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tv   Power Lunch  CNBC  April 6, 2016 1:00pm-3:01pm EDT

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jpmorg jpmorgan. that is not going to change. energy is just not a big issue at 2% of the whole book. and not all 2% is going away. i think it is misplaced. i think this is one you want to own if you -- >> good stuff. j john, good having you here. "power lunch" starts now. welcome to "squawk box." he "power lunch." i'm here with melissa and brian. we kick off with big government, big money crackdown. we're talking tax inversions, oil deals perhaps going bust. and even your nest egg. so let's start with the $160 billion deal gone bust. pfizer and allergan calling off the so-called tax inversion merger after the u.s. government put the deal in its cross hairs. let's bring in jared bernstein, senior fellow and james
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pashakokis, both cnbc contributors. i start with jared bernstein. good to see you. >> hello, michelle. >> yesterday, president obama touts this change by treasuries as a great thing, citing understandably one of the great things about america is its rule of law, but apparently missing the irony that by changing the rules in the middle of the game he has undermined the rule of law. how on earth can this be justified? >> laws change all the time when there is a problem. i think the government -- >> this is not a law. this is just a regulatory change that has gone around congress. >> these are new rules on the books that have to be followed. if people don't follow it, they will be in violation and there will be actions. i think the important point here is that there are two very significant problems afoot. one is tax avoidance by industries who just moved their tax mailbox, not the operations, over to foreign markets in order to avoid the tax bill, and the
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other is a group of -- a small group of advisers who give conflicted advice it retirees and that costs extra money and it shouldn't. >> let's stick with -- >> one quick point. first, i want to -- one quick point. in both cases, i think the bad actors here are a minority. most people pay their taxes, most financial advice is not conflicted. >> jared, we are one of the few countries in the world that uses a worldwide tax system, almost nobody else does it. everybody else has gone to -- this is not about a combined company, not paying u.s. taxes, they would pay taxes on the money they earned in the u.s. -- >> this is all about -- you're right that our corporate tax code is a hot mess, that desperately needs reform. however, let's be very he clear. this is purely about tax avoidance. i'm not saying they wouldn't pay any u.s. tax, but they do this to cut their tax bill. they'll pretty much tell you that. that's not inside information. >> james, removing the incentive
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for american companies, to move their headquarters somewhere else, everybody agrees it is a good goal. is the way president obama doing it the right way? >> listen, i have been hoping during this whole sort of spate of inversions that this could be a catalyst to come together to fix the real problem. the problem isn't bad guy corporations, wanting to cut their taxes. wanting to cut the tax bill is somehow a bad thing. but the problem here is we have an uncompetitive tax code that say burden for corporations, so this is how they choose to get around it. the solution is for white house and the congress to come together and do meaningful corporate tax reform. they have not. so now we have created this new regulatory barrier to prevent inversions. and so right now there is no catalyst. i think what is going to happen is the continued status quo which we have corporations continuing to labor under an uncompetitive tax code. >> jared, do you see this going another step?
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for example, corporation based in connecticut that may want to move to texas? do you think this is first step in expanding what the government is saying, companies can or can't do physically? >> no i don't think so. in fact, you know, companies are welcome to go ahead and move their headquarters wherever they want. what they can't do is invert, which is a very specific thing. it is not just as jimmy suggests lowering your tax bill. i mean, there are lots of companies that try to do that and many are very effective. what they're doing here is they're moving their tax residence, taking advantage of american infrastructure, american markets, american educated labor force, but they're not paying their fair share for that and that's why, you know, the vast majority of people look at it say these corporate inversions are simply tax avoidance, and that's something that any government has a right to try to prevent. but, no, it is a very distinct from sort of some massive shutdown of corporate mobility, of course not. >> i think that's an interesting issue. >> go ahead, jim. >> that's an interesting issue
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because, remember, we have some presidential candidates in this race who are very much against corporate mobility who would prevent companies from moving operation overseas. i do -- i am concerned this is sort of first wave of government saying, you know, we're not going to let you move headquarters overseas, it is a new or government power in action. >> under inversions, nobody is moving anything except their tax mailbox. it is all on paper. >> there is a reason for that, i want you to look at this chart. we're going to show it to the audience, the oecd countries, the blue line, that's the corporate tax rate, the united states is the red line. look how it changed since 1991. we are uncompetitive. and one of the rules of government is to help us stay competitive. >> great point. great point. >> they're faing, jared. >> so great point. first of all, that's a really -- you mackke a great point. your chart is not very great. it is misleading. it is showing the statutory rate. the effective tax rate that most
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corporations pay, especially multinationals is way below the 35%. pfizer paid something like 7% effective tax rate in 2014. the important thing -- >> the effective rate -- >> the statutory rate is too high. they don't pay it. here is the thing. you ask exactly right question. how could we become more competitive? and the way we become more competitive is by simplifying our tax code, by closing down some of the egregious loopholes that make companies that should be focusing on pharmaceuticals or medical devices or making hamburgers or whatever, instead they're focusing on how to implement more tax avoidance. so i think simplifying the code and proving our domestic infrastructure would really help our international competitiveness. >> but, jimmy, sorry, go ahead. >> so, jared, until we close these loopholes, it is okay by you for a government agency to say, you know what, we're going to enact the rules and shoot down mergers as we see fit? >> well, i wouldn't put it that way. i think what they're trying to do is shut down a particular type of merger called a
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corporate tax inversion which is not that in the interest of economic efficiency, it is not really moving your operations overseas, it is a pure tax avoidance measure to move your -- to move your tax residence, your mailbox -- >> you say that like it is a bad thing. >> that is a bad thing. that is definitely a bad -- >> tax burden -- >> tax avoidance, that kind of tax avoidance is a bad thing. if we have a fundamental disagreement there, so be it. but, yes, i think that's -- >> tell the share holders who benefit from a lower tax rate for their companies. >> the problem is you can't -- you can't pay a 7% tax rate to -- and hope to keep up american infrastructure, support american markets, support our education system. do you think our infrastructure is adequately funded? >> we spend too much on other stuff. >> you didn't mention one year where pfizer's tax rate was under 10%, but their average over ten years is 22% effective. >> fair point, fair point.
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>> this -- i think actually jared indirectly brings up a very important point in this discussion, which is taxes are hard to understand. they're a hard political sell because they're so complex that you can take one year of anybody or any company's tax rate and say you didn't pay anything, but if you look over 20 years, the average is high. politicians can eat -- part of the easiest thing they can use to make a point either way. how do americans cut through the crap and figure this out? >> well, listen, since nothing has been happening, even though -- everyone agrees there is a problem, but there is no action. i'm in favor of some policy innovation here, which would be to eliminate the corporate income tax and have that tux burden go to the shareholders. we can just tax american shareholders, raise your investment taxes, ordinary tax rates and tax the shareholders where they live. much simpler system, big jump, but nothing is happening on
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these more incremental reforms. >> five of us need to go to dublin and do a month long investigation involving whiskey and tax rates. >> and guinness. >> we got to go. breaking news, sorry, sorry. >> sorry, go ahead. >> thank you. to breaking news from phil lebeau. phil? >> chrysler announcing it will be cutting one shift from its sterling heights manufacturing plant just outside of detroit. that means that it will be laying off, starting in july, 1300 workers. that's about 41% of the workers at that plant. that's the plant that builds the chrysler 200, this is all part of chrysler quickly phasing out manufacturing of sedans. they have announced this some time ago, they're shifting almost all of their production completely to trucks and suvs. this is part of that shift. so starting in july, they will be eliminating 1300 jobs at the sterling heights plant. don't be surprised if we see those jobs brought back at some point in the future had they begin production of an suv or a
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small pickup truck at that plant. but certainly not a surprise given what we have seen with the u.s. automakers and production of small cars. >> and on its surface, it looks like bad news, right, because we hope -- >> it is bad news, sure, for 1300 people. >> of course, but to your point about getting rehired, let me ask you a technical point, chrysler for first time in years is rolling out a new minivan, taking the pacifica and turning it into a minivan, expecting big things. do you think this is less a job cut as more of a we can't make those here, we're going to make them there, so these men and women will get rehired to your point somewhere else to work on a bigger vehicle? >> i think that they will be rehired because they're not going to let that capacity in sterling heights just sit idle. eventually they will be replacing that capacity with an suv or a small pickup truck and you will see a lot of these -- maybe not these exact people but 1300 jobs, they will be hired again. they will be filled again as they increase that capacity at
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some point in the future. but for now, we have known this for some time, sedans, it doesn't make much money for the automakers here in the u.s. and that's why we're seeing chrysler accelerate this shift away from that. >> the plants are different. you've been to many of them. are they different? sometimes you can't make a vehicle here that you can make there, correct? just the way it is built you can't -- >> you have to retool the plants. your plant is pretty much structured to build either cars or trucks, some have flexibility, so that they can do both, but you need to have that mapped out in advance. you can't flip a switch and say, you know, next week i think we'll build an suv here. you have to have the tooling available. >> let's hope you're right and they are rehired. phil lebeau, thank you very much. now, let's turn to big government's crackdown on a big oil deal or perhaps lack of an oil deal, the justice department suing the block halliburton from buying baker hughes.
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t let us bring in an analyst with buy ratings on both baker hughes and halliburton, brian omer with gmp securities. brian, less i guess on the government side, more on now what is going to happen, let's say the government suit is successful. and the deal goes the way a pfizer, allergan and is canceled. how good of a position is baker hughes now left in? >> i think they're left in a conservatively top position among the pr group. they'll have a net debt neutral balance sheet. have almost $6 billion in cash after a $3 billion breakup fee. assets available and full acquisitions available to be had. there is a variety of assets changing hands now, going to private equity hands. where baker could be stepping in and buying those, number one. number two, carrying probably 500 to 600 basis points of margins due to the halliburton deal because halliburton has to
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approve the facility closures, plant layouts, things like that, layoffs of personnel. they're caring excess, carrying 300 basis points in q 4 of this year, last year. made 500 to 600 basis points of incremental costs they're carrying now. >> they have until april 30th. either party can walk away since there was no regulatory approval. let's say they go forward with this suit together with the government to try to get this deal through. is their case stronger because there might be a need for consolidation within the industry. i would imagine pricing is not very high in this sort of environment. >> that's an understatement. pricing is abysmal now. i don't think that the best path forward is to sue -- is to fight the suit. they still have to go through eu approval and approvals by other regulatory bodies as well which have not come to fruition at this point yet. they can find out they run into hiccups with the european commission. they have that issue. and you just completely kick the can further and further down the
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road. meanwhile, baker hughes businesses is degrading in the process. i think it is very limited chance they could win this suit. >> brian, thanks for your time. straight ahead, third leg of the government crackdown, how new rules will change the way you save for retirement. you're watching cnbc, first in business worldwide. at ally bank, no branches equals great rates. it's a fact. kind of like grandkids equals free tech support. oh, look at you, so great to see you! none of this works. come on in. the first stock index ♪ (musiwas createdoughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks.
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lunch." i'm melissa lee. the u.s. government out with new rules that could have big impact on your retirement savings. mary thompson and sharon epperson are with us. let's start off with you, mary. what are the changes? >> this is the obama administration's plan to protect some small investors. the goal is to prevent the retirement accounts of small investors of being eaten up by high and unnecessary fees and commissions. under the so-called fiduciary rule, they must work in the client's best interest when recommending investments for retirement accounts. this means they should take into account the appropriateness of an investment for a client as well as the cost of making that investment. the rule allows for -- that may carry higher fees and commissions as long as the client is made aware of how the broker or adviser is paid and the client signs a contract acknowledging they're aware of the fee schedule. firms must comply with the standard or acting in a client's best interest by april of 2017.
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they have until january 2018 to comply with other administrative aspects of the law. adjustments made to the final rule from an earlier proposal streamlined a lot of the compliance burdens was concerned about, the new rule gives a broader definition of what can be seen as information about education or retirement as opposed to having this information classified as retirement advice. the financial industry's response has been muted given they say they need more time to did a close reading of the rule which runs a number of pages. >> i think, sharon, a lot of people will hear this and think, don't my brokers always act in my best interest and, surprise, they don't. >> they don't. and they don't have to right now. that's the issue. if you have a retirement account, an i.r.a., thinking about rolling over your 401(k) to an i.r.a., and you use a financial professional, this impacts you. it could impact you greatly. we're talking about over $7 trillion in i.r.a. money out
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there. what people need to know is their broker now only has to adhere to what is suitable for their investments, not necessarily what is in their best interests above and beyond what kind of profit they're going to make. and what they need to do if they don't know what their broker is to ask. some advisers call themselves that but may not be fiduciary. ask if they follow the fiduciary standard. check them out. go to the s.e.c. website. if they're registered with the s.e.c., they must be fiduciaries. and ask the question that some of them never want to answer, how do you get paid exactly? exactly how are you compensated. >> it will shock some people to know they get paid based en wont they sell. all these things are things people need to be aware of. >> and could change under this. there is a carveout for some proprietary investments or products as well within the new rule. >> the big question -- the big issue is many people just don't understand how their advisers
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are compensated or what their advisers really obligations are to them. they never know to ask. i talked to people who are extremely wealthy who said i thought just because it was a broke we ar with a big firm, th were going to do what was best for me. in this cases they can suffer greatly and the white house says the conflicted advice is costing americans now $17 billion. >> this is for retirement accounts. and so for us, for instance, we're not retired obviously, we still have to be aware there is a difference between -- >> if you had a general brokerage account and this is something that has also been out there for some time because the s.e.c. is supposed to -- for a long time saying we're going to issue our own fiduciary rule that would include all retirement accounts, dragging its feet on it for some time and the dol stepped in because it could act under erisa or use erisa as a vehicle to do this to protect retirement savings.
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>> our 401(k) plans, that's already under the fiduciary standard. you're protected there. your i.r.a., that's where you are thinking, okay, now i'm on my own, i going to to make my own investment choices but i need a little bit of help and that's where people get stuck. >> especially for those rolling over from the 401(k) to the i.r.a. that's really the key market there. >> okay, guys, great advice, thank you. still ahead, minutes from the latest meeting of the federal reserve. what are investors hoping to hear from the fed today. could be a real market mover. stay with us here on "power lunch." you may think you can put off checking out your medicare options until you're sixty-five, but now is a good time to get the ball rolling. keep in mind, medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans insured by unitedhealthcare insurance company come in.
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. for some of the other big business headlines you may have missed today, facebook says its what's app messaging platform is fully encrypted and unreadable to anyone including law enforcement. facebook up more than 1%. shares of tesaro are soaring, up 10%. the company says johnson & johnson will invest $50 million into the company, and license a potential prostate cancer drug. if you own a kindle and get frustrated by dying batteries, some good news. amazon will release a new kindle e-reader with a rechargeable protective case and should extend your battery life. shares up 2% today. market flash and for that we go to seema mody. >> puerto rico's debt crisis saga has hit a new level just moments ago. the island's governor signed a
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debt moratorium bill into law, giving him the power to halt debt payments on its bonds including general obligation bonds. the news pressuring general obligation or go bonds to new lows surpassing the levels hit in june when the governor declared puerto rico's debt unpayable. bond ensurers taking a hit on the news. >> seema, thank you very much. well, down a few percent one day, up a few percent the next. just another day in the life of crude oil lately. we'll tell you which way crude is making its latest 5% move coming up. plus, get this, a stock one analyst says could rise 200%. he's been covering the stock for five years, not some random call. we'll tell you that name coming up on "power lunch."
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hi, everyone. i'm sue herera. here is your cnbc news update at this hour. former coal executive don blankenship has been fined $250,000 for conspiracy to violate mine safety standards for his role in the deadly mine
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explosion in 2010 that killed 29 men. supreme court nominee merrick garland was back on capitol hill this morning. he met with illinois democratic senator dick durbin, who is also on the senate judiciary committee. durbin urged job leaders to lift their opposition to garland's appointment and hold hearings. dozens of migrants stranded in northern greece protesting their plight. many have been in that camp for more than 45 days, prevented from continuing their journey to germany. think it is easy being a politician? when rick scott went into a starbucks in gainesville, he got an earful from one angry woman. here is part of what kara jennings had to say. >> you don't care about working people. i'm not talking to you. you don't care about working people. you should be ashamed to show your face around here. >> a million jobs. >> a million jobs. great. who here has a great job? or is looking forward to finishing school? you feel like you have a job
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coming up? you strip women of access to public health care. shame on you, rick scott. >> and there you have it. that is the cnbc news update this hour. i'm surprised he even stayed for the coffee. back to you guys. i would have been out of there. >> mm-hmm. thank you, sue. so gold prices are closing right now as you can see, lower by roughly half a percent. profit taking after yesterday's rallies, move may be muted because we are awaiting the fed minutes, just half an hour from now. the rest of the metals complex is generally lower except for copper, you can call that flat, not a big move there. now to the bond market, rick santelli is tracking the action at the cme. >> indeed, not only do we have the minutes, the mid-march meeting coming up shortly, but there is a lot of extreme levels that the markets are being attracted to that could have very big outcomes. let's look at a few. let's look at february start to ten-year, you see that the low closing yield for the year was
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in february. right around mid-160s. we're getting close. up several plus basis points today. look at one week chart of the boons. they came within one day -- close at seven basis points, they moved up several. foreign exchange is the battlefield. let's look at some three-year charts, shall we? euro versus the dollar. above 115. boy, big runway. dollar yen. right now breached 110. 109-110, below that, big runway. and if we look at the last chart, the dollar index, you see it all in that chart as well. anything much below 94, currently only trading half a euro higher than that. big open field. what we don't know is will these levels hold or will we go through, like, a hot knife through butter? i can't tell you that. what i can tell you is those levels are big for the traders behind me. sully, back to you. >> rick, thank you.
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it might be a tough day for bill ackman. why not? been a tough year for his investors. ackman holding a conference call with those investors. his hedge fund suffering its worst ever quarterly loss, primarily but not only due to the so far disastrous investment in valeant pharmaceuticals. which brings us back to you. the great debate of whether it is smarter and better for you to pick single stocks or try to diversify using etfs, exchange traded funds. joining us to talk about this and get some ideas, heidi richardson for u.s. i shares at black rock onset and nancy wrangler at hartland financial. thank you very much. before we get to your ideas and you brought in picks as did nancy, my only beef, i wrote something about this on my facebook page the other day, not knowing you were coming in, my only beef with some etfs is they can mislead investors into thinking they're going this broad diversification.
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190 or so biotechs, but the top five are 40% of that index. do all etfs protect you on the downside when they're so concentrated in big names? >> there is a number of different ways to represent. if we think about index replication, we're just -- if an investor wants a specific slice of the market, they get that -- i think investors can get downside protection, particularly with some of the opportunities and minimum volatility, factor-based investing these days. >> factor based investing? way over my head. >> many firms refer to it as smart beta but getting slices of the market. quality, we have an etf. what it is looking at is high quality earnings and dividend streams looking at solid balance sheets, cash on the balance sheets. investors are looking for qualities and companies. >> going back to the ibb. it seems to be the best poster child for what has been
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happening or what people think has been happening by hedge funds. hedge funds have been big holders of a lot of biotech stocks, also holders of etfs, so for instance, when there say big biotech swoon, the ibb would sell very sharply and some thought it is because there is heavy selling in individual names, which happen to be to brian's point some of the biggest market cap companies in the market. and that really helped drag that etf down. should individual investors be concerned that their trade is hijacked by hedge funds, institutions? >> i don't think they're being hijacked by institutions, but i think it is going to be represented of the flows. if there is more demand for the stocks, you'll see some prices go up. less demand, you'll see the prices go down. it is across the board. biotech is a great example. could happen in any sector. >> nancy, ironically, one of the stocks you brought for our idea book today is the heaviest weighted stock in the ibb. which is amgen. what makes that single stock so attractive to you? >> yeah, so i would obviously
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disagree somewhat with heidi. i'm an active value investor. amgen is a lower valued company, not only from a pe basis, but on a relative price to sales ratio. and even on a historical relative yield basis. the company upped guidance for 2016. they hit their -- they exceeded their numbers fourth quarter, hit the top line. and no one cares since hillary clinton tweeted out about higher biotech drug prices. this is a company that is doing good, that is a solution to higher health care costs in the future, not the enemy or part of the problem. i do think this is a time where you want to be valuation sensitive. our value strategies have exceeded the index by a couple of hundred basis points this year. that has not been the case historically necessarily for active managers, but this is an environment where you want to overweight high quality, pay attention to valuation, and cherry pick your way through. >> to that point, if i'm an
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individual investor, i'm bombarded by the stats that many active managers are underperforming their benchmarks and paying much higher fees for being in an actively managed fund versus an etf. make the case as to why i should bother trusting an active manager when i can pay very, very little in terms of overhead costs and be in an etf. >> i would actually -- i am a professional investor and certainly we get paid fees by our clients, so not mutual fund level fees necessarily. i've written a number of books and taught courses to women in particular because i think individual investors can do a good deal of their investing themselves. so one place i teach my college students to start with is the largest holdings in etfs. active management by the individual investor, your viewer is something i think is accessible to anyone who wants to pay a little time and attention to it.
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>> last word, u.s. mv, what is it? >> minimum volatility representative of the u.s. stock market, but trying to mitigate some of the downside risk in a portfolio. so overweighting those low beta, low standard -- >> so heidis like u.s. mv, degrow and mcal. go to to see more picks. your first look this year at our exclusive power city indexes and the rather surprising city whose stock market is posting the top returns this year. here is your first hint. a famous funicular. is real estate headed for a relapse? dolly lens will be back and she'll tell us what she's seeing right now. plus -- >> coming up, a startup taking divorces online. >> every 13 seconds someone is
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getting divorced in this country. it is the second most stressful event of life. we're dedicated to turning every divorce amicable. >> will the panel be amicable? >> really concerned about how this scales because divorce is such an involved transaction. >> if you're cutting lawyers' fees by more than half, why do they want to work with you? >> stay tuned to find out. you can't predict... the market. but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... our experience. call a t. rowe price retirement specialist or your advisor see how we can help make the most of your retirement savings. t. rowe price. invest with confidence.
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time for power pitch where entrepreneurs get 60 seconds to make their pitch and a panel of experts weigh in. ask questions and decide if they have what it takes to become the next big thing. >> i'm michelle crosby. if you were stranded on a desert island, which parent would you choose to live with? i was only 9 years old when i was asked this question during my parents' divorce proceeding. every 13 seconds someone is getting divorced in this country. it created a $30 billion market
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in legal fees alone. and the second most stressful event of life. it is why we had over 1 million people come to learn about divorce. over 30,000 come to talk about it and 2500 will start their divorces this year. we're dedicated to turning every divorce amicable. but you don't have to just take my word for it, because the results speak for themselves. we have a 98% settlement rate, doing it in a quarter of the time and a third of the cost and we had over $40 million in sates run through the platform. and if you think the lawyers won't like us, we already had 600 join us and take the pledge to change divorce for good. >> welcome to today's power pitch. i'm melissa lee. you saw michelle's pitch. let's meet the panel. on set, alicia syrett of the new york angels. she advises and invests in over 40 startups. also with us is fran hauser, she's a partner at rothenberg
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ventures. from the bay area, angel investor nat burgess with a firm involved with more than a billion dollars in mergers and acquisitions including deals with google, microsoft and intel. alicia, kick off the questions. >> i love how you talked about your personal pain point, i love how you talked about the market sizing and also the milestones you reached. but i have to give you a b because i would have liked to hear you address pricing, competitive advantage and how you're reaching customers. >> i read that 65% of divorces are initiated by women. how does that inform how you design your product offering? >> there is concerns about parenting. there is concerns about how you adjust the finances and expenses and assets going from one household to two. we're constantly providing that information to mothers, to fathers as well, because it does impact. >> fran? >> so i really love that you used your personal story to illustrate the pain point. but i wish that i had had come away from the pitch with a
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better understanding of the product offering. so for that reason, i would grade the pitch a b. >> what is your conversion rate? what percentage of people that start the divorce process on the site actually complete it. >> this is one of the things we're really proud of is that our families are getting the education, the support, and 98% of them are settling within our platform and staying out of court. >> your question? >> you have the opportunity to build the zillow of divorce. but the pitch was really more of an origin story and mission statement. i'm going to give the pitch a c. if you cut lawyer fees by more than half, why will they want to work with you? >> if you look behind the legal industry, what you find is an industry that has really low margins, lower than 2%. what we're doing for those attorneys is software saving them 60% of the time right off the top. we're also helping them with the market and business model. so they're actually getting a much higher net margin return when they are working with us. >> so i believe that you just
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recently raised a significant round. and i would love to hear about how you plan on using those funds. >> those funds will be used for growth for building up the brand. we're networking with corporations and their employee assistance programs and starting to optimize our product for each company and their needs. >> nat? >> it seems like one challenge with your business model is you work with customers once. are you done at that point or do you are an ongoing role? >> one of the short comings of the existing industry is you get the documents and then what? you have to do a lot more work to finish the process. since we help the family from beginning to end we are able to help connect them to the right resource support them through taking those next steps to take their settlement into action. >> so can you walk through the revenue model then of your business? >> it is a marketplace where we are certified professionals, and then each mfamily that starts
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pays us 749 to start using the platform. >> we want to know if the panel is in or out. >> i was concerned about how this scales because divorce is such an involved transaction. and it really needs to be tailored to each family going through it. but with that said, given the milestones that this company has reached, i feel like they are on the way to figuring it out. and i love the fact that this entrepreneur has experience this pain directly and has an extensive legal background to be able to solve it. it is a big opportunity. so i'm going to go in. >> fran. >> so i really like that this is a big market. it is ripe for disruption. i think the product is clearly delivering a value. and i also feel really good about the tech based part of it, just from a scale perspective. so for those reasons i'm in. >> all right, two ins. nat? >> no one raises money because their company is already perfect. and your answer to the question how you spending the money is what really turned me on this
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one. you're building a brand. you're going after a market that is immense and you're fearless about it. i'm in. >> all right. you won over the panel. what is your reaction? >> excited about the work we're doing. thank you for your support and questions. >> and our thanks to michelle crosby and to our panelists, alicia, fran and nat. that is today's power pitch. >> so are you in or out on wevorce. follow the conversation on twitter. we have some news, power pitch alumni one find stay a luxury home rental service has just been acquired by aqua hotels. they will serve as the majority stake holder. one fine stay is in new york, london and l.a., but told cnbc it plans to expand to 40 different cities over the next five years. congrats. >> that's what they use the money for.
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cool. is new york city's red hot real estate market about to take a hit? what is the impact of the so-called panama papers that is spotlighting how some around the world have stolen tons of money and then used it to buy real estate? dolly lens, power broker dolly lens will give us the pulse next. and then coming up, on closing bell today, an exclusive with the ceo of merck, he weighs in. people talk about "deals"
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on their auto insurance. wouldn't a deal involve two parties discussing something? a little give? a little take? because last time you checked, your rate was just, whatever they say it is. why not give you some say in the matter? or -even better- let your driving do the talking. liberty mutual righttrack finally puts you in control of your rates. all you have to do is connect, drive and save. in fact, safe driving could save you up to 30%. with 5% off just for signing up. for righttrack. and the discount is good for the life of your policy. to get started, visit a local office or call liberty mutual today at take control of your rates. visit a local office or call see car insurance in a whole new light. liberty mutual insurance
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numerous real estate agents and cnbc contributor ron insana saying the top end of real estate is topping out. now another potential drag, the panama files highlighting that some real estate may have been bought with, get this, dirty money. thoughts from our own robert frank and dolly lens. good to have you here. >> thank you. >> speaking of people with miami, a number of projects there appear to be at risk because of the release of the panama papers suggesting that money was used -- >> dirty. >> was dirty. same situation in new york? >> well, we're hearing a lot in new york. for example, the parkline hotel,
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an acquisition with steve witkoff is part of the panama papers as well. i think those will be on hold for now. >> real estate doesn't have kyc laws, know your customer. banks have to deal with this, but real estate doesn't. >> it does not. with the new laws, there is a little bit of that. they're trying to get there. >> are we going to see this trickle down to price per square foot at the high end? >> well, where we are, where there is too much supply, so the west 57th street corridor, right, so we're talking about 432 park, 157. >> for viewers who don't know this is a strip in the middle of the city where seven towers with megaexpensive properties are going up billionaire's row is the other word for it. so those will be in trouble, i think, because it is just too much product. and now all this dirty money story. so, for example, the released information on 432 park, a lot
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of unusual characters buying in there. that's going to be very interesting how that plays out. will you want to be the buyer that is next door to them. that's a question. >> i think what you hear a lot in -- from realtors is that, look, this is a very small segment of the market. those few bad actors had a lot of money and were driving a lot of the price growth at the very top. we talk about new treasury rules, i've been told all you have to do is wire transfer the money and you get around that rule. so whatever rules they set up, for the brokerage industry, it is going to be easy to get around. >> i don't think it will be that easy, because i think whatever they get around will be plugged. everyone is very serious about knowing whether this is dirty money, where it is coming from, and what do we do about it? i think the government is very serious and i think the whole allergan story talks to that. >> so far we have seen no impact. prices keep going up.
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sales keep going up. >> it is all data. >> i -- i would have bought an apartment, first time we did a segment on the death of new york city. you can call in for the death of real estate now for -- >> exactly. >> to your point, 27 christopher street in the west village, right, 100 million? >> we sold it in a bidding war with three private equity guys, guys, of course, all bidding against each other to get it, 45 million was the winning bid. the new owner is putting in, i'm told, in excess of 50 million to renovate it. we're talking about the first rest village mansion. >> how many square feet? >> 13,000 and change. >> for one family? >> the car nation carnegies, b mansions, back to the 1890s. >> why not? what problem do you have with that? >> apparently some politicians don't either when it comes to trade. it is fine. >> thank you, dolly. >> good to see you.
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>> good-bye, dolly. we're counting you down to the minute for the last fed meeting. could be a major market mover. we're all on it. it is on the other side of this break. six minutes away, in fact.
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in minutes, we get the minutes. that is the minutes of the latest federal reserve meeting. will they show an increasing ly fractious fed? we have bob pisani, rick santelli and seema mody. rick, i'll start with you. >> i think the market could have some volatility because we're at very extreme levels. whether you look at yields, bou bunds in particular, our the fact that our two-year, the day of the first day of the meeting where we get the minutes is 97 basis points. we're at 74. and i think especially with the dollar yen, now under 110, with the euro hitting ever so close to challenging 115, i think there could be a lot of market volatility as the market
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differentiates risk on and ri, f and the market volatility that goes with it. >> when we see big fed decisions or lack thereof, it seems to play out the most in the currency market. >> enormous pressure on japan and europe, nations that are so reliant on exports. i think it will be interesting from the fed is the fed's focus on global developments. we already have seen an uptick in the number of times janet yellen mentions china, just singling just how important china is to central bank policy. once again, that will be in foc focus. over the past week we have seen an improvement in manufacturing, services and industrial profits data from china. if that data continues to improve and we see stabilization in the yuan, that could potentially increase the likelihood of the fed raising rates. >> we used to talk about the fed being about u.s. policy. >> what are the markets telling you about what we expect, we are close to session highs now, we have seen a turn in the russell 2000, sell-off in the safety
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trades. >> that's all -- a lot of that today is due to the rise in oil because the inventory levels were very bullish for oil as well as for the markets in general. i think the -- it is very clear that since yellen spoke at the press conference, dollars dropped notably and volatility has dropped notably. traders believe she's going to be able to prevail. if there is any sign she doesn't have the backing of the vast majority of the members for her dovish position, you'll see volatile. the other thing i would note here is how big is this whole international position. she sounded like a global macro hedge fund manager last time with her concerns about china. how much is international growth a big part of the equation now. and secondly, the whole infli inflation picture. >> even if the fed is fractured, we get that vision, don't we think that janet yellen is really in charge? does it matter that much if she's got naysayers?
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>> i don't know. i've said i want to hold and listen to yellen and the other ones are the lineback coaches. too many coaches are talking. i made that point. nobody seems to care. we are seconds away from the release of the fed minutes. to steve liesman. >> the federal reserve in the march meeting debated a rate hike in april, but a majority opposing that seemed to prevail. a number worried that head winds would subside, global head winds, would subside only slowly. several expressed caution about that april rate hike. some said, however, the april rate hike might well be warranted and a couple actually wanted the hike at the march meeting. we know that the kansas city fed president, she dissented and wanted to hike. we don't know who the other one was. there was heightened global risk. that was the view of the majority here. the fed worried about running out of ammunition, with rates
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low, near zero, the fed would have little ability to respond if the economy were to make it a downturn. most saw downside risk to their inflation forecast and there was concern over weak foreign growth and a strong dollar. many thought it was prudent to wait for additional information on the economy before hiking interest rates. the fed had a bunch of debates. they debated whether they were at full employment or whether or not still further to go on employment. they debated the risk from global growth and they also debated inflation. some saw signs of brewing inflation in the recent rise and others said, you know what, temporary factors, very similar to janet yellen talked about the fed chair saying that she thought that the recent rises were factors that were volatile and could go away in the future. finally, almost all saw rates below trend or long run rate, all the way through 2018. had that april debate. it didn't seem to carry in terms of the majority. but there are a bunch of folks out there who wanted to hike
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rates in april. and we heard from most of them, i should assume, five or six fed officials. but not necessarily on the voting side of things. participants are those who do not vote, may vote, but not -- but not all of them and members are the ones -- didn't see that same debate among the voters. >> we talked about this idea of a fractious fed. when you look at this, you just barely had a chance to go through it, does it indicate a more fractious fed or fed that is coming together? >> i think it is a fed that is maybe just about as fractious as i thought it would be. that wasn't one of the options you offered me. sorry to pick option c there. we know there is a contingent out there. we know that the fed chair stepped forward. peter had an interesting comment earlier today, there is going to be a lot of he said and she said in the -- in the minutes, but yellen has stepped forward and that's what the market is listening to. we'll see how long that new
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yellen prevails religion, which seems to have taken over the market. you notice they ignored ros rosendren, he's a dove. the market is like a laser focused on janet yellen and what she said. >> stick around. now we know the headlines. let's get more on what they mean for you and your money. let's bring in lindsey and jonathan. lindsey, i love to count words. it is my new hobby. i went back in the last ten seconds and went through the last three fed minutes, the word global was mentioned 23 times in these fed minutes, more than the previous two meeting minutes combined. do you believe that chair yellen rather than focusing on jobs or inflation is now, as steve would say, laser focused on what is happening around the world.
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>> i think in part she is. right now if you look through the minutes, it is very clear the fed maintains a relatively solid, albeit cautious, expectation for the u.s. economy, but it is international developments that are driving this divergence in fed opinions. of course, with that improvement in the domestic economy as the backdrop, you saw several committee members really desperate to raise rates, possibly in the near term. on the flip side, focused on the potential contagion from international developments from a list of events. this could be further slowdown in china, geopolitical tensions, the migrant crisis in europe. we have a u.s. presidential election coming up and the looming possibility of a brexit. should this cause continued volatility, you see fed officials saying no, absolutely, it is inappropriate to raise rates without additional information. not just chair yellen, but officials are focused on the international -- >> let's go all conspiracy theory here, lindsey, shall we? i just did a quick, thank god
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for google, brexit was not mentioned once. england was not mentioned once. britain was not mentioned once in the fed meetings. but do you believe that there are maybe some on the panel in the fed governor's board room that are worried about the possible outcome of england leaving the eu, they won't say it, but it is in their minds enough that they're going to stay dovish. >> well, that's the beauty of fed speak. they don't have to specifically identify the brexit for it to be included in international developments or events. and so absolutely the fed is watching that. remember, that referendum vote is just eight days after the fomc meeting. and so, again, the fed is going to have to anticipate and be very cautious of the market's reaction should that become a potential possibility. and in that june -- or leading up to that june meeting. that would be an unprecedented event that could cause a significant amount of volatility in the marketplace. as we know, the fed does not
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like to adjust monetary policy in the face of financial market chaos. >> jonathan, does it matter if we have a fractious fed or like steve liesman said, that right now everybody is focused on not what he said, but what she said, janet yellen, and what she says goes? >> i think that's what happened when she spoke of the economic club a little over a week ago. basically said was, i'm in charge, and this is -- what is amazing is when i heard her speak about a year ago, and the same questions came up on, you know, how much -- how important is global, she said i'm in charge of the u.s. federal reserve, the u.s. central bank this is the only thing that matters to me, only two things we care about, growth in -- employment, and inflation and if at that point in time you told her 5% unemployment and over 2% wage inflation, 1.7 pce -- >> what we have. >> off to the races on interest rates and now she's backpedaling in a huge way, i'm not sure
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where is -- what is the framework that investors are supposed to use rather than reading the tea leaves. >> didn't we just get confirmation with the minutes that it is a risk on environment until it is clear that she's going to move towards raising rates. that's at the market is telling us in terms of reaction we had since the last meeting. would you agree with that? >> no question about it. i do think that there are consequences to having half the world's interest rates, you know, negative out to five years. this is really bad for global banks. i'm not sure this is very good for -- it is horrible for savers, if you look at global trade, does not like to see this amount of currency and commodity volatility which happens on the back. so to think the only risk of free money is inflation and not all the side effects -- >> the chickens come home to roost eventually even though it is right now, people are saying this is a risk on environment,
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it is smooth sailing ahead, free money for the foreseeable future? >> my kids like more candy too. but that's not always the right thing. i think that this is -- it just doesn't seem to make sense to me that with an economy that is running -- not hot, but we're running it, you know, low gdp, full employment and okay inflation, 37 basis points of short-term money doesn't make sense. >> make sense of it for us then. >> i think what we learn from janet yellen is that she's going to side on the more cautious side of things, that if there is any doubt at all that the fed could be wrong in raising rates, she's not going to do it. or some people describe that in the kind of language that john was reaching for, which was, any excuse not to hike, and it does create confusion out there, that the reaction function of janet yellen a year ago was more understandable than it is right now given you had this rise in inflation, and what does janet yellen say, i don't believe these increases are going to stick around, so a lot of frustration among some people
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like -- who want to see -- >> let me ask you a different question. a little difficult question. melissa said the chickens come home to roost. let's use that poultry. the fed individuals, they're all human beings. they got emotions. they have fears. they're not, you know, a-emotional. do you think there is a fear in parts of the fed of raising rates too soon, even if they want to, the data says maybe they should, being a little chicken about it, they're worried that the outcome will outweigh the risk of staying dovish for too long? >> i think you precisely stated it that way, brian. it is that risk. where are the cost benefit is. i'd rather -- what we're hearing yellen say, i'd rather be a little wrong here on inflation to the upside than wrong even a little bit on inflation or growth to the downside. it is also worth pointing out to john's comment, and i share some of what he's feeling about this,
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but that the world did change. you had draghi going further into negative rates. japan in negative rates. the ability of the fed to move apart from those two big central banks and the drift of interest rates into negative territory around the rest of the world is limited. maybe the fed thought, maybe projected this idea, that it thought it could do its own thing but it is finding out it can't and that conduit of the dollar ismelissa's point, you he best of both worlds in the sense that you have a fed on hold, and you seem to have the data being okay. so you have a lower projected funds rate, lower interest rates, and depends what the data does, that first quarter gdp number looks weak. other stuff looks like it turned around in march. that risk on concept that on a short-term basis makes sense you were talking about. >> all good points, steve. thank you. thank you, lindsey. jonathan, steve. >> here's what is on the menu coming up at the remainder of
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"power lunch." elon musk's short response to a question on twitter. should a ceo even be responding to random tweets. and if you think you know what is going to happen, wild and unpredictable election year, why not try to make some money off it? we'll explain how. sometimes a vacation home just won't do. you need your own resort. you need your own island. whatever. we're going to show you what the super rich are now buying. all that and more when "power lunch" returns. t "deals" on their auto insurance. wouldn't a deal involve two parties discussing something? a little give? a little take? because last time you checked, your rate was just, whatever they say it is. why not give you some say in the matter? or -even better- let your driving do the talking. liberty mutual righttrack finally puts you in control of your rates. all you have to do is connect, drive and save. in fact, safe driving could save you up to 30%.
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with 5% off just for signing up. for rittrack. and the discount is good for the life of your policy. to get started, visit a local office or call liberty mutual today at take control of your rates. visit a local office or call see car insurance in a whole new light. liberty mutual insurance
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elon musk replying on twitter to a question about what he would tell someone who is shorting tesla stock. musk's two-word answer, probably unwise. the stock is up 60% over the past two months, musk is probably one of the few ceos in america who would and could do this. let's bring in phil lebeau, familiar with the unusual way of doing things. and he's commented on the stock price in the past, phil. >> and he does it quite often. in fact, we went back over last couple of years and we didn't do a real extensive search, but over the course of ten minutes, my producer megan reader and i found five different examples where elon musk talked about tesla stock price, too high or whether or not it deserved to come down a little bit. here is an example of some of the things he said in the past. >> our stock has a lot of volatile. it depends so much on what
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people believe future execution will be. our stock price is too high based on historical financials or even on current financials. there is a lot of optimism priced into the -- we need to execute very well over the next few years in order to justify the stock price. but i, you know, i'm feeling like we probably will. >> i think our stock price is high right now to be totally honest. let me put it this way. if you care about the long-term tesla, i think the stock is a good price. if you look at the short-term, it is less clear. >> so what do you take away from all of those comments? not a whole lot. the bottom line is this, whether elon musk said the stock is too high or it is too low and deserves to go higher. there is very little correlation between what he said and where the stock goes shortly after that. only thing we did find is the stock moves down the day he makes the comments or the day we first hear the comments, not by
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a lot, but a little lower. but over time, it is hard to say there is any correlation between his comments and where the stock goes immediately. when he says i wouldn't short the stock, i took it and said, well, what ceo says you should short the stock? >> the difference, i'll play elon musk's attorney, i'm not an attorney, but i'll play one on tv now, you got to be careful with this kind of stuff. most people are not on twitter. 20% of america is on twitter and half those people have fallen asleep or logged out. if you make comments on anything, the s.e.c. will be paying close attention, make sure with reg fd everything you say can be -- >> twitter qualified for full disclosure. >> that's not the issue here. >> they change the rules. >> this speaks to elon musk doing what he wants and that's part of his appeal. that's what people love about tesla, that's that they love
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about spacex and solar city if you want to lump that in there, he's out there and he's the face of the company. the flip side, though, phil, is that he's also said in the past that he would be prone to leave tesla once the model 3 is in full mode, full production mode. and that could be in a few years. >> well, do you believe that? look, this is a guy who is very passionate about tesla, and about not only the model 3, but the future for the electric vehicle. it is possible that when they reach full production, which let's give them the benefit of the doubt, let's say it happens by 2020, that elon musk says, i've had enough, i'll hang it up, i'm going to run counter to that and based on the fact that my conversations with him and seeing him at enough events over the last couple of years, i think he's so passionate about this, that he's the type of person, he may not stay officially the ceo, but he will always be actively involved in the company. >> phil, thank you. phil lebeau in chicago. coming up, a stock, one
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analyst says might triple in the next 12 months. that and four other analyst calls coming up. we'll leave you with a little bit of merle haggard, passing away a short time ago. >> on his birthday. >> passing away today at the age of 79. we'll leave you with a little bit of "lonesome fugitive." back after this. at td ameritra, ♪ the one you're holding now a different kind ♪ w, that was r. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade.
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time for our daily dive, street talk. wells fargo, guggenheim cutting the rating to neutral. the analyst says the downgrade reflects three factors. one, asset growth will not offset interest margin pressure. two, the earnings estimates are below street consensus. three, stock valuation is full relative to other banks, cut the price target range to $51. little bit of where it is now but downgrade. >> this is a problem with all the banks. interest margins because of janet yellen. fed minutes watching financials closely. we did have one off the initial fed meeting. up next, cisco, j pchlt morpmor
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neutral to underweight. they're modeling conservative switching revenue offset by better routing and security growth and slowing u.s. growth offset by better china and india growth. you're getting paid to hold it. >> i think that's one of the biggest highest div didends out there. owens illinois. ticker oi. citigroup upgrading to buy from neutral. the analyst says the stock is poised to outperform because shares are down 35% over the past 12 months, cut guidance three consecutive quarters. citi sees prices stabilizing and like that management set the low bar for this year's guidance, easier to beat. citigroup says this is a multiyear deleveraging story. they boost their target to 19 from 15, so about 17, 18% upside. keep in mind, though, it was a $35 stock. >> all right. darden restaurants is our next
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stock. after the 4% decline yesterday, and lower than expected guidance, raymond james is cautious, saying the stock has a premium valuation. raymond james sees a modestly negative near term risk reward here, sticking with the underperform rating on this one. >> no comment than a seasons 52 is packed all the time. all the time. finally, this is the call we referred to earlier, i was nervous about putting this call on street talk, but a real gifi, serepta therapeutics. they raised their target, 200% gain. analyst sees a positive panel result for their drug in april. then a positive follow-up in
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may. stock has been at 40. i reached out to the analyst, he said, listen, i've covered this name for five years. today should be, quote, interesting. it is a bold call, melissa. >> it is. >> what is your take? >> he's saying the stock should go to where it had been months ago. this has been very volatile. we talked to the ceo on "fast money" in the past. >> if it was some company or analyst that nobody heard of, we wouldn't put the call on. but it is oppenheimer. $60 target. there is your under the radar stock of the day. oil up 5% as stockpiles actually fell. li live to the nymex. and how you can play oil and gas stocks coming up on "power lunch."
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i'm sue herera. here is your cnbc news update at this hour. tsa administrator peter neffinger testifying on capitol hill, saying the agency is highly focused on securing so-called surface transportation
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networks like trains and bus stations and said they have tightened the vetting process of airport workers. former bosnian serb leader radovan karadzic, sentenced last month to 40 years in prison for war crimes, asked to be released pending appeal, saying his detention was ruining his health. he's spent eight years in custo custody. his appeal was denied. the union of european football association says it has been raided by swiss police. it said it has handed over evidence of a tv contract with an offshore marketing agency that has been implicated in the fifa bribery scandal. and pope francis blessing an american girl who was losing her sight and her hearing. 5-year-old elizabeth myers from ohio suffers from a genetic disease known as ushers syndrome. the pope approached her at the end of the weekly audience in st. peters square and spent some time talking to her and to her family. that is the cnbc news update at this hour. back to you. >> thank you, sue.
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julia boorstin is standing by. >> mark zuckerberg just started a live broadcast as part of the celebration of a lot of new features that facebook is rolling out for live video. now, a lot of people on social media, on twitter, were asking questions when the live feed abruptly shut down. questions of whether or not there were technical difficulties. looking aat the screen now of what many people including myself saw when we were trying to watch zuckerzuckerberg's liv. they said there were not technical issues. he decided to shut down the fiefeed because he wanted to change locations. he'll be restarting the feed shortly. a lot of attention on how well facebook's new live features are working in order for this to be a big area of focus. facebook telling us this was a decision of zuckerberg's to move. >> we'll see.
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thank you, julia. oil market closing for the day. jackie deangelis standing by. >> 5% rally on our hands today. the boost from the inventory number from the department of energy, surpassing expectations. we were looking for a bill, we got a draw. u.s. production dropped very, very close to 9 million barrels a day, one tick away from breaking that crucial mark when it comes to our production. weaker dollar today helping out and still hopes of that surprise freeze on april 17 on the table, though waning a little bit. optimism in the market, but some traders telling me this could have been a technical rally too. not sure we go that much higher from here. we dipped close to 35 yesterday, it seemed like a good entry point. take with a grain of salt. back to you. >> all right, jackie, thank you very much. want to call your attention to hk, it is halted for news pending. a tiny company, and you say why are you bringing up a small
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market cap company. this was a $90 stock two and a half years ago. it was a $10 billion oil field services company. now trading below a buck a share, halted for news. oil was at 52 bucks per barrel. most oil experts said the path of least resistance was higher. instead, we all know what happened. oil fell by another 50%. but lately it firmed up from the lows. let's try to figure out if we can really figure out what is ahead, and more importantly whether you can make any money from it. we'll chat the macro view. oil stocks. is there any visibility into the price of oil over the next six months? >> i think very little visibility over the next six months. but i think if you step out beyond six months, it actually gets very visible. supplies starting to come off. the u.s. is close to going below 9 million barrels a day.
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close to 8.5, 8 million barrels a day, enough supply has come off that this market gets balanced by the end of the year. >> that's nice, but as we talked about yesterday, global production seems to be rising and imports into america have gone up a million barrels from this time last year. if we lose production here, which we are, will global increases offset that? >> it might over the next few months. we have iran, we have russia, we have saudi increasing a little bit of production. the fact of the matter is opec and the big nonopec producers are essentially tapped out. so they might be able to do that for three, six months, but 12 months from now, not able to raise production -- which is what the world will need to balance supply and demand. that's a fact. >> base case, best case scenario, happy new year, december 31st, where do you see the price oil? >> we're above $50, $50 to $60 by the end of the year. you're going to start having visibility into a 17 and 18 that
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could actually be quite a bit more dire on the supply side. and so the long end of the curve could go quite a bit higher. >> what is the -- what is the wild card to your projection? >> by the end of the year? >> what could happen to help keep prices down? >> well, the u.s. could always be a little more resilient than we think it is going to be. that's what happened last year. if prices go up too fast, too early, we could get some production that comes back on in the u.s. and always opec. you know, you've got saudi and iran in this proxy war. maybe iran gets production up to 600, 700,000 barrels a day and saudi counters with 500. that sets us back 12 to 18 months. >> chris kelly, thank you very much we apprecia. let's bring in michael, he downgraded five different oil stocks today. welcome. you downgrade anadarko, sm energy, but we were e-mailing
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this morning and you say the last two in your analysis are operating at more expenses than their cash flow. that's not good. >> well, both believe they have assets that make money at these prices and they are still early stage in some of the development of those plays. so-so far the market has been okay with that, particularly for matador, stock has done very well. sm bounced really strongly off the bottom here, up more than 70%. >> why, when as you point out, their balance sheets are still struggling. >> well, right now, actually, both of them, their balance sheets are okay. it looks like they could get in trouble. matador has plans to sell some midstream assets, which would, if they get that done at the right price, would bring things back into balance for them. sm is not going to outspend by a whole lot, about $100 million, their balance sheet can
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withstand that, but we think it is going to feel a little bit of stret. >> just because they had such a run off their lows? >> more so based on chris' last scenario that he painted, that maybe saudi arabia and iran continue to fight for market share. if saudi arabia gets serious about that, they have 2 million barrels a day of spare capacity, also this neutral zone with kuwait that they could bring back online. that could put pressure on prices and push that recovery that chris is talking about. >> you're not in the $50 camp? >> we think there is a lot of risk to that for sure and right new we're forecasting 37 for this year. >> give us one name, a lot of dire stuff in oil, why are you so negative on oil, the numbers haven't been there, give us one stock that you think does work in this price -- the price of oil doesn't move for the rest of the year. who looks good?
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>> i think concho is as well positioned. balance sheet is in good shape, very well hedged. very well run company. they're as good a company you want to own in a low price environment as any. >> michael, steve, thank you. now, back to the fed. and what it means for you and your money. your trading nation team today is larry mcdonald with acg analytics and craig johnson with piper jaffray. give us a way that your take on the fed, the fed minutes, they use the word global 23 times. my take is that's nice, the world matters, but i thought the mandate was supposed to be job creation and price control. >> well, i think the biggest news really that a lot of clients were seeing focused on is on the 29th, yellen's speech, she moved the accepted level of inflation that the fed is
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willing to accept and that's also in the minutes there is hints to that, i was going back and forth with jim cramer about this on twitter, and it is really a game changer. you have to look at this as a game changer. secondly, for the gold miners, this sets up very bullish for the gold miners because you have about 5 to $6 trillion of bonds and negative yield territory. yesterday, clients were talking about a very large euro dollar trade. interest rate trade bet. a bet will have two rate cuts, two cuts by 2017. so we're seeing money pile in on these bets, betting on rate cuts. >> rate cuts. >> rate cuts by two of them, by 2017, that puts this in negative territory. >> yesterday, the head of goldman sachs strategy team told our viewers to short gold because he thinks we'll get two or three rate hikes by the fed. >> well, i'm just telling you what i'm seeing -- i'm seeing money move into bets on the rate
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cut s. from 1%, 2% chance of rate cuts from now and 2017 to 10%, 15%, bullish for the gold miners. >> back to stocks. most people don't own the gold miners, only s&p, how does the broader market index look? >> let's talk about two things here. first, talk about equities and fixed income folks, i've been doing this for 20 years and never seen such a differentiation between the fixed income folks and equity folks. fixed income folks are negative, looking for the rate cuts. equity guys looking for the rate hikes. so we're kind of at an interesting inflexion point and turning point. i think the market has got it right and is telling us that. you look at the chart of the s&p 500, we are up to a very important downtrend resistance line, have seen the dow break above it and we're seeing the s&p 500 retesting the downturn resistance line off of those may highs of last year. from our perspective with the improving market and the move above the 200 day moving average, the pain trade is still
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up, volumes are weak, no one believes it, but we think the lows are in for 2016 and we think that we're still going to achieve 2350 by year end. we're bullish and believe the market is telling us that and we want to continue to be long equities at this point in time. >> long equities. bullish call there, bond guy who is negative, a stock guy who is -- sharks and jets, east coast, west coast, choose a side. thank you very much. >> thank you. for more trading nation, head to our website, do you believe you know who will win the presidency or the republican nomination? if you're so confident, so cocky, we're going to show you a way to actually bet on your views coming up. traders sometimes like to look at put call ratio as a means for gauging trader sentiment. but it can be based on volume or open interest, the two are measuring two different things. don't assume that a high put
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call ratio is always bearish and low put call is always bullish. if you want to understand a particular stock, make sure you look not only at its current put call ratio, but how that ratio compares to its history.
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every day we see poll numbers, but there is another tool you can use to figure out who womill be the next presiden of the united states. it is a website called predict a marketplace where you can buy or sell shares in individual candidates and races. some on wall street are paying attention to it. steve ratner tweeting out what betters are saying about the possibility of a brokered convention after wisconsin. that contract is at an all time high. john philips is the brain child behind the site, one of the co-founders of it. welcome to "power lunch." >> thank you. >> predict, that usually means it is a nonprofit. is this a nonprofit? >> set up for academic research purposes. has about 20 universities including oxford, victoria university of wellington was the first university that became involved in this, and they used the trading data for research purposes.
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>> it is real money that people can -- are putting down on these questions you have? >> right. small dollar, $1 winner take all contract between two people who think opposite something opposed to each other is going to occur. >> you have the screen here. what is happening on your laptop. >> let's go into -- who will be the 2016 republican nominee? going there. and as you can see, traders of whom there are about 30,000 that have some amount of money, the average deposit is about $100, so traders are saying donald trump by 44 cents -- 44% is likely to be the nominee. what is interesting about that, is that price is down 40 cents since march 4th. it lost half its value. you can buy and sell shares in trumps, cruzes, ryans, kasiches. you see the pricing that is being offered. >> thinking like a trader, right now, there is all this talk about a brokered convention,
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maybe paul ryan looks cheap now at 16 cents, because he could end up being the nominee if you believe all the conspiracy theories about what the gop is going to do. >> it is interesting. ryan is ahead of kasich in terms of who will be the republican nominee. you don't have to wait. if you're a trader and bought ten shares of trump at 44 cents you don't have to wait until the convention. you can get into trump at 44 cents, goes up, you can sell him at 45 cents or 50 cents or if he goes back up. $1 contract. there is a market for a brokered convention. and -- >> that's a yes or no question. >> yes. they're all binary outcomes. all yes or no questions. if you think something is going to happen, you negotiate the price, as to what that -- what you're going to buy -- >> who is going to be the next president of the united states now according to predict it? >> it is pretty clear, it is going to be -- the market -- the traders think that it is going
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to be clinton. they're giving -- they're buying and selling shares of clinton to be the nominee at 60 cents. if you don't think it will be clinton, not necessarily who you do think it is going to be, you can buy for 40 cents, buy the chance to win $1. or if you think she's going to be the nominee, for 60 cents, you can buy a single share that she will be the nominee to win a dollar. >> trump only gets 18 cents. >> that's right. >> that market is telling you nobody in this particular market thinks that trump is actually going to win? >> well, i mean, you know -- >> right, 18%. >> people may like trump to win at 18 cents and hate him at 25. >> think like a trader. >> right. >> it is set up as a stock market. >> when did you set this up? >> it was established right before the 2014 general election, the weekend before. >> is this for elections only? >> no, just elections, but other kinds political questions. will -- who will obama nominate to be the supreme court justice? will the senate even hold hearings, confirmation hearings on the supreme court.
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>> this is legal? >> yes. >> this isn't like fan duel where the new york attorney general will come out and say you can't do this. >> right. we went victorian university, of new zealand, got approval and they got a no action letter in late 2014. >> okay. >> so the -- >> translation, it is legal. >> yes. and it has got research value because the market tends to be correct about 87% of the time. this market does. so it is not perfect, but it does give you some insight into what is likely to happen and how traders react to information coming into the market and how they decide they're going to -- what they value that, that's what this is about. >> we'll be watching. thank you very much for joining us. predict phil lebeau, news alert, right? >> this comes to us via reuters. a headline saying that honda confirms a march 31st fatal crash in texas was caused by a faulty takata air bag. this is the ninth fatal air bag
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accident involving a honda vehicle in the united states. the total number of air bag deaths now worldwide linked with takata air bags, faulty takata air bags, is 11. millions of these vehicles have been recalled, but they're still on the road. national highway traffic safety administration said, look, we got to figure out a way to get air bags fixed as quickly as possible. in the meantime, we don't want people to not drive these vehicles at all. and yet we had this type of headline, a couple of times now in the last six months. you have to wonder atgoing to b outcry. >> difficult story there. phil lebeau, thank you very much. on deck, we'll let you know what cities in america are performing the best and the worst with their own stock market so far this year. which city is number one in 2016? we'll give you the hint. the famous funicular and rusted root.
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now that the first quarter is in the books, we want to update you on the power city indexes. 40 different city and metro areas and the biggest 12 companies in each. if we average the returns of the 12 companies in all 40 areas so
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far this year, i'm sorry, boston, i love you but the worst performing stock market in 2016, thank you biotech wreck. boston at an aggregate down 9.4% and motown is down, down 7.4%. let's get for some optimism. the number one stock market city in america, the first three months of the year is the great pittsburgh, thus the famous it comments, rusted roots, others, and portland oregon up 4%, so we are seeing pittsburgh, dick's sporting goods and others do well. a mark flash from seema. >> hey, brian, i want to start out with movement in the pharmaceutical space. shire acknowledging that the u.s. treasury notice published on april 4th, and geffen that acknowledgement, it still
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anticipate that the transaction will proceed as felts originally announced the original combination with baxallta expected to close mid 2016. shire also on the move. let's witch focus to tech. cara swisher reporting that the book that yahoo bankers are using to find prospect it i have booers show us weakness, expected results from 2016, yahoo is estimating that revenue is dropping close to 15% and earnings but over 20%. shares are slightly higher, but again moving lower initially on this report. intoic to you, brian. portland's own seema mody. your city made the index. >> i know. down 15%, that doesn't -- >> how poor the usage rates were going.
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coming up, the new trend to the super rich. it's not even vacation homes, it's like vacation countries. robert frank is back with more. . 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 stop taking cialis and get medical help right away. serena williams. hi watson. you are a fierce competitor. i've heard that. i have analysed your biggest matches. oh really?
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when down a point, you serve an ace 5.8 times more than other top players. you sound like a coach. i am not. but i can customize training programs based on biomarker data. watson, that's pretty impressive. you might say i am the serena williams of cloud-based cognitive systems. nah, i wouldn't go that far. go to and post your job? to over 100 of the web's leading job boards with a single click, then simply select the best candidates from one easy-to-review list. and now you can use ziprecruiter for free. go to parts a and b and want more coverage, guess what? you could apply for a medicare supplement insurance plan whenever you want. no enrollment window. no waiting to apply. that means now may be a great time to shop for an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. medicare doesn't cover everything. and like all standardized medicare supplement
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granted, 2014 was a banner year for real estate, and the real tors say it's mostly about supply. they saw the medians price of a vacation home jump last year, however, 28% to 192,000, the realtors again say an expanded pool of buyer admit a number of let to tighter sales. i spoke with james wedgeworth, a longtime real estate agent in hilton head, it says when we come to the high end, we have more supply thannen can shake a stick at here's a twist. both wedgeworth and the realtors say the nation's uncertainly political future has buyers leery of the economy and more hesitant to put money down on a discretionary purchase like a vacation home. i guess that's okay, because i don't have a vaca home. >> neither do you, but what do you do when a vacation home isn't enough?
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some need an entire resort, and that has rob frank looking at the lives of the super-rich. >> we went to an estate in bock a raton and of course the helipad. check it out privacy was so important to avoid noisy neighbors, they bought the three-acre long next door lined the grounds with 20 palms trees imported from europe and california. that kind of privacy costs $35,000 per tree. so we're talking probably over a million just in the trees. >> absolutely. >> inside this fenced-in oasis, they build every resort-style amenity, a guesthouse, a gym, running trails, and a private lake. >> the lake cost 2.5 million to build. >> lake views you are nice, but
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on occasion the view on the tennis covert has been even more amazing. >> serena and venus williams are friends with the owners, so they actually played here. >> it's not enough anymore for the rich to go to the four seasons. they have to other than their four season. >> they do, because they want privacy. 300 acres, there are 32 homes on this 300-acre private community, so it's a very exclusive group. you know you have a lot of money when you live in florida and i have to import your own palm trees for 35 grand apiece. >> probably not enough in the states of that maturity. >> exactly. coconut falls, cracks open, and diamonds fall out. >> they're going to sell them to friends? rent them? the homes -- >> in this gated community, so this is one estate in that gated community. the owner of the boston red sox is in that community, greg
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norman the golfer, so it's an exclusive home in a private community. it's like your own private four seasons. new episode tonight at 10:00, "secret lives." >> thank you. >> thank you for watching "power lunch." "closing bell" starts right now. welcome to "closing bell." i'm kayla tausche in for kelly evans at the new york stock exchange. >> and i'm david spade. [ laughter ] >> no, i'm david spade. >> i'm boy george, i guess. go to twitter, you'll see what we're talking about. today's top story, the government smacking down big deals. the department of justice looking to block a major oil merger between baker hughes and halliburton. you probably already know the $160 pfizer/allergen deal is dead after the treasury revealed new r t


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