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tv   Power Lunch  CNBC  April 5, 2016 1:00pm-3:01pm EDT

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is this the place to buy it? >> i'm looking at it right now, but there is a poe pe to put on call spreads where you're able to buy something. i think it's a great opportunity at the these levels. >> good stuff. good having you >> that does it for us. power lyn"power lunch" begins n. >> let me be the first to wish everyone a merry christmas. we'll get to tyler and some of his great guests in just a moment. we begin with some breaking news. let's get right now to sue herera. >> mississippi's governor has signed a controversial law that allows public about and private businesses to refuse service on gay couples based on the employer's religious beliefs.
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governor phil bli auryant signe despite opposition. this comes on the heels of p paypal saying it will plan to bring jobs to north carolina after lawmakers in that state passed a law in a restricts protections for lesbian, gay, by sexual and france gender people. in the north carolina situation, a large number ofgender people. in the north carolina situation, a large number of east called on petition calling on the governor to reject the particular law. the mississippi news comes just when the whole controversy started to heat up in the southern part of the united states. there are other bills that are pending in various states. thish to that, nissan gave cnbc a statement previous to this law being signed that says nissan is committed to providing an
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inclusive workplace environment and we oppose any dlaw 45 allow discrimination. so it will be interesting to see what the corporate reaction is to mississippi's governor signing this particular law just a few moments ago and also paypal canceling its move into north carolina. back to you. >> we are also following a developing story out of washington, d.c. the president make statements just moments ago on so-called tax inversions. let's get to eamon javers in washington. >> that's right, the president just a few moments ago had very tough words for companies that engage in the tax inversion process. here's what he he had to say. >> i've been pushing for years to eliminate some of the injustices in our tax system. so i am very pleased that the treasury department has taken new action to prevent more cooperati
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corporations from taking advantage of one of the most insidious tax loopholes out there and inflame the country just to get out of paying their taxes. >> the president linked this whole issue of tax inversions to the "panama papers" case which broke over the weekend in which leaked documents reveal that world leaders around the world had accounts -- or had law firm in panama that was setting up structures where they could hide money around the world. so that is an interesting point from the president. linking that case to what we're seeing here with tax inversions in the united states. the president saying this is just an indication of a system globally in which people who are rich and powerful have lawyer and account tafrants and they d have to play by the same rules. so you're seeing it play out on the campaign trail and around the world and in washington, d.c., as well. >> treasury department's new tax inversion plan is throwing a bunch of proposed merger there is to question, most notably the pfizer deal to buy allergen.
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allergan's shares down about 16% on record volume. meg tirrell has that leg of the story. >> we know pfizer has been trying to invert for a long time and initially tried to buy astrazeneca and now it found its way to allergan. it seems like they have found a way to do it even as treasury strengthened rules around inversion several times. this is the third set of rules and this may put a pin in this one. folks are expecting the deal won't go through given the new rules. and people are saying these new rules specifically target this deal and that's because of the rule about the size of allergan essentially. given the new treasury rules about inversions, the acquired company has to be at least 40% of the total company after the acquisition. if you look at allergan's acquisitio acquisitions, this is what treasury is targeting. they're saying the last two acquisitions of forest labs and
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allergan won't be counted under what they're calling the three year look back. basically only deals that got done more than three years ago can be counted as allergan size. so under that rule, it would no longer hit that 40% provision and that is why people are saying this probably won't work anymore because it couldn't be structured as an inversion. so there are a lot of questions about what happens next. does it actually fall apart, do they find a way to go forward, do they sue the government because a lot of people are saying this oversteps. what the companies are saying is that they won't speculate about the outcome just yet. >> meg, stick around. let's bring in former office depot ceo and cnbc contributoco. steve, what sort of message does this send for treasury to be making -- i don't want to say make rules as you go along, but doing these rules to target inversion.
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>> this is the third attempt by the administration to pass regulations that deal with tease inversions and this one as meg said seems specifically targeted to the allergan/pfizer deal. certainly businesses are frustrated with the politicians here in washington targeting business leaders and calling them up pay tnpatriotic when th simply following the laws placed by the people in that building behind me there. so it seems to me that the way to get at this is to change the law. business people, ceo, follow the laws. in fact, if they did anything different, they would be breaking the law. now, they have a choice as to with whom they merge, but the issue here is that we have the highest statutory tax rates in the world. ireland has about 12% ors 25% tax rate depending on which structure. the point is, it's cheaper to do elsewhere. >> so the root of the problem is the corporate tax system.
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eam eamon, there is a note on allergan and they make the point they use the term temporary regulations implying it's unlikely for the rules to go through without congressional cod if i indication. what is your take on where the treasury stands and if it's overstepped at this point? >> a couple thoughts. one is that in the conference call last night announcing these new regulatory changes, trerry officials were very he careful not to bite when reporters asked them whether this was targeted to one specific deal or not. they always say, no, no, this is a general thing, general policy. it affects deals in the pipeline right now. i'm not sure if it matters to the companies whether or not they could over the long haul that they could have a lawsuit that could result in a favorable outcome. you might see a new congress next year, there will certainly be a new president. what they will do legislatively on this issue is anybody's guess
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right now given how this is all playing out on the campaign trail. inversions are very, very unpopular among americans. it's not something people like to see. so all of that plays in to the calculus of the people trying to put these deals together. >> and meg, what is the path forward at this point? there are a lot of analysts who say that it's trading as if the deal is basically dead at this point. >> we have to remember allergan sold a unit, so they will have about $41 billion in cash coming in which they could presumably use to continue to do deals. so you're seeing those coming out from analysts starting to value allergan and pfizer separately again. a lot of people are saying allergan is a good buy here, that it has a lot of good things ahead of it. as for pfizer, same thing, people are saying maybe this accelerates its ability to split itself up. so nobody seems to think this is
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really doomsday for either company, but maybe doomsday for the deal. there are some people making money off of allergan's new drop. a lot of new names may suddenly be in play if the deal goes down the drain. dom chu more with that. >> we talk about the idea that people like to buy low, sell high. take a look at some of the traders and investors out there. with the big different allergan shares out there due to the proposed tax rules, one investor is stepping up to buy some of the beaten down share. specifically martin sass. he currently holds allergan and is adding more to that position today on this particular dip. sass says says were unduly pressured by merger arbitrage and hedge fund sellers in what
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he characterizes as an overreaction to this built of news. he thinks allergan's standalone value without a pfizer deal suggests what he thinks is a share bryce authority of $300 in the course of the next year. for you, his platinum portfolio is currently down around 6.5%, so full transparency there. sass just one of ten portfolio managers featured. for more insights, go to cnbc.com/pros. sub prscribers can get the full story. >> and melissa talked about other players maybe there. well, guess what, cowen and company out with a few names saying if the deal falls through, alleger began might go after bio again, alexion or some vertex phrma. possible targets of allergan if this falls through. >> all big ones, as well. one state's richest man is
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about to make a big move south. the tax people in his state are starting to scramble. what guy can single handedly screw up a state's budget? this amazing story coming up. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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welcome back. a bigger than expected trade deficit this morning prompting economists to reduce their forecasts for first quarter tracking gdp again, down 0.2
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this time to just a half a point. this number was up above 2% when we started the quarter, but a series of disappointing data points have come in. you can see the range is quite shy. not everybody agreed that this trade data was bad. and this compares to an actual reported q4 gdp. moodys analytics leading the downgrade reducing their forecast to just 0.2%. as we reported last week, variance could be plus or minus, so could be growing or contracting. atlanta fed followed by a lot of folks down 0.3. morgan stanley at half a point. had a conversation with chris rupky, he saw strength in the trade number. same with gold than. and re got the stronger than expected ism services report.
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so not all hope lost, but right now gdp tracking just a half a point. >> steve liesman, thank you very much. robert frank is joining us now because there is a very new and very interesting story out of this state, new jersey. the richest man in new jersey is moving to florida and he pays so much in taxes, that it's going to screw up possibly the entire state budget. robert frank, a name known for our viewers. >> and that name is david tepper. he filed a declaration saying that he was officially a resident of the state of florida. now, he also as of january first filed a declaration saying apapolooza management was now officially headquartered in florida. florida of course has no income tax. this has a huge impact on the state of new jersey. just take a look. new jersey income tax comprises about 40% of all revenues and top 1% pay with about a third of
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that income tax. frank haines, finance office to the senate budget and appropriations committee of new jersey, he says, quote, we may be facing an unusual degree of income tax forecast risk if news reports are true that the wealthiest man in new jersey has shifted domicile to another state. so unusual degree of income tax forecast could change based on mr. tepper's move. new, i'm told he moved not tax reasons, but to be closer to his mom and sister who are in florida. >> very veebconvenient that it s out that way. you have to think that other states will be starting to woo some of the mega billionaires to trade their book. >> florida has had a very concerted and successful effort luring specifically hedge fund guys. a lot of the big guys moving. and i see them down there more and more. i think in the next year, we'll
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see some big names move down there. but you see -- this is a guy who earned $3.5 billion in 2014. new jersey income tax rate is 8.9%. so over 9 $95 million that he contributed to the coffers in one year. so you see why this matters. >> so the residents of new jersey of which i am one, new
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jersey, new york, connecticut, massachusetts, to a point they will continue to have a net outflow of population thus increasing the financial burden on the people that remain. until they learn. they have to learn. >> money goes where it's treated best. and right now it's treated best in florida. >> also 23 degrees in new jersey. >> that helps. >> robert, thank you. at the iconic in seattle, the new big business summit, with mr. wonderful. ty. >> i am indeed. thanks very much. this is year two of our iconic tour. really a celebration of and practical advice for entrepreneurs and entrepreneurship in this country.
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and when we come back, i'll be joined by a guy that everybody knows and some people even love. kevin o'leary, mr. wonderful, we will talk about inversions, disney, about bond rates and much more. so why wait? call now to request your free decision guide and find the aarp medicare supplement plan that works for you. like all medicare supplement plans, you'll be able to stay with the doctor or specialist you trust, or look for someone new - as long as they accept medicare patients. but unlike other plans, these are the only ones of their kind endorsed by aarp. rates are competitive. so call today. and learn more about choosing the doctor's you'd like to see. go long. [so i use quickbooks and run mye entire business from the cloud. i keep an eye on sales and expenses from anywhere. even down here in the dark i can still see we're having a great month. and celebrate accordingly. i run on quickbooks.that's how i own it.
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welcome to seattle. a celebration of and practical advice for entrepreneurs and entrepreneurship. it is a beautiful day and probably the most naturally beautiful city in america, seattle. the break has just happened. just our luck, so the crowds are out here. it's a little noisy. kevin o'leary is with me and let's talk about lots of stuff. we'll be on stage a little later. but let's start with your concerns not just about tax inversion, but about what you see as the vital need for tax reform of the corporate tax code. you own phaser. >> probably longer than any other stock in my portfolio.
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it's a very well managed company and now what has happened in the last 48 hours is a travesty to us as american taxpayers. and i'll tell you why i say that. instead of fixing the core problem which is an uncompetitive corporate tax rate, we are the most uncompetitive tax rate in the world today. and so our great companies like phaser, which have billions of dollars they want to bring back home to america can't do it. that's problem number one. thumb t number two, they don't have the same income statement that all their competitives have, so we're at a disadvantage. we can't spend as much on r&d. the last administration was focused on the distribution of wealth and health care.
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that mandate is over. the next man or woman running america must fix our corporate tax rate or we will fall to the wayside of competitorslobally and pfizer is a case study. when i teach again, i will use that case study say sthg how crewed up we are in america. p this is how broken we are. every u.s. taxpayer and citizen and user of pfizer's products should be outraged that the treasury is attacking one of our companies this way. it's so unfair. so broken. it's time to use this test case and focus the light of transparency on it. >> it is time i think for congress to get going on this. i mean that's where it has to take place. a president can have the bully pulpit, whoever that next president may be. i absolutely agree with you on that. but congress has to get edge gauged on this and they have to figure it out. because we are hobbling ourselves competitively as you point out, billions of dollars sitting over -- a trillion dollars sitting overseas unable to be brought back. it's not right. it's not smart. >> i think you brought up a great point and i think there is a reason that the american and our voting constituents are so frustrated in washington, d.c., get off your asses and do
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something. they don't do anything. this is a huge problem. they haven't done anything for years. and now we can measure the cost to us as a society. we are becoming less competitive. i would love to see why there is a bernie sanders, why there is a donald trump, how frustrated we are as voters and how the lack of any kind of focus to get things done. get this done. go fix this. >> let's pivot a little bit to another passion of yours and that i know is bonds. you have a lot of bonds. today interest rates on the ten year down about 1.71, 1.72. what do you see happening to interest rates and people like you own a lot of bonds? >> i always look at the bonds it tell me what the future looks like because the smartest money in the room is always on the fixed income side. particularly this morning, does this signal a further slowdown in the gdp of our country. that's really the issue going on. >> did yo you see that? >> well, no. i've never seen so many negative interest rate environments in
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other consistencies that are forcing capital home. take the swiss franc, they go difference interest rates in europe. my dad lives in switzerland and he's moving it two places. he wants a fixed income mandate, america is where you come because at least you're making 1.7% on the ten year. you're not negative yet. if we were to go to negative interest rates, that would be really bad and i hope we don't. >> i have one minute left. i want to bring in former ceo of office depot and get both of your thoughts on this succession matter at disney. you're familiar with the company. >> i worked to them. >> what is going on? >> so when this happens to a coo which is the heir apparent, it could be for two reasons. it's not necessarily a signal from the existing coo. i think the board is saying you where n
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are not the success or or there is a large shareholder who does that like this individual. >> and steve, let me turn the question to you. quick answer on what you see for disney going toward. >> the best succession is always there within. they named tom staggs last year to be that successor and now a year later they have changed their mind for whatever reason. but this is a bad governance move. it leaves disney without a successor which means they either have to go deeper in their bench or they have to go outside. either of which will be very disruptive to disney. it's a bad move, it's disappointing that it had to happen. >> thank you very much. i think you're right about the hear of somebody -- some shareholder doesn't like him. you see iger maybe staying? >> i think he should stay. my goodness, he's been the best deal for the company in decades. plus he's young enough. he's powerful. some of the very best media hipds on the board. so they could pull from the board. >> all right, folk, back with
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more from iconic later today.
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hello. i'm sue herera. here is your cnbc news update.
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it is the first casualty from the "panama papers." ice land's prime minister has resigned amid the controversy over the his wife's offshore holdings. he arrived in parliament earlier today where he was facing a no confidence vote. meantime, a spokesman for british prime minister david cameron says the cameron family does not benefit from any offshore funds. however he did not answer a question on whether he or his family had benefited from offshore investments set up by his father. his father was named in the "panama papers" release. paypal is canceling plans in similar hot after lawmakers passed a law that restricts protections for members of the lgbt community. last month north carolina's governor celebrated the company's anticipated move into that state. a heartstopping sight in china as a motorist launches a landslide.
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the vehicle's recording advice captured the moment when tons of rocks poured down in that region. miraculously and thankfully no injuries were reported. wow. that's lucky. that's the cnbc news update this hour. i'll send it back to you, melissa. >> timing is everything. let's get a check of gold prices. no surprise we're seeing a bit higher this gold. just a quick backup on the s&p 500. watching that very closely because year to date it it looks like we might slip into the negative. back to fwld, up would 0 ppts 7%. 1227.80 is the last trade. silver is high by almost 1% and platinum also 0.8%. copper trading to the todown si. rick sap tentelli is at the cme. german bond yields is a shocker. >> definitely shocking. i don't think it could be a
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shocker. you can see rates are going down. here is an easy one. we know the kbs banking will correlate with rates, but when you put a year to date, what should jump out at you is we have a negative loop between central bank policy and weak economy and this is definitely not good for banks. if banks rbaren't going up, i don't see a lot of glitter in the financial sector period. we heard melissa lee talk about we got down it eight waivbasis points. look at the difference. why do i show this? if we start to get under 160, this thread is probably telling you that getting long on our tens might be a great way to take advantage of a narrowing spread which looks like it will occur. dollar index first start out at february 25. you see how important 94 is. and if you open it up to it a five year chart, we start trading below this level, there could be a lot of room.
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back to you. >> by the way, your cubbies beat my angels. good start to the season. let's ghe back to the topic of tax inversions. here now to talk about the crackdown and political brawl, we're joined by former republican kay bailey hutchison and larry kudlow. senator hutchison, a lot to talk about. let's start with the issue of tax inversions. the president coming out and talking about it, treasury surprising a lot and making some new rules that could put pha pfizer/allergan at rifrg. what is your take? >> i was aghast at the president's statement saying they are twri took avoid paying their fair share of taxes. america has the highest corporate tax rate in the world and corporations are suffering under a 35% rate. if the president would cooperate
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with congress, there should be uniform decisions to lower the corporate tax rate and then you wouldn't have all these mash nations of companies trying to do the best to their shareholders and having to go overse overseas.to do the best to thei shareholders and having to go overseas. >> larry, if you read the new york daily news, there is a transcript of an interview with bernie sanders and he named gm will on whiften pay no taxes in year. on one hand people hear we have the highest corporate tax rate in the year and the other hand you say politicians say american companies aren't paying anything. >> it is simply untrue. let's take ge for a minute, former owners. if they're losing money for two or three years, of course they get a tax loss carry forward and their effective rate will be
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low. but when they're making money like they have been the last bunch of year, are their effective rate is in the low to mid-30s for heaven sakes. so that's just a nonsensical argument. i just want to say it's rare that i get to do this. i never see my friend kay bailey hutch hutchison. she's had more integrity, more knowledge than any five senators i've ever met and she has this story dead right. how many times have you said give me a 15% corporate tax rate, fwifr me full experiencing. let's go territorial. america will become the most hospitable -- >> and today in the president's discussion, he did say that he supports simplifying and maybe even lowering the corporate tax rate. obama said that today. >> i don't care. he always gives lip service to it. first of all, he didn't give you a plan. he just said lower. that could be -- he's the guy by the way one of the things they had with respect to bringing
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money back home, deemed repatriation, he wants 18%, 19 percentage rates. senator hutchison, why is it take this administration instead of rewarding businesses around the world making america hospitable, why do they always want to punish? they have done it for 7 1/2 years. always punlishing instead of rewarding. >> exactly. they beat up on the private sector time and time again. and of course private sector jobs with what fuel our economy. and they wonder why this economy is shruggish. although the president said today that the economy is doing great. the economy is not doing great. we should be aring a surge in employment if we would get the government off the backs of our corporations that can hire people. and thank you for all the kind word, rarely. larry. verse i love being with you and we
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appreciate the fact that president obama says one thing but if he would acceptsend a bi congress or say that i will support a 20% corporate fax rate, something simple like he says he wants to do, congress would pass it in heartbeat. but every time congress wants do a corporation tax rate, the president wants to do something that raises taxes on someone else. >> you got wisconsin today, very interesting, all three of the republican candidates have major corporation tax cuts. kasich does, cruz does, trump does. both of the leading democrats, sanders and clinton, have none. none. in fact again following bochlob lead, they want to punish. this is the weakest recovery. wages have not increased for middle income people since the year 2000. can we not have a consensus between parties -- i'm serious
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about this, it should not be republican or democrat issue. this is a common sense issue to help businesses, to help investors and to help middle income wage earners. >> on top of this being a u.s. versus the world issue, this is also a state level issue. we just got news that david tepper is redomiciling himself to florida. redomiciling his hedge fund to florida. and that will put a dent to the tune of $95 million in tax revenues for the state of new jersey. there is something else at issue right now in terms of tax inequality across states and countries. >> this is dreamily important. you're dead right. and money flows to where it's the highest rate of return. i will say this. there is a messaging issue here that is worth considering politically. this is not a rich man's tax cut. corporate tax reduction is not a rich man or rich woman's tax cut. if you look at the data, and my friend jared bernstein, my liberal friend jared bernstein
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is on the same side as kevin has let. it's the middle income wage earners who benefit most.haslet. it's the middle income wage earners who benefit most. this is the quintessential middle class tax cut but it's not been messaged properly. >> let me say the elderly who live by being able to invest and have something to live on when they retire, the retirement community is suffering because of course we know what the rates are interest and bonds. and our retirees will get in worse shape. >> sit tight. according to reuters, pfizer is apparently leaning toward abandoning its deal for allergan. not the adjusting, not changing, not tweaking, but abandoning its
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deal. that is sending allergan stock down 16%. the stock has been down all morning. i think many ininvestigators, a lot of hedge funds had pretty much assume this had might happen. but again, according to reuters, pfizer leaning toward abandoning its deal. >> perfect example. these tax games, that's what they are, little political games, should not be driving stock prices. earnings and inventions and entrepreneurs, not tax games. >> every single pep anny that allergan shares went up should into the have happened in your view. >> i don't want to say up or down with allergan. i'm not an expert. but when you see what you just reported, it's another example of why the tax system is screwed up where these changes are effective and hit the shareholders and makes the world go round. >> my thought was they are going probably after allergan and
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phaser because of the time frame that they had structured. one does wonder if it there is a potential for any claw backs of deals that have already been consummated. >> here is the good news. nine months. all you got left. things will change. and we won't have to worry about all this stuff. >> let's talk about that because we have to get it in. senator hutchison, let's talk about wisconsin. if cruz comes in over governor kasich, does kasich -- must kasich drop out in order to sort of unite a the gop against trump? and do you believe he would drop out if pressed? >> i don't think he should be pressured to drop out at all. these are the rules. everybody knew the rules when they decided to run for president. and i think john kasich has very good reviews. he is -- >> i'm just saying when you look
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at the votes and the electoral college vote takes as that are remaining, if he loses wisconsin, does cruz have a chance against trump? >> even if cruz wins wisconsin, can he for the win the first ballot. regarding donald trump, if donald trump loses wisconsin badly, then he's going to have a harder hill to climb for the first ballot. >> sadly. >> if he loses by 10 or 12 percentage points, all the congressional districts are swept by cruz, that will slow the trump machine way down. on the other hand, if trump loses more closely by four or five points, the real clear politics average now is about 4%, so may be closer than folks think, if trump wins of course he's in good shape. so john kasich is a fine person. this is not a good about you should do this. it's unbelievable to me. they are pouring money in.
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club for from pouring money in. they're the attacking trump and kasich. cruz was running ads good causesic. >> did you believe that today could be the fimg daft john k s kasich bid is this. >> no, i do not. this is america, it's a great country p. he has every right. >> and i agree with larry on that. >> thank you both. i am a technological breakthrough. this morning i read over 4000 articles on leukemia. in less than a second. (speaking japanese) i can understand euphemisms, idiosyncrasy and complex metaphors.
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welcome back to iconic in seattle. a lot about entrepreneurship these days is tied into the idea of disruption. new companies that take existing or old businesses and basically put customers, the piereers clo to the company providing the service or the proproduct. and it that's what our next guest did some 15 years ago. robin was the co-founder of zip car, puts cars where the people are and made it impossibly easy to rent a car. now looking at the transformation of nothing less than capitalism by the new economy. so when you started zip car, mom of three, you have this idea, did you have any idea that you were mints what we now call the
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sharing economy? >> no, i didn't. but i did know that i was enabling us to share a resource easily among lots of people and that i was putting the power of that twrransaction into the han ever individuals and that was the breakthrough that we made it as easy to rent a car as to own one. we had to leverage technology and make it happen. >> i know you've written a lot about the sharing economy. did i characterize it correctly that basically what the sharing or the new economy does is put people closer to businesses and make the transaction simpler? >> yes, that's one of the things that does. we're using technology to make complex things simple and give the power of the corporation or large and handing it off to the individual. so we have this new collaboration that was impossible before, but it's the internet and technology that is taking away the transaction costs, making it really simple. >> you've exited zip car now.
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but i have to ask you, as you look at uber and lyft, the ride sharing services that are kind of dispended from zip car, if you were still at zip car, would you regard them as rivals, competitor, friend, frenemies, what? >> if you think about transportation, it's based on what the trip actually is. so uber and lyft are taxis and there are some places where i would always take a taxi because parking is expensive. whereas zip car is used more for trips that i want to go out of town for the weekend, i want to have the car physically for four hours. so it never was used for short taxi-like trips. so it's a complement of changing how people feel about how they get around. it used to be that your car did everything and now people are real lying, no, sometimes i want to use different ways of getting around. >> now let's turn to the bigger broader question of how the
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sharing economy which disintermediate eights, fabs city word, a lot. is going to change society, change capitalism, change social structures. benefit structures. it is big. >> you understood, yes, it is. and so if we think of the old day, the company owned everything, everything was inside, it was vertically integrated. and that that has banks
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worried. >> i think banks are somewhat nervous, so there is a clear pull back on the construction side. >> most of the construction since the recession has been in pricey high end amenity building z like this one, not in the more affordable units where demand is highest. back to you. >> so what does it mean for the stocks in the real estate and home building space? let's bring in alexander gold fash and megan mcgrath. alex, slowing rents and rising vacancies, does it mean it's not ro profitable? >> if you look at the past, this cycle, we have 7 million more represent renters and only overbuilding by 70,000 more units. so the landlords still have the upper hand. if you look at what happened last year, after years and years of a recovery where you would expect moderation, last year
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they were able to boost rents and increase the rents they're pushing. this year not surprisingly as diana mentioned, rents starting on slow. that said if you look at the reits performance, last week we downgraded camden based on outperfo outperformanc eflt. p. >> so maybe best days are behind them. >> they made a lot of money, still producing very good earnings growth, but that rate of growth is starting to slow. essex is buy, all others rated hold. >> is does the slow down mean g days are paed for home builders? >> it doesn't necessarily mean good days are ahead. higher rates sometimes are good for the home builders. it encouraging folks to move from rental to owning a hoemg. our problem there has been in
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the first time buyer market, your typical move from a rental into a home, that market has been slow. credit remains pretty tight if folks. you don't have a lot of cheap price land for the builders to build on and that helps the rental prices go up. we're seeing a little bit of movement there and that could be why you're seeing some of the say say can says going up. >> what are the strongest markets and weakest markets in terms of the rental markets? >> the strongest markets we've seen obviously new york city, places like d.c., san francisco, that's where you are seeing the rents highest. but you're starting to see more young people move to the second tier cities, kansas city, st. louis, the smaller cities where it's more affordable and that's where you're starting to see more demand and rent go up gone. and developers say the problem is that so much of the construction has been on the high end, so the high end renters will see easing in
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prices, but on the low he said, you're n oig, you're not seeing construction in apartment rentals, so those struggling the most will continue to pay higher and higher rents. >> and if you look at what is going on in the cycle, you had a lot of the subs go out. so if you try to build what is called stick building, it's hard to get labor for that. and when you think about what has gone on about land prices rising, new development is harder to pencil and then you combine in the labor shortage where you have folks who walk off the job site because the next site is paying more, so iá is difficult. so the market that is diana just mentioned out in the kansas citys of the world where you're trying to build more stick build garden style apartments it's harder because of the labor shortage. and when you go to the urban areas, the map doesn't pencil. so there is a governor on supply, but for the time being, renters while they may not feel it are benefitting in the sense that the rate of growth is
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starting to slow. it's still high and that still hurts the pocketbook. >> megan, your top picks for -- >> i'd be interested to know -- >> yeah, sorry about that. top picks is toll brothers. we like that luxury high end market. áu$eir exposure especially in california where rental rates and home prices continue to go up. >> diana, last word. >> yeah,xi wasdevelopers say because there is so much building on the high end, it become the b and b becomes c. i'd be curious to know if any of our guests agree with that. >> it's one of the reasons we like essex. what is termed a b building is suddenly a because the rents are so high, but it is true as the few product can comes out, it d age the product built five, ten years ago and the apartment
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reits have been starting to sell those aged out. and they sell to someone else who takes on that and the reits tend to focus on the newer more añtype properties. >> guy, have to leave it there. thanks so much. let's go now to oil. crude oil today hitting a low of 3524. low he isseest level since marc. what is next from here? for a "power lunch" exclusive, jeff curry, goldman sachs, maybe the first to call for oil in the 20s. you were ridiculed for the call, you were proven correct. what are you calling for now is this. >> we maintain our view. we need to keep prices so they create financial stress on the
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balance sheet, take the production out of the market, rebalance it by a third quarter, then we can start getting positive toward the end of the year. >> and i want the audience to really dig into what you just said. because you're a commodities guy. you're not a stock analyst. but what you're saying is we need problems on the corporate balance sheet in order to fix this oil market, are you not? >> absolutely. got to keep pressure on the system. keep capex out of the market, reduce production, keep it below demands. data still shows a surplus. then we start to get the green light to want to get positive. >> we got a little bit into it yesterday, but it bears repeating because this is not a u.s. oil market. imports to america up about a million barrels -- or a million a day from last year. so if u.s. production declines as it is, is is it more than being made up for in increased global production? >> in the current context, yes. but as we think towards the he had owing of the year and we
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start to see the drop in capex create that decline in production, we expect towards third quarterowing of the year start to see the drop in capex create that decline in production, we expect towards third quarter then the answer no. but today, yes. >> what you just said is everybody who has been bullish on oil has been waiting to. when will the decline in capital spending and rig counts trickle through too a meaningful decline in production. >> and the answer we have is somewhere in that july/ewiaugus deep third quarter. we're still seeing drilling come off. and by the time we get into the late third quarter, fourth quarter, we should see -- i want to emphasize, it look at where production is today, 9.1 million barrels a day, off of a peak of 9.75. >> which is great, but what if a run boosts up to a million, suddenly we have 300,000 more barrels a day than we did before u.s. production went into
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decline. >> that's obviously a risk and i would put libya into that camp, as well. >> or ira >> iraq to the up side. but then we have offsets. we think about what is going on in venezuela. i like to think about libya and skr venezuela as offsetting each other. so it pushes the recovery further out. >> in the meantime, is it possible that we see oil in the $20 range once again before then? >> absolutely. when we positiositio think abou containment and saturation, probably more of a probability on products. we did raise our trading range from a 20 to 40 up to a 25 to 45. one of the key reasons for that is time has passed. the probability of reaching the containment issue or blowing out stories a he as we like to call
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it as declined somewhat. >> you're talking about when storage gets so full, i have no more room, i have to tell you my incremental barrels for nothing. >> that is more of a local issue than a global issue. blowing out storage on a global basis is -- >> but you still have a $25 band on your bottom range. >> and that's more likely in the spring. >> quickly before we get you go, is there any commodity you are recommending? >> short gold. sell gold. >> gold has been hot. >> let's think about why we see that. i like to say it's the one, two, threes. market is pricing in one rate hike for this year. fed has signaled two.
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data is signaling three. you put that together, the market needs to trade interest rates hire. what do higher interest rates typically do to gold? send it down. >> all right. jeff curry, sees the possibility oil goes back into the 20s. short gold your best commodity idea p . we got a lot done in four minutes. ceo pay and company performance, they don't always go hand in hand. but just how out of hand are they? shocking numbers ahead. plus the worldwide fallout from the "panama papers" continues. we'll tell you about the first major heads to roll. and a billionaire star of billion dollar buyer will join us live from the iconic conference in seattle. yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird.
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they found out who's been who? cking into our network. guess. i don't know, some kids in a basement? you watch too many movies. who? a small business in china. a business? they work nine to five. they take lunch hours. like a job? like a job. we tracked them. how did we do that? we have some new guys defending our network. new guys? well, they're not that new. they've been defending things for a long time. [ digital typewriting ] it's not just security. it's defense. bae systems. we're always looking for ways to speed up your car insurance search. here's the latest. problem is, we haven't figured out how to reverse it. for now, just log on to compare.com... plug in some simple info
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and get up to 50 free quotes. choose the lowest and hit purchase. now...if you'll excuse me, i'm late for an important function. compare.com. saving humanity from high insurance rates. some of america's biggest companies are reporting salaries including ceo compensation packages. how did ceo pay and company performance match up? mary thompson has been looking at the thumbnumbers. >> is this a very early read, but it does gave a hefty raise. 42 s&p firms filed by february, and keep this mind this is a small sample, most companies file proxies by the end of march. this is what they found. median ceo pay rose 13.4% from
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2014 even as median revenue growth and total shareholder return rose in the low single digits. median ceo pay at these companies $9.3 million. up from 2014. base salaries ticked up slightly to just over a million. annual cash bonuses fell to $1.73 million. that reflects results from to 15. long term incentive bonuses was a healthy 26%. the ultimate payout may prove to be very different from the value reported in the approximate city. remember these are tied to the company reaching specific goals, so ultimately they can be more or less. compensation advisory partners says these big long term bonuses reflect two things. they can be used as an incentive to keep the executive around and they also reflect the stock at the end of fiscal year which ends in july. so that was basically close to
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the highs of the stock market last year before there was a big selloff, as well. but again, heavy long term incentives. >> mary, stick around. let's bring in former ceo. steve, since you sat in that chair at would be point this time, we hear so often especially when it comes to earnings season about how companies are manipulating earnings. they're buying back shares. can't the same thing be done so that a ceo's pay will be bolstered, as well? >> normally what you want to do is you want to see ceo pay all executive compensation al line with long term shareholder value creation. and so when you seeline with long term shareholder value creation. and so when you see a misalignment like this, it does raise questions. the important part, when you look at the cash compensation, which is what you're comparing last year's shareholder value creations, cash compensation was actually flat. so it was the long term incentive portion of it that was up. and if i'm on a board of
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directors and i'm seeing my earnings flat to up slightly and i want that to improve, the way to do it is to give stock options that will vest over the period of time and create value over the long term. thereby aligning the executive's compensation and their perspective with long term shareholders'. so it is the right move and you don't know whether that will pay out. it could be zero or a lot. you just don't know. but you have to value it and that's what the proxy does which is it's a little confusing and some of the push back with the s.e.c. i think the issue is though that the boards are trying to align long term compensation with long term shareholder value creation. >> two points off of that. first of all, as you said, the long term compensation does have certain metrics tied to it, and melissa, something you brought up about the buy backs, there is movement to have boards take a look at that and take out what the buy back impact would be on
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some of the ceo pay. a couple proposals suggesting that. certainly something we're starting to hear about in the world of ceo pay. from becau >> because the choice is a buy back or dividend and i would think a differenvidend yield mi t)e(uá i think something bugs y about this. >> i can't believe that we're having this discussion every single year because we have to have this discussion. because i don't disagree with what steve said, however, in either tricks is what we all come back to. a great story in the "wall street journal" taking a look at how michael pearson was compensated. and he brought up one hetrick that is always talked about and that is that 54% or over 50% of the companies base total long
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term compensation on the total shareholder return or stock price. that is absolutely absurd. why are they not using return on investment capital? that would make it a little less likely that the buyback would have an impact. >> mary, i would imagine these sorts of things come up every year. >> once again, it will be a look at performance and again, as herb pointed out, any company can use a number of different pet trick hetrick metrics. so this is a continuing conversation. i think what we do have to point out, there are still issues maybe to address here, but the boards continue to refine it. maybe not as much as a number of people would like including herb. >> steve, what are some of the most egregious things that need to be corrected about ceo compensation right now? >> part of it is this proxy thing and i agree with what herb said. it's hard to just look at share
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price alone because you have other factors involved that are but i think how it do you at line ceo and executive actions with the long term shareholders. that's the most important thing. as the ceo myself, i was always trying to align our actions or long term strategies with our long term shareholders. but suvhort term shareholders wt it now. and if that conflict -- >> are you singling out hedge funds? >> any short term. my view as a ceo was if i could get everybody on the same end date, it would allow me to sync up my plan with their plan. but ite's not always poblgssibl. so it's important that companies layout plans and be clear on what they expect to deliver. and then align compensation with that. and that should be long term
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oriented. >> and again if you read the cbna disclosures basically on the pay for the executives, that's what they try do in the long term incentive which tends to be the majority of a ceo's pay again tied to certain metrics. not just one. there may be one that is more popular, but they do lack ook a number of different factors when deciding the pay. >> mary, thank up. and of course our thanks to steve and herb. big protest in ice land today where we're seeing the first heads to roll in the "panama papers" scandal. all the latest details coming up.
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they go after this. but the question is when you have a government that is run by the same people who are participating in this offshore tax benefit, the question is how aggressive can they be. and we're seeing some countries move to simply block coverage of this or to ignore it all together. you can definitely see serious political and economic and geopolitical repercussions. >> do we know how many of the 11 million or so payables of documepages of documents have been going through or has anyone hinted that a bold faced american name may come out? >> we didnon't know, but presumy
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they have gone through a lot with computer aided searching looking for key names, key search terms. they say that at some point they will make the document dump public to some degree. we'll have to see whether that comes to pass. as of now, only the journalists involved with seen the actual documents. and in terms of american, it's a big mystery right now why there are not american names that have been revealed in this press coverage so far. i ccan tell you i talked to several sources who tell me that they know for a fact that in are american clients who have done offshore shell entities in those -- other law firms. not necessarily moss sack gokno gone say came. >>eamon javers, thank you.
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all of you trade better together, so today let's go hunting for something very rare. yield. dividend yield above 9%. the i shares etf, pipeline etf and etf containing closed end funds. are any of these products worth your money and the risk? max, i'll begin with you. when i see 9% in this kind of no yield world, i'm thinking i'm buying some risk. are any of these worth to you? >> it's a great question and i think you should look at it suspiciously priced assets with all the fear that you would a deeply discounted, but not only something you want to buy without a lot of skepticism. that being said, you're trying to buy net asset value that you think doesn't really fully describe the value of what they hold looks the best.
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i know it's 9 loes of the three in terms of yield, but what you're really saying is i don't think this will get worse before i still keep clipping my coupon. so trying to buy income taking some risk with capital, but income is so much higher that i think it is worth it. so closed end fund are most appealing to me. but things that are too good to be true more likely to end in tears. >> the 2:00 a.m. hot dog on the street corner not always your best bet. analogy noted. stacy gilbert, to you on the options side or any side. are any of those three high yielding etfs worth the risk? >> i think you're right, yield is where investors are looking this year. but of those three that you highlighted there, the one area that we are actually seeing inflows is into the mlp sector. amlp. we've seen about 700 million inflows in this year, similar to what we saw last year.
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of that amlp is about half of the inflows that we've seen this year. so there is definitely money still did going in there with the yield that it's offering. that being said, i would stress and to max's point, it doesn't mean investors really love the underlying aspects. in fact in the component stocks that make up amlp, we're seeing more cautious flow with investoring suggests up side may be limited. if you look at the performance year to date, at about 14%. tack on the yield, total return is closer to down 10% or 11%. so we think it's the yield captured here. that being said, in mlps is where we're seeing the money go. >> okay. max and stacy, thank you very much. and for more trading nation, go to trading nation.cnbc.com. back now to the king of mermaids, tyler mathison at the iconic conference who doubt with a triple fat nonfat latte.
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>> can't get a good cup of coffee here in this town. i'll be joining the west restaura restauranteur in america. we'll talk oil business, politics, anything under the sun. the pursuit of healthier.
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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. welcome back to seattle. and iconic 2016. joined now to talk business and more with the biggest bad ass restauranteur in america and our own guy, good to have you with us. you will be talking to entrepreneurs here, people who either have just started businesses or want to.
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what would you tell them they need to understand most? >> the thing that shocked me the most is is that people don't know their numbers. and the first thing that i tell everybody, know your numbers. when i go in and meet these new companies, i can tell within three minutes if they have any idea of what they're doing when it comes to the economics of their business. so first thing more than anything, know your numbers. >> when you go in and you have bought a lot of restaurants, a lot of businesses over the years, is that what you focus on most? you're known as a pretty sharp cost manager. let's put it that way. >> definitely. and part of it is because i know my numbers. i tell everybody the one department that better be strong is your analysis department. i'm not worried about the journal industries. anybody can do that. but have an analysis team that really dig into your numbers and know if you're lending costs is truly 0.2 of a point.
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know your costs to every tenth. and at the end of the month, you can see where you need to fix those numbers. >> as these folks here are contemplating starting businesses or taking a business they have started and making it grow, how do you see today's american economy? is this a good time to start a business? how is business? >> number one, business is good. but anytime you've had six good years in a row which we have coming out of basically the recession in '09, you will get choppy. you won't have six, acceseven, t years in a row of strong growth. now it's just looking at each other and saying what will happen here. ic i think everybody is waiting for somebody to not being right. it's in the bad, but not the growth of two years ago. >> are people waiting to see what happens in america in terms of who our leaders are?
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>> that could have some impact. every time we're going to shut down the world, congress and obama, everybody stops spending money if a littfor a little bit. so i think everybody is waiting to see what happens. we get a new president in '17, the economy could boom again. >> the theory has been and we've talked about it on cnbc tons the idea that lower oil prices, lower gas prices means that americans have more discretionary dollars in their pocket to go to your restaurant. is in a a direct cause and effect connection that you see or have seen? >> i come see it, but then after it's happened for a couple months, what else is happening in the world.see it, but then a it's happened for a couple months, what else is happening in the world. economy liists always love to h everything tigg efigured out fo. retail has struggled. but it is a fact that people do have more money in their pocket
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because they're spending a few thousand dollars less per car. and most of america does have two cars and drive to work every day. >> so the flip side of this, i know you've talked to sully about this, you're based in houston. and a lot of your restaurants are in parts of the country that have prospered under the oil boom of the past decade or so. and now are suffering a little bit. are you seeing that show up in your newspapers? >> you're definitely seeing it show up in the numbers a little bit in the houston area. is it a lot? it's not a lot. but you just don't have the crazy oil parties anymore where they're coming in and spending $10,000, $15,000 on a private party for 30, 40 people. your conferences that you -- you were having an energy conference in houston every single week. and now we have the big otc coming up and you will probably have 20,000, 30,000 less people. so when you have a convention and you bring in 30,000 less people, it isn't going to fill up the restaurants the same or the hotels the same.
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>> you were known as a guy who pays attention to every detail, you're in the kitchen, you're on it. of all your restaurants, what is your favorite dish to eat? >> i don't know. >> what do you like? >> there is nothing better than a good old juicy steak, but also nothing better than a great piece of fish. i truly don't have a favorite dish and i truly don't have a favorite restaurant. you could be at disney eating a t-rex or you could be at mastro's or all the ones in between. >> you don't have a favorite baby. >> i don't have a favorite baby. >> let me turn to mr. trump. you bought a trump property. he was no longer really involved with it. but you're familiar with him. you know him. you bought that property at a fraction of what he paid for it. i'm asking what do you think of him as a businessman? not a political candidate. is he as good as his rep?
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>> well, are we talking about as a promoter or businessman? i think he gets the oscar, the emmy and everything else for being the greatest self-promote tore of all time. he makes the barnum and bailey look like an am xhur. amateur. so you have on give him credit at creating a name that people will pay him millions of dollars a year to license his name. as a businessman, does he make things happen, yes. he has the entrepreneurial spirit where if it takes a city three years do, he can get it done in a year. so does he know how to make things happen, absolutely. so as a good businessman, yes, absolutely. >> that's a pretty complimentary review p of donald trump. you have to look at what he's accomplished and he's still one of the richest people in america and he's a guy that knows how to make things happen. i know how to make things happen. >> we have a show tonight called billion dollar buyer. >> it is.
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two new york companies tonight. >> brand new fresh episode tonight at 10:00. you will see the man right there. thanks. we appreciate it. i forget when i'm supposed to toss back to englewood or break, but which ever, power lunch continues. >> he fibbed to you. he has a favorite restaurant, it's in galveston, his hometown. that's his baby. >> what do you say? >> i could say that. any of them in galveston. i have a half a dozen. you've been there. >> he has half a dozen. >> not the bad. good to see you. thanks. meantime can the run continue is th continue? four calls you need to know about in street talk is next. getting unlimited data for your family is a struggle.
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at ally bank, no branches equals great rates. it's a fact. kind of like social media equals anti-social. hey guys, i want you to meet my fiancée, denise. hey. good to meet you dennis.
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. time for street talk, let's start with a little stock you might have heard about today,
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allergan. the whole pfizer thing, forget about it. town and company takes a deep dive in evaluation, even if the deal with pfizer is canceled, a stand is lone allergan should be worth 255 to $275 a share. $220 a share, trading two times 2015 pass flow yield. if you compare biogen and amgen, the valuation should be higher. analysts note if the deal is canceled allergan could take out another buyer. >> those names aren't getting too much of a bid in today's session. netflix is getting more bullish raising estimates into the quarter, kicking up $130 price target. they are expecting an inline quarter stronger guidance. they also point out
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international net ads and average revenue per using and contribution margin are more important met ricks and u.s. ad numbers are the ones behind the soft volatility. >> if you're that bullish, why not raise the price target. >> i like -- i really like it. >> starts coverage with a buy rating and notice this could shine by 2018, analysts said wendy's made substantial progress into the company and they sout off assets and you have a visible path through higher earnings and base case price of about $13. we'll call that their target. 18% higher -- >> gaining traction on the four for $4 menu versus mcdonald's and burger king's 2 for $5 menus. you couldn't make this up.
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next up, in particular, 19 bucks in general, they do not feel about the regional banks and key focus areas will be energy related reserve and up at the cross sector 1 to 2% and expecting no eps for 2016. 16% over 2017. >> example of second and third derivative impacts, it's a cincinnati based bank and worried about exposure to oil and gas. under radar call of the day, a philadelphia base the chemical company, upgrading to an overweight to sector weight. $32 on the tank and 20% upside, chemtora under the radar name for the day. a big oil headline from the
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kir kuk region hit by an explosion according to north oil company in iraq. wti crude -- by the way want to bring up brent, that would be impacted. we'll bring up brent in a second. the news there is that an oil well in north iraq apparently has exploded or been hit by some kind of explosion. brent crude up just about the same. we'll bring you more on this developing story as we get it in. for now a short break and more with cnbc right after this. [dad] i wear a dozen different hats
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and again to bring you up to date on a breaking story. an oil well hit by an explosion according to a north oil company official. 120 miles south of baghdad as we understand. we're watching oil respond on these reports. >> north oil company kind of an odd name, one of the 15 or 16 major iraqi oil companies. it is a major player. no more details but iraqi oil production very important to the world. do 4.4 million barrels a day. any decline in iraqi production would have a meaningful impact on total daily global oil production. >> and again we're seeing some reaction, wti now up 1% as well
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as in the trade for brent crude. all right, i'll see you tonight on 5:00. we'll look at the allergan fallout, a top hedge fund holdings, a lot of pain being felt on the streets. >> ""fast money" at 5:00. thanks for watching "power lunch". >> closing bell" starts right now. and welcome to the closing bell at the new york stock change. >> i'm bill griffeth, aller gan shares sinking huge amount as pfizer reportedly is ready to walk away from the $160 billion deal between the two pharmaceutical giants, down 16%. this after the government announced new rules that would eliminate the tax benefit of that deal. so could other mergers that might involve tax inversions be

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