, director of asset allocation strategy, stacey gilbert, head of derivative strategy at susquehanna. everybody is different. if you're 24, 74, a risk-taker or not, i get it. let's take the middle of the road, middle aged investor. right now what percent of a portfolio would be smart to be in stocks? >> brian, for a 40-year-old investor right now, he or she should have at least a minimum of 80% in equities right now. i know that seems crazy after the four days we've had at the start of year, but that's what the minimum would be. >> 80%. and i assume that's a 20-year time line though. is that part of the thesis, if the dow or s&p is not higher in 20 years, it means you're probably living in caves because of some thermonuclear
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armageddon. jo a >> and i'm assuming the 40-year-old investor is not looking to retire in ten years. for someone in a typical time line looking to invest in their early 60s, they're saving money for themselves, investing that, they should have a pretty significant equity exposure in their portfolio. >> as my grandpa might have said, don't be afeared of stocks. stacy, again, not professional investors, but people that may have a little experience with the options market. is there a way for them to keep the stocks they've got to albert's point but maybe use options to mitigate some of the risk? in a simple way? >> sure. there are several ways you could do it. one, you have to know what your biggest exposure is. do you have a lot of exposure to small cap, midcap, large cap? let's just assume you have a lot of exposure to large cap. could you look at for example the s.p.y. that's your best large cap portfolio you can replicate. you could choose to buy puts on
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them. on a relative basis just given the recent volatility in the marketplace, those puts are certainly traded more expensive than they have been. we have seen investors buy puts for protection, very common strategy, and they sell some of the upside calls against it to help finance those downside puts that they're buying. it's called a risk reversal or collar. booiring the protection for the pull back, giving up some of the upside but helping to offset some of the costs. definitely a common strategy and one we certainly see being done over the last several days. >> stacey gilbert, good stuff. albert. thank you. to get more information go to "trading nation." cnbc.com. dot plots. >> brian, a huge jobs number hitting the street this morning. so is this a one-off or can we expect more in 2016? we'll be digging in straight ahead.
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the jobs report for december was a winner nearly all the way around. when it comes to this ktype of data, taylor swift was right, the haters are going to hate, hate, hate. even in this report, bill, which i mean i honestly thought was nearly impregnable, when you went into it, people say ah-ha, but some of the folks leaving the workforce are leaving the workforce for noneconomic reasons. your take. >> as the economy continues to get to grow and be strong as we were over this year and the year before, you see people who are going to actually -- they have been out long-term unemployed, their skills have atrophied a bit, employers may not want to take a chance on them so they
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will initially take them on part time and move them up to full time. >> if it's noneconomic you have people leaving for child care reasons. hey, child care is expensive. it doesn't make sense for me to work. we have to fix that as well. was there anything else that even as an optimist, bill, could you find that maybe we'd say, okay, it wasn't an a-plus report. >> that's my training. we're trained to be skeptical. the obvious bun that juone that is the wage number. you saw a little bit of a decline in wages over the month and then over the year it was modest. you know, in a bigger piece, you do see that wage growth is better than the year before suggesting that we are starting to get a little more tightening. >> let's be honest. >> i'm always honest. >> in the sense that this is the jobs recovery that rodney dangerfield doesn't respect, right? so the guy who nobody respects, this is even worse, right? you did 3 million jobs in 2014. you did 2.65 million jobs in
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2015. brian, there's nothing that the haters who are hating that is wrong with the job market that can't be fixed by what we're doing right now, which is hiring more people. it is the absolute answer to all that ails the job market right now is more jobs, and we're doing it, and i don't think obama is responsible for it, but i think the other side of that you get this notion that certainly his policies, it's hard to argue that they're reducing job growth because it's hard to imagine the u.s. economy actually making more jobs than we've been in terms of the consistency of the plus-200,000. >> and i think the reason why this recovery doesn't get that respect or even want to call it an expansion is that the labor force participation is still well below what we were at the -- >> but it's the same level it was 40 years ago. if you look at the labor force participation on a 20-year chart, it does this. on a 40-year chart, it does this.
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we're going back to where we have more people choosing to stay home. >> or retire. >> or go back to school. >> there's nothing wrong with the participation rate that more jobs won't fix. >> well, the answer to jobs is jobs is what you're saying. we're going to leave it there. bill, we're going to get you back on. it's a good debate. melissa? >> still ahead, is this the year of walmart? more on the standout stock of 2016 when "power lunch" comes right back.
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welcome back to "power lunch," i'm melissa lee. walmart was the worst performing dow stock last year but this year it's the only dow stock in the green. is 2016 the year of walmart? ken perkins covers walmart for morning star he has a buy rating, oliver chen is more cautious with a neutral rating. oliver, i will start off with you, this is a massive amount of outperformance in 2016. walmart shares are up 5% versus the overall markets which are down. most of this outperformance has to do with the markets doing badly and maybe the perception is that economic growth is going down around the world? >> we do think walmart is a defensive stock and it is
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inexpensive. at cowan we are focused on quality names like costco and ross stores. we think walmart is in turn around mode, that's why we have a neutral rating on this stock. we think they're making the right decisions investing in labor and service, but amazon the growth of traffic online, mobile, they are having to reinvent the business model and we would prefer that investors play other names. >> what's your take on walmart's out performance? is this the kind of stock that does better when the rest of the market isn't doing so well? >> if you look at what walmart has been doing, the traffic has been up, same store sales have been pretty decent in the u.s. there are a lot of people struggling and with half of walmart sales coming from groceries i think you're still going to see some pretty stable traffic trends and sales trends that a company like walmart where some of the more discretionary categories that are in the cross hairs of an amazon will be hurt probably more going toward at least in
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2016. >> oliver, what would get you to be more constructive on walmart? if we see the economic backdrop dim in 2016 will that make you more constructive on a name like walmart? >> there are names we do prefer, i would say costco and limited brands and victoria's secret being global names but walmart is defensive. what i'm looking for is walmart enhancing their service which should drive conversion rates as well as traffic in stores. what that means is walmart is really increasing labor, adding more talented people, making their check out cleaner and making their bathroom cleaner. they are adding convenience to the customer and this is a longer time of process. so those are my thoughts in terms of what we're looking for. >> ken, you make the point that walmart has the locations, the distribution centers to put up a fight against amazon. what sort of multiple do you think walmart should get if it does improve the e-commerce side of things? >> i think ultimately our fair value on the company is $75 a
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share. that puts it more the at a mid teens multiple versus a low teens multiple right now. i think ultimately the way we see it is this is a long-term play. this is a turn around play to be fair and the company is investing quite he have i will in wages and e-commerce. over time we think if you get stable traffic trends and you get a low earnings multiple and you get any sort of share buy backs you will get a recent turn over a three to five-year time horizon. >> oliver chen as well as ken perkins. now to dom chu for a market flash. >> we're watching shares of maxim down sharply right now, down about 2, almost 3% right now, this on the heels of bloomberg headlines saying that both texas instruments and analog devices are said to decide against trying to acquire maxim. again, maxim has been the target of possible takeover talk from both analog devices and bloomberg saying now that texas instruments and analog devices
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may be dropping out of this particular race. we were down about 4% for one moment here, maxim has already done about a full day's worth of trading volume on this. the s&p down about a quarter percent. "power lunch" back in two minutes. 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 and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it.
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financing vehicle called the mobile leasing solutions unit, it is expected to provide the company with approximately $1.1 billion in cash proceeds at closing, we are growing and adding subscribers, as a result we, sprint, believe we are well positioned to finance our turn around. it's easy to say stuff like it was a wild week for stocks, but guess what, that's exactly backed up by the data this week. get this, in just 48 hours this week the dow traveled up and down more than 2,000 points. so we have put together a brief montage of some of the craziest moments of the week. take a look. >> there's the opening bell. the whole world is down 2%. happy new year. >> the worst start to the year for the dow in 84 years. >> highly unusual for day one to see a big selloff like this. >> china's big fall down 7%. >> it is a historic day here on wall street. >> s&p at the bottom of your screen, breath a little better than at this time yesterday. >> the dow adds maybe call it ten points on the close.
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>> right now the dow down 207 points just off the lows. >> look at these markets, another down day on wall street, dow giving up almost 350 points. >> what started off as a calm soft session now has turned into -- i don't know, it's picking um steam. >> it happened about 9:42, the csi 300 is down more than 5%. >> china down 7% overnight. >> dow briefly dropping 400 points, we are down 384 right now. >> the currency in china has devalued or dropped quite a lot this week. why is that happens? >> at one point it did look like we could see a come back by the dow, the market gave all of that back and then some ending near session lows. >> dow is up 72, not as high as the futures indicated. >> we had a nice rally overnight, a nice rally on the jobs report and it kind of sold into that. right now the dow only up 64 points. >> the shanghai and the shenzhen markets both ended the day
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higher. investor mood still jittery. >> should be an interesting final hour of trading here, brian, as we are still down on the session right now. >> and a big "fast money" 5:00 p.m. eastern. >> absolutely. i will see you then, brian. thanks for watching, everybody. >> "closing bell" starts right now. thanks, melissa. hi, everybody, what a week it has been, welcome to the "closing bell" on this friday, i'm kelly evans at the new york stock exchange. >> and im bill griffeth. stocks on another roller coaster ride today. we had that stronger than expected december jobs report this morning, looked like we may be off to the races with a rally, kicked off with a triple digit gain for the dow but we have given all of that back now. we are back just off the lows of the session down 56 points right now. >> that's despite a rally in china which has been the main culprit behind in week's selling. we have a lot more on what's happened and a
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