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tv   Power Lunch  CNBC  January 12, 2016 1:00pm-3:01pm EST

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up. if you're a long term investor, stay invested or add more to your investment. >> keep an eye on intel. looking at the consumer and the outside of energy and all the rest of it, intel. >> guys, good stuff. see you tomorrow. "power lunch" begins now. welcome to "wer lunch," everody. thank you very much. i'm mandy drury. i'll sooil is falling once agai big time today. >> as oil goes, so goes stocks. you see the dow starting off well. but tumbling now. there is the west texas crude down $1.23. there is oil, a brief flurry, back above the flat line. down a modest 24 points at this hour. >> let's get straight down to the stock exchange to the floor of the nyse where we find bob pisani. is there anything about this
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move in oil that feels like capitulation which could be a good thing, instead of a washout moment for stocks as well? >> i wish i could say there was. there isn't. we have people calling for $20 oil. we have people in the single digits for oil. it's a race to the bottom at this point. most of us would like to get it over. drip, drip is agonizing. i want to shoate s&p 500. there are two things moving the markets these days. oil and the chinese currency. the chinese currency against the dollar was calm overnight. that wasn't a big issue. oil did not behave. moving down the middle of the day. that's what's been killing the rally. we're just off the lows for the day. but slow drip, drip to the down side here. big problem in major commodities throughout the day. freeport down another 8%, 9%. alcoa is down 9%. there was some missing on the adjusted guidance. it was back loaded. they had earnings out. look at these declines. there is one day, folks. this is not a month or a whole
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year. so people asked me about freeport. they say -- they tell me the stocks are trading like they're going out of business. i say it's not that. they have great assets. but they had a problem with whether or not you'll be able to pay the debt. so look at freeport. i'm pulling up one. with debt of $20 billion. there is a question that comes up about whether or not they're going to get sufficient money in, cash flow to be able to service the debt. i'm not picking up freeport. pull up half a dozen or dozen of these stocks and get very similar situations. that's the main concern that we have. look at oil. slowly down throughout the morning. and that's what killed a lot of the things here, the rally here. finally, just put up the energy stocks. they're down double digits. all the names that we've seen, cnx, coal, natural gas all on the weak side. back to you. >> thank you very much. you want bearish, we got bearish. rbs, dom, saying sell everything and that 2016 will be a
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cataclysmic year. let's just remind folks that rbs had to be bailed out in the last crisis. >> we should -- rbs has had its problems in the past. and this one here is a call by an economics and rates team out of europe. it is not necessarily everything in the world but they're giving a lens on a bigger picture f you go beyond the headline, it is sell everything. but they say except high quality government bonds. so what they're saying is be safe. don't be as risk -- at least risk prone as you have been in the past. they also talk about what bob pisani is talking about, the oil idea. they're bearish on that oil trade. they talk about the idea that is way too much debt in the world and that's going to hamper global economic growth. they're not the only ones. remember, over the course of the past week and a half or, so just to start the year, a whole host of banks and their individual strategy and technical analysis, chart watching teams have come
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out tachlt a look at what ubs said this past week. risk of seeing a significant bear cycle in one to two years. they're putting a time frame on it. they say we're due for one. jp morgan chase had a team say this is a regime of now buy the dips may be over. meaning, it used to be the winning strategy sever time they pulled back, jump in there and buy stocks and you got bailed out. now it may be about selling the risks. in other words, selling or taking profits every time the market goes up a little bit. then you had citi saying weaker earnings per share momentum and rising fed funds, interest rates and the micro economic stories, earnings season is kicking off right now. maybe it's slowing down. all the analysts are expecting that things are going to slow down for sales and earnings. all of these things -- >> that one makes sense to me. that one makes the most sense to me. >> what is interesting, you have the fed putting the brakes on a little bit. and you've got corporate profits in the position they are right now. we were talking yesterday about an earnings recession.
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>> right. >> those are the two mother's milk of bull markets. >> sounds just like larry kudlow. being a bear right now is almost a consensus. >> all right. thank you. >> in the news alert now nshg, herrera has details. >> $24 billion in three year notes went off the board. looks like the demand was weaker than we've seen recently. the bid to cover ratio came in at 2.94 to 1. recent ten year average has been much higher than that. the yield came in at 1.174 which would be the lowest yield since october. so we had a little bit of weak demand. but the yield was low at 1.174. indirect bids were about 62.8%. mandy? back to you. >> thank you so much for that, sue. dom just highlighted the growing bearish calls on wall street. now with oil continuing to fall to new lows, what should your
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strategy be? we have a portfolio manager joining us. thank you very much for joining us today, margaret. i see year to date your fund is down just over 6%. of course, the market has had a pretty rough time so far this year. you've got a number of well known names in your top ten holdings. names like apple, microsoft, visa. you also brought along with you a few stock picks, things that maybe people should look at in the large cap arena that could withstand some of the volatility that we're experiencing at the moment. tell us what are the names? >> right. so i mean, look, we've been thinking a lot about the volatility that everybody is talking about. the reasons for the volatility. and we don't think it's at all uncommon or unusual for that to continue for a couple more quarters. so we run a growth strategy. we're looking for companies that are on the offensive but are growing. we've also been thinking about what companies are also defensive. so comcast is one that i highlight that, you know, they
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have demand for their products. they have nice free cash flow. growing a little faster than the market. it's a good quality company to own in a down turn i think. >> certainly today it's holding up. it's kind of break even other n. an otherwise rocky market. you have also acamai and you like that one. >> it's interesting. i wouldn't necessarily say it would be defensive except that the stock underperformed. i think there is some valuation support here. look, akamai is a content delivery network. that is something that helps you watch video by cashing content closer to where you're located. if you believe that internet video is going to continue to grow and be more and more prevalent, then somebody like an akamai is poised to benefit. >> i want to turn back to comcast a little bit. obviously, it's our parent, number one. number two, there are headwinds in that business that that company as well as disney are facing which call into question
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some of your thesis there. i want to go back to the prior segment and ask you, how do you react when you hear an esteemed bank like rbs say sell everything? >> i think that's pretty extreme. you know, i do agree with one of the commentators in the past who was saying the consumer is in good shape. there are certain aspects of the u.s. economy that are in fine shape. we have unemployment low, we have housing in good shape. we're starting to see some early signs of wage inflation. there are a lot of encouraging signs. and that's why the fed announced its first-rate increase in several years. so, i mean, i think there are some things that republican couraging. but to your point, you know, we have been thinking about that pivot to defensive. if you look back at the last down turn, comcast actually did outperform in the last down turn. i think it's because of that cable business. and that's a business that disney doesn't have. so if you think about the reason that's the entire media group has been weak, it's really the fears around core cutting. comcast has a partial hedge against that because they have
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the broadband service. >> thank you very much, margaret. clear bridge investments. and your other two stock picks are eco lab and anheuser-busch which has a little regulatory risk. they're also on your top four stock picks. thank you very much. >> thank you. >> all right. margaret, thank you. mandy, as well. battered bioteches clawed by the bears. underperforming the sector. the company's ceo will join us exclusively to tell us what's in the pipeline there. plus, three big calls on three big dow components, apple, intel, coca-cola. you are watching cnbc, first in business worldwide. in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow.
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like in the hudson valley, with world class biotech. and on long island, where great universities are creating next generation technologies. let us help grow your company's tomorrow, today at business.ny.gov
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welcome back. three big calls of three big dow components and all three are trading higher. bank of america upgrading apple, the tech giant to buy from neutral with a price target of $130. concerns over iphone production cuts are reflected in the stock price which is below $100 now. and that apple could be primed for a bullish cycle involving an upgraded apple watch and possible new iphone. intel getting an upgrade to a buy. the chipmaker is a dominant force in cloud and other new markets. the stock is up over 1%. coca-cola raised to buy from
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hold. the core based on evaluation and improving growth trends. let's get to sima for a market flash. >> another record low today falling over 4%, etsy. the company's lockup expiration of shares. we tlik clarify this was the second lockup of shares since etsy's april ipo. 22 million shares were eligible for sale. the stock still trading more than half below the ipo price of $16 a share. tyler? >> all right. thank you very much. it is the biggest health care investing conversation of the year in san francisco. hundreds of ceos in attendance to discuss hundreds, hundreds of them to discuss what's in their pipeline. our meg terell is there with the ceo of biomarin. hi, meg. >> thank you so much. and the seize is joining us now. thank you for joining us. >> thank you, my pleasure. >> i want to ask you about the
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drugs in the pipeline. let's start with the broader question of biotech wlachlt is the sense you're getting from investors about how they're feeling about the market? >> i think investors are struggling between the short term situation and the stock market and specifically the biotech ticker. but at the same time, we're realizing there is still significant value creation being built in the industry and specifically -- [ inaudible ] keep an eye on the long term and feeling the anxiety in the short term. >> on the issue of drug pricing, you said you never taken 10%, 20% price increases. >> we haven't. i mean that is not our business model. you know, we -- >> however, they are very highly priced drugs. >> they are hirely priced from the get go. but strategy of taking a -- injecting the price substantially, we've never done. that in the u.s., we never increased the price of our drugs you significantly above
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inflation level. jacking up the price of drug 10%, 20% a year is not our business model. it will not be in the future. >> are you feeling any pressure on the pricetag of your drugs? >> actually in the u.s., again, making the headlines in terms of politics more than anything else. but the price of our drug in the u.s. hasn't changed since the whole controversy on the pricing in the u.s. and in the rest of the world, actually, it's not that much pricing issue, it's more the drug in some local currencies and developing countries which is impacting us. but not reimbursement per se. >> let's talk about your drug for muscular dystrophy. i think you got into early january. you had a panel of outside advisors discussing in november and most people perceive that to be a fairly negative review. what are your expectations from the fda? >> the fda, you know, told us they would in late december they would not make a decision before
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a later date. so they communicated us they expect and anticipate to make a decision in easterrly january. i think they're still completing the review. the jury is still out. we still hoping for a pull in the u.s. in either the short term, not too distant future. however, i want to emphasize that the u.s. market for this product is out of the 11,000 patient that's could be treated with this drug in the world, only 2% of them are in north america. the vast majority of them are outside the u.s. with european approval is more important than the u.s. approval. european approval very important. we have freedom to operate worldwide for this product. >> what are your expectations in europe? some folks say they have taken a different tact with drugs there with another drug in the space? >> the europeans are showing the review is independent from the fda review. indeed, in the space they have
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approved last year a drug for ptc for a different mutation. so there is a precedent for, you know, the two review organizations. so that's why whatever happens in the u.s., you know, i think the european decision will be an independent one. >> and how are you looking at getting to profitability? i know that may change a little bit depending on what happens with this drug. >> yeah. so we have communicated in the past year or so is that assuming early approval in the u.s., basically this year or this quarter, we think we can be profitable next year in 2017. obviously, there is a significant delay in approval the u.s. or approval that will delay this profitability. so we say we will get back to guidance on profitability timing by middle of this year. in addition to -- there is approval in the u.s., there is the european decision which is very important, too.
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and we have also several other regulatory milestones that are -- key milestones which are coming up which is pivotal date for various products for pku which is a billion dollar opportunity potentially. and we're filing for another opportunity. so you know, irrespective of what happens to this or in addition to it wegs have $4 billion plus opportunities either on the market today or in the pipeline which will propel revenues for this company in the years to come. >> a lot more news to talk about. we'll leave it for now. thank you for joining us. stick around, we have a lot more coming up from the jp morgan health care conference. coming up, the ceo of bristol-myers squib. >> thank you very much. we'll look forward to it. local shares are down about 15% since going public a year and a half ago. what is the restaurant chain's
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growth plans then and what impact is chipotle's ection he could lie outbreak having on business? >> mandy, all topics we're about to cover. plus same-store sales growth and so much more. we're going to be sitting down with an exclusive interview with the company's ceo after the break. stay tuned. tastemaker, and teenager. watson, you sound like a fan. millions look to you for advice. i know... i can't believe it. i am learning to analyze social media to spot trends and predict demand. sounds like you spend a lot of time online? i constantly absorb online content to follow shifts in pop culture. so... you're learning to think like a teenager? yes. how am i doing? well... uh...
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hi, everyone. we have breaking news concerning
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volkswagen. the eric karabecar california a board rejected the recall plan. they also issued a notification of violation to vw. the board rejected this vw recall plan based on three components, one, the proposed plans contain gaps and lack sufficient detail according to the board. the descriptions of proposed repairs lack enough information for a technical evaluation. and the proposals do not adequately address overall impacts on vehicle performance, emissions and safety. so once again, california's air resources board rejecting vw's recall plan. back to you. >> thank you very much. you can clearly see there on the board intraday where that news came out. volkswagen was trading positively. now it is in the red. let's get a check on the bond market with the big board behind me. certainly feels like plunging oil prices are driving not only the stock market but also the bonds market. and treasuries have rallied sharply today pushing yields down. you have here behind me the ten
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year note, the benchmark yield pushing down to 2.112% which i think is around the lowest since late october. we'll keep watching the impact from falling oil across all asset classes. that is your bond report for today. over you to. >> the state rev tail and the consumer mshgs of the nation's t ceo's meeting today to talk about that topic and their growth plans. morgan has an exclusive. >> hi, tyler. that's right. so joining me now is the ceo of el pollo loco. thank you for joining us. let's talk about same stores sale growth. there is a dra mat matic deceleration. same-store sales growth, we've seen that drop to .6% in the third quarter. you cut full year guidance a few times in the past couple of quarters. are we on track for similar growth this quarterer? >> we think first of all we've
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had 17 consecutive quarters of positive same-store sales growth. we did see some softness at the end of -- during our q-2. we went this summer and did a lot of work on our pricing and took a very modest price increase this fall about a .will -- .8% increase versus the 1.5%. we also tiered our pricing. three different tiers. restaurants that can take more pricing aggressive in those middle tier and then lower tier. so that was all really scientifically studied this summer. we feel very good about our q-4 and then 2016. >> so you would say that some of these areas you're looking to re-engage the customer, drive sales growth. it's working so far? >> we think we in the q-2, we lost a little bit of that value conscious consumer, some of the frequencies. we want to make sure we haven't lost those. we brought back our $5 combination menu. we have a snack menu on the
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menu. we also, if you look at some of the -- i mean, when you look at value, when people are looking at that, we also enhanced the service in our restaurants. we added more labor and peak hours. we got a new line in the back where it's a more efficient line. so we speed of service improves for the consumer. we're using pagers on inside time and we track that and we've improved that time. so we feel good about the things that we put in place for 2016. and we think all of that will help value which prices part of that equation. it is also the service, environment and most importantly the quality of the food. we think we have great food and consumers with all the research we did this summer reiterated that. they love our food. >> let's take into more the quality of the food. one of the big worries for consumers and investors out there is the e. coli and norovirus outbreaks. what are you doing to prevent any events like this? >> good question. that is certainly a hot topic. we're very proud of our quality
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assurance, our qa department. we have in house people that monitor the quality in our restaurants as well as we have companies that audit our stores from outside auditors. we do two inspections, full inspections on the stores every year. more if needed. and we feel very good about that. but it's something that we take seriously. and we have always taken seriously. you have to. the public's health is of most importance. >> in light of that situation, you have been able to take market share from chipotle or has the situation there hurt business? >> i think it's too early to tell. we're looking at that question. it was asked earlier this morning. we're looking at our stores in the l.a. market that are about 30 of our company stores are close to theirs and looking at that. we haven't decided -- determined that yet. >> well, steve, thank you for joining us today. back over to you. >> all right. thank you very much. the last few months have been whacky for global investors to put it mildly.
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sector funds, leveraged funds. how much is the two trillion dollar etf market to blame if that's the right word for driving that volatility? the ceo of one of the biggest etf firms will weigh in, invesco. they run the popular qqq. through see them up on the day. [vet] two yearly physicals down. martha and mildred are good to go. here's your invoice, ladies. a few stops later, and it looks like big ollie is on the mend.
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hi, everybody. here is your cnbc news update for this hour. turkish emergency services bringing people to the hospital after an explosion rocked the historic tourist district in istanbul killing 10 and injuring 15 others. the white house has condemned the attack. the u.s. soldier that has been charged with walking away from his post in afghanistan in 2009 appearing in court for a preliminary hearing. sergeant bowe bergdahl entering a military courtroom to face an army judge. he's been charged with desertion and misbehavior before the enemy. the powerball jackpot is $1.5 billion and growing. the lump sum reaching $930
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million before taxes. while you daydream, remember, the odds are not good. 292 million to 1. and nfl owners arriving for the meeting to decide what teams will relocate to los angeles. the st. louis rams, san diego chargers and oakland raiders all vying to play in the city of the angels as soon as mechlt year. no strict timetable on a decision. and that is the cnbc news update this hour. back to you, ty. going to be fascinated to see whether or not the rams actually return to l.a. >> it really will. i bet they don't make a decision any time soon, for some reason. i don't know why. i just have this feeling it's going to drag on just a bit. >> i think it's going to be in the off-season. >> yeah. >> i really do. >> all right. sue, thanks. let's look at gold prices. as we mine the metals as the saying goes. let's show the quote. i don't have it off the top of my head, folks. there you go, down about 1%, almost 11 at $1085.30.
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silver and copper and palladium are all in the red. palladium is down .3% and platinum is down 1.2%. mandy? >> stronger dollar not helping those commodities or this commodity either. oil. hitting new 12-year lows today. getting closer to that $30 a barrel mark even. that's really taking the steam out of what started as a nice rally in the stock market with the dow peaking with a gain of nearly 200 points early in the morning. we're checking on the other major indices and seeing how they're standing. the nasdaq is still holding in positive territory. the s&p 500 is slightly below the russell 2000 is the lagger. small caps are doing it. they're down by 1%. yesterday they tipped into bear market territory. let's get to sima for a market flash. >> we'll continue that discussion. take a look at the s&p 500 energy and materials sectors
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reaching bear market levels. that's 20% or more off their recent 52-week highs. 90% of energy stocks are at bear market levels with only three stocks in correction territory. that's phillips 66, cameron and the stocks are trading between 2% and 6% lower year to date. back to you. >> thank you very much. clearly oil is leading stocks lower. how do you play this market right now? with me is andrew slim and the portfolio manager from morgan stanley. we have a strast jit frtegist f wealth management. we were talking about the ibs call, it is going to be a cataclysmic year, sell everything. then you have goldman sachs saying yeah, okay, we may see more of a down side. that would be a good buying opportunity. which camp would you sit. >> i have to pick stocks for a living a these junk tours, what
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drives ultimately stocks is earnings. so if you look back at last year, all that noise we had but the other date market was flat because earnings were flat. so i think you really have to make the -- the question is, are earnings going to be really cataclysmic? i just don't see that to be the case. >> so you don't see an earnings recession? >> i don't hear any -- i think it will be very important to listen to the first -- the quarterly earnings coming up in the next couple weeks to hear what they have to say. but, again, going back to last year, all that noise but at the end the market returned basically in line with earnings growth which was virtually zero. >> what you about, david? which camp are you in? >> i'm actually in andrew's camp. we look at the market very similarly. and i think we are going to see a resumption of earnings growth here in 2016. if you look at why there was no earnings growth fwh 2015, it was really primarily the energy sector and the strong dollar. if you look at the heavyweights in terms of earnings by sector,
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consumer discretionary, tech and they account for two-thirds of earnings. you're going to see that strength come through in 2016 because you're going to have a smaller head wind from energy and the dollar. so from our perspective, we think stocks can grind higher from here. >> you think the strong dollar is going to no longer be such a head wind? i mean what is the call on the dollar? do you see also energy prices currently bumping around the bottom right now and likely to get better? >> so in terms of the dollar, we're looking for maybe a slight appreciation from here. basically flat. if you think about what's been driving the dollar, it's really been the deverge ens in central bank expectations. we don't think that divergence is going to get much bigger than it is right now. in term of energy, there is clearly a lot of negative downward momentum. but prices look unsustainbly low. it's very hard for any oil company to make money at these
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levels. that means prices have to rise. >> you would be buying energy stocks? >> i think it's a great time to look for high quality companies with good dividend yields that are in the space where you think they can sustain the dividend yield. >> sustain the dividend yield. >> it will take balance sheet work. this is the time to step in and say wait a minute, energy is a commodity. it's cyclical. there is a lot of tax law selling at the end of the year into a lot of the stocks. i think this is a time to say i can pick up some pretty high quality names here if i look out far enough. and so i completely agree with david. the math for the market is going to be easy they are year to have pretty good earnings growth because the debacle in energy cannot repeat itself like it did last year. >> i think you said the key words, there look out far enough to get the longer term horizon. make sure the dividends are safe as well. we've seen those being cut with certain companies. thank you very much for joining us. andrew and david, thank you very much. you can go to our website to see
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what andrew and david say are the market risks at our website. in the meantime, let's get straight down to times square with melissa lee at the nasdaq. >> thank you. i'm joined by dan draper, managing director of global etfs for invesco. they control 140 etfs. it's great to have you with us. bob pisani is playing in this interview from the floor floor of the new york stock exchange. it's an unsettling time for investors in general in 2016. really brings back memories of the time in august whether we saw the flash crash and the volatility that we've seen in the market. there are questions about etfs that are resurfacing right now as to whether or not they contribute to volatility because they could potentially have a dislocation between underlying price and the actual etf. what are you telling investors worried about that? worried about another flash crash where they're caught off guard? >> you have to be careful about the etf and regulation. i think if you look at a lot of the experts who now looked at
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the august events and look forward, really the conclusion almost unanimously is that this was a market structure event. not a specific etf event. what i mean by that is you look at regulation that came in 2005, basically, you know, they set in a lot of the circuit breaker infrastructure we have. you have the flash crash of 2010 and modification there's. but what we found in august is this legacy of a decade of different types of regulation. ten years ago etfs were much smaller. we're basically putting in shock absorbers for future stocks. and in some ways this market infrastructure is potentially impeding price discovery of the etfs. this is where i think a lot of experts both at the regulatory level as well as exchange level and clearly etf providers, we want to goat a much more responsible environment for investors. >> etfs are not just a tool for investors but hedge funds and
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institutions cho trade much more frequently than individual investors. whether the cause of what happened during flash crash was from market structure or the etf in and of itself, can you tell investors right now that that won't happen again? >> you can't say that it won't happen again. again, we have for the most part even a recommendation proposed. we still have the same regulatory structure that was in place. now the recommendations coming out. but at the heart, an exchange rated fund compared to a mutual fund, mutual fund, think an log technology. you get one price a day. zbh right. >> etf is a mutual fund but digital. you're getting intraday pricing. it's a technological innovation like the internet. you can have fraud and problems. do we want to get rid of the internet today? no, we have to be responsible. we have to think about how to utilize the technology which can help individuals and constitutions meet the future wealth goals.
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etf is described as an arbitrage product. that creation around the underlying securities, stocks, bonds, and etf itself, they keep the trading very close together to give you this digital experience. >> i'm going to bring in bob pisani. one more quick question for me though. cnbc interviewed the manager this morning and he said we need -- regarding etfs, we need a warning label. should there be some sort of a warning label or investors not warned adequately? they're just told this is a great way of getting in and out of the markets. >> you need smor responsibility. the investors burned the worst in august, many of them used market stop orders. >> right. >> effectively, many of them put the orders in weeks or months in advance. so they were basically being filled. you need to use limit orders. if can you think about risk management that, is a responsible way of executing.
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forget about whether it's an etf or individual stock, really understanding that execution of that security that you're trading is paramount. >> bob? >> let me bring you to august 24th. can you be more specific in your rela recommendations. the etfs had trouble opening because the underlying stocks were not open. do you have any specific recommendations on how that process can be improved or should we simply not allow the etfs to open if 50%st stocks themselves are not open? what is your specific recommend sngs. >> again, i don't want to provide -- there are a lot of people looking at specific recommendatio recommendations. you look at that chain of event, china was down 11% the previous week. futures leading into asia were also led us to a limit down situation on those futures. if you goet to the situation where a few of the stocks are delayed, most etfs, you know, the qs or s&p 500, for example, have a large number. does every stock have to be necessarily open in trading to
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give a good price discovery for the entire etf there. i think also innovative ways of looking at price discovery, potentially slowing things down to looking at different types of auction processes potentially. so there is a litany of things being reviewed by investors and by regulators. but i think looking at it wholistically, let's get back to the regulation which was put in place maybe appropriate for that time. markets have evolved. we've been through flash crash a august 2015. let's also get to that heart. let's make sure that arbitrage mechanism works. once we got through the limit down scenario within an hour or two, the market worked. the market forces found price discovery at the right levels for those etfs. that's why in that time period that the circuit brakers were in place, that's where if you did not understand how to basically place your order and putting market orders or stop orders in place, you did not have risk
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management control over your execution. those are the people that really got bushd burned. >> thank you so much for joining us. dan draper of invesco and bob pisani. >> thank you very much. times square home of the most expensive real estate in the world. so expensive that toys "r" us gave up the flag ship store and moved out. a new tenant is ready to move in. we'll tell who you it is and we'll talk to the man that helped broker that deal coming up. 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 on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on 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 derivatives pricing model, honey?
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♪ ♪ those who define sophistication stand out. those who dare to redefine it stand apart. the all-new lexus rx and rx hybrid. never has luxury been this expressive. this is the pursuit of perfection. commercial real estate prices are around 16% nationally. but in large cities like new york, they're up a whopping 60% above those levels. in times squares, toys "r" us had to close doors and gap and old navy are moving n joining us
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to discuss the future trends and costs in commercial real estate is robert funderman. welcome. good to have you with us. will is so much to talk about here. we begin with the thesis that brick-and-mortar retail is not where it's at anymore. and, yet, you have a company like gap which has its own retail issues coming in to some of the most expensive real estate in the world where it's 1,000 to $2,000 per square foot per month. how do they justify that? >> well, a company like gap and old navy want to have a presence in times square like many other tenants. times square is still the number one attraction in the world over 130 3 131 million people come to times square every year. so for a company like gap and old navy, brand recognition is critical. the same for a lot of other tenants wanting to open in times square. bricks and mortar very strong
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right now. >> so are you saying indirectly there, i wonder, whether it isn't so important that the store itself be profitable as a retail venture, but it is very important to have that brand presence? it's as much an ti advertising e as retail value. >> yes, the rent chalks off a lot of value to advertising and a showcase. and it's a brand recognition that the whole world will see. so it's still important to have a bricks and mortar presence, especially for companies that want to be in the market and express themselves and control their identity. >> robert, do you feel there is any indication out there that the rents that tyler just quoted per square foot that we might be at a peak? >> you know, i really don't think. so when you look at markets like times square and fifth avenue and soho and even other shopping districts around the country, i still believe there is rent
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growth. i think that what tyler mentions in terms of 60% increase since 2007 is indicative of that. i don't think we reached the peak. >> what are you basing that on? what makes you see there will be growth from here in the rentals? >> well, right now even though you're seeing strong dollar and less tourism, i mean, prior to that, rents have increased and sales have increased and tenants have a desire to be on fifth avenue and be in times square. and they will pay up. it's important for their corporate identity. >> we look at new york city. we talk about the numbers there wlach . what about some other downtown shopping districts? chicago, miami, l.a.? what's happening there? >> well, i still think you're seeing rent growth in chicago and rents on north michigan avenue are close to $800 per square foot. and there is elasticity in the markets. they're going south of the
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chicago river. miami is burrowing itself. you have lincoln road, the design district, winwood, all the different sort of burrowing of miami. and there is more and more residential growth. there is still international tourist growth and domestic tourist growth. so i still think these markets are very, very strong. in addition, l.a., you're seeing an emergence of downtown l.a. where people want to live and work. not sit in their car all day. so that's why you're seeing the elasticity of the markets and downtown l.a. is a perfect example of that. >> robert, thank you. we hope you'll come back. >> any time. >> mandy? >> really interesting fact. i believe when times square was being planned, there was a law put into place that buildings had to have the bright glitzy lights at that big glitzy environment was absolutely mandated. >> you go there and get the naked cowboy thrown in. >> yeah. wonder if he's in law as well.
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all right. oil taking up more lows to day, falling to levels not seen since 2004. falling to a level just above $30 a barrel earlier. the sectors leading the way this hour coming your way next. take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card
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okay. welcome back to "power lunch." here are the power points. with oil tanking again, hitting new 12 year lows, crude is down 4%. it is now sitting at $30. stocks are struggling for gains. tech and consumer discretionary are the sector leaders. united health, intel and coca-cola leading the dow. coming up next, finding the next mark zuckerberg. the president of rice university lays out his plan to encourage entrepreneurs. that's next. you can't predict... the market. but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... ...in our experience. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence.
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hello, everybody. volkswag volkswagen's response to the california air resources board declining the plan. the jection of the two litre recall plan does not reflect the current state of talks. it goes on to say that rejection of proposals was made in december. volkswagen says it is still working on a revised recall plan and it says the rejection of the recall proposals does not preclude a recall. keep in mind, vw is going to be meeting with the epa tomorrow. all right. the stock did take a late down on the earlier news of the rejection of the recall plan.
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we'll see whether or not given the fact that voekz wag sen clarifying the situation whether the stock recovers a little bit. >> cars as in line, how you deal with rejection. all right. rice university is on the hunt for the next mark zuckerberg. they're putting millions behind a new program to support and finance student-led startups. rice president david lebron is spearheading the initiative. he joins us from the houston campus today. welcome. i got your slogan four. come study with lebron. everybody would show up for it. okay? when i worked in the magazine business, we chose rice university by the way as the greatest university value in the country. when you take the price and the quality of what you get there, congratulations on that. every university i know of, president lebron, has an entrepreneurship program in practice or in the planning. how are the good ones different from the bad ones?
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>> well, i think the important thing is that the program has to really imbedded in what a university does and what a university does best. you know, we're not here just to start the students -- help the students start a business. that's one thing we can do. there are really four elements you need to look. to one is the educational component. and sometimes that's a traditional educational component, sometimes it's a little different. the second is experience learning. getting the students out. a third is resource that's we can provide to a student to help start a business and learn from that experience. that's really the important thing. learning from the experience. and the fourth element is really providing the research and scholarship part of it. that all really needs to fit together for a university to occupy a very distinctive position in this ecosystem of producing as you put it the next mark zuckerberg. >> how do you involve alumni or
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your network of people who have come through rice university as part of this? because that is part of the entrepreneurial ecosystem that is so valuable. >> absolutely. alumni are critical. and that actually makes it a great opportunity for us. when we look at our alumni, we see that 28% of them have started a business. our alumni have started and we're relatively small university. 4,000 businesses. that's a remarkable group to be able to call on and to build on their experience. and it's not just putting their alumni in contact with students but in contact with students and faculty. so one of the things we're working on is making sure we have a state of the art system for connecting alumni to students and not just in this area but in lots of different areas. but in this area in particular, bringing that experience, that mentoring opportunity, that advice to our students is really going to be critical to our success. >> well, congratulations and
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continued success you to. the president of rice university. david lebron. don't forget that slogan. come study with lebron. that's all you need to know. that, folks -- all right. >> they want to change employers every couple years. they don't want an employer, they want to be the employer. >> they want their own business. what a change. particularly in the business schools. folks, that does it for first hour. >> indeed. brian, over to you. >> thank you very much. now 2:00 on wall street. 1:00 p.m. in houston. oil has nearly fallen below $30 a barrel. and just about every single oil stock once again is selling off. the dow struggling to hold gains. hi, everybody. i'm brian sullivan. melissa lee is at the neasdaq. as bad as things are. there are hot companies and ways to make money still out. there we'll show a few of those to you coming up. right now, we have to begin with the story of the year, oil. crude nearly broke below $30 a barrel earlier today. it still could. it's at $30.20.
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crude oil is not been this low in more than 12 years. and your next guest says it might go much lower. adam longson is head of research at morgan stanley. he is a new face to cnbc. we welcome him to the show. adam, thank you for joining us. your report yesterday created shock waivves. you think oil could go as low as $20. it's not because of supply/demand. it thooz do with the u.s. dollar. explain. >> hi, brian. thanks for having me. it's pretty simple. i think the truth is for all the jie ragss we've seen in oil this year, the reality is you can explain most of it by the u.s. dollar, not the swings in fundamentals. i would actually argue that difference between $35 oil and $55 oil is essentially the u.s. dollar. and you can see fit you plot it on a chart. if you look at brent and the trade weighted dollar together since last march, they're effectively the same line. and even today you can see
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they're moving together intraday. there is a clear funneledamenta relationship there and it's a powerful trading relationship driving it. >> if our audience, you know, mom and pop with the 401(k), if they want to know where stocks are going, lately they've needed to know where oil may be going and you're saying they actually need to know where the dollar may be going. >> that's right. and it's frustrating for an oil analyst. it's one big macro trade. the truth is, does the oversupply matter? absolutely. it's what drove us to call it $60, to try to smooth down investment. changing in fundamentals in an oversupplied market don't drive changes in price. it's much more about other factors when you get into that world. it doesn't really set the level. so think about it this way. let me give you an example. if i came to your house and filled it so full of food that you couldn't use it all, how
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much would you pay me for another gallon of milk? >> zero. >> the answer is nothing. and it wouldn't matter if you had a little less food or a little more food. >> i might pay you to take the spoiled milk out, adam. >> exactly. that's the case where oil is. as long as we're oversupplied which we should be, it leaves you subject to the dollar and other headlines to drist price. >> so you say it's all about the u.s. dollar. is it really all about the people's bank of china? the path to the higher dollar that you see causing the oil to go to $20 a barrel, that's really wrapped up in the valuation, correct? >> partly. now to be clear, the house view is that we will see a gradual devaluation. but i think we've seen reports that china may go quickly with this. we know that could ripple into other currencies. i think it's not our base case that you can hit $20 but it's an important bear case to think about. if you frame it this way, the china devalues 15%, that as a
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basket would move the dollar about 3%. oil is moved about three to four times whatever the dollar's move. so that right there would put new the mid to high 20s. but if you got something larger like a broader currency devaluation or a feedback loop and the dollar moved 10%, then you're talking about $20 oil. >> so how do we understand the offsets then in terms of -- i mean, let's say we factor in a gradual depreciation which is what most people believe. then we also have a supply coming off the market. we have demand remaining the same. how much off an offset is that depreciation a gradual one? are we right back where we are at the endst d of the day? >> i think the framework is the supply demand damage can improve. it changes the timing of when we move to the next phasest cycle wlchlt do we rebound? but as long as you're out of whack, whether it's 500 barrels or 5 million, you're left to drift on headlines and the
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dollar. and that's really the reality of it. supply is tapering. it's not going negative. it's tapering. but it's not enough in the short run to change the path of oil. >> all right. just a note for viewers. crude oil, the current contract is now below $30. i know what you're seeing on the screen shows $30.04. there might be a slight lag there. but our data team just told thauus that the latest crude oil trade is indeed below $30 per barrel. expect that to go to $29 and change momentarily. again, crude oil falling below $30, adam. it is now at $29.and change on the latest contract. a slight contango. every futures krart i look cont look at, you wrote the difference between $35 and $55 oil is a swing in the dollar. so explain how much the dollar needs to move for those -- you just talked about a $20
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different in the prit of oil. we're talking about a nickel against the euro, quarter against the euro? >> well, the key is it's the full basket. so what i think people miss is a lot of dollar indices don't capture the emerging markets. china is 20% of that basket. so to put it in context, it's about a multiplier of three time. to get to $20, what do we need? 30% down in oil. that is maybe a 10% move in the u.s. dollar. which would be a big one. but to also think by the other way, i think the trade weighted dollar up is like 11% over the last year. oil is down around $3 33% to 35. there is the clear relationship between the two. the good rule of thumb is three to three and a halftime. >> three to three and a half times whatever the dollar moves. look for adam. adam longston. a real pleasure. thank you. there you go, folks. oil, $29 and change. we're back above that.
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so just a brief dip under $30. we're talking about 13 to 14-year lows on wti. and before we get to our next guest, i want to show wlau is happening in the oil stocks. question this yesterday. i'm going to show you a big flat panel tv is that is filled with the oil stocks that we watch on our systems here at cnbc. a lot of the traders use it out there. these are my oil screens. i know it's hard to read the exact names. the red obviously means they're down. but again, today i just want to show you the magnitude of the declines that we're seeing on manufacture the names which have been driving the overall market. i flip it. the worst decliners are at the top. i separated them by group. big cap oil. marathon oil, another day. marathon oil is down 9%. you have hess. we'll get to more on that later, down 6.5%. conocophillips, down 4.67%. i'm going to scroll through here so you can see. that's the bakan.
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that is the shale in texas you have viper energy. the only one up there. and a bunch of other names. so you can see that losses are not only big, they are broad. we have manager director at tutor pickering holt & company. and he joins us now. it's been a tough time in your world. you're joining us from london. what do you make of the declines in the biggest names? the names like the marathons and shells and the chevrons? these are not mom and pop shops with a lot of debt and no prospect. these were some of the biggest and strongest balance sheet companies not in oil but of any companies in the world and they have lost 40% to 50% of their value. what do you make of that? >> yes. good afternoon. i think what you have to have a look at over here is how are these companies coping in a $40 world or $30 world now? when we look at the u.s. and the european integrators that we
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cover, even with a 30% reduction in cap ex-this year, those companies are outspending to pat dividend by $50 billion. you get down to $30 per barrel, that is another $20 billion out of cash flow. so these companies are massively outspending even though they've cut capex along the way. so it's extremely hard for them to cope in this environment. it's hard for the mps but the larger intergraters as well are very much struggling in this pricing. >> let's just cut to it here. here's the problem. if i'm the ceo of a major oil company, i have a major decision to make. maybe i can't really afford my dividend. but if i don't pay the dividend, a lot of investors are going to be ticked off and sell my stock. it is a very delicate balance between keeping the investor interested through the dividend and making sure that you have
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got cash flow inside your balance sheet. so who is doing it right? because this is not about oil anymore. this is about balance sheets, accounting, and being a damn good cfo. who's doing it right? >> you're absolutely right. the only reason you have the integrated stocks is for the dividend. you look back over the last five years when oil prices were $100, the integrateds didn't grow. you own the stocks for the dividends and the dividends are completely unsustainable in the $30 and $40 world. you probably need $60 to meet the dividends and capex. the companies are still not going to grow because they cut capex? >> the ceo of chevron told us three or four weeks ago in an interview in california, i sat down and looked him in the eye. he said never going to cut the dividend. do you think there will be companies that do? >> i think this year you've got a chance of some companies cutting the dividend.
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i think what you're going to see is that companies are going to try to struggle through 2016 with the use of the balance sheet. so increasing debt this year, increasing disposal this is year. clearly if, you get oil prices staying at 30, $40 per barrel, the dividends are unsustainable. any ceo that cuts the dividend is likely to be out of a job. >> yeah. there you go. a tough world right there. thank you very much. appreciate it. >> all right. let's get to seema for a market flash. >> we're tracking the selloff all three major averages are now at session lows. this as oil prices continue to dip lower. i want to focus on the oil services names. european commission opened an indepth investigation into halliburton's plan purchase of baker hughes. another setback for the world's second and third biggest oil service companies that are looking to merge at a value of $26 billion. a part of this energy consolidation story that we've
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been watching. halliburton and baker hughes have responded saying they will continue to work constructively with the commission. we're looking at shares of baker hughes down 2%. brian, for now, back to you. >> all right. thank you very much. we have much more market coverage coming your way on "power lunch." outside of oil as well. it's not just about oil. the russell 2000, the big small cap index, now in a bear market. 20% off the highs. we're going to be digging in on wall street's big concerns over the small caps. plus, we're headed back out to the jp morgan health care conference with another big interview, an exclusive with the ceo of bristol-myers squib and again all this commodity collapse, crude oil breaking below $30 a barrel. the biggest overall commodity index now at prices not seen since 1991. the oil market closing at about 20 minutes. will it close below $30? stick around.
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you're watching crude very closely as we normally do. just moments ago wti went below $30 a barrel for the first time since december 2nd of 2003. interesting to take a look at this chart. in context of comments made just about an hour and a half ago or so, he said that he expects there should be a short term bottom in oil today based on technicals and we did reach that $30 level and then seemed to
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hold that $30 level after that. so we'll be watching this very carefully. as for the overall markets, we're watching the russell 2000 slipping into a bear market. are the small caps a giant risk for your money? let's bring in jay capland and george young. great to have you with us. james, i'm going to start with you. you know, this would seem like this should be a great time for small caps and for small cap investors. we have an interest rate environment in which interest rates are going to remain low. ie, rise not very quickly. investors want to gravitate towards domestic plays. want limited exposure to multinationals and the risk of a strong dollar. what's going on here? >> i think you're right about that. i think the setup for small caps is really good. but if you think about what's gone on, small caps like you said are down about 20% since last summer. but before that, since the financial crisis, it was straight up. and within that straight up, there was a lot of risk embedded in the market. in the last two years, the small
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cap markets leadership was really biotech stocks and companies that had no operating income. and that was very unhealthy. so now we're starting to see some of the risks come out a little bit. and we're setting up for a healthy environment where people who want to own businesses for long time are going to have the opportunity to buy great businesses at great prices. that's what we try to do. >> but george, in the context of the markets that we have today where there's a lot of volatility and investors are gun-shy. 2016 has been so far a brutal year. is that the environment in which small caps do well? do we need a rising market overall? >> the long term ideas is what we focus on. and you want to have buying opportunities. we certainly have those now. we have had them for some time. i think it's very important to remember liquidity is important. and for the big stocks to move, it takes a lot of capital. our world is domestic small caps. we think it's important to take a chance whether the occasion presents itself. i think we see that right now. >> right. >> stocks are undervalued in our world. we see a lot of opportunities.
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yes, they could go down a little bit further. but we have the luxury of looking out three to five years and we think that's what investors should do. >> i want to go straight to your picks here. jay, matrix service company, this builds energy storage facilities and constructs energy plants. you make the point it's been trading along with oil prices like an emp company and we all know right now that emp companies are trading like they're going out of business. what does this disconnect and people say this is not an oil play, per se? >> it's hard to know the timing. that the connections is irrational. we look for mispricing, missed opportunities. there is actually earnings growth. no one believes it. as they continue to put up good quarters, so far we've seen that everything is working okay. it's 11 times earnings. once we get that decoupling, there is an opportunity for the stock to do a lot better. >> now i'm going to go to the next pick here, george. and that is taser. that caught my eye. it's been getting a lot of contracts recently. the subject of a barons report.
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it's down 40% over the past 12 months. 80% of the revenue come from the core weapons business. the post recession upgrade is almost over. so why wla is going to be the catalyst for growth? >> good question. the big difference is the body cameras. remember, the tasers is well known for the stun guns but on the other hand what is really important nowadays and after ferguson and other shootings that we've seen, police need to make sure they have evidence and they have a rational for what they do. so it's very important that body cameras are worn. more and more are being bought 206789 th 20,000 were bought by the london metropolitan police. it's very important that the body cameras get worn and more important is the data produced is properly stored and retrievable for a seven-year period. this is where taser has a great name. they can leverage that name into another service altogether. we think it's fantastic stock. >> all right. thank you for joining us. we appreciate it. jay and george. >> thank you. >> brian, over to you. >> thank you. right on deck,en into hard
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times, there is always opportunities somewhere. so coming up, the stock calls you need to hear about today when "power lunch" returns.
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time now for "street talk," aur daily dive into the calls of the day. en into times like these, there are opportunities. me list yashgs you're supposed to buy low, right? >> right. sell high, something like. that. >> something like. that here we go. first stock, steep will financial. a big upgrade. they go to a buy from a sell. so really a two notch jump by goldman sachs. analyst says after a year of negative surprises they think expectations on steeple have come down even when earnings are close to reflectsing. they like the balance sheet and short rate sensitivity. they boost the target on sf to $52 from $51. >> next up we have intel. a lot of earnings after the close. the stock is up 2.5% this week alone. they expect intoll beat estimates driven by more
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inventory. better demand in china. $37 price target. >> i can't believe it's earnings season again already. >> i know. >> oh, my goodness. stock three, cabbot oil and gas. boosting to outperformed and the price target goes up. cabbot is the most leveraged to price improvement in the northeast in natural gas. and they advice clients to use weak pricing to build new positions. they think the new atlantic sunrise pipeline, great name for a pipeline, will be more of an uplift than the cost of its construction which had been weighing on the stock. follow that? the chart goes to 31 there are from $22 much the stock is at $15. really a double from here. the stock is down 45% over the past 12 months. >> the fourth stock, am fanning. bullish call here on amazon from credit suisse. urging investors to add to current positions. it is increasing the fiscal year
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estimates. credit suisse rebuilt the model to separate the aws services business from the e- commerce services. the capital intensity css to run aws is starting to level off. free cash flow should reset higher. also on the commerce side, there should be operating margin expansion because of the benefit from shipping loss moderation. >> all right. our under the radar call of the day is a name known for its name but maybe not the stock. dream works animation studios. fbr capital markets upgrading them to an outperform and putting it on the top picks list. they have a movie catalog and apparently very positive tracking data for cunnikung fooa 3. >> two is a legend.
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one was not good. that's it for "street talk" on a tuesday afternoon. always opportunities out. there the oil close coming up. could we close below $30 a barrel for the first time in more than a decade? we're going to find out in a few minutes. stay with cnbc.
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it's gotten squarer. over the years. brighter. bigger. it's gotten thinner. even curvier. but what's next?
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for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. hello, everyone. president obama appearing on the "today" show this morning sharing his opinions about donald trump with matt lauer who asked him if he could ever imagine a trump presidency. >> well, i can imagine that in a saturday night skit. look, anything is possible. and i think, you know, we shouldn't be complaisant. everybody has to work hard. >> an avalanche in the italian alps this morning. no injuries were reported. take a look at that. a cabin owner caught the
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avalanche on a cell phone that shows that blanket of know coming down the mountains. people continued to ski and snowboard. yale school of management announcing that the pepsi ceo made a landmark gift to endo you the deanship of the school she is the most generous graduate of the school in terms of lifetime giving. an odd sight on a thailand beach turning into a tourist attraction. a massive number of herm it xrabs scouring the beach. the night time numbers have grown into the tens of thousands of hermit crabs. it's never good when it looks like the ground is moving. that's the cnbc news update this hour. brian, back to you. >> sign of the apocalypse in some way, i suppose. >> yeah. >> i'll avoid that beach. thank you very much. all right. the oil markets are set to close for the day. wti briefly dipping below $30 a barrel. did bounce a little bit here. we're going to close right around $30.43.
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so down still $1, more than 3%. at least over $30. got to talk more about there with kate kelly. we have jackie deangelos joining us in a second as well. all of us sort of a roundtable. kate, first you. let's talk about what might be the two most important stocks in the world. actually, jackie weeshlgs g, we you first. you're both so good. it's like picking between gold and gold. jackie, what are you hearing? i dug myself out of that one. >> give us the price. >> what is the latest call? >> what she said. >> well, here's what happened today. four different instances in the trading session today where we made a run for $30. and nobody was surprised that we broke it. every time you keep making the lower lows, that's what traders were aiming for. as we got closer to $30, it seemed inevitable. to say that we had a little bit of a lift in closing over $30 was more optimistic. we've seen this before. once you touch the lows, then you seem to hit them again and
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close flr that level. it is something to watch for. but one of the major themes in today's trade was these very bold moves, very bold calls people have been making about oil prices. the most recent came from standard charter today calling for $10 oil, guys. and they're saying there is no equilibrium in the marketplace right now. it is about supply and demand. we know that's not balanced. at the same time, it's also about currency wars and other issues as well looking at the other asset classes here. how equities, for example, may impact oil prices further. so there are a lot of things to watch for here. api numbers will come out tonight after the close. that is something to look for. we are expecting to see a big build. right now in terms of total stocks in the united states, we're about 40% above the five-year average. then you have the eia coming out and saying that 2016 demand forecast is staying stable. demand is staying flat. dollar index looks like it is poised to climb from here. crude can really take a hit n
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terms of the other calls we watched this year, it's not just standard charter to day. brian, you interviewed the analyst for morgan stanley, they're saying 20s. also you had goldman sachs saying it wasn't the base case but 20 is possible. >> jackie, can i ask you a question? it seems like when you look at prices and you look at sort of what analysts and strategies are doing with all due respect to all of them. there's a feeling to me having done this for a long time, kind of like the runup in intranet stock prices where analysts were tripping over themselves to put a higher price target. >> right, to catch up. >> everyone is just trying to trump each other now on the down side which sometimes, i'm not calling anything, sometimes can mark a bottom. >> it can. it definitely can. when you see so many people getting on this side of the trade like this, it certainly something to watch for. i will say the standard charter called today, they're known on the street for being either overly bearish or overly bullish. certainly the lowest call out. there i'm not really surprised
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to hear. that will we actually see $10, it's hard to sachlt the last time we saw it was 1998. it was some time ago. definitely the sentiment is building to the down side. many traitors cautioned me that when that happens, that's the time to really be careful. >> jackie, thank you very much. >> folks, if you just joined us, here's some breaking news. today is another ugly day in energy. xle, they track big oil and gas stocks. deep in the red. perhaps more concerning than oil stocks are many of the bonds of the oil companies. bonds generally are a better reflection of a true financial condition for a company. so what we want to do now is take a hard look at some of these. we're showing our viewers four bonds and stocks of four different companies. we're not picking on these names. we're showing these because these bonds all traded today. it is a very i williquid marketr bonds. it is really hard to sell
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everything. not every bond trades on a daily basis. these have. this is why we're showing you the companies. chesapeake energy, the bond due in august 206of 2020. now yielding 39.5%. danbury resources, that is yielding 28%. the stock is down 80%. oasis, 18.5%, stock lost half the value. whiting petroleum, same storey. remember, yield onz bonds go up as prices come down. many of the prices of these bonds have fallen 40%, 50%, or even 60%. folks, those bonds happen to trade today. they've all seen bonds get wall opened. let's bring in kit kelate kelly. we want to talk about the bigger stories. the bond moves are incredible and scary. >> they are. i think it is nice to say you're not picking on the names. they just happen to be more liquid today. chesapeake with a big natural gas exposure and oil and other
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liquids exposure, one of the worst performers in the stock market of 2015. they've been trouble ford a while. whiting, oasis, we know about them as well. the numbers are astonishing. i was a little bit amazed to see we did pierce that $30 floor within the last 20 minutes or so. i thought the standard charter call was interesting. on jackie's point, you know, they were the first actually on the street to call the super spike which was the commodity super psych that will started in the late 90s. and they were right. it just was short lived compared to past super cycles. they've been very aggressive on the up side or down side. >> and chesapeake had a bond swap recently. they gave bond holders the offer and they offered them the opportunity, that's how you sell something, it's always an opportunity. 50 cents on the dollar and stretch that maturity out. >> to exchange the existing bonds for new bonds. >> and people d you're thinking 50 cents on the dollar may be better than 0 cents to the dollar even though i have to stretch the maturity. >> it wasn't a resounding
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success. >> no, the ten year was 20%. >> it was not huge. yes, you can see what they're going for there. they do have assets that people on the street like. so there is a reasonable case that they can sell some assets if they need to raise cash. and they'll ride it through this. very tough time. >> the two most interesting, maybe important stocks in the world, my sort of humble opinion, are not oil companies. well, they kind of are. and they're not even traded here. they are glencor and they are noble group of asia. who are they? what's going on? why are they maybe not the most important but pretty doggone important? >> they're harbingers of what is happening in commodity land right now and an indication of what is happening. i would argue it is the case. you're right, they both trade on other couldnntinents. >> they don't get at tension. >> they're not stocks that our viewers typically hold. they're definitely interesting to watch. take a closer look at them. basically, it's been a mess in
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the oil patch as everybody knows. but mining actually is a lot worse off if you think about it. if you take a look at the s & p energy sector for the last 12 months, down 27% which is certainly rough. look now at the mining etf which is down 57%, 30% worse. that tells you an important story which, of course, is as bad as things are in energy. they're worse particularly in base metals. thanks largely to the chinese demand that is drying up. think about glencor. it is switzerland based. one of the single worst performers on the ft-se last year. we were talking about chesapeake, glencor is the european corollary to that. it's off to a horrendous start this year. also the chapter 11 filing of an aluminum environment here in texas helped spike the swap prices. these are insurance policies that would pay out if the company defaulted, and there are on going worries about the impact on the financing and, therefore, day to day trading business. if its debt were to be
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downgraded to junk status. that already happened to noble group. there is asia's largest commodity trader. they're exposed to oil, iron ore, coal, as well as metals and mining. it has fallen 71% since 12 months ago. a recent credit downgrade to junk status on the part of two credit rating agencies could be devastating. swaps on noble cost twice than what glencor do. they're trying to raise cash and pair down. >> two names that don't get attention because dhoent trade here. they are massive companies. massively important. they should be on everybody's radar, glencor, i had somablie s radar, glencor, i had somabli s analysts on the show and noble group. all right. another big story to watch is hess corporation. fitch today doing two things. number one, they did affirm hess' long term debt ratings. however, they cut the outlook to a negative longer term. they say the company right now is strong. the balance sheet is okay.
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but the outlook comes on concerns over spending on projects down the line which fitch's concern could reduce liquidity. hess' recent asset sales are a good thing but because they were sold off, may down the road may limit the company's options because now there is less to sell. hedge funds i have spoke within are putting negative on hess. kate mentioned the swaps. take a look at how the swaps on hess are trading. again, insurance on the bonds. you you can see the price on the hess swaps is way up indicating higher risk. well, imagine a graphic showing a line that goes up. and that would be it. we reached out to hess. here's what the company had to say. "we have one of the strongest balance sheet and liquidity positions among the big e & p corporations. as of september 30th we got $3 billion in catch, $4.1 billion in committed unused lines of credit so liquidity is not an issue." >> a small point i want to make. there was a story in the ft i think talking about how the energy companies were sort of caught unaware by the commodities slump.
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i don't think they were. you and i know from the people we talk to the view has been lower for longer within this community for a while. i think they were continuing to drill and mine because they needed the cash flow and hoping for the best. and unfortunately, their prognostications have been realized. >> we have to go. scott ship of pioneer said it well this morning. companies have been punished for cutting production. so why cut production? plus, you may need to pay your debt. >> you need the cash, absolutely. >> thank you, kate. time now for "trading nation" and your question today, can the u.s. markets rally even if stocks in china continue to tumble? our guests join us. jean yashgs i gina, does china really move our markets that much? >> no, brian. they don't. if you look at the relationship between chinese equities and u.s. equities, it's extremely low. so there is no relationship between those two. but what is driving money out of
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chinese markets really has more to do with currency than with the stock markets themselves. in fact, if you look at analysts, they've been revising up chinese earnings estimates for next year. so that doesn't really jive. but what you do see is you see a massive drying up of liquidity and that isn't just affecting the chinese markets. hong kong lending rate between banks and hong kong rose to 66%. and that has an infect on dollar liquidity. on monday we saw flash crash in the south african rand. liquidity is drying up at a time when the u.s. is withdrawing liquidity. so do i think that the u.s. equity markets can rise in that kind of environment? let me tell you something. the one thing that the three major tops we've seen in the last 20 years have in common is a drying up of liquidity. i that i is very concerning. >> all right. yeah. we forget that we sell about a third to china than we take in. most of what we sell to china is
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agriculture, chemicals, literally even garbage. >> right. >> we're not selling a lot of high value goods except for a couple of buicks. does our market really depend on china? do you. >> he >> no, it does. i actually agree with -- i agree with gina that liquidity sis an issue. the blowup on the chinese market which is retail oriented is affecting the floe blowup of the chinese consumer. the chinese consume certificate buyer of everything in the world, autos, hollywood movies, buyer of apple which is why you're seeing apple stock get punished. the massive wealth destruction of the chinese market matters to u.s. corporations. i think you're going to see the after effects of that six months forward. >> so it's a consumer story? >> it is a consumer story and a finance opinion as well, yes. >> okay. maybe the chinese consumer not getting a lift from low gas prices. good discussion. thank you. for more trading nation, go to our website.
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melissa? >> up next, our exclusive interview with the bristol-myers squib ceo. "power lunch" will be right back.
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welcome back to "power lunch." live at the jp morgan health care conference in san francisco. we're joined by the ceo of bristol-myers squib. so you guys are big in oncology, the harvesting of the immune system to fight cancer. where do we stand in the progress in that space and what your drugs have shown and what more we're going to be able to do in this area? >> this is a really exciting time for us. we're the pioneers in immune oncology. we're in an exciting period of growth. we will a great 2015 with unprecedented success. our product was approved about it fda in five indications in
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2015. and overall, we're approved in 40 different markets. we were able to show a survival advantage across three times and i'm really pleased to see that adoption in the market has been very rapid. >> we're talking little bit about the sentiment here at the conference. inve investors feeling nervous. the stock really getting hit, especially hard yesterday. you have a unique growth stories and they weren't asking but macro issues. can you talk about what is going on in the sector and how that affects you? >> we look at market trends as a priority all the time. our funneled. fundamentals are very strong. we have strong momentum with our pipeline in r & d. very good commercial execution, strong trends with our portfolio. it's not just our drugs. it's on its way to becoming a leading agent in its market. we had a very strong 2015 in positions as well. in the real position of strength to continue to grow in 2016. so from my perspective, at
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bristol-myers squib, i'm looking forward to 2016. >> one big chang challenge in kaerns right now is combining drugs and figuring out how to pay for those when each one can be more than $100,000 a year per patient. you're stacking them on top of each other. how are you thinking about pricing in cancer drugs? >> first of all, we really believe that combining oncology agents is the way to go to provide long time survival for more patients for more tumors. we have direct experience. our regimen was actually approved about it fda. so we are very focused on access and pricing. we want to make sure that no patient that needs the regimen really has an access issue. we work every day with payers and providers and access hasn't been an issue. actually, adoption is very strong. >> as we go forward, do we have to change the paradigm of pricing, treating lung cancer
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will cost a certain amount rather than a certain amount for this drug and that drug? >> that's the future. we need to be thinking about pricing combinations and different indications. the key is to continue to focus on breakthrough innovation. you like opdiva that prolong survival it's important to make sure that patients have access. so that's clearly an important area of focus for us. >> thank you so much for joining us. >> thank you. it's exciting to be here. thank you very much. >> coming up on "closing bell" we have a lot more of that $32 pll deal announced yesterday, we have the ceo of shire joining us that's coming in "closing bell." >> thanks so much, meg tirrell. >> on deck it seems like everybody hates china right now, but most your next guest. why the director of investment strategy for glen immediate why he is still bullish. 're putting. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com.
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steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and 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.
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td ameritrade.
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welcome back to "power lunch" i'm mandy drury. stocks are struggling to hold steady amid china's ability to stabilize their markets and economy. jason pride is director of investment strategy with glen meade. welcome to "power lunch." thank you for joining us. man, what a rocky start to the year, particularly for oil prices. what are you telling clients and
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what are they saying to you when they pick up the phone and say, what's going on? what should i do? >> first and foremost we have positioned portfolios to be what we think is a neutral risk posture now because we're in the back end of the economic expansion, valuations particularly in the u.s. have gotten more pronounced. i think the risks are a little bit more balanced coming into this year. we didn't see what's happened in the first couple weeks here coming right at the start of the year, but we think that risk of down side is there and investors need to be prepared for it -- >> how many down side? when you have rbs coming out and saying sell everything, run for the hills. >> i think it's important to put into context. a 5 to 10, maybe even 15% downward drift in the market is actually relatively normal on an average year. to see that happen in any given year shouldn't be out of the -- considered out of the norm.
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in fact, investors should have their bothers positioned for that and be ready to actually add in the stocks when that downward drift comes. having said that the returns on equities will not be that good for u.s. stocks to the valuation point, the starting point is a little higher than what we are used to from what we should normally have. we're thinking we are in one of those growth is okay, economy is okay but the returns on stocks may be more mute the. >> if you're in the keep calm carry on buy the dips mentality what exactly would you be waiting to buy the dips on? for example, are you seeing any sign of capitulation in energy and would that be a sector you would be want to go scoop up at a bargain price? >> there are opportunities like that, that and international markets. you have to be picky right now still because the information still evolving, what's going on in the energy space, the estimates i see doesn't look like there's going to be a change in that supply -- demand imbalance on oil until the back part of 2016. you're basically stepping in, buying something on the hopes
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that valuation is enough, which reality is normally valuation isn't enough. you have to have valuation plus some catalyst. if you're looking at energy, it's going to have to be an i'm buying now but i am probably going to have to buy again in a month, probably again three months from now. i'm probably going to have to be averaging in over a fairly long time frame. i bet you one of those buy points is going to be a pretty good price for entry. >> not yet. >> in the near term you could have some pay. >> thank you so much for joining us. jason pride with glen meade. brian, over to you. >> mandy, thank you very much. good seeing the two. we are setting up for the final hour of trade next. "power lunch" been back in just two minutes.
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you might like right now the -- actually we are taking a look at crude in the s&p 500. tonight on "fast money" the ripple effect of the decline in crude prices what the options markets are saying about the dividends of the integrated oil companies and whether they are safe or not safe, brian, a big question on investors' minds tonight at 5:00 on fast. >> listen, melissa, they need to keep paying them to keep the investors but some may not be able to afford paying. >> exactly. >> how do you manage -- i really believe this is going to be the year the ceo and cfo and not necessarily about the rock or commodity it's going to be who can manage their balance sheet. >> it's a huge issue and the options market very good clues about the safety of dividends. >> look forward to that at 5:00 p.m. eastern time. melissa, thank you very much. "fast money," big show tonight.
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by the way, oil bouncing a little off the lows, really? we're still down 2.5%. still down. >> exactly. well, thanks, everybody, for watching. >> "closing bell" starts right now with a big hour of trading. thanks for watching. hi, everybody, welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. it's happened again, stocks shot higher on the open, the dow was up 192 points at the peak this morning only to be dragged lower by another oil selloff. oil as you probably have heard by now broke below $30 a barrel briefly intraday first time we have seen that since 2003. so we keep setting new benchmarks. we have more on oil's decline and the fallout coming up. >> now the bears are out in full force it seems on wall street. jpmorgan with a new note saying forget buying the

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