tv Power Lunch CNBC February 3, 2016 1:00pm-3:01pm EST
keep your eye on the dollar index for the remainder of the day. it is having its worst day in some three months and the ten-year yield is now at the lowest level in a year. that economic data today was squirrely at best and has a lot of people talking. the stock market moving all around. that does it for us. "power lunch" begins right now. hi, everybody. welcome to "power lunch." along with melissa lee, michelle caruso-cabrera, brian sullivan, i'm tyler mathisen. >> the dow and s&p 500 down less than a percent today, it is the nasdaq feeling the pain. no help from yahoo!. look at the shares hitting new lows in today's session. it is now down by just about 6%. and down 40% over the past one year. the struggling tech company cutting 15% of its workforce and saying it may be up for sale. here is ceo marissa mayer on isis this morning. . >> we feel good about our plan. we're confident in that plan. i think it makes sense for us to have a more reasoned per
spective in terms hough quickly we can move it. we're coming from a position of strength, a better place to be operating from. >> we're going to be talking more about yahoo! coming up. we're debating go pro, just before the quarterly report, the stock down what, 38% in six months, tyler? >> 80 some percent. >> that's a lot. >> that is a lot. did you find marissa mayer convincing? >> she does protest too much. >> and low energy. >> to borrow a phrase, low energy. >> she did just have a child a couple of weeks ago. >> that's true. >> but if you're back, you're back. this is arguably the toughest quarter she has to get through, the toughest interview and she should have put on her game face. >> but as the father of a young son, i'm saying the crying in the middle of the night does sap your energy. >> i said it about myself. i just admitted i'm tired. >> you're up a lot. >> yes.
>> from a business perspective, from a business perspective, when they -- when i read their strategic planner and they talk about yahoo! mail being the core of part of their turn around plan, i thought yahoo! mail. >> i haven't thought about yahoo! mail in ten years. >> and search. aren't people's search and mail habits already set. >> my wife apologizes now for still being on aol mail because it is so out. >> it is vintage. >> it is vintage. we'll talk more about yahoo! and also debate the f.a.n.g. stocks, facebook, amazon, netflix and the company formerly known as google or goober. kung fu panda's big box office debut. >> another major market flashpoint, the financials. bank of america down more than 4%. city group down 2.5.
jpmorgan and goldman sachs getting hit. all sitting at or near their 52-week lows. goldman sachs ceo lloyd blankfine on "squawk box" for first time since disclosing his diagnosis. here is what he sees from where he sits. >> things are improving, not trajectory people wanted, of course. there is a -- the sentiment is bad, and the politics are bad and everybody hates everybody. and now, and i think it is adding to just a general malaise, but frankly, i think this negative sentiment is not justified. >> you think the u.s. banks had it tough? the european banks getting hit even harder. down sharply in the last month. so what is the problem? to be very frank, a large number of banks in europe are insolvent at worse, deeply undercapitalized at best, assets they refuse to write down. nonperforming loans they never took care of. these problems were supposed to go away once europe started growing again or until the ecb
forced them to do something about them. still waiting. ground zero for the concerns, italy, new program announced on monday, that was supposed to clean up the bad loans they never took care of. it underwhelmed the market hence the heavy selling. emblematic of what is going on. there is more. the european banks have unprofitable business models now because interest rates are so low, driven by the european central bank. plus, they also have higher cost structures dure to european labor laws, regulatory environment makes it tough for them to do creative things that they used to do to make money. arguably that's not bad though, right? deutsche bank down 53% in the last six months. citi and jpmorgan down 32 and 17% respectively and deutsche only $20 billion compared to $116 billion for citi and $206 billion for jpmorgan. how bad is it? for deutsche, the senior debt is still trading close to par. junior debt is not.
some moved from 90 cents in december to around 80 cents just in the last week. that's junior debt unsecured, senior debt close to par. >> you really hit it on the head when it comes to deutsche bank. we'll bring in jon. michelle was talking about deutsche bank declines. we haven't seens they levels since before the crisis. michelle mentioned the market cap. deutsche bank has 55 euro, trillion euro dollars in exposure to the derivatives market. >> one of the big issues. the rest is the exposure in the zone itself with mario draghi continuing to push rates below zero, all the way down into the negative yield area and deutsche bank, $160 stock nearly, 2007, now $16, so it is one tenth the value it was in 2007. you look at the recoveries that
jpmorgan and morgan stanley and others made, this one is the opposite. >> in the cds market, they have been screaming higher in the month of december. what are the options markets saying in terms of pricing and more risk for deutsche bank? >> the volatility has moved up pretty dramatically in there, but still higher by the way in citigroup. and you kind of get why that would be. this is, i think, one of the 12th largest banks by assets in the world, deutsche bank, but people are trying to protect that -- exactly that exposure you're talking about by buying puts, buying the april 11 puts today. and i think they're buying those because cheaper than the cds protection how expensive that can be. >> april 11 puts for deutsche bank, we have citi up there. for citi, how are they positioning themselves? >> there doesn't appear for citi, wells fargo, not the same sort of pressure. but the volatilities are higher. the elevated volatility tells me
people are looking for protection, whether that is protection against cds and the risk there, or whether it is just that the softness in the market itself. >> what is the bottom line in terms of how you trade this group, seeing how they trade, they're severely underforuming the market today, worst performing sector of the year. what is your trade? >> look at the vix, 23 now. the vix for the efun, the european financials, those are around 35, the vix for that. the vix for the xlf is right around 30. so, in other words, this is about whatever, 70% higher risk than the s&p 500. the european banks in particular. so i think that tells you it is not done yet over there. >> it is a no touching -- >> it is getting close. >> dr. j., thank you. >> to the u.s. banks now, they're getting hit hard across the board today. bank of america, citigroup, jpmorgan, goldman sachs, all down now. you see various degrees of
decline from three-quarters of a percent up to 4% for bank of america. financial is the worst performing sector this year. rather hard to believe when you look at energy and what it has been doing. but financials, the worst performer. paul miller is a managing director with fbr capital markets. let's talk about the u.s. banks, welcome. you got a variety of things that might politely be called head winds. a lot of major banks, big money centers, you've got oil loans that may go bad. you've got international exposure, particularly in the case of bank of america and citi and falling ten year yields which doesn't help their net interest margins. is this a time to nibble, stay away, what? >> i think the selling is overdone. goes back to the market sentiment, got the ten-year falling to yearly lows, you have people worried about credit and not just energy, but cre credits, think we're going in a recession. we talk about a year ago, people were finding reasons to own banks and these banks were probably overvalued at the end
of the year. now, you know, we're one month into the year and now we think you can pick up some really good bargains here. however, you got to get to ten year to stabilize, got to get energy prices to stabilize, i think before anybody comes in. if you have a long-term view you can buy some things today and mack a lot of money here. right now, nobody wants to own these things. >> a lot of people complain, where are the banks trading below book value. maybe it is that nobody believes the book. do you believe the book? are we getting an accurate valuation of what is on the banks' balance sheets here? >> a lot of people trading bank of america below book, you got zion, comerica below book. their taking their energy loans and writing them to zero and thinking they have to raise capital. these banks are better capitalized than they have ever been, they have reserved and they're earning money. they're not earning 7%, 8%, but they're earning money. that's why we think buying b of a is a good buy, but the bottom line is people are concerned about credit and therefore they
just don't want to own them. >> paul, you mentioned one of the things you needed to see for the banks to trade better is a stabilization of oil prices is that because of perception is that the banks have a lot of bad or potentially bad debt on their books or a reality? what is the truth in this? >> investors don't want to own energy energy related. if you have banks with overexposure, they're writing the credits to zero and that's where they're trading the stock. we think that's not the case. these are not first loss positions. we won't lose every dollar on the energy loans. what it is, we believe, investors don't want to own any energy exposure. another area they don't want to own, any texas exposure because of the energy issues down there. they're shying away from anything in that area. we think there is bargains there, but a lot of investors are saying why buy it now when we can get cheaper. >> any sign that credit is tightening, that mom and pop will have a tougher time getting the loan than we already are? >> we don't see it.
tough getting a loan anyway. we haven't seen it relax that much, so we don't see it getting tighter either. and we don't even see the credit concerns a lot of people are seeing out there as we just went through first quarter, fourth quarter earnings and nobody out there saying they're seeing credit issues, you talk to clients or investors, they get really worried about that. >> what is your favorite potato chip in the bag? >> bank of america, not only 8%, but trading at below 90% on book. the other one is zions, 27.5 book, trading with 20 handle, we love that one. >> you mentioned you wanted to see the ten-year yield stabilize. what if it doesn't, especially in the wake of some of the economic data that we have been getting. >> well, that's the problem, as long as the ten year goes down, you'll see the banks have bad days. and that's just the bottom line. >> paul, thank you. paul miller of fbr capital markets. go pro shares higher ahead of the earnings report. the stock down, though, more than 80% in the past six months. so how can the cameramaker win
back wall street? or can it? you're watching cnbc, first in business worldwide. what else i how's your mother? umm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.
the board authorizing a buyback of up to $10 billion. the stock is down 9% over the last 12 months, but look at the stock now, up 2% in today's trade, melissa. >> thank you very much, seema mody. go progetti ingetting slamm. the company set to report earnings after the bell here. analysts predicting break even earnings on $496 million in revenue. let's bring in tavis mccourt of raymond james, and megan murray of piper jaffray. good to have you with us. tavis, why are you so bullish on the stock? i think investors feel like they have been burned by mr. woodman, mispricing on the hero 4, so some execution issues. why should we look through that? >> well, so they should feel like they were burned because they were. go pro really misexecuted on a lot of fronts in 2015, not having meaningful product upgrade.
but the stock has come down quite a bit. the company has a very good balance sheet now. and to be clear, these near term earnings will not be good, but there is significant new products coming later this year which could reinvigorate growth. >> erin, are you optimistic about the products? we're supposed to get the drone, a hero 5 at some point. can the company turn it around, especially since it is trading so cheaply, relative to where it was before. >> sure. so in terms of the drone, i think it is a natural extension for the brand. clearly go pro has that mind share with the consumer. that being said, the launch of the drone, which should still happen in the first half of this year, i do think it is a little bit too late, just given how established that drone market already is, we're already starting to see price redictiucs in that market. they should have new products in the back half as well. but, again, the concern we have is does that cannibalize the sifting 7 million units out
there in the base. i think it will be some time until we get the visibility. >> what is the future of this company in terms of whether it is a consumer facing company or something that sells to the professional market and what is the future of the ceo? does he need to stay or go? >> in terms of the company, it is a consumer focused company and my hope is that they're smart enough to expand the product categories broadly over the next three to five years. >> isn't there a point in which those that want got, in other words, that how many more do you sell, once you've got it. >> there is no different than any other consumer product category f under armour was still selling t-shirts, it wouldn't be the value it is at now. you hope the company has a vision for expanding the product category and leveraging the brand beyond its first initial product. same as any other consumer product company. >> did you say you hope, you hope the company has a vision? erin, back to you, isn't the issue here is that it is a hardware company and we haven't seen much in terms of how it is going to move beyond a hardware
company to more of a services model so that can it have reoccurring revenue and not dependent on a premium pricing to every other competitor that it is now entering the market. >> right. i think it is still absolutely viewed in that vein and i think taking a step back, we still believe it is a consumer brand, you got to put that into context with the distribution and one of the biggest concerns we have is this is a company that while it is great that it sells 7 million units, it sells that across 45,000 points of distribution. i cover nike as well. nike, clearly the revenue base is in excess of $30 billion, they sell 1.1 billion units of product in 110 points of distribution. that's the concern we have longer term. >> so, tavis, i think i interrupted you before you got to the thought about the ceo. you cited execution missteps. to you -- does he have your confidence? is he the right guy to turn this
company around? >> i don't know. i think we'll find out the next two or three years. this company went public, they were still very, very immature, the employee base has really grown dramatically in last year or two. so to erin's point, she's right, if all this company is selling the same products to the same distribution, this company will never grow again. i don't think that's the plan. i think this company will have a much broader product range, i think that's the ceo's goal and i think they'll execute on that over the next couple of years. >> does he have two or three years to prove it? >> you'll start seeing it this year, right? the drone and action camera refresh and i think there is more in the pipeline for 17 and 18. >> okay. we'll leave it there. thank you. tavis mccourt, raymond james, erin murphy, piper jaffray. burritos, chips and health care, number of big calls and a number of big stocks. street talk on deck next. ♪jake reese, "day to feel alive"♪
street talk coming at you again today, a little earlier, 1:20. it is our analyst recommendations on stocks you need to know about, or we think you should know. we're going to tell you what you think. here you go. first stock, chipotle, battle of calls on wall street. wells fargo upgrading to outperform. this is interesting. they did a study into two decades of food safety and found in case studies, share price recoveries closely tracked the recapture of sales. that's obvious. but the majority of restaurants that have experienced food safety issues returned to sales growth 12 to 15 months after the
incidents, i think credit suisse downgraded it today. draw your own conclusions. i thought the study was interesting. >> that's a long time to go -- >> upgrading today which i thought was a bold call. >> we should note the company is planning on a half day store closure on february 8th, then a company wide promotional campaign to get the customers back. there is an interesting point being made by max group that could remind consumers about the food safety issue. yet to be seen whether or not this promotional activity could pay off for chipotle. so devry education, this has been a very interesting stock. so this is a very interesting call coming from credit suisse. $29 price target, this is a stock that tanked after the ftc said it was investigating the claims about how successful the for profit education company was in placing the students after they graduated. they said if you graduate with a degree in hospitality, you get a job as a waitress or waiter,
then that's a success story. the department of education, we by the way, is looking into the claims as well. the analyst says the investigation could cause declines in the core business, but the analyst thinks the other parts of the business, particularly health care, test prep, and the brazilian business. who knew. >> herb greenberg pounding a lot of the names for years and a lot more right than wrong. devry may be its own story but volatile sector. microchip technology, goldman sachs cutting the rating to a sell from a neutral. cut the target from 38 to 44. stock down 2.4%. they see another drop from here. couple of things, slow growth and key part of the business, 40% of the revenue, slowing down. also worried about exposure to china and they note that 98% of the company's cash is overseas and goldman is worried about leverage if they complete the deal for -- a lot of semiconductor companies emerging and they're worried about the leverage. >> we both have the
semiconductor bug in us today. the next call is goldman, also in the semi space, applied materials, goldman, adding up to the conviction buy list, $22 price target, a challenging year for amat. there are signs of recovery in orders and amat is gaining market share and there will likely be an inflexion in gross margins. >> the stock has been -- everyone is waiting for a semiconductor turn. it just hasn't happened yet, despite being a digital world. under the radar name, a bigger company, now uk based malloncrote, $7 million market cap. she was concern about communication execution, but she is, quote, compelled by the company's cash generation and the near term stability of the business, target boosted to 78 from 72. 18% upside. that's kind of low.
14 analysts cover mnk and the average price target is $97 a share. it was also $125 stock a year ago. >> interesting because this is one that has been rocked by the drug pricing fears. because this is a company that rolls off of a lot of other companies. >> that's it for street talk. and, hey, programming reminder, bill gross will be joining us out with his monthly newsletter. it is called "increasingly addled" and has a muscle man picture on the cover. we'll explain all that, tyler, i promise, when bill comes on the show shortly. we'll find out what mr. gross is talking about, always provocative. to the bond market, yields on the benchmark ten year note hitting one year lows. rick santelli, what's going on. >> i'll tell you what's going on, yields are going down. there was a time when our economy was much better than the
recent spat of data since thanksgiving demonstrates. and even then europe's relative value trade when their yields were dropping, in 2015, 2014, we followed. now our data is deteriorating and europe's yields are moving lower. it is a double whammy. look at february 1 of the, last time, early february, since we were down here, you see ten-year yields. boone yie boon yields, 26 basis points. if you look at french two-year, ten-year chart, minus 41 basis points. italian two-year, negative one basis point. it is like a herd mentality. central banks are pushing rates down and the outcome is exactly what they seem to try to prevent. it is a spiral. and if you look at year to date dollar index, you see its recent move, this cements the notion there is changing dynamics in the interpretation of the
direction of our central bank, no interpretation needed on foreign central banks. tyler, melissa, back to you. >> rick, thank you very much. bill miller who beat the s&p for 15 consecutive years says the markets now, his words, an absolute gift. and stocks that look like good value at these levels. we return in two minutes.
welcome back to "power lunch." the dow down 32 points, a fifth of a percent. it dipped below 16,000. yield on the ten year note falling at one point during the day, the lowest level in about a year. right now at 1.86. the euro strengthening to 1.10 for first time in six weeks. the dollar index moving lower. weaker dollar helping oil today, up 1.75 or nearly 6%.
back above 31 and then some at 31.62. to sue herera for a news update. speaking at a heritage action for america policy meeting in washington, house speaker paul ryan calling on republicans to stop fighting angrily among themselves and to not be distracted by guns or other hot button issues president obama raises this year. >> we cannot fall into the progressive trap of acting like angry reactionaries. the left would love nothing more, would love nothing more than for a fragmented conservative movement to stand in a circular firing squad and fire so that the progressives can win by default. >> the federal election commission sending two notices to the ted cruz for senate campaign seeking information about the goldman sachs and citibank loans not reported in 2012. it wants a response by march 8th. the convicter killer who
escaped last summer was in court wearing restraints this morning. he's already serving a life sentence without parole. and michigan governor rick snyder said he wants $30 million from the state to reimburse water payments made by flint. an estimated 21,000 customers have continued paying their bills, 9,000, though, have not. you're up to date. that's the cnbc news update at this hour. back to you. >> sue, thank you. a check on gold prices, which are closing right about now. no surprise it is the weakening dollar that is driving the trade across the board. gold, co-mex gold closing at $1142.80 an ounce. strength across the board with this dollar index trading at levels not seen since december of last year. now to seema mody for a market flash. >> a strong start to the year for the first two ip os of 2016. the two stocks are this year's
first ipos after pricing shares last night. editas, and beigene, both in the health care biotech space. if you're in the red this year, you're certainly not alone. the legendary value investor bill miller told cnbc he lost 20% in a month, but still bullish on stocks. >> i think my psychology, i think my mom must have dropped me on my head because i like lower prices. lower prices tell me i've got higher future rates of return. when prices are high, it makes me nervous. prices are low, i feel good about that. market like this, i like it even though it drives people in my office crazy. i'm, like, this is great. >> is he right? is this a great time to buy stocks? joining us, ron winer of rdm financial and chris cordero of regent atlantic capital. welcome to both of you. chris, i'll start with you. is it a great time to buy or
something a little less than that? >> i think bill miller is absolutely correct. right now is a really excellent time to get into the market and buy stocks. we're seeing valuations that are terrific. i think a lot of the economic news that we see is really being overplayed. just thinking about -- i grew up remembering 73, 74 when the price of oil was just hammering stock prices as the price of gasline was so high. here we have the exact opposite situation and the market doesn't like it. >> ron, you've been raising cash since 2015. what is your view on whether this is a good time to buy and are you still raising cash and taking a more defensive stance? >> well, i'm not so sure about this market. i don't think anybody is. everybody has an opinion. but the truth of the matter is there is a lot of unchartered territory. we have negative rates on european debt, china and everybody else lowering their currency. we have a lid on u.s. growth
because of the dollar. things look like they're slowing worldwide, so why get bold here? i don't see it. we're financial advisers. we're not about beating the market. we're about having our clients reach financial success. since june, we started to pull in and take some high beta positions off. we started to move to things not drastic, things from the s&p type investments to the splv or we moved from the industrial sector to the staples sector and we took a little cash. i think it is better to be prudent now. not out, just prudent. >> a little defensive there. chris, why don't you speak to ron and tell him why he's wrong. >> sure. so i think, when we can buy companies like an apple, like a bank of america, at 10 times earnings, i think those are great valuations. and we're never going to get the timing right.
so we're never going to be able to pick when the bottom is. if you're not in the market, not developing the positions now, you will miss the opportunity when things turn around. when they do turn around, they turn around quick, they turn around much faster than most people can react. >> ron. >> that's right. i listen to bill mill,er and lloyd blank fine. lloyd says, valuation should come down a little, the pes are high because we don't have the same growth. i don't know who to believe. i want to protect my clients so they don't freak out. the biggest reason why people fail financially is they get emotional. the best thing i can do is keep them stable, get their allocations right and don't try to -- don't try to be smarter than the market. >> a very quick thought here, you said that one of the things you would recommend if people want to get a little more defensive is fixed income, but you specify individual bonds, not bond funds, quick reasoning behind that. >> you bet.
bond funds are really equities. bond funds or etfs they don't mature, the way that the investor -- what the investor gets is the yield curve for the most part. except bonds are really complicated. i don't know, probably 5,000 ways to invest in bonds these days and they're not just bonds. we would rather buy, hold the bonds to maturity on a latter portfolio, so we know what we get. i can tell you, the liquidity issue for etfs and bond funds, we buy and sell bonds. they're not that liquid. they're not stocks and that could be a problem. i don't have that problem. i know what i'm getting. >> an interesting point. one that often gets overlooked a little bit. ron, thank you very much. and chris, we appreciate your time today. and helping us. go to powerlunch.cnbc.com right now to see other big cap stocks that chris and ron may like in this environment. that's powerlunch.cnbc.com. now to tech, the tech
industry has been making some major headlines in the last week with earnings and now yahoo! seeking strategic alternatives for the company. our next guest covers majority of the tech names out there, but today focusing on yahoo! and alphabet. mike mullhaney joins us now. good to speak with you. let's start off with yahoo!. down about 7% today. new lows on the stock. guidance was not good for the current quarter for the full year, cash flow or ebitda, margins for the past quarter below the street. at the same time, the company says it is entertaining all options. shouldn't this be what investors should be focused on? >> well, investors should be focused on any turn around in the fundamentalals a als and it there. people have been waiting and we haven't seen it. the outlook for cash flow, for ebitda, for 2016, is lower than at any point in ten years at yahoo! that speaks volumes for
how afraid or weak the core fundamentals are, in a rising secular growth environment. she should be ex-plorg aploring options. there is skepticism they'll pull the trigger. >> are you a skeptic as well? what are some of the obvious questions in terms of bidding process what will constitute a real bid, are they going to open their books it other companies for due diligence. did you get any of those answers in the call? >> no, the press release sounded more open to strategic alternatives than i thought the earnings call did. there is the truth that this would be -- this will be a complicated acquisition, you have three pieces you have to peel apart. the tax efficiencies with regards to peeling these apart, those are very uncertain. somebody looking at this may
want to say i'm going to wait for them to spin off, figure out how to spin themselves and then come in for the core asset. >> you lowered your price target today. why stick with a sector perform. why bother owning this stock at this point for potential five upside when you're telling me that it doesn't really sound according to the conference call like they're truly open to alternatives at this point. >> the question is did we -- the fundamentalals based out, can you believe the numbers they're laying out now in terms of generating 700 to 800 million in the cash flow next year f you believe the numbers, this is a dirt cheap asset. so i guess in a way we're hoping the numbers are right. the right call over the last year has been the cell call. ever since the alibaba ipo,
fundamentals cratered and that was the real miss here. >> i want to switch gears here and toss you a question. i know we'll talk about alphabet. netflix. the stock pick can't get out of its own way. down 23% this year. what needs to happen for this stock to turn around? back to a darling? toward that direction. >> of the f.a.n.g. stocks, the one with a negative inflexion in the december print was netflix, the negative top line inflexion where people are to take their ford sub ad numbers and lower them. story changed. now it is almost all an international play and at some level greater risk associated with that. one needs to have a lot of conviction they can add in, you know, 4 million subs, probably per quarter for the foreseeable future, call it 4, 5, 6 quarters to buy the stock. we think they can do that.
that's the -- the proof shifted hard to international and that's why the stock traded off. that isn't where the proof was required last year. they proved themselves, now it is one thing left. that's the skepticism, the correct skepticism on the stock. we'll stick with it. remain buyers of netflix, more so with the stock correcting. >> mark, thanks. good to see you. the s&p down more than half a percent. the financials in technology, the worst performers. financials as they have been for so much of this year so far. energy, materials -- energy utilities and materials leading the way. much more market coverage coming up. plus -- >> coming up, a startup folding kayaks into backpacks. >> utilizing the magic of origami, we go from box to boat in under 5 minutes. >> will his pitch fall flat? >> why will people pay upwards of $2,000. >> stay tuned to find out.
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td ameritrade. time for power pitch. >> my name is roberto gutierrez, co-founder at oru kayak. we make a kayak that folds into a compact case, our kayaks go from box to boat in under five minutes. we make them here in the united states and they're exceptionally durab durable. i've taken them down rivers, surfed six foot wave and thrown them off a roof. in 2012, we launched our company on kick start. we have become a multinational entity. in the united states, you can find us on orukayak.com, rei or west marine. we have a few key distributors in asia.
over 120 million americans are on coastlines but few have places to store their kayak. we have a solution to that. we have a product with the fonl potential to redefine an industry. as more and more people go outside, opt for oru kayak. >> you saw the pitch. now let's meet the panel. joining us is alicia syrett, she advises and invests in over two dozen startups. from santa fe, axie navas. and from the bay area, david wu, general partner at mavron, he invested in and mentors over 30 startups. great to see you all. thank you for joining us. roberto, you're in the proverbial hot seat. >> i give the pitch a solid b. i think it was good in terms of
giving the product overview and talking about some of the company milestones and distribution to date. however, it was a bit light on the numbers. you didn't talk about company sales and you also didn't talk about pricing of the product. i've seen market estimates that the total kayak industry in the u.s. is upwards of $250 million. how do you think about expanding that market opportunity potentially through other products or services? >> a lot of people coming into our website and buying kayaks are first time paddlers and never koyia be e kayaked before. outside of that, we're focused on keeping our heads down and growing the thing we have before we branch out too much. >> a little background, i understand from your website you have four different designs starting at 1,275 going up to 2,475, correct? >> that's correct. >> i thought it was an inspiring pitch. i like that you emphasized the ability to get more people
connected to the outdoors. i would give it an a minus. i love the idea behind the company, but i am worried it is not a huge market and will get saturated quickly. do you have any plans to use the origami technology in other boats. >> yes, we'll be releasing new products next year that are more in the camping realm that are a little bit more -- much larger reach. >> look forward to that. david? >> i agree that you did a great job on the pitch, explaining the product, what an innovative boat that is. like alesha, i would like to hear why this is a big important opportunity. i would give this a b on the pitch. how much money do you make per boat, direct and retail? >> retail is 35% margin. formargin on the products down to less on the more volume plays. >> alicia, if i go online, i can
find kayaks as inexpensive as a couple hundred dollars. what justifies your price premium? >> it is access to the lifestyle you want to have and do and more and more we see people investing, saving their money and putting it toward experiences rather than commodities and products. this is a product, but it provides an interesting experience. >> now we node to kneed to know panel is in or out. >> there is a lot of things i like about this company. i think the design is really awesome. and they made a lot of headway in terms of sales and distribution. however, i do remain concerned about the total size of the market and even in this smaller market, it is very competitive. this is a viable business, they're serving a need for portability and for saving space. as an investor, i would like to see a larger market opportunity so unfortunately i'm out.
>> what about you in. >> we tested oru kayaks and we're impressed with how pe perform on the water. they're beautiful to boot. for all those reasons, i'm in. >> i think it is a great product. really innovative design. at the same time, i'm not sure they'll sell enough boats to build a lifestyle brand. i'll be out. >> we heard many of these things before. fantastic to get a nod of approval. that's a huge accomplishment for our company in particular. >> thank you very much for join is us today. thank you to our panel. that is today's power pitch. breaking new on hoppnda. >> a big recall from honda. it sent a memo to dealers
alerting them that they are recalling 1.7 million vehicles. we'll run down the vehicles and the model years. all vehicles that have defective takata air bag inflaters. those inflaters, they have been linked with ten deaths. the models that will be involved in this recall, 2007 to 2011 honda crv this isovecrossovers. we have reached out to the national highway traffic safety administration, which says it has received a filing from honda, but has no comment until it officially releases anything that is inside that filing. that could happen over the next couple of days. as for honda, we have reached out for a formal comment about this memo that it has sent out to dealers.
honda will be recalling 1.7 million vehicles and, mellas arce the most interesting thing about this, they're warning their dealers, if you have any of the used models on your lots and you sell these used models, you're liable for anything that happens if the recall repair has not been made. remember, in the u.s., dealers are not responsible for anything that happens if you sell a recalled vehicle. you can sell one without the repair being made. honda is telling its dealers, you need to make these pair re if you have these vehicles. >> auto sales down by 4% a piece. why do you think there is limited damage to the stock? >> primarily because this recall is an extension of what we have seen for takata with 24 million vehicles being recalled. there is recall fa teak here. and the expectation in the market that a lot of these vehicles with takata air bag inflaters will have to be repaired. and they're baking that into the
expectations. >> how many are there? >> how many are out there? >> it is not the air bags, it is specific inflaters. even national highway traffic administration they announce this recall, they said they're even having trouble identifying specifically which inflaters are involved. they haven't found the root cause of these exploding air bags. that's part of the problem here. they're still investigating and recalling. >> the market has done the work though. the market looked at who has takata air bags, sold those pretty strong. >> phil, thank you very much. "squawk bost "power lunch" will be right back. this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding
and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity 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.
the s&p 500 was off by more than 1%. back to wti, we just had on, it is surging now, up more than 6%. so once again, we have stocks moving lower, even though oil is moving higher. >> great decoupling. >> yes. >> banks are the new oil. >> it is conscious uncoupling. >> that's what i was thinking. much needed good news for rob thimble. he's 100% invested in energy and thinks crude is headed higher from here. i should hope so for you. you are invested solely in energy stocks with a variety of mlps, hit hard, the best thing would have been to be in cash but can't do that. do you see any signs now that the worst may be over when it comes to oil? is it bottoming as we look at the psychole? >> so the way we look at the oil price is this, we are currently in another commodity cycle, we have experienced commodity
cycles before. this is the -- the problem with this one, it is a painful one, the second longest since the 1980s. we're seeing signs we're near the bottom. >> how do you measure that? weeks, months, days what? >> we think what you need to see is global and u.s. inventories begin to decline for us to say we hit the bottom. and we're headed in that direction. and here is how you get there. you see u.s. production start to fall. and you see demand continue to remain strong. that's how we see and reach the bottom in oil prices, we see the two collide. >> when might that be. >> the first quarter, first quarter, we always see rises in inventory. not driving a lot, right? last week we had a snowstorm on the east coast. not a lot of driving happening. but as you move into the summer, and into the spring, you start to see driving and demand pick up. and you start to see u.s. oil production beginning to decline as well. last week, two large oil
producers. both announce they have lower production next year. their production will fall 10% next year, year over year. those are all good signs indicating -- >> imported a couple hundred thousand more barrels last week than a year ago. importing more oil. >> yeah. >> i admire your bravery and optimism, what is your timeline, though? you got to be investing for five to ten years out. you know some of the companies that you may own now are going to be gone. not going to make it. >> well, what we try to make sure we don't invest in those type of companies, but if you're a refiner, why are you benefiting from this? if you're a refiner, i would buy every single oil barrel i could buy on the market now. the price is so low. we won't be here for that long. that's one area we like, we like a company like valero, doing everything that shareholders want it to do. increasing dividend, buying back shares, generating high returns on capital. companies like that are benefiting. >> i assume that tortoise
capital, the mandate is to invest in all energy. are you hedging your positions in any way. you surely haven't been sitting long equities this whole time, watching your aum go from 26 to wherever it is now, you know, half of that. are you hedging? in the bond market? how are you investing? >> well, one area is refiners because when oil goes down, the refining sector goes up. >> can it be short? >> we cannot. we're long oil. >> in equity. >> long only in equities. the other thing we're focused on are the midstream names. especially in areas where you can get paid a dividend. we like dividends at tortoise. pay while you wait. >> 3% to offset the 23% decline. >> well -- >> that math doesn't work. >> short-term. if you take spectra energy, pays you 6% current yield, it just grew its dividend 9.5%, that's usually a sign of a pretty healthy company.
and it has very little exposure to crude oil. it owns a unique set of assets in the northeast that benefit from the growing demand for u.s. natural gas. >> long term oil prices between 1680 a barrel. >> that's long-term. >> how long is long-term? >> we expect over the next five or ten years we expect oil to move back to a higher price. >> what about this year? >> by the end of the year, we'll end up close to $50 a barrel. you're going to see u.s. supply fall, right? and it is going to happen really throughout the year. >> 60% move up. >> absolutely. if you look the last really six commodity price cycles, the one year return in oil, after you reached the bottom, the average is 77% in terms of how much oil prices increase. you could see a major move in oil prices at some point. >> they count by days here, tyler. we're on day 561 of the current
peak to trough commodity cycle. what was the longest? >> 97, 98 during the asian crisis, for 716 days. >> we could go another 200 days if we bottle in the worst case scenarios. >> that puts you into the summer. that's possible. we don't think that will be the case. >> a lot of companies can't go another 200 days. >> that's a good point. thank you, rob. it is trading nation time. today's question, what will it take for stocks to find a bottom. neil azuz and craig johnson. what will it take for stocks to find a bottom? >> i think that's a great question. the way to address it is you need a framework. this is our working framework. we laid it out since day one of this year, you need to look at
three things. one, valuation, two, the technicals, and, three, volatility. let's start quickly with valuations. right now we're pricing in a 14 to 15 times multiple on $120 earnings per share, which gets us to a price target of 1680 to 1800, broad range. that's down from 17 multiple and $130 earnings per share or around 2200 to start the year. the second thing is technicals. we look at three different things in the short to intermediate to long-term, short-term standpoint, we have seen the 200 day moving average pass some time last year. last august, we saw a major move from the short to medium term as measured by the 55 week moving average. and then most recently we are starting to see a trend towards the 200 a week moving average, which is a cycle change. number three, volatility. last year we had a range of plus 4% on the upside and down 12% on the downside.
this year, volatility doubled for a number of reasons, but most importantly doubled simply because of the deterioration in earnings, and the repricing of a recession outlook. that's how you make volatility the most sticky. range going forward is more of a downside of 20 and upside of 10 based on that. and so when you look at all of these things combined, the lower market multiple, the 200 week moving average, and the range expansion in volatility, that puts us in a convergence of somewhere between 1740 and 1700 with downside risk first. >> a lot of good reasons there, neil, a lot to digest, craig johnson, you looked at charts. do the charts say that the bottom is in for the u.s. stock market? yes or no? >> i think we found some stability in here and to answer your question, i want to look at it this way, i put up a 20 year chart on the s&p 500. and we're bullish on the broader market. you look at this 20 year chart, there is a lot of folks that say
we need to come back to 1575, 1650, 1700 as our guest said here. i got to make a couple of observations. when i look at shorter term tools in the market now, the technicals, we're at a point in time where we reached washed out levels. we rarely have seen over the last 45 years with our work. and typically we have seen these washout levels, 13 weeks later the market is higher by high single digits, almost 80% of the time. the second thing i would point out is that when i go back and look at history, and i go back and look at the breakout we have seen early 1980s and early 1950s, we saw pullbacks corrections and cyclical, not secular, but cyclical bear markets unfold, only to see those improve to be very good buying opportunities. at this point in time, i think we're getting close to seeing bottom get washed out here. we're really oversold in here. from our perspective, this
really started to unfold probably back to 2050, could be more. by year end, we're bullish, 2350 at year end, 20 and change higher from where we are today. >> bullish. there we go. on the books. clean air in minneapolis. craig, neil, thank you very much. for more trading nation, go to our website, on the internet. volatile day. want to give you another trading highlight, the euro hit 111. so the dollar weakening throughout the session. this is a 14-week high for the euro. we were talking about levels of 108, 109. 111 at this point. on the menu for the rest of the hour, up next, bond legend bill gross put out a new investment outlook. is he fired up? why he's seeing shades of 2007. oh, no. why plain vanilla is your new best friend. and we found a new names that are hitting new 52 week highs.
the one stock getting ing tingd kung fu chop. can you guess the name? now your trading nation stats of the day and a word from our sponsor. >> we have been in a near zero interest rate environment for a very long time now. as a result, dividend paying stocks have become very popular with investors searching for yield. this can be a dangerous strategy because stocks not only have enough capital risk than bonds, if interest rates stay rt to rise, these stocks can become the most vulnerable to a market pullback.
bill gross' newsletter is titled increasingly addled. this has twisted the global financial markets into a dangerous position, basically asks the banks, how is it working for you globally. bill joins us now. in your note, which, by the way, i appreciated the picture of the strong man on the cover, i'll summarize for the viewers here, you argue, does that make the u.s. good and good place to invest or will that bring us down as well? >> well, it makes the u.s. a better pbe better place to invest. with our interest rates higher than the negative interest rates in japan and euro land and
elsewhere, the united states is more attractive opportunity in terms of investors if only from the standpoint of the yield on the bonds. the u.s. is affected as well because the deflation that is taking place and japan and to some extent in china and euro land and the examples i cited presq specifically, puerto rico, the deflation effects of the united states as well. it causes investment to languish. example, exxon and shell and others are cutting back their capital expenditure budgets by 25% to 30% by the price of oil because of deflating commodity assets and so, you know, there is a negative aspect to interest rates that drive rates so low that it energy companies that ultimately the destination is
destruction of capital as opposed to constructive growth. >> the idea as you note is kind of like the concept of trickle down economics, right? without getting into that argument or discussion, they're supposed to pump all this liquidity into the system, we'll make money cheaper, which means they invest it, they hire people, the real economy grows. that's the idea. doesn't sound like you think it ever is going to work. >> well, that's why i asked how is it working for you? and, yes, to be fair, the united states, you know, has been growing at 2% real and perhaps 2 it is 9% not for the past five years. japan is above the line and euro land came out of their recession. it is working a little bit. i would question their philosophy that is age old and in terms of their modeling. the lower you drive interest
rates, the better it gets. the wealth effect is disseminated down to the real economy and we get back to normal. that doesn't seem to be working for a number of reasons and so, you know this drive to more and more negative interest rates could have negative consequences. it affects business models like insurance companies and pension funds and ultimately it affects savors. if they earn a return on their money, savings diminishes and investment languishes. >> no better example than what you look at what is happening it the financial stocks, which have just been getting hammered. how do you make any money as a european bank right now, it is incredibly difficult, and all the other hurdles they face. that being said, when you look at how bad the performance is with the bank stocks, does it make you nervounervous? are you nibbling, are you willing to buy any of the bank debt in europe, the bank debt here in the united states? are those offering decent
returns? are you getting compensated for the risk you might be taking? >> not in europe. we know the problem and you mentioned the problem, not specifically, but italian banks, but that's where some of the problems seem to be. i think it is a little early. i think many of the problems have been covered up or swept under the rug and we will see. and the united states, obviously, banks are much better capitalize, we know that, instead of 5% to 6% equity, they have 9% to 10% equity and that's growing because, you know, interest rates are so low and they can make some money based on it. not as much money as you point out in terms of if interest rates were higher and if the yield curve was more positive, but making money. i wouldn't say that the u.s. banking system is threatened, but not healthy from the standpoint of its willingness to make loans and that's how you stimulate real growth and nominal growth, which is critically important for central banks. >> we had a guest on earlier who said for the bank stocks to stabilize, the ten-year yield
has to stabilize. is it going to? where is the next stop for the ten-year yield, one or two? >> well, i think it is two. 1%, we're threatening japanese levels, and japan has structural problems in terms of demographics that the united states does not have. it all depends on where the fed goes and that's why i spoke to, you know, the fed being relatively uncertain. the fed at one point, two or three weeks go, stan fisher talking about four interest rate increases over the next 12 months and bill dudley this morning saying, well, maybe not, and the fed ultimately investigating the potential for negative interest rates here in the united states. so 1%, i don't think so, i think 2% stabilizes the bond market so to speak, but doesn't provide much of a return which, you know, as i said in my outlook is part of the problem.
>> most people are probably not financial professionals that watch cnbc. i get to meet them good folks, maybe dentists or doctors, and they're getting scared. leave us a reason to feel optimistic about one or two investments. >> well, let me put it this way from the stand point of a simple model. you know, global economies and the united states, which is your question, they need to grow by 4% nominally, real growth, plus inflation, in order to validate risk assumptions and cover increasing debt service. one can look at nominal gdp growth as the return on capital. and at 2.9% currently, far from the cost of capital. both fixed and equity combined. with such a large divergence, the economy slides towards recession. is that optimistic? not necessarily. what this economy needs is 4% to
5% nominal gdp growth, 2.9%. the fed needs 2% inflation, 2% plus real growth. they think they can get it by keeping interest rates low and driving them down. i suppose to zero. that's what other central banks are doing, but i question that, i think you need fiscal policy to join in with monetary policy. to be fair, to janet yellen and ben bernanke, that's all they talked about in their testimony to congress for the last five, six, seven years. put they have no -- >> it is a tough market. good to be fair to them. they have the toughest jobs in the world and everyone is conducting an experiment. real pleasure. thank you very much. >> thank you. >> all right. up next, are the f.a.n.g. stocks losing their bite? or sinking in? we're keeping a close eye on energy also, only a few minutes left before crude closes.
back to a 1.11 with the dollar weaker. moving lower, ten year loelyiel. lowest level, look at this now, at 1.86%. wasn't that long ago we were talking about 2%. brian, over to you. >> thank you very much. so with that move in yields, our data partners at ken show have found that we have seen bond yields move this rapidly down 152 times over the last decade. that's a lot. what they did is they went in and said when this happens to bonds, what parts of the stock market benefit or fall? the good news that they came to some pretty clear conclusions. the bad news is not many parts of the stock market tend to go up. according to kenshow where the bond yield on the ten year moves down this fast, most people don't care about bond yields, unless you're buying a house, the financial stocks get walloped. that's already happening. banks are the new oil. welcome. energy the second worst
performer. industrials, materials, and the overall s&p 500 moves down on average 1.3%. kenshow not saying this will happen, they're saying based on other times when the yields have gone down, this is what tends to happen. we have seen the stock market move down a lot more than that already. asset managers get spanked as they have been, by the way, when yields fall. we have talked about a lot of the reasons. kenshow has the data for more. check out the story on powerlunch.cnbc.com. when yields move down, everything is terrible, all the time. >> except if you want to buy a house. >> except if you want to buy a house. >> thank you. crude oil is in rally mode. the final trades as they cross. to jackie deangelis, she'll set up the clo for us. crude oil is on fire today, defying gravity. a lot has to do with the dollar and also an under the radar note out there from city.
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the dow was not doing much, and in the last few minutes, michelle -- >> unbelievable. >> the caruso-cabrera effect, cat perpillar and exxonmobil an dupont leading. >> the oil mark oats aets are c for the day. let's get to jackie deangelis. >> we did see a huge rally in crude oil prices after we had to settle under 30 yesterday. we'll close here today over $32 a barrel. reasons for the higher crude, dollar weakness, the first one. all the commodity space ripping today on that. also more talk about an opec emergency meeting. ecuador is the latest to release some headlines on that. then you have the department of energy numbers, they're a little bit bearish on their face, but some bullish factors deep inside there. production in the u.s. did drop for the second week in a row.
small but dropped. imports up and refinery runs were down. the note that i mentioned the tease, an under the radar note nobody is talking about from citi. saying that even if the fundamentals look bearish, the lows are likely in for crude. citi is one of the bigger bears on the street. changing the tone here. that's not to say we couldn't touch the lows again, before we tend to go high, but you can see from the action today, the momentum is to the upside that the point. >> the lows are in, if ed and his team are right, it doesn't mean oil could go back higher. there are two types of companies in the world. companies who can make money pumping $30 oil and companies that can't. >> companies that can't. >> most are in the latter. chevron, been around forever, they bought land in the '30s and 40s. cost of production may be under 10. >> it is not to say there aren't
tough times ahead but it took us by surprise today. many thought the dollar would strengthen. if the dollar weakens, you could see prices creep up jackie, thank you very much. it has been a crazy session, year for oil. i asked the data team, best in the business, how many days has oil this year moved less than 1%. every day we're like it is up 5%. oil is soaring, five days. >> but it moved less than 1%. >> it has been up three, four, five percent, down 3, 4, 5%. those kind of moves, if you're an oil ceo, driving them insane. >> imagine the hedging that you might try to do, nearly impossible when it is moving that much. >> you can't figure out pricing, hard to have a commodity business when it is this volatile, but the point is, traders are now in control also. maybe it is the machines. >> the algos, right? >> news update with sue. >> you're right, miss michelle. here is your cnbc news update this hour.
the italian coast guard rescued 11 migrants at sea after their boat sunk. four children were among those saved. rescue swimmers pulled them on board the coast guard ship just off the greek island of samos. toyota announcing it will discontinue its scion brand after years of slumping sales. the unit was formed in 2003 to try to attract younger buyers. the toyota dealerships will continue to service the car. bernie sanders will soon have secret service protection. nbc news learned he'll begin traveling with protection within the next 24 hours. the sanders campaign requesting that service last week. and the number one high school football recruit in the country is going to michigan. paramus catholic, new jersey, defensive tackle rashaan gary ending months of speculation picking the wolverines during a live announcement on espn an hour ago. he joins high school teammate jibril peppers, number two ranked recruit in 2014.
back to you. >> exciting. wish him the greatest success. >> absolutely. >> why rutgers will never be good because they got all these great players in the state of new jersey -- >> they go somewhere else, i know. >> should have gone to virginia tech. >> you say modestly. you say modestly. i don't know, michigan -- pretty hard to compete. >> a man dreams. >> i'm sorry. i don't mean to dash the dreams. >> speaking of dreams, dreamworks animation is the stock under pressure. down 10% year to date. latest animated release is kung fu panda 3. raking in millions at the box office, $41 million in the first weekend in the u.s. and canada and even better $58 million in china, new opening record for an animated film in that region. is the success of kung fu panda 3 enough to help the beaten down stock.
james, give me the bullish case. >> i think the bull case here is that this is a turn around story. a year ago. people worried about feature films underperforming, worried about leverage. and i think if you look at the stock today, over the last year, up 20% plus and all the things look better. films are doing much better. diversification effort is well under way. and leverage is no longer a concern. we remain constructive on the shares. >> dreamworks is like a lot of companies that was hoping that when it came to real growth, maybe not underlying volume numbers, but the growth would come in places like china. we talk about a potential slowdown going on in china, you worried about the impact on dreamwork at all in. >> not at all. the box office in china is in secular growth mode, $7 billion market there, growing 30% plus per year. i think dreamworks has an excellent strategy with a production with oriental dreamworks. they're extremely well positioned in high growth china
market. >> all right. heard the bull position there. that's james marsh of piper jaffray. david miller, the bear position. give us the bearish side, david. >> thank you for having me. i like james, very nice guy, but i have to say what he just said on air was the run-up you saw throughout late october into november and into december and all of that is built with the stock or should say was built with the stock at $27, which is where we downgraded the stock just last week. at 15 times ebitda, if i'm holding the stock at that kind of evaluation, in this tape, i would consider selling the stock, taking profits, rolling those proceeds into a comparable, say, like a lion's gate, a much more diversified company, and killing it in tv. >> is it because you're worried about the fundamentals breaking down or you refer to the tape, is it that right now it appears
there may be a shift away from gross stocks and more toward value and you might see compression when it comes to multiples on previous growers? >> you have kung fu panda 3 out. $710 million is built into the stock. you don't have another sequel for another two years. so anything could happen theatrically between new and then. if i'm a pm, i have to wait two more years for some sort of stability and predictability in the income statement. that's just too long and this kind of tape, i'd be selling it taking profits. >> david miller, thank you, with the bear case on dreamworks. we have to go downtown. we have a trouble with bob pisani with an unexpected hit. he's always ready. what happened where the dow is
up 127 points. did the world change? >> i don't think so. there were a few macro things go on. we move about 14 points. the dollar, one thing that matters is the dollar finally did come off its lows. the dollar has been weak against the yen. that reversed about 15, 20 minutes ago. that may have been a factor. but you see that rally we're having here in the middle of the day, 14 points on the dow and the s&p 500. i want to highlight what is going on in the banks. a robust debate, most of us understand why european banks are weak. u.s. banks is a different story. we're seeing a turn around in the regional banks, kre, the regional bank index, that had a nice turn around in the last 20 or 25 minutes. most of the big banks in this group have gone positive, that's the kre. put up some other names here, like zion bank, that has been negative down 15%, 20% so far this year. that turned around as well in the middle of the day. other names like regions
financial and p corp. turned around. if you look at what is going on here, there are a lot of people saying regional bank index turning positive, a lot of people saying we get what is going on in the european banks, but regional banks like zion and regents financial -- >> i was going to say, to add to that, bob, we already had strength in a lot of the industrials and also the energy stocks because of what was happening in oil. if you got a turn in the banks, you see a substantial move related to the dollar. why did the trade change in financials? >> i don't see anything fundamental going on here. i saw the dollar move immediately. but you got to argue about how a lot of what is noted, it doesn't make sense that the regional banks have been sold down this much. 20% in some cases like regions financial. paul mill weaer was on noting m
of the banks have no international exposure, they have revenue from fees, not from interest rates. and overall, in the energy exposure, most of them are now trading like the entire energy portfolio they own is completely worthless. that doesn't make a lot of sense. >> i thought that was a great point that paul made here on the show, bob. i would suggest also if you overlay the regional bank index with what is happening in crude in the past hour, they would be extremely correlated. you take a look at the ones most leveraged to oil, cullen frost, texas city -- >> bok financial. >> bok financial, they had a distinct turn around midsession as well. that tells the whole story in terms of financial turn with the oil turn. >> nobody wants to own anything that is related to energy at all. and that contagion has spread over into the bank area. like i said, i agree with him. i don't think it makes any sense. you look at the numbers for zions, which has 7% of its lone
kyle best, founder and principle of haymon capital management was on "squawk on the street" earlier today. his fund made a big bet that the chinese currency will fall when the government is forced to recapitalize its banks. listen to what he said when he was asked if he was risk adjusting and hedging for this very large stake in his fund. >> my macro view is they'll have a significant deval. that will coincide with a multiyear bottom. but until that happens, we shouldn't own risk assets. we'll have fits and starts, rallies like we had in 2008. all kinds of big rallies. but shouldn't be bought until they rectify the imbalance. >> don't own risk assets, that's basically everything. >> exactly. >> until the chinese recapitalize their banks. so think of -- he's thinking
they have to recapitalize, they flood their system with yuan, devalues the yuan. that means all the other asian currencies have to fall as well. >> isn't that what gross is saying? >> we didn't get to that with him but he talked about it. >> kyle's friend is mark hart. if you read the big short, they didn't get any attention, but kyle was written up in the book, but those guys were really on the forefront of calling subprime. mark hart runs a hedge fund, doesn't like to do tv, nice guy, off the radar, he's calling for a 50% immediate devaluation of the chinese currency because he believes the market -- china has two choices. the market will do it for them. and that's going to hurt. or they can do it to get ahead of it to protect their exports. summarizing an complex story in two seconds. >> kyle's point is what are the ripple effects of that? when it starts to spread --
>> everything gets rerated. everything gets sold. particularly european banks. you think you've seen the pain in european banks now? think about the exposure like deutsche bank and hsbc have to china. because tv. >> if you're a country and you borrowed money and now you have to pay them back. >> think of it this way -- >> cheaper yuan. >> you could see big defaults on lots of bonds in asia that spread to the european -- that's the transmission -- >> china is losing manufacturing business to vietnam, to laos, cambodia. let's say we get a currency crisis, the ring -- all the asian currencies that nobody in america cares about, they fall. china loses more of its -- i'm summarizing a complex story here. foreign couraurrency reserve, they're not that big as a percentage of their overall --
>> and relative to what they might be to use them for. >> they got trading -- well, look how big you are and your debts. >> imagine in this world what the yield and the ten-year yield is. >> a lot lower. >> making that .8. >> raul paul, a global macro investor. >> you had him on last night. >> we did. prior appearance he said the ten year yield would hit half a percent. >> kyle bass is -- clearly has a short position, right? he's going to talk his book. but he's incredibly smart as well. >> yeah. >> these are all things to think about, even if you don't agree. >> right now, there is somebody driving their honda, you need to recall it, probably, driving your honda listening to sirius xm channel 112, if the chinese devalue what does that mean for my stock in ibm? i don't know. i'll make it my personal mission to help us understand. >> he's suggesting all stocks will fall. everything will go down. >> that scenario.
that's a doomz dsday scenario. >> i know. i listened to your interview last night, it was a heart warmer. to zero, you're, like, zero? >> and maybe citi. anyway, on that note. >> thank you. >> we're continuing to watch these markets on a volatile day for stocks. the dow is higher, though. refiners getting whacked. stay with us. "power lunch" after this. td amee trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place 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. td ameritrade.
the dow has turned around, now up 177 points, but the refinesers are not parts the 'em as aisle jumped 8%. oil closed up 8%, not helping them. we are back with more "power lunch" right after this. this just got interesting. so why pause to take a pill? and why stop to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating 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.
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after graduation, they came back and other kids started wondering why they were popular in the first place? those are amazon, alphabet, facebook and netflix. amazon and netflix have been tossed out of the cool group. facebook is the only one that's seen a jump in popularity, even cooler than it was, up 6%. if you understood that analogy, you're smarter than i am. if he says this year these stocks will not be able to repeat. jason and david, thank you very much. jason, first to you. what has happened with the amazon and netflix. they have been unceremoniously booted. like that kid in "can't buy me
love," it didn't work out. >> it's the earnings season really. then the top-line miss and gross margin miss. the numbers they reported we are similar to the first half, but third quarter was much better and a deceleration, and people are still trying to get that are arms around it. there's some concern as you enter the second quarter amazon will have tougher comps, the cloud service business against a price increase two years ago, but really, you know, in a mark that goss risk on/risk off where you don't have clear visibility or clear momentum. people are looking to shift money around. netflix is second quarter is their weakest quarter typically can net ads. there's some concern around the expiration of the grandfathering of the pricing increase facebook
you want is still fine, they had a terrific quarter and i think the momentum is still intact. we had use more data around the distance of instagram -- >> i'm not hearing you make the case for any of these stocks. >> sure, okay, so the case for amazon is we think amazon missed that number, because they saw unprecedented demand for fba, and they had to make up -- they basically had to add short-term -- >> tell me why to buy it now. >> because they will scale into that. so the fact we think there was a tipping point with prime, where they've never disclosed, 40, 50 million households, and with respect to if you're a seller, you need to get to those households. we think there's still unprecedented demand in fba. they gave us data for the first time and they couldn't handle the demand. the warehouses were full. when they dealt about that, they had to add costs that did not scale for them.
temporary costs, renting trucks last minute, which they will own that infrastructure ultimately and that i can ma scale. we think it's a great buys opportunity. on netflix you might want to wait. >> david, anything you have to refute there? >> well, the group in aggregate are all great businesses, dot quite well. when we think they're pulling back is because of gravity they have up 40 to 140%, you can't be a 200 million 300 million and go up 100% a year, we're wary of their valuation, our history in the market is when you're paying north of 50 times earnings, there's very little -- you can get hurt. the reason we're not egnomeored is we think there's great opportunities in the technology area that can you buy 12 times earnings, and you have that chance to make -- >> like where? >> a company like microsoft had a very good enough be, yet
they -- so we think that's one place. qualcomm which can do absolutely no right is under 7 or 8 times earnings if you adjust for cash. apple, which has gone from being the most loved stock to -- >> would you buy the financials here? i know we're buying tech, but they've been so hammered, and i understand at least you're thinking about them? >> when we're talking about better opportunities, we think financials are a great area to be in right now. the companies just came through their earnings call. all said very good things. they all said they absolutely understood their energy loans and were well, well reserved for them -- so we would be buying into this dip. wells fargo, jpmorgan. schwab we think is great. >> jason what about the whole idea that maybe sentiment has just shifted, and these multiples are going to compress,
because people suddenly are more interested in value. you know, you can talk all the fundamentals you want, but suddenly these guys -- >> take google, google is fading at low times earnings, so, you know, like there's a stock, that, you know, it's working, it's at a reasonable price. you can make an argument that right now if you go out another year on facebook potential u. you're paying not enormously different than you would pay for disney a year ago. so you have to pick your spots. i mean, you know, i think it's easy to say all of these stocks are the same, f.a.n.g., you're seeing different patterns with facebook and google than amazon and netflix. it may be the case that amazon and net flick may underperform for the next few months while, look, facebook underperformed the back half of last year. i think investors move around in this group. >> guys, it was a good
discussion. we got some financial action in there as well. thank you very much. have a terrific day. folks, thank you all for watching this program. >> a pleasure to have you, "closing bell" starts right now. . welcome to "closing bell." i'm kelly evans. >> i'm simon hobbs in for bill griffeth. a wild day for stocks. the dow was down 193 points earlier, oil seeing a big move higher, and financials raptly cutting losses from earlier on the session, el and arguably a lack of confidence. >> and the oil drop is far from over. we'll dig deep into the ripple effects of what's happening in venezuela. yahoo, one of the biggest loser on the nasdaq, shares