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tv   Power Lunch  CNBC  April 4, 2016 1:00pm-3:01pm EDT

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oversold. >> on slb, like it? like the call? >> i like some of the names but i think it is premature quite frankly. i look at the names and that particular name has been beaten up, i know, but i think it will be a little while. >> good stuff. rebecca, great to have you. >> good to be here. >> see you soon. rebecca patterson. "power lunch" starts now. welcome to "power lunch." i'm michelle caruso-cabrera with melissa lee, brian sullivan, tyler mathisen is on assignment. we begin this hour with a bombshell of a story still developing. a massive leak of financial documents revealing how the wealthy and the world's most powerful leaders are hiding their money. eamon javers joins us with more on what is being called the panama papers. robert? >> that's right. it is being called the panama papers, also being compared to the edward snowden leaks and the wikileaks situation back in 2010, a dramatic exposure of global information. here's what is at issue here.
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a panama law firm called mossack fonseca, 11 million documents taken from that law firm, given to a german newspaper, which shared them with a global consortium of media outlets around the world. in those documents, according to the reporters who had a chance to go through them, are accounts of world leaders, as many as 12 world leaders who set up shell corporations using that panamanian law firm to allegedly hide assets around the world. one of the leaders under scrutiny today is vladimir putin. his name does not show up in the documents personally, but the names of a lot of his close confidants and inner circle do show up in those documents. the kremlin has already had reaction here and we're getting reaction from some of the world capitals to this story. kremlin saying this report was simply an information attack on russia. also reaction from the icelandic prime minister who is being interviewed by a television crew when he was asked about this. he stood up, walked out of the interview , but said i have never hidden assets.
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also, a statement from a law firm called velum that ukrainian poroshenko, that the allegations are groundless. reverberations around the world today and more to come as reporters continue to pour through that 11 million document trove and find out where all the money is hidden, guys. >> thank you. certainly everybody knows the name vladimir putin. but there are many other names, some well known, some more mysterious, mentioned in that investigation. robert frank has more on that side of the story. >> press reports say 29 billionaires on the forbes list were linked to yore shore structures involving mossack fonseca. very few of the billionaires are named, but forbes saying many appear to be from russia and eastern europe including several putin allies like rottenburg, childhood friend of putin's and the ukrainian president petro poroshenko. this is interesting, no american billionaires or american clients
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have been named in any of this leak. but u.s. assets, well, they have become a favorite destination for some of the money. the miami herald reporting that 19 foreign nationals created offshore entities that purchased miami real estate and eight of those foreign nationals have been linked to corruption or tax evasion in their home states, include ing several from brazil. half of all real estate purchases in miami are all cash and overseas buyers bought $6 billion worth of homes in sound florida last year, that's about a third of local spending. offshoring is perfectly legal in many cases, but it has helped support the art market. reports say russian billionaire dmitri rebelev created trusts to purchase more than $2 billion worth of art including a famous madiani, sold by steve cohen, by the way. the trusts were disclosed last year and created for estate planning purchases but this could add a chill to the art market, diamond markets, all the
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markets. we don't know how much support came from this offshore money. >> are you surprised at how many friends of putin seem to have a lot more assets than what their typical salary would indicate? >> who knew playing cello could be so lucrative. this cello player, allegedly, according to the reports, making $100 million or more. yeah, you know, the group of people, their professions, we knew some of the billionaires, but right under the radar, need a lot of people to be on the shell companies. and a lot of them didn't have jobs you would think they would be making that much money. >> makes me think i picked the wrong industry. >> picking up the cello. >> how do the wealthy and the powerful stash their money offshore? and more importantly, how do you regulate all of this? answers now from heather lowe, legal expert in financial corruption, money laundering and global tax havens and joins us now with global financial integrity. take us through how something, maybe not this specific instance, but how something like this would come about, how would
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a law firm get established, how would money be brought in and how would money be brought out. >> sure, it is actually very easy to do this. in my line of work, i'm working on the movement of illicit money around the world. i had moments where i thought it would make me a lot more money to go to the other side on this because it is that easy. you create, you know, put out a shingle, set up a business and you can start creating companies on behalf of people without any training. in wyoming, there was the historic example of somebody who didn't have -- i think he had an eighth grade education and had created a company to create companies for other people and had thousands and thousands of companies on his books. it is very simple to do. now, you know, the people that set up mossack fonseca were -- are very well trained attorneys, very well educated, and they learned the ins and outs of moving money around the world
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anonymously. and so they started a trade in doing just that. >> heather, are you surprised that we haven't seen any big american names yet as we get more and more information about these 11 million documents? do you think we'll see prominent americans? >> i think we will. i don't have any inside knowledge as to who they will be at this point, but i certainly heard that the u.s. wave is yet to come. and i look forward to that. because i think this is a topic that americans really need to know and understand. the amount of illegal money that comes into this country using offshore companies but also u.s. anonymous companies is staggering. >> how much of this would be considered illegal in panama? >> it is really difficult to know. you talked about the purchase of the modigliani using offshore shell companies set up by mossack fonseca, and the question you were alluding to but never got to was what is the source of the funds that went
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into those accounts held by those anonymous companies that then were used to purchase the modigliani. the person who sets up the anonymous company doesn't have to ask that question. they're not required by law in any way, pretty much anywhere in the world, to ask that question. banks are supposed to be asking that question. but the actual people that create companies don't. and that's something that absolutely needs to change. the other thing that needs to change is that we need to know when we create these companies who are the owners and controllers of them? sometimes called the beneficial owner of a company. >> but, heather, let me ask you about that, i think back to when i started covering the early days of hugo chavez, in venezuela, and he sees legitimate business people -- their property, he woke up one morning and said i'm taking that business, i'm taking that business. and i hope for those people's sake they had money somewhere else. and if he knew who owned shell companies, he would have gone after those as well. we live in a country where we
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generally can believe, i know some people scoff at this, that our politicians are less corrupt than in other countries. we live in a much more just society than the rest of the world. is there ever a reason why -- isn't there sometimes a reason why money should be hidden because you live in a place where the government could really take everything you own? we have seen it. >> it is a risk. but that doesn't mean, you can have the money abroad, but it doesn't mean that -- that that can necessarily be seized by your government, and it doesn't mean you have to not disclose it. it is important to pay taxes on the funds that you have abroad. it is how we pay for the basic social services that, you know, that keep a country running. >> when it comes to americans. >> certainly. but other countries as well. there are many other countries that -- where the tax base is how you fund basic social services. >> heather lowe at global financial integrity. a real pleasure to get your
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insight today. thank you. >> thank you. >> what are the implications of a leak this size? what will the fallout look like? let's bring in richard b. strong, ceo of front line anti-bribery. we had you on last week to talk about another big leak. we didn't think we would have you on this soon. you run this firm right now, but one of the reason you run it is because you were involved in a corruption scandal, you wore a wire for the feds, served time and now you do consulting on this. tell me something, when you look at this leak, how did this happen? is this an inside job? somebody inside who is angry and wants the world to know or is this some really good hacker? can you tell? >> it is hard to tell yet. i'm still trying to unpack all the documents and all the news reports. but it certainly demonstrates the ease at which criminals can access the global financial system. >> and what else? what are your other observations? are you surprised there aren't any americans thus far? >> i am.
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however, the law firm does have an office in miami. and there are other tax shelters and trusts that have been identified in the united states. so there is certainly going to be a u.s. wave to this, but i think the first wave that we're going to see is enormous international pressure on panama to shore up its anti-money laundering legislation and enforcement. that's probably going to be the first wave that we see. and we have seen this before. if you look at swiss banking secrecy laws, for example, and we have seen the tremendous movement that switzerland has now made toward banking transparency, so it can be done. but as we learned with switzerland, it certainly takes time. >> you can go after panama, richard, and if you succeed, then center like this will probably pop up somewhere else in the world. you want to capture the end use or the beginning use of the money i would imagine. what would be the best strategies to do that? >> that's going to -- that's a
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great question. that's going to be the real challenge because in many of these countries, well, we're already seeing some of the roads are pointing to the political leadership, what is going to be the local political will to address these issues where you've got sort of an embedded culture that tolerates this type of secrecy. you have a lack of legislation and you certainly don't have the investigatory and prosecutorial resources to really address this type of money laundering and banking secrecy. >> or maybe not even the will, richard, right? i think about russia, do they have the will to seek this out? when you see all of these friends of vladimir putin who seem to hold a large number of assets, beyond the obvious, what do you think? >> you're absolutely right. and that's where it starts. political will. and if that is not there, we can't expect more legislation or international law enforcement corporation and for those countries to participate in
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addressing these issues on the local level. you're exactly right. >> when some of the people named are current leaders, former leaders, sons of former or current leaders, or related to current administrations. >> well, maybe we have to look at brazil and petrobas where you have a national corruption scandal where you have millions of people protesting in the streets about the corruption of the political leadership. so maybe in some countries that's what it needs to come down to as we see the tempo of these international corruption cases starting to quicken. we see some of the people in fifa that are in this set of documents, so it is almost like these corruption scandals are starting to bump into each other. >> i start to get a sense, richard, of why it is that vladimir putin may never want to leave office. 20 or 30 years ago leaders were allowed to go in exile, right, and sit on a porch somewhere. but if he leaves office, could he not be prosecuted?
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the asymmetric risks for him are so high. why would he want to leave? he would have to face potential charges? >> that's exactly right. as we have seen with fifa, the teeth of international law enforcement cooperation are very real. that's an excellent point. >> thanks, richard. good to have you on. >> thank you, again. appreciate it. let's bring in dom. >> we have to start with polti homes. executive shake-up. their ceo is in essence being forced out. watching those pulte shares. they lost a quarter of the value over the past year. another one to watch as well, we'll move to the larger cap side of things, apple, above its 200 day average price for the first time since the fall, november of last year. that's a big one as well. look at apple, of course, a big bounce off of the lows we saw earlier this year. and consumer staples stocks, large cap here in terms of general mills, it is trying for its eighth straight upday, investors checking the yield.
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>> hit a new intraday session high. >> trying to stay positive now. if it does, it would be its eighth straight positive day. >> up 13% this year. thanks. if you've been following politics, you might notice that people seem angrier this election cycle. where is that anger coming from? that's next on "power lunch." who are you? i'm vern, the orange money retirement rabbit from voya. vern from voya? yep, vern from voya. why are you orange? that's a little weird. really? that's the weird part in this scenario? look, orange money represents the money you put away for retirement. save a little here and there, and over time, your money could multiply. see? ah, ok. so, why are you orange? funny. see how voya can help you get organized at voya.com.
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man 1:man 2: i am. woman: ex-military? man 2: four tours. woman: you worked with computers? man 2: that's classified, ma'am. man 1: but you're job was network security? man 2: that's classified, sir. woman: let's cut to the chase, here... man 1: what's you're assessment of our security? man 2: [ gasps ] porous.
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woman: porous? man 2: the old solutions aren't working. man 2: the world has changed. man 1: meaning? man 2: it's not just security. it's defense. it's not just security. it's defense. bae systems. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "power lunch." i'm michelle caruso-cabrera. there is a lot of anger in this election cycle. that's fueled outside by candidates like donald trump and bernie sanders with prime we ars
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and packed rallies. steve liesman is here with the exclusive results of the cnbc all america economic survey. steve? >> thanks very much. we are chronicling anger. i'm able to tell you where it comes from, what the source is, and also what it means for actual election or at least presidential preferences here. let's look here. we asked two questions back-to-back, what the control group? how do you feel about your own personal financial situation? you can see here, a majority of americans, 50%, are both satisfied and/or happy here. 20% say they're neutral. and anger on the personal thing kind of muted at 21%. we ask about the economic situation in the country, and you can see here it goes beyond the 50%, like 56% of the country are angry or dissatisfied about the financial or economic system here. you can see just 18% are happy or satisfied. we go on to politics. we have a control group question here. 802 americans surveyed around the country, 3.5% margin of
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error. you see here, a little bit -- sort of even on this issue of the political system in their state. but then look at this, when it comes to the political system in washington, what is the number here? 74% of the public is angry or dissatisfied with a big dissatisfied number here. if you take a broader look here, notice the anger over the political system is higher than the anger over the economic system. now, i want to show you what that means for political preferences. when it comes to those who are angry or dissatisfied about the economic system, here is how it breaks down in terms of presidential references or that they say about who is best for the overall economy. in the overall poll, they're dead even on this question of who is best for the economy. look at the angry or dissatisfied vote, there it is, there is the trump advantage over hillary clinton, 27 to 19. let's look at the same issue here, when it comes to politics. here is the angry or dissatisfied, now we look at the -- how it goes between voters, 28, 21.
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hillary gets some of the angry vote, but more goes to donald trump and percentage of it, say 15, 13% also goes to bernie sanders. that's how it splits for the two front-runners, ang heer helpingt the republican front-runner. >> got it, thanks. don't move. we bring in ben white here in the studio. you saw the numbers, people are angry about the economy. but they're far more angry about politics. why is that? >> i think what steve has pointed out and very interesting numbers is what is driving this anger to some degree is the economy. but we have been trying to figure out how is trump sticking around the way he is, why is sanders doing so well, if we have 5% unemployment, we have an economy that is growing, it is not terrible out there. and the answer is they're so frustrated and sick of d.c. gridlock, shutdowns, debt limits, both sides. on the right, anger among republicans who were promised we're going to repeal obamacare, get spending cuts, and they
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haven't been able to do that. that means finger in the eye of the republican establishment. give us a person like trump. on the left, it means we're not satisfied with hillary clinton, she's not tough enough on wall street, want to see bigger wall street reform, want to see more expansion of entitlements, want to see people taken care of more, it is that anger, both sides, dissatisfied with washington. >> one more piece of data from the poll. when we look at anger by income group, it is flat in the sense that we cannot determine -- you're not angry are because you're poor. and you're not angrier because you're rich, the same amount of anger. 55% of below 30,000 and 55% of those above -- >> which is important, you look at some of the demographic reporting, look at the coverage of trump, they're always talking about lower income white folks and that runs counter to that kind of -- >> a contingent of wealthy republicans that drive that. but some of that democratic anger, michelle, breaks for
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bernie sanders. >> here is what i didn't understand. when you surveyed the angry, they like trump and hillary. i did understand that correctly? >> right, right. >> why not bernie sanders who i associate with -- >> 15% -- i got the numbers here, 15% of the angry vote seems to -- angry or dissatisfied vote to bernie sanders. >> got it. smaller. >> you would think it would be higher given that he is a candidate of protest on the left. and it is -- it is a little bit about economic dissatisfaction. i think for sanders voters, it is much more about -- he hasn't -- she hasn't done anything on wall street, too close to wall street, the obama administration didn't put anybody in prison, sanders could do that. anger over elites are doing better than we are, the system isn't fair, that goes to bernie. >> 46% of the public says the economic system is rigged and 41% say it is open to the wealthy. >> i do wonder, though, guys, i say this about anger, with a very nice way, which is, do you think we're more angry than 30 years ago or because of social media, 24/7 news cycles, et
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cetera, we're simply more aware of everybody else's anger? >> that's an excellent question. we have an echo chamber on twitter, facebook, everybody else, if somebody puts something up negative about the system being rigged, it gets bounced around everywhere. there is an echo chamber effect that exacerbates this anger and people watch a couple of networks and read a newspaper. everywhere now, in your face, all the time. >> enough to change an election outcome? >> i don't know ift changes the outcome, but it gives a forum for trump and sanders to tap into that anger in a way that they probably couldn't have done. >> if you're right, that means we're not going to go away even after this presidential election is decided, that this echo chamber will continue on in perpetuity and we may be in the state of sort of constant anger
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and -- >> the election itself exacerbates it. into an echo chamber and the political system itself is an amplification of what happened. >> thank you so much. we'll be back in two minutes. f s and patricia thompson. this tv? margaret and tom lee. the championship game ball? that was sebastian diaz. good guy. and all i had to do was ask for their money and pretend i was investing it. their life savings is now my lifestyle. female announcer: don't let someone else live the life you're saving for. find out if you're dealing with a registered investment professional at investor.gov. it's a great first step toward protecting your money. before you invest, investor.gov.
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halliburton and baker hughes back in november of 2014 was done without -- while it failed to notify antitrust authorities going forward. we now have a response from value act. and its ceo, jeffrey oven. value act saying it fundamentally disagrees with the justice department seeking civil penalties related to its halliburton hughes merger investment. value act saying that it plans to contest the justice department actions and will defend its position in court. more "power lunch" after this. "ow..."
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hello, everyone, i'm sue herera. here is your cnbc news update. president obama meeting with nato secretary-general at the white house this morning. the two discussed how nato can help train and assist troops in iraq, jordan and elsewhere fighting islamic state militants. california's governor jerry brown signing legislation that will incrementally raise the state's minimum wage to $15 an hour by the year 2022. businesses with 25 or fewer employees will get an extra year to raise the wage. critics have said that bill could cost thousands of jobs.
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hundreds of passengers were evacuated from newark liberty airport earle this morning after a fire erupted in a terminal. it started in a boiler room ceiling. that fire was put out, but then started up again a short time later causing passengers to have to evacuate once again. and miraculously a 3-year-old boy was recently rescued alive after falling into a nearly 300 foot deep well in eastern china. firefighters injected oxygen into the well and used a special device to pinpoint the boy's location. after two hours, he was pulled out and not injured. he's one lucky kid. that is the cnbc news update this hour. back to you guys. >> what a story. thank you, sue herera. china sparking global volatility with the shanghai composite testing new lows but worries seem to have eased thanks to an improvement in economic data. how long will this last? seema mody takes a closer look at the story. >> there is an active discussion around whether china's economy is in fact turning around.
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we did see two important economic reads, industrial profits and manufacturing coming in better than expected. but before we start celebrating, keep in mind that a lot of the economists expect further pain to come. they're staying cautious saying the rebound that we saw in manufacturing is purely a byproduct of the liquidity injected by the central bank and this is just a short-term blip in otherwise longer term secular decline and that the real growth will come once china completes the supply reform agenda which includes cutting down capacity that will take about 6 to 8 months. another red flag for investors, looking at china, is its earnings report card. according to financial data firm wind on average steal industrial and energy companies in china posted a 45% or greater drop in 2015 net profits which is not encouraging sign. experts say there is a good chance that this will lead to chinese policymakers once again using the currency as a tool to kick start growth in their
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expert oriented sectors. goldman sachs writing that officials will likely allow the currency to fall to the 7 handle once a dollar resumes its upward trend. keep in mind, the chinese yuan posted its strongest midpoint fix against the u.s. dollar this year. so at this point, they're keeping the yuan stable, but if the data worsens in the coming months, more pressure on policymakers to once again use the currency as a way to boost exports. >> recent increase in the shanghai composite, does that reflect the idea that data is either bad or not believed and so therefore there is a belief there is going to be a back stop in some form. >> it seems to be -- that seems to be the case. also macro factor like the rebound in commodities, base metals and sentiment around emerging markets seems to be helping. the question is will it continue if the data doesn't sustain itself. >> seema mody, thank you. let's use this rainy monday here on the east coast to take a pause and re-examine your money and what strategies you should be taking right now. joining us, david stubs, global
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market strategist at jpmorgan and david rainy, co-manager of the morning star five star rated tennessee focus fund. david stubs, we begin with you. you heard melissa and seema talking about china. the shanghai composite one of the worst in the world this year, but firmed up a bit in the last month. are there big concerns around china and are they over for the moment? >> over for the moment is the most important thing. china's issues that it has, i think, on pause right now. and unless it starts dealing with the credit growth that we have seen, it is going to have some kind of significant economic issues but could be as much as two or three years away. certainly there has been a bounce in the data. you see in the result of quite significant stimulus, both in the monetary and fiscal side. and the big worry of -- that went through markets about the falling currency, that's easing for a couple of reasons. the outflows, repayment of dollar-based debt, that's stopped to a certain extent and the scale of the current account, helping stem the need --
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>> you said economic issues. there is two types of economic issues. there are the -- we're just going to slow down for the next ten years and kind of just fade away. neil young trade. or there is going to be some kind of an imminent turn down, fast and hard. which one is it? >> look, for the time being, you've seen already quite a significant transformation. investment in manufacturing to services and consumption, they have the agenda that is -- >> many people say it is built on unsustainable debt levels. >> there is a risk of a major credit event in china a number of years out. those events happen not from the asset side, but from the liability side of the banking system. right now, it is stable, no signs of those issues. but we can't have credit growth inside china at the current levels for too much longer. otherwise the risk of those things go up. they know that. they're trying to deal with that, then they see the problems very -- front and center. so slower growth future for china, something you can invest in.
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but we like to see a turn around in the debt dynamics before you write off the factor before the crisis happening at all. >> mr. rainy, you're both named david, how do you think about this when it comes to what you're actually deciding to invest in? i hear a lot of concerns about china, you have people say, listen, ultimately they have the walled off capital account. it is hard for money to cross the border. how much exposure do you have here in the united states? some people are dubious. do you worry about it? >> well, at the hennessey focus fund we don't have any direct investments tide china. most of our businesses in core products that are involved with china, it will likely be a three to five to seven, maybe longer transition period. what we find though is the macro level volatility often creates buying opportunities for us. so we're to some degree indifferent what happens in china directly, but indirectly it will create market volatility and we try to take advantage of that when we can. >> has it already done that? have you taken advantage
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recently because we certainly saw it in august of last year and january again of this year. >> absolutely. historically we have been much more active in red days rather than green days. this transition has been going on for several years. i think it will go on for another five year and we'll take advantage of that episodic volatility when the baby is thrown out with the bath water and names that are either in the fund that are smaller positions can take more capital or maybe even move names off of our watch list into the fund to take advantage of that better risk return dynamic. >> one of the stocks you like -- david rainy recommends is a perfect example of why maybe investors are confused about china. o'reilly automotive, based in the midwest, domestic seller, you can look at it and say who cares about china, they're selling auto parts to americans. i'm willing to bet they get a majority of those parts or a big chunk of them in china, and are probably impacted by the fluctuating currency. does a company like an o'reilly or hundreds like it care about
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what happens in china? >> absolutely o'reilly cares and many of the other american importers of chinese goods. they'll look at this over three and five-year cycle, their plans and processes go back several years ago. they anticipated some degree of volatility. but bottom line is as long as they're able to import the products in a consistent basis that is china continues to develop the infrastructure and the way to get the products over here, we would anticipate everything would be just fine. >> the two davids. thanks so much. go to powerlunch.cnbc.com to see a company that david rainy says has excellent growth prospects. now to a check on the bond market. rick santelli is tracking the action at the cme. >> of course talk of the town is the markets aren't crazy, but ten year note yields, they
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moderated a bit. some of the lowest yields since the beginning of march as you see on the one-year chart. we're at 176. and foreign exchange can change all the inputs in terms of the interest rate differential. and how happy investors are. but a quick glance around the globe shows if you're looking for a big jump in rates anytime soon, the odds are stacked against it. let's look at the jgb, ten year, buying at seven base points. a 20-year chart. 20 year chart of our neighbors to the north in canada, their ten-year, a bit under 1 and a quarter. the uk. we know they have a vote coming up as to whether or to stay or go, around 143. see that 20-year chart? in the end, we can have a lot of dynamics going on, but there is power in numbers, the relative value trade has gotten contagious to just about everybody. i didn't include the european ten-year because you know at 14, it is only seven basis points away from challenging all time low yields. and the final chart that can
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make the difference? october 1st, dollar index, you can see it is at the lowest level but if it stabilizes at 94, look for investors to get brave, probably a lot more buying in treasuries considering our yield versus theirs and the volatility and the foreign exchange market. >> thanks a lot, rick santelli. up next, eight years after the financial crisis, former crisis inquiry chairman phil angel angeletti says not enough has been done. you pay your car insurance
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big dogs on wall street at minimum investigated by the department of justice. quite frankly, it sounds like they wanted them prosecuted. phil angelitti chaired the commission. he joins us live from sacramento. thank you for joining us. >> good to be with you today. >> when i read through the releases, it sounds like you thought robert rubin and chuck prince should have been investigated and perhaps prosecuted. is that true? should that have happened? >> the commission had a duty to look at what caused the overall crisis, we had a specific duty of where we found potential violations of law, we were refer them to the department of justice for further investigation and prosecution if warranted. there was no prejudgment of guilt, but, yes, as the documents which have been released recently show we did refer matters to the department of justice for further investigation and if warranted, if the evidence indicated prosecution. and, yes, there are individuals
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such as robert rubin, stanley o'neil, chuck prince, who are named in those referrals. >> are you surprised -- do you think they were investigated? were they ever investigated by the doj, do you know? >> i do not know. one of my concerns has been in the wake of the financial crisis, the department of justice has sought settlements and fines from institutions that are paid by shareholders. and while they prosecuted over 2,700 people at the local level who may have lied on five or ten loans or been involved in scams, bad things but relatively small scale, they have not yet held any senior executives responsible for any wrongdoing, misconduct during the financial crisis. so, for example, one of the key pieces of evidence that our commission turned over to the department of justice was about two dozen major financial institutions, that were buying loans like goldman and jpmorgan and citigroup, bank of america,
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buying loans from amer quest, new century, country wide, and they were doing due diligence on those loans and finding that one in three of the loans were defective. but despite that knowledge, they warranted to investors across the globe that these loans were fine they made material misrepresentations. now the department of justice has obtained more than $40 billion in settlements and fines because of this misconduct, but apparently while the banks engaged in misconduct, no banker was involved. so i've been troubled about the lack of individual accountability, and i think this notion of getting settlements from banks that are paid by shareholders, it doesn't serve the purpose of deterrence, and it raises real questions about the fairness of our judicial process. >> how effective, phil in your view, would it be to go after the individuals presumably they had directors insurance of some sort in which case it is really going to be the companies that the end of the day that are going to be on the hook,
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correct? >> well, it depends. so first of all, when we refer these matters to the department of justice, we didn't make a judgment, a prejudgment of guilt. and we didn't judge whether there were civil violations or whether there were criminal violations. of course, civil is reckless. not a lawyer, but criminal is willful. i know this. that in the wake of the crisis, no senior executive has had clawback of their compensation, they haven't paid civil fines. nor have they been criminal prosecutions. and i said, this stands in such stark contrast to the department's decision to go after the small fry. how do you prosecute someone who lied about ten loans, but you don't prosecute senior executives whose institutions lied literally about millions of loans when they sold them to investors. just doesn't make sense. >> i want to drill down on that very point, related to citigroup, because i hate to hammer at citi so much, but we're talking about a former u.s. treasury secretary at this point. it is a very high target.
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you're saying that citigroup knew in 2007 they had 55 billion in subprime exposure, but they only told investors about 13 billion in subprime exposure. what do we know about whether or not chuck prince or robin knew about that. >> we were a bipartisan commission. we took our duties very seriously. our main job was to try to explain to the american people what caused this crisis. what brought our economy to the precipice of collapse. our duty to refer matters to justice were found potential violations, laws with a serious obligation, so we didn't do this politically and as you can see, we never revealed any of this until all this was revealed by the national archives, but in this instance, we refer this matter to justice because we felt there was enough evidence to indicate that there was a potential violation of law, that chuck prince, that robert rubin, and that other leadership and citigroup had knowledge their
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empo sure was $55 billion to the subprime market when they were telling investors in the market it was 13 billion. in the end, there was a small, you know, fine to citigroup paid by shareholders. >> 75 million. >> but teeny, the cost of doing business for them. and meanwhile, two individuals pay relatively small fines, lower down in the chain, and we pointed out that in fact it looked like the bank's top leadership knew about this. again, as a very serious matter we referred this to the department of justice and our expectation was, because we really weren't set up to be a full investigatory body, a prosecutorial body, our expectation was that department of justice would marshal the resources to do a full scrub. and i'm not clear that's ever happened. in fact, mr. rubin's people last week said they were never contacted by the department of justice. >> you and i talked about this along with michelle and melissa for a couple of years now. why this renewed push now? is it because you learned something new in the unveiling
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of some of the documents or simply because the statute of limitations upon prosecution is about ready to expire on many of these cases? >> so, first of all, one reason it is back in the news is you can tell by the 2016 presidential campaign the american people still want to know what happened here and why it happened. secondly, our documents are now out in the public, so people can see what this bipartisan commission did. but, yes, in the matter that i referred to earlier, two dozen major financial institutions engaged in clear misconduct, where they represented to investors that mortgage pulls contain no defects when one in three loans were a failure, the statute of limitations on that is running. we gave the department of justice information that showed misconduct, in 2006 and 2007. january 2006 to june 2007 and the ten-year statute of limitations is running. so i want to say one other thing, the department of justice
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in september of 2015 put out a new policy that said from now on we're not going to go and seek penalties against inanimate corporate entities. we're going to go after the individuals responsible. with the new policy in place, the department needs to take a fresh look at this, and assure the american people that there will be a full investigation -- >> the obama administration is not a republican administration. it is not one known to be friendly to wall street. to say that eric holder hasn't done his job, i would think that this administration would want to prosecute individuals. the lack of action perhaps that it would be too difficult to get a conviction? you don't think that's possible? >> i don't know, but, again, i want to just point out, and i've been disappointed, and wapt i wo say i'm a democrat and i think the president has done a great job for the country, but this is an area of disappointment. how do you prosecute 2700 people at the local level who lied about five loans and you don't
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seek to know who are the senior executives at major financial institutions who either drove or condoned the misconduct where millions of loans were -- >> it is another thing to lie outright. it is another thing to say, i make 100 grand when i only make 20, right? it is different then when you incentivize your staff to say this is a potential pool of revenue, let's go get it. >> here's what they did. they told investors that the loans you're buying have no defects. when, in fact, the evidence showed they were aware of the defects and they disclosed materially misrepresentations to investors. that's a lie. and that's why we have securities laws. my point is that at some point human beings were involved in this. again, how do banks pay $45 billion in fines and no banker being held responsible? that defies common sense. and it sends a very bad signal for future deterrents. >> thank you for joining us. >> thank you so much.
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>> "power lunch" is back in two minutes. ed the father of behavioral economics. i've been called a lot of things. i have read all of your books. did you learn anything? i learned that humans are complicated. we're emotional. absent-minded. and we make some really bad decisions. my trade-off analytics can help companies make better decisions, but i am still learning what makes people tick. what makes you tick watson? natural language processing, reasoning algorithms, statistical parsing. now you are just showing off.
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overweighted key bank capital marks. the firm saying an increase in apparel demand and weakening dollar should help drive sales. gap stock, by the way, up 20% this year. tesla continues to rip. orders for the upcoming model 3 continue to rip in. at last count, reservations topped 276,000. investors love it. that stock up 20% in just the past 30 days. and here is a bonus street talk like stock for your idea book. shares of they're pe therapeuts soaring. a buy rating. target price on it, 10 bucks a share, about 35% higher than the current price. we're back in just two minutes.
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welcome back. facebook is down more than 3% right now. the news today delay in shipments fothe oculus rip, the new virtual reality product. there say note from deutsche bank. ross sandler expressing concern about the company's earnings. facebook is due to report results on april 27th. what is the openings market saying about facebook's stock now? joining us is jon najarian,
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co-founder of option monster. what is the message, jon? >> well, michelle, it seems that people are continuing to bet on the upside of facebook, even as it is slumping today. the bets aren't near lit saly t as they were a week ago. to your point and mr. sandler's point, the worst enemy of facebook is their own success. the fact that they're up 57% year over year, that's the ad revenue. and the deutsche is now saying maybe only about 53% for this coming quarter, which will come in after the market closes on the 27th, i think, of april. that's one of the concerns is they have set the bar so high that they might not be able to get there, and that's why you see an awful lot of paper kind of betting that it -- >> what kind of rewards are you seeing? >> specifically, today they have been retail customers buying upside calls.
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that's not the guys i like to follow. love them, but those aren't the guys i want to follow. i've mainly been seeing some of the smarter paper betting on downside. in other words, either buying puts or selling calls. and that's what i want to follow. so i think it trades back down, maybe a little lower than this, michelle, could break 110, but i think that presents another nice entry i got out of my trade that i had in this one, real money, and in the halftime portfolio last week i was in that for about a week. i'd like to reload if it breaks 110 and get back to the upside for earnings. >> got it. for the viewers who are listening on the radio now, it is trading at 112.30. thank you, jon. jon najarian. >> we're coming up on 2:00 p.m. on wall street. we kick off this new hour with a look at your health and your money. just ahead, one investment that is nothing to sneeze at. we're talking the big opportunity in allergy season. but, first, let's talk about biotech stocks. having guy day a good day.
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it has been a very rough year for the sector, even with the gains today, the ibb is down 20% in 2016. is this a golden opportunity to get in or should you steer clear? let's bring in daniel seeburg and les fundleiter, more cautious here. this is a sector that had a terrible year since the february 11th lows. this sector is up by 12%. at what point in your view does a valuation, the fundamental case kick in or is this just being hijacked by the political rhetoric that exists out there on drug pricing? >> i think we'll see a sector where there is a move across the entire sector. you have to lean on that macro factors are moving. it is true sentiment still is terrible and we're probably due for a bounce as we have been, but i think there are better places to go, especially in health care where you see actually improving fundamentals and reasonable valuations like medical devices.
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not to say individual issues and biotech can't run and there a number of them with important clinical events -- >> such as? >> intercellular. i have a clinical event coming up, these are companies that could see positive news flows. so you can pick -- you can make a sector call, but it is like trying to call a bottom. we prefer to go with good fundamentals. >> sure. david, your view, you've been making the case, bullish case for biotech for a while, though you're cautious on the broader markets. what do you see here? les is concerned about the macro factors taking over the fundamentals. what do you see on the fundamental side driving you to say, i'm going to look past this political rhetoric and i'll dive in. >> i think you're setting up right now for one of the best relative value trades around. look at biotech down 20% this year, so far, i look at the move that we have had in other sectors, so let's look at energy, right? the whole energy trade was predicated on a lot of lip service out of opec and a lot of
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short coverings. you've seen a move in a lot of these energy names where maybe fundamentals don't really support the outlook now. >> just the rotation? >> i think -- look, i look at it and say biotech in general is a fundamental trade in my opinion. fundamentals are there to support the outlook for large cap biotech in particular. so you look and say, where else are you going to find growth? 20% growers per year for next five years with the valuations this cheap. you look at gilead, biojen, sell jeanne and they're set up for a person that wants to buy a sector because they have solid fundamentals looking out for the next three, four, five years, as a perfect entry point to step in now. so i look at the smaller cap names and say is there risk? absolutely. i don't want the risk of a drug not getting approved and the stock cut in half. i look at the larger cap names that have fundamentals backing them up in a tape where a
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fundamental analyst can look at the energy sector or sector that had big moves. >> that's the thing, les, oil is oil. largely a commodity. this group is so different. companies are developing oncology drugs or osteoporosis, different stages of testing. 120 of the 140 stocks in the biotech ibb etf are down this year. doesn't it appear to you like the market is trading them all the same and throwing the proverbial baby out with the bunsen burner? >> i agree with that. the individual fundamentals have overcome -- have been overcome by macro factors. that's why you have to sift through to see who has interesting science and who has enough cash in the balance sheet to make it to the finish line. i agree that the larger caps are apparently safe, but i think you get more upside from the mid and
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small, so to the extent you want to be a stock picker, i say go mid and small and try to sift through the wreckage because there is a lot of wreckage and you're right, a lot of stocks probably shouldn't have been down as much are down quite a bit this year, 30%, 40%. >> thanks a lot. i'll see you later this week. you want to stick around here because we're going to talk about the big business of allergies. if you're not suffering, you're lucky. you'll soon be perhaps as trees and grass are turning green. les, you know, we talk about this every year, is this really a big line-item for big pharma companies? really, if they're selling whatever it is over the counter treatment, is that going to move the needle for them? >> it is a little bit. it depends on the year. i point out that it is it varies regionally. this year is an ill nino year. so one would expect that in an el nino year, allergy season would be a little worse. a company like merck has a new drug for allergies, a tablet that may see upside.
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johnson and johnson has a slew of products over the counter as well. we also like cvs and kimberly clark because everybody knees kleenex and you have to go somewhere to buy the stuff. there are a lot of ways you can take advantage of sneezing and the suffering that comes from allergies. hopefully won't be is bad this year, though. >> the other part of the cvs walgreen kind of story is people go into buy tissues and might walk through the store and might buy other thing, right? >> right. and certainly that's -- a little economically sensitive too, but, yeah, it would seem to be showing some improvement over let's say a not so great last year and the back of the store for walgreen, pharmacy is, walgreen and cvs have been holding up pretty well. so good economy, bad allergy season, they probably can do a little bit better. >> one last question, some
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picks, we talked about health care more broadly. it looks like you're going towards i want to say the parks makers. but hips and valves and things like that. >> we think utilization is going up again consistent with improving economy. so we like the medical devicemakers more than anybody else. companies like boston scientific and edwards who had great data today, we're seeing -- and striker who makes hips. we're seeing good results, improvetion fundamentals and valuation that are attractive. and they get an obamacare tailwind because they're not paying the tax this year. all good news and relative to the other sectors. the valuation is high and the risk is pretty high. >> sure. thanks for your time. appreciate it. >> want to get you up to date on what is going on with the major averages. dow and s&p at session lows.
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s&p lower by 7.5 points, a third of a percent. the dow lower by 64 points to 17,728. natural gas is rallying today. up 4% despite today's gains, though, that gets it slightly above $2. still sharply lower for the year, down about 13%. where are prices headed to? let's bring in alan. where do we go from here, alan? >> finally natural gas turned. all the commodities and resources had this downward movement and had an uptick as the dollars come back down. natural gas is the last stop to make this upturn, led with gold and copper and oil. natural gas made lows last month and just a month ago. $2 is important. but 2.50 is what it takes, 2.50, 2.60 to get to the midpoint of action last year. last year's high was made in july. a lot of natural gas usage happens in the summertime with air conditioning, now that
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generates what half of the electricity in america. so it is a little bit of a fundamental that most people aren't aware. most people think this cold time like teed oday is what drives t market. >> it is a perfect example of how price draws supply to the market. nat gas at 16, then above 20 and the massive glut that happens because of people like aubrey mcclendon and two bucks now. let's say i run a pizza -- pizza rew ria or something. should i take that or could it go lower? >> i don't think you want to play it much lower. 1.75 is the lowest it has been in many, many years. that's just a gamble. and, you know, that's the purpose of locking in your cost and something you can live with. if it goes lower, so missed out on 25 or 50 cents.
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we see how the markets get moving in one direction. great example is gold. and no one was looking to be long gold and everything all those fortunes turned. the same thing could happen on natural gas. additional short squeeze here because everybody has been short the market to the downside. and the sellers did get tired. if you look at that march technicals, you can see where we made new lows in the natural gas, but did not make new highs of volatile. that was bull, saying the sellers were getting tired and, you know, it could be a -- there could be a couple of things. >> we got to be careful. we have natural gas above 10 bucks twice in the last decade. it lived almost the entire 1990s in the $2 range. it is quite possible and historically accurate to say that natural gas does not have to go higher. >> nothing has to go higher, nothing has to go lower. until it gets $2.50, we're in a down trend. we're at the highest level. we're taking out the tops from november and january.
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a little push to the upside again gets momentum moving the other way. where everybody has been in one direction. you know how markets move? when everybody gets in one side of the boat, it goes the other way. that's typically the mechanics of the market. look at ung as a good trading vehicle. that's been trading sideways and not back inside this longer term channel. >> i would lock it in. alan, thanks so much. >> thank you very much. we're seeing some big moves in natural gas related stocks and as morning note flag a few names saying it makes the most sense to own names exposed to natural gas. among the energy plays, some name he named, range resources, eqt corporation, rice energy and gulf port. here is what is on your menu for the remainder of this hour. up next, three names that might be poised to pop. three names that could be due for a drop. plus, why now may be the best time to rewrite your portfolio
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with burgers and soda? later on, looking at the big money on the line on tonight's ncaa championship game and we asked the question, should college athletes be paid. want to hear from you. we're going to debate it also when "power lunch" returns. turnc turnc why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.
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(music plays from one way or another )♪♪ ♪ i'm gonna find y♪ i'm gonna getcha ♪ ♪ getcha getcha getcha ♪ one way or another ♪ ♪ i'm gonna win ya ♪ i'm gonna getcha ♪ ♪ getcha getcha getcha ♪ one way or another ♪ ♪ i'm gonna see ya ♪ (inhales cigarette) welcome back to "power lunch." i'm melissa lee. we're always on the hunt to find you opportunity. today, we have found a few names
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that could be set to pop and a few that could be set to drop. dom chu has all of the answers. >> i don't have all the answers, but i have statistics and our data partners used that information to find stocks that are set to possibly fall or rise this week, all based on each of these stocks and how they perform after they perform above or beyond their 50-day average price or moving averages, some traders call it. among the stocks we could see rising this week possibly, endo international. look at some of the oversold stocks year to date. and look at endo, down 50%. when it falls by this much away from its 50-day average price, the stock tends to post a positive return about 56% of the time for endo stock. now, if you flip the coin, you look at some of the overbought stocks, alphabet, google parent company, could be one that fits the bill there. historically this has happened 89% of the time when we see alphabet shares, the a-1s, fall to or go to a level as high as
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it has relative to its average price over the last 50 days. 89% of the time, five days later it tends to drop. so, again, these are statistics and some historical could be text, not meant to be gospel, but sympathy tradetraders use ts of stats. for more, go to cnbc.com/pro. subscribers there can get the full story on that particular news. >> what is the deviation from the 50 day moving average? >> if you want to talk about standard deviations, at least one to two. we also have a couple of other ones we talk about every once in a while here. general mills is one of those ones that is identified on the cnbc pro list as well as being a possible candidate. so some of these are big name well known stocks that could be moving at least a little bit away from where they trade on average and because of that, could be from at least from an odds perspective, if history proves right, due for a pop or
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drop based on that. >> got it, dom, thank you. for more, check out powerlunch.cnbc.com. and let us bring in brian bellski and chad morganlander. welcome. you're well known to the viewers. i won't go into your title. they know this stuff. let's talk about what to do. we have a little bit of time with the fed. we start to get into earnings season. taxes are being worked out for everybody. kind of the pause that refreshes. take some time to figure out new strategies for portfolios. you remain bullish on the stock market, correct? but you're not going to suggest the average risk toltolerance, somebody should put 100% into -- >> we got a rebound from the january and february lows. and we do admit that -- we know through our experience that stocks are never linear for long. >> to your credit, you remain bullish even when the world was collapsing in january. >> we did. and for us because we are process and discipline oriented with respect to our fundamental
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attributes and how they look at things, there was no reason not to be bullish when the market pullback. and we said there would be risk to 1800. at the end of the day, we have a lot to deal with, though, still with the slowing earnings environment, with the fed that remains, we think, questionable with respect to their direction going forward. and let's face it, the election is going to cause some noise. we remain steadfast with our 2100 target on the s&p. we're pretty close to that. would we be putting in 100%? >> if we hit 2100, you're going to raise your target or say, hey, guys, put cash on the sidelines. >> the majority of our brethren lower their targets when the market was going down, right? in our view, that's not the way to do t yit. >> you don't place a bet when the game is under way. >> right. if the market rallies above 2100, we're convinced our year end target remains the place to be. >> which would indicate don't
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put money to work, maybe take some off the table. kind of what you just said. >> especially if we believe -- >> if we go over 2100 and your target is 2100, that means you think the market will go back down to 2100. >> technically yes. we said it would be transition years as part of a 15 to 20 year bull market. >> chad, you're not bearish entirely, are you? >> no, no. optimistic in terms of big gains. >> there are scenes of opportunity. our long-term forecasted return assumptions are 5% to 6% over the next three to five years. we're not seeing a whole lot of global growth. >> per annum. >> per annum. >> with dividend yield. >> that's far lower -- >> that's a -- >> it is two to three x inflation which makes it somewhat more of an attractive return. the thesis here is that the global economy is going to continue to decelerate. we don't think that that is cyclical, we think that's
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structural. when it comes to global growth, the emerging economies really fueled the global economy over the last decade, about 75% of that contribution. so we think trade and earnings is going to be somewhat lackluster. there are scenes of opportunity. so, for example, when the markets were down, critical point, we entered the emerging market side of the trade as well we see scenes of opportunity within the high yield market. >> that's interesting. because default rates, while still quite low, are at the highest in six years. the last numbers i saw were about 3.8% of companies not making their debt obl geoigatio. but they're rising. >> you look at spreads and you can come to a conclusion that either we're going into a global recession or here in the united states a recession. we think that it is factored into the high yield market at this point. so we wouldn't be 100% invested in high yields, but albeit, well diverse fide portfolio you want
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to have exposure there. >> you see u.s. recession in the next 12 months. >> no, no, no. we're very clear, no recession in our case. economic variables and earnings improving from here. we continue to focus on what was, not what is and what is is an improving landscape. clients around the world positioned for a recession in the u.s. and that's the wrong call. >> there you go. the wrong call. i like it. last comment, maybe think about zepplin, what is and what should never be. >> back to music. >> it always does. thank you very much. we're watching the hyg high yield index as well. up next, one stock getting a triple downgrade today. that's right. three analysts saying dump this name. that name and the reasons why coming up in street talk. oil hitting session lows. the final trades about to cross. we'll bring you those. and, oh, so much more. it is no quarter when "power lunch" returns. [vet] two yearly physicals down.
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martha and mildred are good to go. here's your invoice, ladies.
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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. welcome back to "power lunch." i'm michelle caruso-cabrera. you hear the word e-commerce, you probably think of names like amazon, ebay. but today as part of our eiconi series, we're digging in on an
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e-commerce site that helps you shop small, as in small business. kate rogers joins us live from seattle with that story. kate? >> hi, michelle. that's right. you think small business, you know they're typically limited in their reach, but they're able to cast a wider and more profitable net. take a look. seattle based garmenttory is making every day a good day to shop small. the platform connects emerging designers and boutiques on five continents to customers around the world expanding their reach. >> boutiques, one of the biggest problems was inventory. one of the biggest costs, also one of their biggest risks. and they have a whole world of people who really want that inventory, but kind of bound by where their brick and mortar star is. >> the platform launched in april 2014 and the following fall the company was accepted into the tech star seattle program. prices range from $75 to $600, targeting young luxury customers who might otherwise go to
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barney's or nordstrom. today they have 250 designers and boutiques to choose from, including seattle-based baby and company. it is a great way to gain traction and for existing boutiques like baby and company the platform is bringing in new traffic both online and on foot. >> pairing with garmenttory gives us a larger audience and presence to go up against, you know, bigger companies in e-commerce. >> while taking on the giants of e-commerce and brick and mortar worlds can be an uphill battle, this startup is up for the challenge. aligned with a cause they want to see succeed. >> we believe in what they do. >> since launching garmenttory, they say they have grown 20% month over month and now they have boutiques and designers coming to them asking to list on the platform. and as you know, we have a great lineup at the iconic store in seattle, kicking off tomorrow. we have shark tank's kevin o'leary, greg glass from cross fit, robin chase from zip car.
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tillman fertitta and tyler mathisen live all day. >> on a plane right now. we're looking forward to the live coverage. thanks so much. oil taking a big leg lower as the final trades are crossing for the session. to jackie deangelis. set us up for the close. >> another 3% decline in oil. prices as we head into the oil close here bouncing off the session lows right now. but three reasons that oil is taking this leg low eer and wha to expect for the rest of the week when "power lunch" comes right back.
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timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. hello, everybody. i'm sue herera. here is your cnbc news update at this hour. kurdish forces have been making gains against isis. the area is significant because it contains several oil fields. the kurds have slowly tightened
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their grip and recovered weapons left behind by isis. donald trump in wisconsin is predicting a big victory in the state's primary tomorrow, despite polling showing him trailing rival ted cruz. >> i really believe tomorrow we're going to have a very, very big victory. very, very big. >> train service was suspended just outside of chicago after a commuter train collided with a vehicle. look at those aerials. the scene showing the train stopped and mangled vehicle on the tracks. the vehicle drove right through the railroad crossing. the wwe says nearly 102,000 fans packed at&t stadium for wrestle mania 32. its professional wrestling version's of the super bowl. the stars were out including shaquille o'neal and the rock. that's the highlight of the show. when shane mcmahon, son of the chairman vince mcmahon leapt from the top of the 20 foot high steel cage and crashed through a
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table at ring side. looks like a regular day here at cnbc. that's the cnbc news update this hour. looks like the morning meeting. back to you, brian and michelle and everybody. >> that was, like, the number one topic on twitter last night, i don't know why. it was impressive. i don't know why you would need to go to those lengths, but nor am i a wrestling fan. >> but, brian, it is the wwe. what do you mean? they always go to those lengths. >> sue aaa herera. a wrestling reference. oil market is closing. to jackie deangelis. oil is big but natural gas stealing your thunder a little bit. >> that's right. let's talk oil for a second. 3% decline today. moving lower because the iranians said they want to get back to presanctioned output levels and saudis saying they won't freeze unless iran does. a stalemate in the hopes that this cooperative freeze out there in the marketplace that might come to fruition in doha probably will not at this point.
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also, the u.s. recounts its falling further but u.s. production is stuck. we'll watch to see if there are any declines in that number on wednesday. and some fears about asia's economy and the growth prospects out there. that impacts the demand side of the equation. you mentioned natural gas, and we are seeing a big pop in those numbers today. the reason for that is we're talking about an april polar vortex, brian, believe it or not. we're seeing colder temperatures than expected for this month. and we could see nat gas prices go up from here. i want to talk about gas prices at the pump. we're seeing them up 36 for the last 41 days. the national average $2.06 according to aaa. i'll say this, they're still lower by 34 cents from a year ago. this is the cheapest start to april's gas prices that we have seen since 2009. >> jackie, thank you. let's stick with oil and gas and bring in halema croft and lord john brown, author of the new
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book "connect, how companies succeed by engaging radically." it is interesting, you talk about engaging radically with society, so much of our oil discussion has been about sort of these worrying factions now and why you need -- you can't engage in normal economic diplomacy because countries like iran need money. how is it going to play out in the middle east? >> it was always like this. people's objectives are very different and very difficult to reconcile. opec from the beginning of time has been involved with people who don't need money and need a lot of money ganneti iand gettio agree on anything is very difficult. >> we have an opec meeting on the 17th. do you think anything will come from that? >> let's hope something does but i would be surprised, very surprised at this time. production is high. people are scrambling, i think,
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to maintain the markets they have and to gain markets from other people. so it is not a time for reconciliation, yet. >> even when foreign companies could invest in iran, i'm told it was difficult, that the way they structure contracts were so onerous, that a lot of foreign strech investment shied away from it. what are you hearing about what they're willing to do at this point. >> i worked in iran for a long time. and i would say that the iranians are some of the very best negotiators i've come across in my business career. tough and clear minded from their point of view. so i think this will take time. and i think if you just look at the analogy of very different nation, iraq, just how long it took for iraq to build up their production, much longer than where people expect it. there are plenty of aspirational discussions and i think iran is in the same category. lots of aspiration, i think the
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reality will be lower than people expect. >> the big question has been the reason -- one of the reasons oil stays so low is iran is going to ramp up. >> so many reasons why oil can be lower or high. the u.s. production is russia. record levels. it is iran, it is iraq, it is everywhere, really. so we need to see how well that works out. >> you nailed it. you get so many viewers, very he smart viewers. they write in and they have the u.s. numbers at their fingertips and say, brian, look at u.s. production, it is on the decline. rig counts are down. is a matter of time before oil goes higher. but if you point to the world, isn't the world making up the gap in the decline in u.s. production. >> what happened in iraq last year. iraq was up close to 700,000 barrels year on year. you have russia at record high levels of production at 10.9 million barrels. so the question is, like, who is going to invoivoluntarily pull
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barrels off the market. >> who voluntarily pulls their barrels off the market. >> i think you have certain countries, increasingly some gcc countries like qatar, kuwait, saying they would be willing to freeze because they're getting concerned about betting credit rating downgrades. the saudis keep switching their position. a couple of weeks ago, they were like we don't need iran. now they do need iran. unless somebody in saudi arabia make a final decision that they're willing to freeze, particularly the print, they're not going to do it. >> state the obvious, price is determined by supply and demand. doesn't sound like supply is the issue for a long time that when prices move, it is going to have to be demand at this point. everybody has incentive to keep producing -- >> and the cash flow. i think in the end, everywhere, even a big state oil company has a balance of cash flows, makes money, has to give it to the treasury, has to do things for society. but it is also got to invest
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because none of this production happens automatically. you have to feed it. you have to feed it with capital expenditure and that will be the thing that will get this sorted out in the long run. >> underline what you're saying is because the cash flows are so negative, they stop investing and production falls. >> it is everybody. >> unless you do something crazy. like take the world's largest company by far public. lord brown, do you believe saudi aramco, four times bigger than exxonmobil, will go public? >> i have no idea. but i do think investors look very carefully at the state oil companies and have to think through carefully who controls what. these are not normal companies. they don't make normal economic decisions. and there are plenty of examples, whether it is petro s petrobas, sinopec, a lot of companies that have been so-called privatized, they haven't really.
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a little bit has been floated. >> i would say that the big problem with earamco privatization is it feeds a vast machine. i think it is going to be downstream in the end. >> good discussion. pleasure. thank you very much. once again, check out the book. appreciate it. up next, two names that might bring you some pretty fat returns. we're talking big money in college sports. and asking this question, should college athletes get paid? we'll take the cnbc take on that story when "power lunch" returns. ♪
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how about a burger and a soda? nutritionists might say that's not the way to go, but guess what, your investment adviser may say this has been the way to go because after several years of flat shares, coca-cola and mcdonald's stock hitting all time highs. let's discuss the moves and whether or not there is more to them with the trading nation team. so interesting because when you
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look at investing, you say, well, follow the trends, sort of peter lynch model and guess what, people are eating fewer burger and drinking less soda. what do you think is behind the strength of these companies whose business is primarily burgers and soda? >> you bring up a great example. this is a great lesson for traders. what we're seeing is stocks are going up not really because of what the companies do, but rather there has been a sea change on wall street as far as the risk appetite for these low volatile, low beta names. these defensive names. that's why they're going up. not because of the companies are doing much better. when you strip that away, basically you have two companies that are overvalued, are low growth, and really extended. i stay away from both names. >> all right, can't be more clear. let's look at one of them from a technical perspective and make that mcdonald's, it is not quite parabollic, but the stock has gone off the charts. is there any more gas left in
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the tank at mcdonald's? >> i think so. mcdonald's has broken out of an amazing four year sideways nothingness. there is a couple of things driving. they make a big push into china, i think they'll go 225 stores this year, maybe 2,000 in the next couple of years. china is a big play, number one. number two, this market is searching for a yield. consumer staples, mcdonald's is trading more like a staple with a 3% yield. and the third reason we're seeing it is you start to see the dollar lose its upside momentum. mcdonald's large multinational, lower dollar will help bring those earnings back in a better exchange rate. >> so stay away? >> i like it. i'm going to continue -- it is parabollic to your point. i like to buy a pullback towards 100 to $122. can't buy the chart at the all time highs as you mentioned. pullback, yes. >> pullback, it looks attractive. eddie says no way, no how, not with my tongue or your money. thank you very much. appreciate it. >> for more trading nation, go
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to our website, tradingnation.cnbc.com. up next, not one, not two, but three firms out saying that one stock may be done. a triple downgrade. maybe a first. net net a strong dollar is good for the economy. but that doesn't mean all companies will benefit equally. companies that do a lot of business abroad and companies that are in manufacturing versus services tend to be most vulnerable to a strong dollar. so if you believe that the dollar's trend is going to continue high, you may want to check your exposure to companies in these segments of the market.
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great time for a shiny floor wax, no? not if you just put the finishing touches
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on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. time for street talk, our daily dive into the five analyst calls you need to know about or we're telling you you need to know about. edwards life sciences. what a run, melissa. you had some favorable heart valve trial results leading to upgrazed a upgrades and positive calls. raising estimates, raising the price target, reiterating top pick status for the stock. analyst says the heart valve could be, quote, game changing. doctors will react positively.
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the fda should update the label in a few months. boosting the target to 110 from 98. btig also upgrading with a higher target of 115. stock is up 17% right now. >> and coincidentally we had les talking about edwards life sciences, one of his top picks for a while. props to les. now, netflix, pacific crest defending the buy rating ahead of the quarter, fear around subscriber guidance is overdone and quote/unquote myopic. they see global net sub ads of 6.1 million. that's below consensus but likely in line with buy side, in line with what actual investors are expecting. look past q 2 because a conversation will shift international and that is larger opportunity for netflix. >> if you bring up -- look at the longer term chart. traders made some money, but the stock is really where it was nine months ago. kind of flat money for nine
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months. is anybody talking about netflix on fast money as being a magic over. >> not as much. international is a big thing. that's the -- the traders who stick with it cite international. >> weird for nine months. next up, gunmaker smi smith & wesson. is their big run done? three firms think so. bb & t capital markets downgrading smith & wesson to ne neutral or hold. concern about growth going forward because of lack of inventory. kalyn downgrading citing a slowdown in background checks. that stock is down 19%. we do these -- we do these names generally in the morning before the market opens. >> we should note the context to that downtick in the february to march background check is there was an uptick, big one in the month of december, so there is concern there is pull forward in terms of demand, that's why there is sort of the slowdown coming right now in this
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quarter. next up, oracle, a lot of bullish commentary ahead of the launch of oracle world, tomorrow night, and the analysts on wednesday. all eyes on what is known as the hcm cloud, that's the human capital management cloud. >> not another acronym. >> very specific. very specific. not just cloud. human capital management. drexel hamill son saton says th is behind oracle and expects tougher talk when it comes to one of its competitors, woul. not all clouds are the same. drexel says workday and oracle will go scorched earth on each other to gain share in the space. >> when you brought this name to our attention this morning, i looked at oracle, doesn't get a lot of attention these days. i'll not sure why. if i said to you, if i said who is the best performing software or tech company in the s&p 500 this year, the answer is oracle. last three months, oracle is the best technology company in the the entire s&p 500.
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larry ellison is going to have a new sailboat. >> sterne upgrading from a buy to neutral. analyst sam poeser says the company looks ready to hit inflection point because of new point of sale and ship to home technology in place by year's end and 45 bucks, about 25% upside. of course the stock down 27% over 12 months but sam poeser little more bullish. >> cabela's is looking at options, will this be an opportunity for some of the others like a dick's? >> they should merge. >> street talk is down. a big debate coming up. should college athletes get paid to pay? the cnbc take on that hot question when "power lunch" returns.
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if you're a baseball fan, an interview is coming up in closing bell with rob manfred, who will join the team in the 3:40 hour, just under an hour from now. baseball is happening. but let's talk about basketball for a second. the final game of the ncaa men's tournament will be played tonight. one the key players in tonight marcus page said this, when you
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see the amount of money in the tournament, wow, i think a little cut wouldn't be too bad. the ncaa is in the middle of a $11 billion 14-year deal with cbs sports which brings us back to the question, should ncaa players be paid? here's andrew, a professor of economics who said they should not and ben strauss is a contributing writer for "new york times" who says they should. ben, a lot of criticism, much of it rightly so has been lobbed at the ncaa over the past few years. we're not first ones by far to bring up this should they be paid argument. right now they are not except when it comes to scholarship. has any movement been made on the front. is anyone working on this topic to get player's paid? >> the ncaa has recently passed what they pay a cost of
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attendance stipend. to help them out with basic living expenses and what they don't tell you is it's the result of serious lawsuits and union movement to move the needle just this far. on the flip side, this is a couple thousand dollars each year for these athletes. the ncaa tournament going on right now, we're going to see about a billion for the ncaa this year, coaches are making $5 million, sometimes $10 million when you look at coach k's salary at duke. roy williams, coach at north carolina will make $250,000 in his team wins the national championship. and the players are going to get almost nothing of that. so some movement but there's a huge pie out there and athletes are getting most a sliver. >> it's michelle here. it seems that the players are the key asset. they are the reason that these schools can make all of this money. why shouldn't they get a piece
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of that revenue? >> well, first of all, to correct what ben said, it's not a couple thousand dollars, it goes up to $5,000 and sometimes more and they are pell grants which can be over $5,000. i believe the athletes exploited and deserve better benefits and better treated by the ncaa. but if you look at the top subdivision in division one, the top 128 schools according to the last financial report, the median deficit in the athletics department is $14.7 million. and that doesn't -- most capital experiences and indirect expenses. you've got to find money to pay them, number one. number two, this is college sports. college sports is supposed to be an extracurricular activity just like dance, just like gymnastics, just like theater -- >> but it's not though.
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come on. >> all right, fine. wait a minute, don't interrupt me, if you think okay this is really -- these are not students, the idea of college sports and says it in the ncaa constitution, the idea is that you're supposed to provide a balance to the said entry activity of a student life. if it's not that, fine, we can pay them. let's make it a minor league separate it out. don't pretend they are students anywhere any more which most aren't and call it what it is. make it professional sports. as long as you want the kax privileges and tax exemptions and special treatment and call it college sports, it should be a college activity. >> where do you get the money to pay these students? they will then have to pay income tax and colleges will have to pay payroll tax for these guys. will they provide health insurance? where do we draw the line? they are supposed to go to college to get a degree. >> andy makes a nice point.
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if we want to go by the ncaa rule book, college sports as he described it, 1985, we have come so far from these guys playing extra krik lack activities, going to school and in their free time they go to basketball practice or football practice. >> why not have them work for another league and have them not be students anne do this full-time. >> this would be a wonderful idea if it existed. the world that exists in college sports is that they are essentially minor leagues and rather than put lipstick on a pig, let's fundamentally recognize what they are in school for and that is to make money for the schools to drive donations for the athletic department. these teams are the number one marketing wings of the school. >> it sounds like you basically degree. >> about the for different
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reasons. >> we have to leave it there because we have to earn our revenue through a commercial break. >> exactly. >> i'll see everybody tonight at 45:00 on "fast". >> thanks for watching "power lunch." mlb commissioner coming up on "closing bell" which starts right now. see you tomorrow. >> welcome to "closing bell" i'm kayla from for kelly evan. >> richard branson said there is nothing he can do to stop virgin america's sale to alaska airlines, he's not a majority shareholder but he's making money today. shares of virgin america of soaring by more than 40% but the question is what impact will this deal have on consumers, on travelers, we have more on that story in just a moment. >> reality check for

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