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tv   Power Lunch  CNBC  March 15, 2016 1:00pm-3:01pm EDT

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the data is softer than expected. >> retail sales -- if we were speaking to that specifically -- >> right. we are continue to be in the vacuum, look at the data see what they are going to do. june is definitely on the table but i don't think anything before then. >> valeant and the markets itself down. "power lunch" starts now. welcome to "power lunch," i'm melissa lee along with tie tie, michelle caruso-cabrera, and brian sullivan. we kick things off this hour with new developments on the stock disaster of the day. that would be valeant. purging square out just within the past hour saying it will take a bigger role at valeant and believes the stock is unvalues. valeant enduring through its worst day in trading history, down 46%. losing $10 billion in market company.
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david, great to have you with us. >> nice to be here? in your view what the odds that valeant befaults because it can't meet the filing deadline for its annual report? >> i think there is a meaningful chance that it happens. a couple things that i would upon out here. without knowing all the specifics of accounting issues this is a company that has made dozens upon dozens of acquisitions. the accounting is highly complicated some. he when it comes to default, you really can't rule anything out. i think that's one of the reasons the stock is down as much as it is. >> why did it take you so long to downgrade the stock? why wait for the stock to fall 45%, lose $10 billion in market cap to tell people to sell the sell when the issues, the accounting issues, the levels of tent you flagged in their report they existed long before today's
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earnings report? >> i would just like to point out that we went to a neutral on the stock from a buy over four years ago and were telling people to take profits then. and we've been consistently at besting a no, sirric on this stock. i think the reason for the downgrade today is that the question we've been getting is what is the floor for valeant? i think today not just because of the tee fault risk but because of the comments on certain business segments suggests to me you can't conclude there really is a floor. i think there was a lot of issues that were brought to light today that were new related to to key segments. >> you think also no floor to the stock that is down 4r5% in today's session. what can valeant do? there is talk of selling assets, a piece of boush and loam. there is whacker demand in the
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gastroenterology business, cancelling all price increases. what can it do to pull itself out, if anything? >> i think it's going to be difficult. one thing that i have said in the past is that i think the board has to evaluate a break up of the company. i don't really see that as a true company in the traditional sense. there is no core. there is just a series of desperate assets. right now it looks to me that management just doesn't have a handle on the unlying health of the business. i think a break up of the company, frankly, would be in order. >> what happens to mike pearson? why did he bother coming back? did he come back just so the company can break itself up? they don't have to get a new ceo in place in order to go and sell it? >> it is a good question, a fair question. i'm not sure why he was allowed to come back, honestly. i think there has been a whole host of issues regarding his credibility. and frankly, i was surprised to see him back. and certainly his performance on
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the call today didn't help. so i think that's as big of an issue as any, credibility. >> we'll leave it there. david thank you for joining us. downgraded valeant today to a sell rating. tomorrow on "power lunch," we have got one investor who defended valeant stock all the way down. in fact he bought more today. we'll and him why. tomorrow on "power lunch." >> melissa, i'm looking at other pharmaceutical type companies. looking at horizon pharma, endo, mylan, a lot of the companies down as much as 11%. the ripple effects of what is happening with valeant carrying through to other parts of especially pharma as well. >> it is a worthless stat, but i think it magnifies the issue. valeant has lost a biogen worth
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of market cap in seven months. >> in seven months. and it was close to a billion dollars for bill ackman. >> $65 billion in market cap in seven months. outside of the valeant news today's show is bought to you by the letter "e "because for next of the next two hours we are going to help you navigate the three big risks to your money right now. the election, the emerging market, and energy. after all, three is the magic number. let's dig in. starting with energy. free lander says oil may retest its lows and we are unlikely to break $50 a share. he is sticking by calls he has given over the last few months. roberto pavel. we've had a nice rally. last couple days aside, if we move above $40, where do you say
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we are going back to a two handle? >> we have have had a lot of short covering. the moves were amplified by expirations of the contract last month, the moves amplified certainly by the inverse etfs. >> do you think then roberto the $10 move pop off the lows we had for crude oil is fundamental driven? >> no. >> it's not? >> it's not. it's quite the opposite. if you are looking at the builds that we've seen pushing inventories at de facto capacity. we arest just below 80%. 67 million barrels sitting in cushion right now. storage is becomecally full right now. as we get to the end of shoulder season, quote the end of may there is simply nowhering to for this product. prices have to drop immensely.
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18 secondaries year to date. over $12 billion raised by energy companies that should have been bankrupt three or six months ago now have a stay of execution to keep drilling. and we have a massive duc -- drilled but uncompleted wells, over 4,000 sitting in inventory waiting to be put back on, which have only a three month lead time. it's going to keep us capped. i think we go lower, 25 to 28 range before we go higher after shoulder season. >> occidental, hess, koss most energy -- what is managed saying to you? are they saying we think oil is going to move higher over the next few months or we are not sure and we are going to guard the fort until then? >> the guarding the fort is the short answer. by the way, let me correct one thing roberto said. those 12 secondaries, or 18 you have alluded to, those are not to increase drilling activity. those are to shore up balance
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sheets and preserve investment grade credit ratings. that capital is not going out in the field. u.s. cap exfor oil and gas is going to be down 50% this year at least. it was down 50% last year as well. global cap exdown 30% for two straight years. that hasn't happened since the '80s. the entire industry is in austerity. the rig count collapsed. u.s. supply is probably going to be down a million layerst barrels a day this year. chinese supply is going to be down. colombia, canada -- >> to be fair, the reason we went to north droikt dakota last week, everybody has been waiting for the decline because rigs have come down, yet it hasn't come down that much. the technology is so good is they are able to get so much out of every single well. >> u.s. supply is already down 500,000 barrels from its peak last summer. all the countries that i just
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mentioned are also starting to see declines. that we didn't see last year. we are forecasting a million barrels a day of additional decline by the end of 2016. versus last year's exit rate. so as that happens you are getting the supply response. you are also getting a demand response. global demand was up 2%. going to be up a percent and a half this year. that's above trend. so you put those two things together, inventories are still high, no question about it. they are going to be drawing quarting q 3 really into q 4 of this year. and we'll be looking at an undersupplied market in 2017. that's a recipe for $60. by the way, if saudi arabia and russia cut a deal to cut production we'll probably see $60 a lot sooner. even without that we could see $60 by the end of the year. >> that is a big if. we have got a lot to do. we have got to let it go.
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that's what it takes to move a market and make a market. thank you both very much. let's move on to the next risky e, emerging markets. the index up 13% from its late january low. the question, will the em rally hold when so many bankruptcies are expected in so many of these regions. let's bring in two guests. david redell and samir samana. mr. redell, let me start with you. i see you are telling your clients brazil, russia, malaysia are all oversold. i want to focus on brazil because it's so much in the news and widely held. that sector or that market is up 8% in the last month. why do you like that sector? so many people have piled in because they think the president will be impeached. is that why you like it? >> to put brazil in context the
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market is well below where it was in 2008 lows. that's an valuation argument. i'm not expecting the president to step down this week, this month or this year. but the process is about to change for the political powers that be in brazil. if you were going to build in an economy in the next 25 years you would build in brazil. food, fuel, population, they need to get a couple things right, they need to get politics right and need oil prices to stop falling. they don't need them at $100 like russia does but they need them to stop falling. >> i see you are recommend aring two insurance companies from brazil which don't have adrs here. i'm thinking as an individual u.s. dollar based investor i've got to pay money to change to
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the currency. and then i have to worry about the moves in the currency. you think there is up side in the two stocks that it's worth enduring all those risks. >> it's worth it for the secular trend, the cyclical trends and currency trends and did two high quality companies. >> samir? you are the bear, why not. >> we are not bearish on the global economy or the markets. but with emerging markets, so much comes back to whether you are getting compensated to take the risk. as emerging markets bounce back you haven't seen earnings estimates going higher. so emerging markets are more expensive now. if you look at u.s. equities, development market equities they are trading at multiples that aren't that much higher than emerging markets. again, i don't see why you would take the risk in emerging
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markets when you have got head winds, possibly rising rates in the u.s., stronger dollar. from a relative standpoint we see better value in equities outside of emerging markets. >> does that mean zero allocation? or just reduced allocation to what would be a typical portfolio in better times. >> it is a tactical weight. thinking 16 to 18 months out. longer term, emerging markets could be a better part of the allocation. but there is so muchin uncertainty in the near term with what's going on in these countries we think it's better to watch from the sidelines as an underweight. >> thank you guys. coming up, should ceo pay be tied to stock performance? chipotle says yes. and in our new sear make it we will tell you how a former prosecutor bought an empty prison. you will never guess what he
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together, we're building a better california. welcome back to "power lunch," everybody. i'm tie tie. kmip oatly's coe ceo is taking a 50% pay cut last year as the company dealt with a massive e. coli outbreak and declining same store sales. chipotle says part of the executive compensation will be
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tied to the company's stock performance. should all ceos be incentivized by stock performance? let's bring in steve am land as well as jeff sonnen felled. welcome to beth of you. steve, what is the appropriate role for stock price performance in terming a ceo's compensation? >> normally it's great when a board takes action and aligns executive compensation with the owners and so that everybody is aligned. but the issue here isn't just the stock price. the stock price is the outcome the business performance. the issue here with chipotle is they are making their customers sick. and this goes back to 2008 when they started with food safety issues. it hit acute levels in summer and fall and winter of last year. they said we've got it fixed. we've clean it up.
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noro virus, salmonella, e-coli. they haven't fixed it. it is a systemic issue going back up through their supply chain. they closed for a couple of days in february. here again last week they have got another outbreak in one of their boston stores. i think it's great that the board is taking action here. but i think the bigger issue is they need to fix the underlying food safety issues which has caused the 15% same store sales, which caused the stock price hit. >> the stock is down 32% from its peak on august 5th. they took 50% pay cuts. one could argue with respect to the stock price they have actually taken a bigger hit than the stock would have suggested. let me go to a point here. and that is that it's easy for ceos to do things that can juice the stock price. they can buy in shays. they can do all kinds of things
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that can help that. at the same time on the other hand sometimes a company company performing beautifully, profits can be growing, revenues can be growing, but the stock doesn't move. where does stock figure into the investigation to determine a ceo's compensation? >> you are absolutely right. you raised one challenge. sometimes a company is doing everything right -- now the stock is catching up with the history. there is often a time lag. that's one problem that plagues a ceo when there is too much emphasis on the stock price in their compensation. another thing which i'm sure you and steve would agree with, sometimes it motivates people for reckless fire sale of prices selling off pieces quickly for a stock top, which is what some of
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the more reckless activist investors encouraged them to do. which is a shame. >> so steve should the stock price have an influence on what a ceo gets paid? shouldn't they be awarded if they create value. >> you want to align with the constituents. but you have customers, employees and ceo. in this case they are only focused on the owners. i think in this case if i was on the board looking at a basic fundamental food safety i wouldn't put it on the stock price because you can buy back irs sha. jeff is exactly right. you can buy back shares. you can slash all costs, take away all food safety issues and juice the stock price. they have got fix the fundamental food safety issues so theym stop harming their customers or they are going to destroy the bran and destroy the company. that ultimately will lead to a big stock price. >> if i could piggyback on what steve said, where has the board
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been aum along. going back to 2008 or just the last eight months. shake shack, it also makes a claim of superior product quality and organic origins and things. you can actually see what farm. these guys have been opaque. they have u.n. had uncontrolled growth. people in the stores are not that well trained. the people are not in a skilled in what they are doing. it's poor management. and they should be punished for it. it is a shame this persists. >> tyler, the issue with this company is that over the past three years this board has aw d awarded these coceo's in $130 million in total kaengs compensation. >> i hear all the complaints. what's the right answer? you are on the board, in charge of the compensation committee. what would you do?
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>> i think at this point in time given the severity of the issues and the whole brand and the whole company is at risk i would tie to it food safety and i would say nobody gets any of these stock options for three years until you prove that you have got the food safety issues addressed. you have got to put the customers first. >> what do you think? >> i think that's a piece of it. 18 months from now when hopefully this is fixed. i would put it in the portfolio of performance factors. you want to look at what the shareholder return is. you want to look at the growth in revenue and new products and things like that. >> the traditional metrics. >> i would include those traditional metrics. but the fact that these guys they are still pulling in $15 million, these coceo -- in their punished 50% state they are still okay. >> final word on israel valeant, which has lost a big hurch of its market value today. i know you have written recently
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in a major magazine a piece about drug companies, and particularly companies like valeant. what do you think? what's your reaction? >> tyler, it was in your old magazine, "fortune". patent drugs have a long history of fraud here. when you get in precipitation, pharmaceuticals people buy hope. usually it's the consumer that's the problem. in this case it's the investor. they were based on a model that was a heavy deb and a huge roll up. they are buying up boush and loam and others and taking r and d down to 3% of revenue. you look at pfizer, eli lily or gilead and aller began, they are putting in 10, 15, 25% in r and d and getting better total shareholder returns or just as good. the model was flawed to begin with. yet you talk to pharma people privately, they were afraid to criticize it.
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just like talking to telecon people. we used to talk about bernie ebbers and world come, they were trying to figure out at&t how do they do it? well, because the model is a flawed model, not fraud. >> flawed, but i suspect fraud here. that filla door specialty business is bizarre. it's why specialty pharma kpriss doesn't make sense the way we are distributing some of these drugs. >> gentlemen, thank you. to dominic chu. >> small cap stocks, the russell 2000 tracking for its worst performance in week. many of the biggest laggers are biotechnology names. all down double digits. you can see there. the index is still off by more
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than 17% from its june intraday high. small caps, melissa, remember we had been seeing outperformance that gave the bulls fuel. now small caps turning lower. straight ahead on our new series make it, how one entrepreneurs is pumping profits out of an abandoned prison. we'll be right back. when you're on hold, your business is on hold.
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welcome back to "power lunch." i'm melissa lee. workouts at a gym may feel like you are in prison. in this case you actually are. we have got the story of one entrepenure who has taken the facility from lock up to push ups. >> this former prosecutor went from putting people in prison to owning one. take a look. these rolling 38 acres used to be part of a correctional facility in new york. but today the property is being turned into of all things a successful athletic facility and fitness center called the yard. although it hasn't completely lost its prison flavor. the content was created by this sbrepture. >> i was a new york state prosecutor for many years. i put bad people in jail and then i represented criminals. how apropos is it that in 2016 we are sitting in a prison. >> you are meant to buy the prison.
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>> he drew upon his experience as a major league baseball consultant. the yard is already profitable and has hosted 500 teens for tournaments. >> oh, my god -- can i sit this out, please? >> this is a passion that i've always wanted to do. and i think a lot of people are afraid of. that because it is scary. you kind of go through that uncertainty. then you wake up in the morning and you say you know what, if this is what you believe, if you work really hard and you focus on what needs to be done, yeah, that's what entrepreneurs do. they don't spend a lot of times thinking about what ifs. >> you can see my athletic ability needs work. but this new series make it is about people like tony that go out there, follow their passion and make it happen. we have a ton more content on our website that you should check out. >> how it was work out? >> first of all, these guys were 14 to 16. so you really find out how out
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of shape you are when you are working out with people that are half your age. >> teenagers. >>. exactly. they were saying maybe you should choose lighter weight. i was really sore for about two days. i had a blast and it was great to work out with tony. you can telles passionate and he wants to see it succeed. >> to me he is missing an opportunity a little bit? >> and that is? >> because you are in a prison, right? combine cross fit with what he is doing. like have wall climbing, have ropes try to scale, the escape work out. seriously. can you shimy down a sewer pipe. >> it's called jail break. >> he has incorporated. >> and then morgan freeman joins us on a beach. >> no, el chapo. >> he has hosted birthday parties and baby showers at the space. he says orange the new black, people love all the prison proteaches. oddly enough. >> women get together and work
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out together. >> he hosted the party in the space. >> in the space. >> eastern state pen ten year outside of philadelphia. a skiry place. >> don't go back there, to prison. >> i will try not to. >> unless you are just working out. >> considering her husband is a state police -- >> i know. >> beyonce. >> he is a state trooper. >> didn't say what state. >> gold prices closing right now. let's look at how they are doing. down $15 at 1230. that's 1.2%. other metalals also moving the same direction. down by fractions or as much as 1.6% in the case of silver. >> stocks may be lower today but the dow and the s&p have rallied more than 8% since the lows of
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february 11th. the nasdaq is higher by 10%. what do you do now? did you miss sit in is there value to find in this market. ginning us chad morgan lande: both of you guys resepect underweight stocks saying maybe i wouldn't buy on the dips heave. chad why are you underweight equities even though we seem to have come off the bottom. >> we believe the general theme attic is a global deceleration of growth coming from the emerging markets. the emerging markets contributed to roughly 75% of gdp growth over the last decade. and you are stashtding to see in part because of a credit dislocation within the em side and china that potentially trade is going to be off. earnings are also going to be subpar. and just general multiples are overextended. >> so somebody could turn to you
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and say well that sounds for a case in not investing in em. but maybe the u.s. is the best house on a bad block. >> well, you know, you have to look at valuations. i'll give you an example. when we had our last drop down in the markets, we actually took a position within the ems on the ems side because the multiples were just too attractive. we are not expecting a global recession. but what we are expect something roughly 1.75 to 2.25 global growth rate. we are not expecting also a recession here in the united states. our base case scenario is roughly 2, 2.25 gdp growth. >> rich, you are unt weight as well. you haven't been buying blindly on the dips. that doesn't work anymore. why not? >> we are basically in the same camp with chad here. this bull market recovery is at a seven year anniversary. it's long in the tooth.
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by almost any metric. economic growth barely going to make 2% this coming here both here and in the development economies over seas. so we are not seeing a lot of value in equities. we are not necessarily looking to ar recession either. but for stag nation, at least a transition point a deflection point so we are getting defensive within our equity purchases. >> we are showing the weiss likes. s&p you tilts has been one of the best running sectors. a lot of people say don't chase that seconder, you are paying too much. why are you in? we've been in quite some time. actually now if you are going to preposition for the next six to 12 months, you might want to start to look at fms. we are not there yet in our estimation but but that's no the next play. >> while you are in utilities
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you are not necessarily adding to those positions. we are showing a chart that shows how well they have done. when do you sul sell those? >> we are looking critically at the u.s. consumer which is where i believe the global economy is resting on. and we're not sure the consumer will be able to hold up the entire global economy at this point. retail stails sales number this morning in keeping with our outlook it is a wait and see. let's see what the fed does. more tore to be told. >> and make the case for financials. i want to highlight to the audience the dow was positive, now it's negative again. what are the reasons that you are thinking about, what would push you there. >> once we wind through this part of the economic cycle and make it through the transition point the next upturn will likely be led by the financials and other procyclical sectors. we are basically working the sector rotation theme here. >> chad, why is it you like high yields it is a one of my favorite things to talk about because the yields are juicy but
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when they are juicy they are risky. >> they are revvingy because of this concern about a global recession. we believe that's not case. when you look at the spread between the treasuries as well as the vaa, what you notice is the spread is historically wide in times of distress. we believe the commodities market has created dislocation, that dislocation creates this opportunity. look at high yield. you could buy a basket, several etfs, and look at emerging markets. i wouldn't recommend hiding underneath your bed or going in the basement with your m-16 and spam. you have to take advantage of opportunities and they are starting to actually open up right now. >> that was a tough metaphor. guys, chad, and rich, thanks for joining us. go to "power lunch".cnbc.com see three investment tips that vich giving clients right now. five states go to the polls
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today to select the nominees for the presidency. we are looking at stocks that could pop during the election cycle. we've got one investor who says you should look at coffee, house and garden, and jet engines. we'll ask him why. "power lunch" is back in two. about a great way to live a better retirement... it's called a reverse mortgage. call right now to receive your free dvd and booklet with no obligation. it answers questions like... how a reverse mortgage works, how much you qualify for, the ways to receive your money... and more. plus, when you call now, you'll get this magnifier with led light absolutely free! when you call the experts at one reverse mortgage today, you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home and here's the best part... you still own your home. take control of your retirement today!
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i'm sue herera. here is your cnbc news update. speaking today at the white house, president obama making some of his strongest comments yet about the 2016 presidential campaign. >> i'm not the only one in this room who may be more than a little dismayed about what is happening on the campaign trail lately. we have heard vulgar and devicive rhetoric. it is a cycle that is not an accurate reflection of america. and it has to stop. >> the president's remarks come as voters head to the polls in five states, including the winner take all primaries in ohio and florida. local gehl judgment media is reporting a suspect has neutralized after an hours long manhunt. earlier today police were reportedly carrying out an antiterror raid linked to the
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paris attacks when shots were fired. actor george clooney and his wife amal are taking a break from hollywood to raise awareness about syria's civil war. the cleanies met with refugees living in berlin. that is the cnbc news upedit this hour. time to you street talk, helping you find opportunities. call number one, bearic gold. argus research upgrades from a buy to a hold. obviously the improving goldman fundamentals play a role in that call. the dollar could post a modest decline. 30% upside. we spoke with bearic. they highlighted how they are pushing to fix their balance sheet. their budget is $1,000 an ounce per gold. anything above that is gravy. but good news. >> i thought it was interesting
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they they called for a modest decline in the u.s. dollar. jp morgan saying abx needs to arrest the fall in production. they have got to get new projects on line. $14 price target, which is exactly where abx is trading. the next stock, outer wall. coin star, red box. announcing yesterday it will explore strategic alternatives and increase dividend by 100%. remains a value stock but the company has announced it is at least in part a result of activist activity. nice pop in today's session, up 9%. >> the analyst seems more bullish on the company than the company is itself. big fan of coin star. >>. delphi automotive. ubs upgrading i. they believe they will be one of
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the first of the suppliers to rebound. they say the managemented three year growth guidance should be achievable. the stock price has a favorable risk reward and should be okay even if there is a slow down because delphi has lower leverage levels than some of its competitors. they have got an 88 dollar target on abd. >> everything is coming up rose force automakers. the stocks are not trading well. delphi trading in line with the gms of the world. next call, astrazeneca, downgrading. long term will be driven into the immunooncology pipeline but the catalyst may not be visible.
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ab . >> i wonder, this is not about astrazeneca but i wonder if with the valeant news and some of the other stuff going on if we are going to see a return of capital to big on line farm executecals. do you say let's go to a bigger company, like astrazeneca or a merck. and i mean smaller biotech. >> it is a good theory because a lot of the big ones have dividends. health care overall is the second worst performing sector on the s&p this year. >> i wonder if it will people spook people into the big mention mansion with the moat around it. finally, rent a center. it is a center where you can --? rent stuff. >> how did you know. >> genius. >> genius. the stock has been on sale.
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it lost nearly half of its investor money this year. raymond james upgrade it to a strong buy from on outperform which means they really like it. boosted their target to 21. stock is at $14.40. ironically the stock is down over 12 months. i want to note there are people out trying to help that really ugly chart. all right. with that, we wrap up street talk. meantime the first day of the he meeting of the federal reserve is underway today. we'll bring you the latest. and the exclusive results of our cnbc fed survey as we await the interest rate call tomorrow at 2 p.m. eastern. back with more after this.
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breaking news to tell you about, guys. >> you are so excited about this
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story. >> i'm excited. steven spielberg and harrison ford are teeping up to come up with an indiana jones movie coming out in 2019. harrison forward will be 76 when it comes out. >> wow. >> you are looking at me because of -- i can't say it, i don't think. >> give the guy a break. >> i love harrison ford. raiders of the lost arc is one of the greatest movies ever. bell ok. bell lock. but my initial reaction is what is the title? indiana jones and the golden dentures? >> by the way, the stock is down on the announcement. >> maybe because tyler is actually right. >> that's the nicest thing you have ever said to me. >> let's move back to our core material, janet yellen and the fed. >> nice segue. >> is there there she is in a
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suburban, silver colored woochlt we assume she is back there, restrained belted in, and the whole business. steve liesman here are reaction on the fed survey having to do with the opinions on negative interest rates. >> we asked will negative rates stimulate growth. that will be a no. can we have michele's microopen for the running commentary. >> by establishment. >> aim establishment. >> we asked our respondents, litd increase inflation. that would be a no. will it create more problems than it solves. that would be a yes. moving on, looking at some of the other i think so from the ecb, what effect it would have on the fed. 59% said it would have no effect but 32% do believe it could cause the fed to hike less than
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they were going to hike. that's the ecb stimulus plan. will it help out inflation at the ecb, 46/46 with 7 say they don't know. commentary on negative rates was negative. negative interest rates represent a jeanne that should be put back in the bottle. she talks about the negative effect on bank frofts and bank stocks. but david coto be points out market agents underestimate the power of nirp on asset prices. all this is on the webb. >> including references to nirp. >> including references to nirp. >> plus the outlook of the federal reserve, which is no hike tomorrow. but 80% of our survey takers say they will hike by june. >> survey says. >> make sure wily time for
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michele's comments. >> up next, stock picks. we'll be right back.
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welcome back to "power lunch." i'm michelle caruso-cabrera. former president of brazil da silva reportedly accepting a high-ranking position had the brazilian government. last week lula was accused of money laundering. by accepting this position he would face less charges in court because high-ranking officials are not subject to. look at the ten year. 1.973% is where the ten year is. coming up next, why one money manager is betting on iced
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switch to liberty mutual and you could save up to $509 call today at see car insurance in a whole new light. liberty mutual insurance. welcome back to "power lunch" i'm melissa lee.
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coffee, cabinets and cruise missiles. those are just some of the companies you you might want to be invested in this election cycle. casey matthews comes in. great to have you with us. >> thank you. >> you have been studying the impact off the cycle on the markets. what are we to glean so far. we have had a tremendous run since the february 11th bottom. what's the connection? >> it's following a similar pattern that we've seen in election years. typically in an election cycle we have numerous candidates in the race. you are going to have vel volatility in the first half of the year. that played out perfectly so far in the first two and a half months. then once we start to see the field thin out of the we might see some of that later tonight. then all of a sudden we see more clarity, less uncertainty in the markets. and typically you see a robust market in the second half of the year. >> so the field is whittling down today. today is a huge day on both sides of the aisle. that means would could
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potentially see the foot informinger the markets to continue their rise? is that your take at this point? >> absolutely, because you remove uncertainty. and markets don't like uncertainty. >> let's look at your stock picks. some are traditional, defense stocks going into a election cycle. already these stocks are up outperforming the market. have we seen the run already? >> i don't think so. >> what we try to do is find, call it election neutral stocks for our clients. both sides are talking about a strong defense for the united states. so i believe regardless of who is in the white house they will support the department of defense and it will be good for companieslike ray thee onand look lockheed martin. in addition, let's talk about ray thee onfor example, 30% of its sales come from around the globe. so i would argue that you are seeing tensions mount, especially with low energy
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prices around the word that unfortunately would be very good for these companies. >> i would think that low energy prices around the world would hurt ray thee onif 30% of sales comes from abroad. saudi arabia who are undert budgetary measures. is that a negative actuality. >> i think that's a balancing effect. if some of the countries get into military conflict they are going to find a way to defend their countries. >> consumer discretionary, home depot and starbucks. >> a little expensive, 28 times forward earnings for starbucks when you look at comps, earnings growth, 10 to 15% earnings growth, which is hard to fine these days in a lot of these companies. but the issue that i like that supports starbucks is really the unpenetrated especially coffee market abroad. >> okay.
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>> so they are making their way into china, asia, europe. >> right. >> i think they have just touched the tip of the iceberg. >> caseying going to leave it there. thank for coming by. we begin this hour with a news alert a. new survey out on what america's ceos think about the economy. mary thompson has the details. >> this of course comes from the business round table. and the ceo's outlooks that improved but the index remains below its long term average suggesting some continue to see the economy as performing below potential. the kroeft downgrading, expecting the economy to grow 2.2%, down from 2.4% expected at the end of last year. ceo highlights show ceos have increased expectations for higher sales, and more capital
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expenditu expenditures. expected to cut back on hiring. a negative for the labor market. and at the same time as candidates are referring to trade agreements as economy killers. they say the tpp would allow them to expand exports. the survey's middling results enforce the need for congress and legislation to enact this year such as quickly ratifying the tpp. he also wants washington to modernize america's outdated tax system a frooekd frequent complaint of the round table. they are calling at 230 to discuss the survey. viewers should know, the survey is inconsistent when predicting the direction of the economy. brian, back to you. >> mary, thank you. stocks rallied offer the
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past month w. that volatility has plunged in that time. but your next guest thinks the volatility might return and that now the time to spring clean your portfolio. heather generally joins us remotely from san francisco. great to have you here. >> great to be here. >> this is a crazy world. five weeks ago sentiment was dismal. we were all doomed. >> right. >> over the past four weeks the dow is up 8%. ten-year-year-old is up 18%. stocks down, bonds down, oil is up 23% and every major market in the world is higher led by greece, which is up 18%. what has changed? >> that's a really good question. and that's what you have to ask yourself, what truly has fundamentally changed? and in black rock's you view it's not that much. for that reason -- >> let me jump in there. >> yeah. >> is january then -- where everything fell, was january the anomaly, and now we've returned
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to normal? or is right now the anomaly, and january, in other words things are bad is the normal. >> i would probably say at that in january we were reacting to valuations which were just too high for the margaret to support. we weren't looking at earnings which were going to be coming in to support those valuations. i think january and february were an important readjustment period. i'm not sure what we are seeing in march is going to be supported by future data. for that reason we say take tactical positions here where you can position more defensively. if you have a portfolio of equities which is all long and you were feeling bad about it in january and february think about migrating to long and short so you have breathing room here. people don't like to sell when things are down. s that good opportunity. >> one of the concerns was shoin whether or not they were slowing. suddenly everybody is relaxed about that. are you worried that the china slow down fear could come back? >> i do.
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if you think about the exports, down 25%. that's one of the worst readings we've seen since the financial crisis. absolute lee that has to be on radar. things haven't changed dramatically so that we can wipe out all concern. >> what about oil? >> i think it's continued volatility. >> there will be oil. >> there will be oil. i don't know what price it will be. as soon as supply comes off the market new supply comes on. we haven't found the place at which oil stabilizes. there hasn't been a of the a number of take overs orca pitlations in the market. >> stocks seemed to be in the tlaul of oil for the beginning part of this year. has that lessened a bit? is that still a critical part of the narrative? or less so? >> it's still a critical part of the narrative. i think part of then are why stocks were moving so in line with oil.
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in general low oil price is good for a the consumers. as you saw, a lot of sovereign nations needing to sell us oil prices fell. you saw technical pressures on the market now. the same as oil lifts is stock market is lifting. i think you are going to see that relationship uncouple but i couldn't tell you exactly when that's going to happen. >> we had our include cnbc survey delivered a few moments ago and ceos downgrading expectations for quarter one. does that make you nervous? >> honestly, this plays into what we've been thinking about all year is that you need to take an active approach to this market. i wouldn't do it from the lens of buying the market or selling the market. i would buy the companies which you think are strong, have low leverage, good pricing power and short those were aren't. good long short streamings could keep you stable whether the
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margaret is going up or down. >> most of our listeners and viewers aren't going to short stocks. >> if you think about specific managers who could do this for you, something like merger ash tros or bench riffity. where you are basically playing on corporate events. the spreads for that type of trade have widened out tremendously. 10%ishes if five to six% historically. >> the merger or got desks have closed. six guys left in america. >> more supply, less demand equals better opportunities. if you can find a good manager that's a great place to be long short require than tied to the market. here's what's on the menu for the rest of "power lunch." biotech stocks have become a political football in this stock section ever since hillary
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clinton put them in her cross hairs ever since that infamous tweet. speaking of hillary clinton, should her campaign cancel a fund-raiser scheduled at a medical testing company? we'll that and all the political hot topics coming. plus, self driving cars are coming. will we have the laws in place to deal with them. >> all that and more coming up on "power lunch."
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so every single day we're monitoring the weather, and when storm events arise our forecast get crews out ahead of the storm to minimize any outages. during storm season we want our customers to be ready and stay safe. learn how you can be prepared at pge.com/beprepared. together, we're building a better california. we're always looking for ways to speed up your car insurance search. here's the latest. problem is, we haven't figured out how to reverse it. for now, just log on to compare.com... plug in some simple info and get up to 50 free quotes. choose the lowest and hit purchase. now...if you'll excuse me, i'm late for an important function. compare.com. saving humanity from high insurance rates. welcome back to "power lunch." i'm melissa lee. shares of valeant
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pharmaceuticals tanking after the company slashed its 2016 revenue forecast and may not be able to meet the deadline to file its annual report. stock loses half of its value for its worst daily performance ever. $10 billion in market cap wiped out today alone. and pershing square says it will take a more active role in the company. on "fast money" we will be speaking with andrew left. that's tonight at 5:00 on fast. >> speaking of biotech, bioteches and health care under pressure in this election cycle especially after hillary clinton last fall taking on price gouging in especially drugs. the ibb has fallen almost 30% since then. will politics continue to pose a downside risk to this sector?
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let's bring in michael. in terms of the candidates who is the worst for sector? >> i think we can all agree that probability of bernie sanders winning is probably not high but we are all scared of what he could theoretically do or say. probably wants all drugs for free. i think that would probably be the most scary. i think clinton is probably someone who you mentioned had the $50 billion tweet. not a great scenario, but i think what she would bring is more certainty to the market. and then trump, being the biggest wild card, i think, would probably bring a lot of uncertainty there, too. would say the one positive is that although all of these candidates have been pounding the table on a lot of political rhetoric, a lot of people on the street and in my sector believe these people probably have to move to the middle to win a general election. so i think that could provide certainty. >> if they move to the middle what does that mean for the
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sector in terms of how far it has come down. when you look at what hillary clinton has proposed. caps on price increases, trying to lower the general price on drugs. if we presume she has to move from that stance, what is the up side for that sector. >> i think the stocks priced in a 35% downward correction and a lot of these fears have been talked about and calculated into stocks. what i think it would do is bring some certainty and visible. right now, these stocks have so much uncertainty and such a lack of visibility that a lot of people think in some instances untouchable, uninvestable for some investors. if we had more visible, the people moved into the middle and a i think that a lot of the thingser in talking about is fear hand reality then the stocks would move up a little because they have more vis lkt and confidence in where we are going. >> we've been talking about the sector and the political uncertainty, political pressure
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since the beginning of the year, michael. have you gotten more constructive seeing where ibb has gone from then? are you advising people now to buy certain stocks that perhaps are the most beat u.n. down? >> i think the most conversations we have with investors are nobody really thinks there is going to be a massive secular rally or a massive bull market or a 20% move in these stocks in the next couple of months. >> the best days for a lot of these stocks are behind them? >> i do think there is a lot of data points that suggest that. the capitulation in january. a lot of these things have been priced. in i think people are making lists of thing to buy with a 12-mont vision. >> what's on your 12 -- it is not optimistic from a biotech analyst to make a list of stocks to buy in the next 2 months. >> sell gene, 12% earnings growth. q 1, it has good growth profile.
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biomarin and vortex. a lot of people are out there looking for names to buy from an m and a standpoint. i think those two names. these are three names we are telling people to buy with a list for 12 months. >> michael yee from rbc. congress is scrambling to figure out what to do about the rise of self driving cars. will this be the start of meetings regarding rules governing the road of the future. and is tonight the night the trump race becomes more of a certainty?
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self driving cars are indeed coming, everywhere except for the mathisen driveway. technology is being developed. but laws are not keeping up. it is now in congress's hands. >> ultimately the federal government sets the motor vehicle safety standards. it really comes down to one question, the question question that needs to be resolved if we are going to see self driving cars take off in the future. does driver need to be required?
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by that i mean somebody holding the steering wheel or having the ability to take control during an emergency. all the other rules they can be adapted to autonomous drive vehicles. we are on a time line where technology is moving faster than the laws out on the road. i did the tesla drive in new york. you saw how that works. fully autonomous models we will see those on the road by 2020. by 2030, mass adoption, widespread adoption. you will see these all over the place. i think 2030 is further out than when we can expect it. i wouldn't be surprised if we have it by 2025. michele, melissa, i know you guys are willing to get into a self driven vehicle. >> i can't wait. >> what's up with tyler? why are you down on this, tyler? >> i just don't trust someone else's car to be in complete working order the way -- >> you are trusting right now. >> other drivers. >> you are on the road, you are
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trusting other -- >> basically, you don't trust the driver. that's at the heart of this. the human makes more mistakes than the machine. the machine is not infallible but the human makes mistakes. >> machines don't drink, either. >> given the fact that 100% of all drivers on the road are now texting and driving that basically cars are self driving right now. >> that's a point for why these would be safer actually. >> unless we are cyber hacked. >> that's a concern. >> and the whole grid goes down and suddenly you are hurdling down the purn pike at 700 measure. >> they could target your car and force you over a cliff. >> melissa, would you be comfortable in a car that doesn't have a steering wheel? >> i think i would, although i've been in a self driving car where i was behind the wheel. i've experienced that phenomenon of led letting go. >> did you like it? was it good. >> i did enjoy it. it was very freeing.
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>> on a serious note, where do we stand with the insurance industry? because this is probably going to be the decider, i think. because if you go -- if there is a wreck -- i'm driving along, tyler is in a google self driving car, tyler's google self driving car rear end me causing permanent emotional dispress. do i sue google? who do i sue. >> generally speaking if you talk to the insurance industry right now, if you are in a car and you have got crews control and you rear end a vehicle you say it was the cruise control, go back and look at the event recorder in the vehicle. that will tell you whether it was the cruise control's fault or your fault. these are things that need to be worked out. >> do i have to wait for congress? or can i just use -- tesla has the autonomous ability. can you just use it? are there rules against it?
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>> you can use it right now. that's auto pilot mode that we have with tesla and we'll see with other vehicles as well. >> what does congress have to do? why are they bothering to hold hearing. >> they have to give the secretary of transportation in theory the right to remake these federal motor vehicle safety standards to allow the mass adaption in the future of self driving vehicles eventual lee without steering wheels. at least that's the goal of the technology industry and the automakers. >> no. no. there needs to be a fail-safe a pedal and a steering wheel. >> now you sound like tyler. >> they believe you have to get beyond in a. >> i can't. >> you have got get beyond that. got to get over it. and he is saying the same thing to me. >> thanks phil. >> you bet. another down day for oil. but that's because of all the of self driving cars are coming. fall about 2%, more worries
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about supply, not self driving cars. we'll take you live to the my meks for the closing traids next. there's no one road out there. no one surface... no one speed... no one way of driving on each and every road. but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in... and the road you're on. the 2016 c-class. lease the c300 for $399 a month at your local mercedes-benz dealer. in new york state, we believe tomorrow starts today. all across the state, the economy is growing, with creative new business incentives, the lowest taxes in decades, and new infrastructure for a new generation attracting the talent and companies of tomorrow. like in rochester,
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here's your cnbc news update. secretary of state john kerry says he will travel to moscow to meet with his russian counterpart and president putin. he says talks will focus on ending the syrian civil war. the obama administration is doing a 180 abandoning its decision to allow oil drilling in the atlantic ocean. interior department announcing it will not auction off drilling rights after all. we're getting new video that shows the excontinued tent of the flooding along the texas/louisiana border. rising waters are forcing officials to shut parts of the major interstate while thousands have had to flee their homes. get ready for another indiana jones film. disney confirms harrison ford and steven spielberg are teaming up for another film in the iconic franchise.
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>> harrison ford will be 76 when it comes out. major stories around global hot spots. russia withdraws out of syria. occurr kurdish -- and north korea threatening to test a nuclear war head. how big of a threat is all of that that we just listed? wesley clark, sir, great to have you here. thank you for joining us. >> nice to be with you. >> 24 hours ago is when we learned vladimir putin said he was ordering withdrawal of troops from syria. do you believe him? if yes, why is he doing it? >> i think there may be some withdrawal. we don't know whether it is a complete withdrawal. we don't know the time scale. and we don't know how it complements or obstructs the ceasefire and peace negotiation efforts. one reason to do is it frankly russia's economy is short on funds and maybe he wants the
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defense money to go somewhere else. maybe this pleases the europeans and he is making an he have to get sanctions relieved. >> is it possible he thinks assad is firmly in power in syria and he doesn't have to worry about that anymore keeping his ally in power. >> i think that's definitely the case that russia's intervention has strengthened assad's grip. it could be that he has other use force these forces. there is still an active set of engage meant around ukraine and inside ukraine. every -- almost every day, ukranian soldiers are being called in a so-called antiterrorist organization backed by the separatist backed by russia. maybe there is a role for the russian force returning to reinforce putin's role in ukraine. we don't know his motives. >> we are always tempted to look at this in terms of winners and losers, the west versus the east. when would he saw putten get into syria the white house said it's going to be a quog myer.
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knock yourself out. looks like he has done okay, doesn't he. >> the real loosers are the people of syria who suffered hundreds of thousands of dead and the people of europe struggling through this immigration crisis and especially turkey who had some 2 million refugees. now this is active risk. bombings in turkey. they have got problems at home. and we're even part of that because of one of the most wanted people in turkey is a man who is a former ally of presidentered want who is in the united states running a network of charter schools subsidized by the united states. >> somewhere in pennsylvania. a crazy story. what should we do with order want? he looks like a budding auto accurate, doesn't fit the description of values that we try to export all around the world. what do we do with him? >> i don't think we do anything. it's their country. you are not going to displace
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him had. he basically aligned with us through nato. we have to work with him. we can't run turkish democracy. >> work with him. >> we are going to have to work with him. we may not agree with everything he does but you know -- i mean, the united states, we have to concentrate on our economic development, we have got to help the people in europe. we have got to strengthen nato. we have a full agenda of things to work on. of course we should try to encourage all of our allies to adapt democratic values and human rights that we believe in. but you have to keep everything in balance. >> how do you manage that balance in iran where once again ballistic missiles are being tested oochb though we've gone through a long and arduous process of trying to lift sanctions for them and giving them a pass on a lot of nuclear capability that up until now had never been our policy before this truk deal was struck. >> this has always been the problem about the iran agreement.
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it is a good agreement in theory. the efforts to restart the iranian economy with a government that's opposed to us. and then their efforts to uncut the existing counterproliferation regime for missiles -- all of this means we've still got a lot of work to do in that region to keep iran let's say from causing even more regional instability. they are pushing hard on our friend saudi arabia and on turkey through the kurds and so it's a real problem for us. iran wants its day in the sun. and we've got to find ways to finesse it to bring the region together to end the conflict if we can. and we certainly don't want to put a bunch of u.s. troops in
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another conflict situation. >> sir thank you for joining us. wesley clark is the former nato supreme allied kmander with us to discuss all the issues we are facing right now. >> the oil market set to close for the day. let's find out how it will close. >> good afternoon. we've got at move to the downside of more than 2% today finishing at $36.31. the session low was $35.96 now a couple of down days in a he ro. interesting because the dollar is relatively weak. that should provide support. it's not lifting crude but maybe it is supporting it in terms of the range that we are speaking of. traders are saying the focus is back to supply, back to reality. and status quo from opec. we were thinking we may get a date for an emergency meeting in march. march is halfway over now. the trading desk chatter is maybe we'll hear something in april but it's so close to june many are saying opec will hold out until june 2nd. the good news is that we are staying over the $35 mark.
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we are in the lower end of this new higher range. the fed tomorrow is going to have an impact probably on equities and also the dollar. that's going to be a key factor for crude as well. watch. that back to you. >> jackie thank you very much. now it is time for trading nation. today let's talk about fear. will tomorrow's federate decision bring back fear, big swings, and volatility? >> nick coalas, dennis davitt. nick, what are your expectations? will the feds stoke a little bit of fear and volatility into the market or steady as she goes? >> we think as a desk view as the fed is going to inject volatility. we have got the vix at low levels for the year. we have got market disconnect from oil custom means other if you know factors are at play. and we have a disconnect for what economists are thinking for the fed and what fed funds futures are thinking. put it all together in a pot, you have got recipe for
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volatility. >> and what do we do about that, nick? how do we take advantage of that to our benefit financially? >> our expectation is that after this volatility you get one final move higher for markets for this quarter becauser coming up on quarter end. and there we like financials very much as a way to play a catch up. there is only two major groups in the s&p still down on the year, health care and financial. we like financials here for a move higher into quarter end. >> dennis, you live in volatility town. this is your world. what are you expecting from the fed tomorrow? what do we do about it? >> volatility is like a sausage. there is a lot of things that go into what brings volatility into the market. the fed is a key ingredient in bringing volatility back to the market. discerning how much of the volatility in the market is from the fed is one part of it. it's all about clarity and uncertainty. there is uncertainty in europe. if you look at the vix of the
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euro stocks it's trading around 23 versus the vix in the united states, which is around 17. i think this fed has been really transparents about what they are doing and what their metrics are and how they are going to go about them. i don't think it is aez is as clear in europe. because of that we are seeing more volatility in europe than we are seeing in the u.s. i think that you are not going to see much more volatility in the market from the fed because they have already started in motion back in august. i think there are other factors in the market which could have as much if not more volatility into the market. >> guys, thank you very much. dennis and nick. we'll see you on line in just a few minutes as well. tomorrow a big day with the fed. if you want more trading nation, go to trading nation.cnbc.com. can america have both free trade and raise the wamgs of the middle class and manufacturing work centers a good old-fashioned political debate about everything from taxes to
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trade. two gentlemen are here and getting in gear. don't go anywhere. we are back after this. [vet] two yearly physicals down.
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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. it might not seem that glamorous having an old pickup truck for an office... or filling your days looking down the south end of a heifer, but...i wouldn't have it any other way. look at that, i had my best month ever. and earned a shiny new office upgrade. i run on quickbooks. that's how i own it. perfect driving record. >>perfect. no tickets. no accidents... >>that is until one of you clips a food truck, ruining your perfect record.
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want to bring your attention to shares of valeant. in the past few moments hitting a multiyear low in the session. a new low for the day. it is down to $34.53. down a full 50%. again, the company cut its 2016 revenue guidance by 12 fundraise and said it at risk of default if it does not file its annual report on time. so shares of valeant a new multiyear low in the session. >> voting underway in five key states including winner take all primaries in ohio and florida. those are the biggies tonight. how will mega tuesday, not to be confused with super tuesday, shape the rest of the 2016 race? thoughts from larry kudlow along
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with robert rich. professor, secretary, larry, welcome to both of you. i really worry -- and there is secretary reich's book, saving capitalism. interesting. i know i don't have to say much to get you guys started. the problem here is not getting these two wonderful contributors to talk. but secretary reich, let me begin by asking you, on free trade, has free trade on balance been a win for american workers or a loss for american workers? then the same question to you larry. >> tyler, i don't think there is a question it's been a win for american consumers. if you are a worker who used to have a high paying manufacturing job, free trade has not been good for you. in fact the chances are you are no longer in that job, you are probably in the lower wage service sector. >> is it free trade larry that has cost jobs in the manufacturing sector or is it globalization and automation? >> i tend toward the latter. i mean, look, you have got a problem right now, free trade.
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if bob reich is for free trade and i'm for free trade, that makes four of us and we are about the only ones left in the country. >> robert isn't really for free trade. >> it wasn'ter cloo. he outlined the issues in the trade off but we didn't get a decision whether or not he looked it. >> the exit polls said 30% said trade creates jobs. about 55% say trade removes jobs. in brief my take is this, between early and mid '80s and the end of the '90s we had free trade agreements, clinton was for them, reagan was for them. created close to 50 million new jobs. that's an important stat. what we need is growth in the united states. that's important. what we also need is to make america the center of world capital flows, custom means, you know, a low 15% tax rate.
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among other things, cash expensing. be the most hospitable spot for investment, which will then create good paying jobs. we haven't had that. in a minute i want to say how to punish china the right way. >> can i interject first of all i want to say how wonderful it is to be back debating larry kudlow on this network. >> i know you guys are old friends. >> larry, i missed your comments. >> thank you. >> i was going to have an adjective for the comments but left it out. in regards to tax cuts and growth. growth is great. everybody lofs growth. tax cuts might help growth. but the issue is the median household is worse than than the household was in the year 2000 in terms of income. people are not feeling the benefits of this economy. haven't felt it for 16 years. that's what the revolt is about.
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they are going to trump or sanders. whatever they are doing, people are angry because they are not sharing in the benefits of this economy. >> i totally agree robert. >> growth doesn't change the economy. >> why don't it change it? he says growth doesn't change that? >> since 2000 average per person age wages have not increased at all. that's an amazing statistic. and there has been virtually no business investment. now look you want the good jobs. that means you have got to have good business. if you penalize wiss with taxes and regulations you won't get it. if you penalize investors with high tax rates they won't invest. i think that we have had bad policies -- i need to get one point in on china. i don't want tariffs. china is a bad actor. okay? i get that. i get that. what you have to do here first of all -- >> what makes them a bad actor? >> enforce the trading laws, which china doesn't do.
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they counterfit our goods. they steal our intellectual property rights, they hack into our computers and force the trading rules. if you can't, then we need a strong president -- i mean this, a strong president to impose sanctions on specific chinese companies that are breaking the rules. that's what we need to do. i don't want a 45% tax on american consumers. >> robert, in all the research you have done over the years is there a precedent for a nation that wants high wages for its workers but also demands low prices on the store shelves? i mean we seem to be a nation obsessed with inexpensive goods. can we have that but also say we need to get wages back up? i just don't snow if there is a precedent for a country like that. >> we did that in the 1950s. we did it late in the 19th century. we do it a combination of productivity improvements, through education, investments in infrastructure.
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we do it because we as a nation decide that we -- not just the people at the top but all of us are going to become more productive. we have given up that kind of social contract since the 1980s particularly over the last 15 or 20 years. larry is absolutely right. the policies from government have not helped. in many cases they have hurt. but remember atmosphere the last 16 years we have had the george w. bush administration. we've had the obama administration. republicans have been in charge of congress most of that time, certainly the house of rent sent tiffs and indeed the senate most of that time. what we have had is not investment in education or infrastructure. we have reduced our investments in basic research and development. you know, we've done everything you can possibly do with the tax code and it hasn't changed night what i'm saying is i hear politicians in all parties -- everybody running has their solution to the problem. but i wonder if it's we the
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people who can solve the problem. i don't want to be jingoistic i am a simple guy from a state agriculture school. if we just thought more about what we purchased -- i'm saying don't the consumers actually have more power to change this? >> no. >> no? >> that's the beauty of free trade. consumers should have the possibilities, the freedom to buy the best quality goods at the lowest prices all around the globe. that's their freedom. that's why i don't like tariffs. on the other hand robert is right on some of his points, we need desperately education reform to help in the new world order of technology. and we also need business investment. the private sector creates the jobs. i come back to this. democrats and republicans. senate, house, white house. have neglected business investment. we've not had any incentives and the businesses do not want to grow. that's what's hurting us. you get me a 15% tax rate,
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michele, give me a 15% tax rate, full cash expensing, i will say to you -- >> and a new car. >> i will say to you trillions of dollars will flow back to america. and that's where your jobs are going to come from. >> you are wrong larry. >> larry kudlow, is wrong again. >> i don't think again. >> we will let you follow up on that after a quick break on the other side of this. more with larry kudlow and robert reich. we'll be right back.
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gentlemen, welcome back. i want to pick up where we left off. secretary, i you propose a number of solutions to what you see as problems in the united states. among them including free public higher education, single payer health care plan, stronger units in the public sector. your book is called saving capitalism. i understand you're more inclined to support bernie sanders. are your opinion capitalist or socialist?
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>> they are certainly capitalist. i don't think we'll be able to save the current form of capi l capitalism we have unless we make changes. between 1901 and 1916 we saved capitalism from the excesses of the 1990s. we saved capitalism before that in the 1830s when a lot of forces in america wanted to create a new aristocracy and prevented us from going down into the great depression again. >> robert, robert. >> we periodically save capitalism from its own excesses -- >> i want to be as polite as i can and say with respect, i love you, budd ddy but you're wrong. bernie sanders wants to make everything for free. he's going to raise income taxes and payroll taxes across the board. you're talking $20 trillion spending program, god knows what he's going to do on the tax
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side. that includes payroll taxes, unfortunately hillary clinton unlike her husband has become bernie sanders like. you can trash this the republicans want to lower taxes and create economic growth incentives, that's good. what's not good is that everybody in both parties is against trade because that's what the polls show. the issue with trade is not tariffs and banning trade to wreck the economy. the issue is enforce the rules, don't cave in and the second issue is where necessary, sanction, sanction a company. all that would be better than tariffs. >> 1930 was a catastrophe. >> let me take on larry kudlow xbr i have a second question for, secretary reich. >> all of the things you would like, free higher education, single payer. what should the tax rate be in america to pay for all of those
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things? >> we know that a single payer is going to reduce dramatically the cost of health care -- >> doesn't done that in europe. >> it has compared to what we're seeing, 18% of gdp going for health care -- >> they are deferring their costs over there. >> that's crazy. they are paying less and getting better health care than we are canadians know this and a lot of them -- well, a lot of them will say you have they have a much better health care program than you do. >> everything else -- >> i was asked a question. >> let me deal with the answer to the question. >> robert, finish. >> you know, the beauty of debating with larry kudlow, he says is free market and it's easy to debate him. a chinese currency manipulation is an issue, i agree with larry. we've got to in the trans pacific partnership there ought to be a provision that says no manipulation of currencies and other countries can attack china -- >> including ours. >> or have some sort of --
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there's no justification for any currency manipulation. the other thing we've lost since the 1950s and 60s and 70s, we used to have an economy in which ceos were concerned and viewed workers as assets to be developed rather than costs to be cut. you've got a lot of ceos and companies that all they are doing is cutting worker salaries and benefits and cutting costs outsourcing abroad, automating these jobs. what do you expect people will do in the midwest especially? they are angry and feel they've been playing the game. >> i'm -- productivity enhancement, really. >> you've got to get to here. productivity is key. it's key to worker wage increases. key. the key to productivity is business investment tyler, you have to increase the k over l ratio, k is capital, l is labor. you put more capital, better
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machinery and better products and more jobs. >> but the way you get business investment -- >> larry -- >> 30 seconds left. >> larry, the way you get business investment, you get if you have customers and don't have a large and growing middle class to buy the goods and services business provide, businesses are not going to hire and not going invest. that's the problem. >> all ei'll say is, taught me n 1801, i was there. he taught me supply creates its own demand and i would merely want to put that back on the table. >> writing it down. >> we can move on. it was the playing game right there the big dance starts tomorrow minight. always nice to see you. >> my pleasure. >> my pleasure robert reich. >> two big stocks falling hard giving investors the jitters.
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let us help grow your company's tomorrow - today - at business.ny.gov here at the td ameritrade 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? td ameritrade. dow jones is reporting that chipot tle hired a new food czar to oversee safety. down 2.5%, a decline of $13 at this hour. >> the suspension of disbelief on that one.
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shares of valeant, the shares actually hit a fresh intersession low. 33.66. the stock is down 50%. we should note tonight on "fast money" we'll speak to a noted short seller andrew left whose report in the fall sent shares tumbling. >> i will say this, the bonds are down 7%. a lot for a bond but not down 50%. >> spiking by the way. >> trying to get them in our system. >> if you're a super contrarian, these are moments you think -- >> this would have been a huge story if valeant was not linn energy, now worth 350 million and 10k filing, risks to it continuing as a goeing concern. this is indicative and maybe a canary in a coal mine. >> that will do it for this edition of "power lunch." we thank you for watching.
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what happens next? >> "closing bell". >> 16 times. >> they don't deserve it. >> yes, they do. >> i want a stuffed eagle that was manufactured in china. do you have that for me? >> i don't have that. >> no. ♪ >> welcome to "closing bell." a siren to kick off the show here at cnbc san francisco headquarters. >> you've got a siren going on there? what's going on there? >> siren, a clock tower, all sorts of things. >> right at noon. on the west coast. i'll bill griffeth, i can hear the trinity church clock going. the big stock story today, valeant pharmaceuticals, the shares plunging by 50%.

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