tv Power Lunch CNBC April 11, 2016 1:00pm-3:01pm EDT
attractive in the group i've seen in a long time. >> best name in the space is what? best name in the space? >> jpmorgan. >> easy. >> i don't think -- visa. >> wells, goldman, morgan sanli. >> you like the whole group? >> jpmorgan. good stuff. pete, thank you for joining us. "power" begins now. and welcome to "power lunch." big breaking news on tesla at this hour. straight to phil lebeau. phil? >> melissa, we have a recall involving the model x, the suv that just started being delivered at the end of last year. here's the details regarding this voluntary recall which was just announced. involves the third row of the model x, the third row latch may fail in some accidents. we'll explain how it was revealed and in what accidents in a little bit. the number of vehicles impacted, 2700. basically those that were built and delivered prior to march 26th. owners of those vehicles are being notified by e-mail right now from tesla. they are asked not to use the
third row until it is repaired. here is the concern, voiced by the president of tesla's sales and service division about what could happen in an accident if someone is sitting in that third row of the model x. >> it is actually with the leverage of weight in the seat pulling it forward. so this would be an example of a front crash, where the weight of the passenger seat belted to that seat could cause that latch to fail. >> the third row for the model x, they are being replaced. and it will take about two hours for the repairs to happen. by the way, the 2700 vehicles almost all of them are here in the united states. there are very few delivered outside of the united states. tesla says the repairs will be done over the next five weeks with a new seatback put in place to replace not only the hinge, but also the seatback. the recall will not impact model x production, which tesla is in the course of ramping up and one other note, tesla says this
recall will not impact its financial results. so, guys, this is first recall impacting a model x suv. but certainly noteworthy given the fact they're starting to deliver this vehicle. >> phil, you mentioned 2700 xs are being recalled. they deliver 2400 in the first quarter. is this virtually every single x that rolled off the assembly line? >> pretty much. they didn't deliver many at the end of last year. remember, they did a couple of ceremonial deliveries on the last day of the third quarter. and then they had product issues separate from the third row seats that were slowing down, initial production in the fourth quarter and really started to ramp up, really from the middle of january until the end of march. >> all right, phil, stick around. joining us by phone is ben kalow at rd bear. thank you for joining us. >> thank you for having me on. >> does this speak to execution issues? as phil mentioned, they had problems in december and posted most recent delivery numbers, they talked about hubris because
of the highly engineered x at this point. and here we have the first recall just really weeks after this car started rolling off the assembly line. >> couple of things. so headed into this call, which people got word of this morning, a lot of people expected a model s refresh, saw the stock up in early morning trading today. i think this is a big disappointment on that side. now, thing to remember about this recall is we also had a similar type recall in 2013 when there was a similar number of ss rolled out and it was for seat welding issues. not too much far off of that event and the stock ended up trading up on it because tess there was proactive in its recall, but still with the stock having a big run here, could see a little pressure now. >> are you concerned, i know they said this would not impact financial guidance. are you concerned at all about deliveries of the x, especially
going to the second quarter when expectations were high this car would be ramped strongly in the quarter? >> yeah, i think that there is still a huge amount of skepticism in the model x and as you said, its most complex car is that elon says ever made. a huge amount of skepticism in tesla's ability to ramp it. there are numbers for q1 that came ahead of ours even though they missed the q1 delivery number. as we see the x continue to ramp up and continue to show gross margin improvement, which will get them to cash flow break even, i think that more people will start to understand that this is a big part of the model and getting to the model three. and so that will make the stock go higher, i think. that was our call and upgrade a few weeks ago. >> ben, this is phil lebeau. does this issue speak to the broader concern that was out there in the marketplace with not just tesla, but any auto manufacturer. as you increase the number of models and the complexity of your production line, you will
start to have this type of an issue pop up. it may not be a lot. it may only be infrequently. but you'll have more of it, correct? >> yes, phil, good to hear from you. the big thing is, you know, tesla is putting two different models on the final assembly line. and so you have, you know, different parts and new value chain that you're trying to tap there. and also in housing the seats there, which might be some of the issues that they're having here. but this is something that will get over, just like they did in the model s in 2013. i think investors are looking ahead now, starting it look ahead and it has been, you know, some of the stock increase here has been because of model xs now getting to a point where people see commercialization. still, upside as people see margin come from the model x. >> ben, we'll let you go. thank you for phoning in. appreciate it. ben kallo. now james arbitini.
good to speak with you. you got a buy rating, but in one of your most recent notes, you said, we believe management overshot with the model x which appears to us as an overengineered product that will struggle. do you still believe that? does this confirmation of that? and does this throw a wrench at all into your expectations for the ramp of the x going into q2? >> first of all, thanks for having me and good afternoon. i think it is a perfect question to start out with. we recover recalls by the way in quite a bit of detail across the industry and as phil knows, we do put a monthly report out there. recalls are, i would say, a structural change in how manufacturers approach consumers. if you look back, gm recalls, takata, there hasn't been as much market degradation as you might think. when manufacturers put themselves in a position where they would rather be proactive and do recalls. tesla and ben is right, this actually isn't even the worst recall they have had. they had a drive inverter recall for the model s which affected
29,000 of their units. so, this is somewhat lower from a unit volume perspective. but they're already stressed as it relates to sales and service, just given the fact they're building out infrastructure. i'm surprised to hear that it won't be impactful to the p&l for the quarter as they would have to deal with the warranty inspections -- expenses in house and so forth. not positive. i don't think the stock is here because of the model x. the stock would be higher if the x was better executed. it is about the model 3 at this point and this talks again about execution, you know, rushing a vehicle, rushing a new vehicle, a big risk as it relates to recalls. that's why we would like them to go slower than faster. >> jamie, just point of clarification, on the conference wall with john mcneil from tesla and this question came up about what kind of financial impact this recall might have. he said that futurist, the manufacturer of that third row, and the seatback, is bearing all
the cost of the repair. that mitigates to a certain extent the impact there. with regards to the question of production, because this came up from myself and several other reporters, is this going to slow down model x production? because they are in the midst of this ramp up and john mcneil said no, they have factored this in, they can take five weeks to do the repairs out in the field and to make the adjustments on the new model xs that are being built. but it does raise the question about whether or not does it take the shine off of the model x at all or do you think that consumers look at this and say, look, i was already interested in the model x, i'm already a tesla fan, therefore i know there are going to be these types of things that will pop up from time to time and it probably won't impact the demand or the allure of the vehicle? >> well, great points, phil. i would say that the way they handled, the way that tesla handled recalls to date, it would seem unlikely that it would take the allure or the shine off of the products going forward. i think this is an opportunity
for them, as much as it is for any other manufacturer to again be proactive. this is a great customer service opportunity for them as well to handle it swiftly. and if it is in fact something that the supplier will bear both in terms of the cost of the product to repair the issue, but also the labor related, then that in effect is a win as well. so i think it remains to be seen how it will play out on the production line. but, again, we think it is an opportunity for tesla to shine. these are inevitable as we think about the broader universe for the next five to ten years. >> here is the reality of electric cars, which is for the last three or four years the tesla was the only electric car that didn't look like a cardboard box with wheels on it. the buyer was a very unique buyer, recalls obviously have not mattered. is the bigger concern for tesla going forward the fact that other carmakers are getting on board, designing good looking cars, with decent range, why don't we talk about the competition three, five years from now? >> brian, good afternoon.
thank you for the question as well. it is a good one. if i recall, just sort of a car guy as well, i can't think of a good looking electric vehicle. sorry to be the bearer of bad news, but outside of some of the hypercars like the la ferrari and 918s and mclaren p-1s, you couldn't give me a chevy volt, you couldn't give me a nissan leaf. they are lackluster. the b class mercedes has not been selling well. i'm hearing from bmw dealers, they're not ordering bmw i3s at any rate. >> truly, tesla has no real competition among those buyers. the point i'm making is if they have problems, and you want a tesla, recall be dammed. you're going to buy a tesla. >> i think that's right. that's how i would answer that question, i think. >> is there downside risk to the year end or the year end targets financially in your view? >> well, we're already assuming
that a slightly lower number from a deliveries perspective relative to their guidance. so we do think there is some risk here in the interim. the model 3 as you both well know, it is still 18 months out give or take. the catalyst flow will be very important. ben had mentioned that we had expected a model s announcement here. so we are still expecting that announcement. but i would agree, i think there say little bit of risk to the downside still for 2016. >> jamie, great to speak with you. thank you. michelle? let's turn to politics and money. the big money story developing ahead of the conventions, the new york times reporting along with politico that sponsors may be getting cold feet when it comes to the republican national convention for fear of rioting and due to pressure from groups who want corporations to disassociate themselves from republican fronter donald trump. joining us now, cnbc contributor sarah fagan and jamie
pathakoukis. do you think corporations are shying away from the republican national convention? >> i think some of them are. and there appears to be an organized campaign as you mentioned to try to get them to do so. we know this about companies in politics. they do not like to be associated with controversy. and they are easily succumbed to pressure. we saw that in georgia, and also in north carolina with the religious liberties bill, where companies threaten to pull out if these bills were passed and in case of north carolina where it was passed. this is not new. but i do think it will have an effect. i do believe the rnc will raise enough money for the convention. >> trying to raise $64 million. they have pledges for $54 million. but talk that some may back out of their pledges. do you think it is possible they struggle to raise the money. and what i find ironic or interesting is that this could be one of the most watched conventions in modern history because it could be so dramatic.
>> right. but really all publicity is not good publicity. and you certainly don't want to have your logo in the middle of -- again, reminds people of the 1968 riots. four years ago, the republicans put up this big report, sort of change their brand. well, the brand is being changed, becoming a toxic brand. i think you're seeing that in some of the corporations getting cold feet. i wonder, in four years, when there is another republican convention, if they're going to be able to find a city willing to host the convention. it is a reversal of bruce springsteen and north carolina, in the future, you might have the states or the cities say to the republican party, these are going to be your trumpian views, we don't want you. >> i would say this, having been around the conventions for a long time, there is always a mad dash to put the money together. never easy. always short. and they always somehow put it together at the end. and, second, it has been difficult for both the republicans and the democrats to find cities that actually want to bid on these because these
cities are not making money on these conventions. >> jimmy, what is the bigger issue? donald trump or the fear of rioting? >> i think certainly the fear of riots, i think that's part of it. it is that the republican brand to many of the corporations which have their own brands to worry about and have a mass audience that they believe that audience, a good chunk of that audience will be offended by -- even if they sponsor democrats, offended by that, the relationship between that company and the republican party and that's a donald trump issue. >> a donald trump issue, i agree with that. but many of these groups who are targeting these companies will end up hurting the democratic convention as well because corporation america likes to be equal. and so if they give $75,000 or $100,000 to one convention, which is far less than they have in the past, they'll likely give the same amount to the democrats which will also be far less than they have in the past. >> interesting. great point. thanks so much for joining us.
gemm jimmy, stick around. still ahead, 1939, the jewish art dealer leaves paris, his art collection falls into the hands of the nazis. now thanks to the panama papers, the owners of this long disputed piece we're showing you on tv now of his collection may have been identified. this amazing story coming up later in the show. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. try align for a non-stop,ive sweet-treat-goodness plan your never tiring retiring retired tires retirement hold-onto-your-tiara, kind-of-day. live 24/7 with 24/7 digestive support. try align, the undisputed #1 ge recommended probiotic. it's more than tit's security - and flexibility.
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welcome back to "power lunch." i'm melissa lee. brian is here with me. we're kicking off a special three part series today called america the beautiful. we started off with the war on inversions. what needs to be done to stop tax inversions and keep u.s. companies here? let's bring in steve oddlan, jamie pethokoukis. you both agree that the core of this issue, the root of this issue is tax reform. steve, you've been a ceo of two different publicly traded companies. i doubt any ceo actually thinks to him or herself what is a way which i can move my company overseas? that's the better thing to do in and of itself. it is all about the tax code. >> it is. that's the fundamental root of it. we have the highest corporate tax rates in the world, and we have all these tax expenditures all over the place. so nobody pays the same rates. ceos and boards are obligated to their shareholders to take advantage of all of these tax code issues and to follow the
law. that's what they're doing. for congress and the administration to stand up then and call these people un-american, or unpatriotic, because they're following the law, and it just is beyond the pale. they need to change the law if they don't like the outcome of what is happening here. >> jimmy, you say that we need to sort of get past this because republicans and democrats, they're at a stalemate had it comes to tax reform and to leapfrog this, you got a proposal, i think, that a lot of people out there including pension funds, individual investors, they would just throw their hands up and say what are you thinking, jimmy. >> listen, here's a terrifying part of this -- of this issue is that you have democrats and republicans both agree that the corporate tax code is broken, that it is bad for u.s. competitiveness. you have complete agreement and still unable to do anything about it. most of the issues are huge disagreement. here there isn't and they still can't do anything. here is an idea. let's complete -- as i said,
leapfrog this issue. one thing, a lot of economists agree on, corporate taxes, bad way to raise taxes, you can find conservatives, can find liberals, the imf, instead of doing that, eliminate the corporate income tax completely, all right. instead tax shareholders, instead of the companies, tax shareholders, where they happen to live. american shareholders pay taxes, quit trying to figure out where on the supply chain each dollar came from. >> you can do it a couple of different ways. do it when they sell shares, that probably wouldn't raise enough money. and accrual basis. paper profits, they pay taxes on the paper profits. capital gains, dividends, you would raise the investment tax rate to ordinary income tax rates and you have a far more efficient system. and you would not have the sort of inversion issue, it would completely disappear. >> steve, i understand pretty much everybody we talked with on cnbc. the worldwide leader in business
news, will say we need to lower corporate tax rate. the reality is getting a corporate tax rate down is as likely to happen as me winning the masters golf tournament next year. is there anything outside of tax rates that could stop inversions? any other way to do it outside of this tax discussion? >> i think you just made an announcement that you're going to win the masters. i ty it i think it is doable, you have consensus on both side that the rachl ra tax rate is broken. what they need to do is they need to level these -- either do what jimmy said or need to fix the code by lowering rates and getting rid of the preferences. one way or the other. but it is unfair the way it is. and it is unfair when the politicians go after businesses for following the law. this is really the wrong way to do things. the economy is driven by the private sector as it is. everybody who watches this channel knows. >> steve, you know --
>> the core of this conflict -- you know maryland has the greatest percentage of millionaires than any state in the country. nobody can really name any companies that are based there except for underarmor. there is a lot of people and billions of dollars being made all finding loopholes in this tax code. you know that if people start saying we need to simplify it, a lot of lawyers, tax accountants, everybody else, republican aside, whatever, is going to start screaming, whoa, you can't jeopardize our way of life. >> i'm not worried about the tax accountants and lawyers, honestly. you're right, it is riddled -- they call them tax expenditures when they pass the law and the day afterwards, they call them tax loopholes which sounds look a terrible thing, like they're breaking the law or something. the whole point is, though, these politicians make a game of this. they get elected, they -- it is all about incentives and when the corporations follow the laws and take advantage of the incentives they put into place, they demagogue about it.
i think the simplification here is what has to happen, both sides agree on this thing, we just need a little bit of political bravery in order to deal with it. >> gentlemen, great to speak with you, thank you. set to soar. one stock, one analyst says could more than double this year. the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.
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participating in a bid for yahoo!'s assets. however, the paper said talks to several potential bidders already at an early stage and no guarantee the deal will get done. yahoo! stock higher by 2% today. a korean newspaper reports that mcdonald's has put its korean unit up for sale and hired morgan stanley to seek out potential buyers. mcdonald's flat today but up 5% over the past month. s&p announcing first quarter results for the business softwaremaker would be weaker than expected. that's on a slower pace of sales of software licenses to corporate customers. sap is higher by .75% today. coming up on our new america the beautiful series, why aren't more companies willing to sacrifice some profit to keep manufacturing and jobs in the united states? both sides of that debate coming up. sic plays throughout) ♪ the first stock index was created over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average.
if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. hello, everyone. i'm sue herera. here is your cnbc news update this hour. a taliban suicide bomber on a motorcycle killed at least 12 army recruit s on a bus in eastern afghanistan. another 38 were wounded in the attack. most are in critical condition. those recruit s were heading to
kabul for training. rescuers racing against the clock to find victims trapped in a collapse three story building in shanghai. the building came down earlier this afternoon. a woman and a child were pulled out of the rubble as dozens of firefighters searched for more survivors. verizon's wire line employees decided to go on strike april 13th after ten months of fruitlessly trying to negotiate a contract. the communication workers of america and the international brotherhood of electrical workers represent over 37,000 company employees. and what a sports weekend, another incredible sports feat. colorado short stop trevor story belted his seventh homer of the season on sunday in only his sixth game in the major leagues. not just a rookie record, but all time record for home runs to start a season. not bad for a 23-year-old. that's the cnbc news update this hour. i'll send it back to you guys. between the masters and that, i mean, you couldn't have asked for a better --
>> just amazing. let's get a check on gold prices and commodity trade, a weaker u.s. dollar, yen dollar hitting a fresh 17 month high. as for gold, 1258.10 an ounce, closing up 1.1%. the biggest gains being seen in silver, up 3.6% as well as platinum up 2%. palladium up 1.3% and copper is eeking a gain to the upside here. let's check in on the bond market. rick santelli is tracking the action at the cme. >> outside of fed news, the treasury contracts and yields and sovereigns around the globe for that matter haven't really moved very far. if you look at two-day chart of ten-year, you'll see we're close to unchanged and at 172, we're six basis points above the all time low yield close for 2016. at 166. bunds, four above their 07 close, around the 11 area.
some of the action in etfs is better to demonstrate what is going on. year to date, close to challenging some of the best levels. l lqd, it is at the best levels back to may of last year. but the big chart, this is the one everybody is looking at, it turned around friday, up today against the dollar, the dollar yen is now in its seventh day of improvement. that chart you see is the entire month of april, which has been nothing but upside for the dollar yen. back to you. >> i don't see how kuroda sleeps. thanks. earnings season is upon us. and the expectations for earnings season are lousy. does that mean a lousy stock market too? joining us, kevin norris, and noah blackstein. guys, good to see you. kevin, could earnings season be rough because of the expectations are so bad or is it all priced in? >> well, i guess we would expect that things could be a little better than expectations if you look at the last 11 quarters
headings into earnings season. the actual earnings have always outperformed the estimates. so maybe that will continue here. we know the sectors that are going to be the disappointment, the energy sector is expected to be down around 100% or more. technology and financials are going to struggle with consumer discretionary probably having a pretty decent quarter. we'll find out if we get early indication of it tonight when alcoa first reports and follow them a little closely. i would think the expectations are low. >> noah, how about you? are we going to trade around earnings because for so long it has been all macro driven, all what is up with china's gdp and what is janet yellen saying today? >> i feel like saying breaking into rescue from the macro stuff. but i think that if you look at what is the -- the stocks working over the last month, it has been almost -- the walking dead, the commodity stocks, the energy companies with atrocious fundamentals rallying the hardest. the barf index or bhp, anglo,
rio and petrobas rallied, all the energy material stocks rallied hard in the face of bad fundamentals. sometimes it is the inflexion point or less worse seems to be how the market is reacting. i worry in some areas of the market, investors have fled to what they believe, because i don't know who told them, the safety, things like campbell's soup, ridiculous valuations for low growth. i think there might be some more to go in the value trade. but i think at the end of the day, after this all shakes out, you got to look for individual companies with strong growth -- >> i was going to ask what your strategy is. you like two chinese companies. which is very interesting that the point. when there is still -- while maybe things will calm down in china, a lot of concern about their future rate of growth. >> right, but i mean, it is the expectations of concern. i think that it is fairly clear that over the last little while that the -- their plan now is focus in on growth and stimulus
in china. the two companies that i highlighted have been growing very rapidly even in the face of slowing economic growth in china. i think the internet names both in travel and ctrip and baidu are about a year and a half behind the u.s. story in terms of when you sought operating margin expansion occur at places like alphabet. we're slightly behind that on the chinese internet companies. i think the operating leverage of both dbaidu and ctrip will drive the concerns. >> what is your strategy for earnings season. >> we're trying to get into growth companies at atrabtive entry points. i pointed out priceline and visa. both solid best of breed in their industries, visa, you know, the global payment leader, and transaction credit cards, i think half of the market is theirs. three-quarters of the debit card
market, attractive venture point. we think the thematic being that the consumer will begin spending at some point, they have been saving forever, frustrated by the consumer not dipping in and spending a little bit. on priceline, the consumers spend on experiences, not on tv, sofas and the like. >> okay. kevin, good to see you. you can go to powerlunch.cnbc.com to see a health care name that kevin likes now, that's powerlunch.cnbc.com. last week we promised you another stock idea from rbc capital's best ideas list. so here you are. and not only is this company on the best ideas list, it has the greatest expected gain between the current price and analyst target price, you could say this is the one stock that rbc capital may be the most bullish on. let's bring in jason arnold, senior consumer and specialty finance at rbc. jason, why are you so bullish on
air lease? >> we like the growth story at air lease. it is a great, great story fundamentally, very significantly levered to air travel demand which continues to grow at a very sizable pace. 7% roughly year over year last year, that's translating into substantial growth of the company's balance sheet, which it focuses in on leasing aircraft out to global airlines. we're expecting 18% to 19% roe on this business. 20% eps groewth over the next several years in the stocks trading like a deep value stock for all the growth. that's why we really are quite fond of air lace. >> you got a 71 target imemploying more than a double from current price, jason. you make a compelling case in your research. why haven't others caught on to this, though. the stock is down 7% this year, so clearly not everybody agrees with your point of view. >> correct. you know, i think the big story there is that the aircraft
leasing sector is new. a lot of different analysts covering the sector from airlines, financials. no one has the big picture view on all the moving parts. a lot of uncertainty in a lot of folks in the market view growth with some skepticism. but looking at all the moving parts, we think this is an outstanding business. the management team is great. they can get there t. the valuation is offering upside here. but looking at what we look at on all these multiples as well as take-out multiples, a couple of acquisitions at two times book value, that gets you near the price target. >> jason arnold, rbc capital markets, we appreciate your views. a short break. "power lunch" back in two minutes.
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welcome back to "power lunch." i'm diana olick. you're seeing the attorney general saying goldman saks will pay $5 billion to settle federal and state investigations into the sale of its mortgage-backed securities prior to the financial crisis. goldman is accused of misrepresenting the quality of the loans it packaged and sold to investors, almost 8 years after the collapse of the mortgage market. jpmorgan, bank of america, citi, morgan stanley, even late friday night wells fargo announcing it i would pay over a billion dollars in a settlement with the fha over faulty loans. back to you. >> thank you. 77 years after the nazis looted a modigliani, the current buyers may be revealed due to the panama papers. robert frank joins us with this incredible story. >> this was an amazing, some new leaks from the panama papers shedding light on the ownership
of a $25 million painting that may have been stolen by the nazis. swiss prosecutors over the weekend searching the geneva free port warehouse for this painting, called seated man with a cane, painted by modigliani in 1918. a frenchman says the piece was stolen by the nazis from his grandfather, a parisian art dealer, and should be returned. in court, he's claimed that the piece is owned by the namon family, the billionaire art dynasty that owns galleries in new york and london. a family member served a year in prison for his role in a multimillion dollar sports betting operation. the panama papers say the painting is owned by an offshore company called international art center. and they control that company, that's according to a report in vice news. in court, the nahmad's denied direct ownership of the painting, saying the ownership is irrelevant and there is no proof the painting was owned by the plaintiffs or that it was looted during the war.
the nahmad's offshore company purchased painting in 1996 for $3 million. today, that painting, michelle, is worth an estimated $25 million or more. >> shows the incredible appreciation in the art market. as robert's story mabz clekes c the fallout just doesn't stop. david cameron was forced to address it in a speech to parliament today. >> mr. speaker, let me turn to the panama papers and the actions that this government is taking to deal with tax evasion, aggressive tax avoidance and international corruption more broadly. >> one of the biggest revelations from the panama papers has been how much money vladimir putin's friends have accumulated. bill broader is author of red notic notice. for our viewers who aren't familiar with you, i want to tell them, you've been a long time guest on cnbc, first as a big proponent of investing in russia, now one of its greatest
critics after large part of your assets were stolen and one of your lawyers died in prison while fighting for shareholder rights. we're curious what you thought of what you saw in the panama papers and putin's friends collecting enormous amounts of money. >> everybody knows that putin is corrupt, everybody knows that people around him are corrupt, but what the panama papers do is give you granular very real life documentary evidence of -- and the really grubby evidence of how they went about the corruption. so there is just page after page of, like, money transfers and free gifts and state banks making loans they're forgiving to putin's friends which is what makes the panama papers so interesting, fascinating. >> do you think it will change anything in russia? >> well, what it will do and we -- first of all, i should say we're just seeing the beginning of the panama papers. there are 11 million documents
that are in the hands of the journalists and so what we have seen so far is just a tiny, tiny tip of the iceberg. i think we'll see revelation after revelation after revelation of malfeasance and corruption among officials and others. >> will we see vladimir putin's name in print? let me ask you a follow on question, we haven't seen it in the panama papers and we all jumped to the conclusion and tell me if you agree with it or not, that when his friends have all this money, that somehow it is a front for the leader -- actual leader of russia? >> well, i mean, let's look at it very simply. why would some guy who is a cellist be getting $2 billion worth of gifts from russian state banks and russian oligarchs. why is he so gift worthy? and it leads us to only one conclusion, which is that -- i've known this for a very long time, i wrote about it in my book, red notice, which is that all these guys are effectively trustees for vladimir putin and when they take money, he doesn't
have anything in his own name. >> hey, bill, it is brian. officially bill gates is the richest man in the world with a net worth of 88 billion. how much do you believe vladimir putin is worth? >> well, the estimate that i gave before the financial crisis in russia was 200 billion. and i would say that you have to lop off some of that because of what has happened with the war and the sanks and te sanks and s and the sanks and anctions and . >> when i was in cyprus for the big crisis when they shut down the banks for two weeks, a lot of russian money in cyprus, i was at the supermarket where a woman was shopping and hoarding food and she said something very poignant to me. she was russian, she said, you guys are making it sound like this is a place full of, quote, dert dirty russians, but, remember, we russians are hiding from the russian government. a lot of the documents are likely hiding leadership money, but to some degree do they also help protect innocent people in
russia from the very people that we're talking about right now? >> well, what you have to understand is that no money is -- any russian money is not safe in russia. so whether you're the dirtiest government official or whether you're the cleanest businessman, you don't want to keep any of your money in russia because someone will try to take it from you. the reason why there is -- all russians keep their money offshore because your money is not secure in russia. this lady might be absolutely right that she is trying to keep her money safe from the russians. but i can tell you that most of the money, most of the money comes from these dirty deals of putin and his regime. >> based on what you said, is there any justification for banking secrecy to protect those innocent people? >> well, the answer is that there should be total transparency because the amount of what we're seeing just in these -- so i should point out this one firm is one of 100 firms that does this type of work. and so this is just -- these 11
million documents -- we have seen a tip of an iceberg and that iceberg is a tip of another iceberg. there is just so much dirty stolen illegal money out there that the only way to stop it -- and not enough policemen in the world to police it unless it is transparent. that's what has to be done. >> thanks for joining us. bill broader, author of "red notice". millennials get a bad wrap as employees, but on the other hand, they are the largest generation in the workforce now. many firms are saying if you can't beat them, give them what they want. ping-pong tables for everybody. plus, a trophy. how millennial won at work. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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there is no problem. we're going to be able to elect a woman in this country. >> would you like to see us elect a woman? >> i would like to see a woman elected. >> that's it. >> no, no, no. that's all right. no, i would like to see -- i don't mind -- i'm not getting into that -- >> i'd like to ask one more question. >> the president and i are not going to endorse -- >> joe biden again saying this was not an endorsement of hillary clinton. but there is, of course, only one woman running for president. what do you think? no? >> i thought he was saying -- >> in general. >> i don't think he was endorsing. >> i want a woman elected president as well. i'm not going tone dor ing to e >> i think he's saying this woman or one in the future. >> he's joe biden. >> the pr person trying to cut him off -- >> just in case. >> added something to a nonstory. made a nonstory slightly less of a nonstory. >> what do you think? >> i think -- >> you think he wants bernie sanders to win? i doubt it.
>> all right. >> the battle to bring manufacturing jobs back to the u.s., that is straight ahead on "power lunch." in the power of active management. by debating our research to find the best investments. by looking at global and local insights to benefit from different points of view. and by consistently breaking apart risk to focus on long-term value. we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management. so what else is new? humm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird. [bassist] two late nights in blew an amp.but good nights. sure,music's why we do this,but it's still our business.
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three part series america the beautiful. our focus, exporting jobs out of america. ford and carrier air conditioning lately taking heat for announcing some manufacturing will be moving to mexico. candidates from both parties using the moves to slam some companies and call for more jobs to stay in america. sounds easy. but is it really that simple? let's bring in brian riley. brian, i understand free trade is good. right? and by this point the horse has by far left the barn. but at some point do we acknowledge that free trade is really never truly free? >> well, trade and investment brings both winners and losers and, look, i get it, when people hear ford or carrier are moving to mexico or think, we can't build on anything in the united states anymore, but the fact of the matter is when it comes to manufacturing, much more money
comes into the united states from abroad than goes from the u.s. to other countries. so, for example, for about every dollar that american companies spent in other countries, in manufacturing, we got about, oh, 1.80 from companies like bmw, toyota, honda, that want to employ u.s.workers and employ over 2 million u.s. workers. >> why can they build the s-5 in spartanburg, and hyundai can build in alabama and ford needs to build in mexico. that's what i don't get, brian. >> one of the advantages that mexico has that we don't have in the united states is mexico has twice as many free trade agreements, so they can bring in the parts, tariff free, and they can sell the finished products tariff free, particularly to the european union. so fwe waif we want to sell a c the u.s. made to the eu it has a
tariff. you build the same car in mexico, it has a zero% tariff. that's why we need more free trade and more free trade agreements in the u.s., not fewer. >> do you buy that logic, if we had even more free trade agreements, it would actually be more beneficial for american jobs? >> no, i don't. i don't think that -- i don't think that's the rule -- the solution at all. the trade agreements are part of what is rewarding and encouraging outsourcing as you menne mentioned, there are a lot of companies coming to the united states. we have a big consumer base. that makes us a good place to invest, but in order to be a good consumer base, we need to treat our workers well, pay them well and we're not going to compete with mexico on low wages. we need to compete by investing in america and infrastructure and skills, we need to reward companies that make jobs, good jobs here in the united states with our government purchasing policies and our tax policies. and we need to stop signing trade deals that are encouraging
companies to move jobs offshore to take advantage of low wages and workers who don't have the rights to organize or to be treated fairly. >> wouldn't all the projects be much more expensive and maybe couldn't be purchased by the very workers that you're trying to -- >> not at all. not at all. there are different i was of competing and i think a very shortsighted way for the united states is to compete by getting our wagers lower and lower and lower and by violating environmental and consumer protections. we're a wealthy country. we'll compete by having strong well educated highly skilled workers and the best technology. and proximity to the consumer market. so trying to -- >> i would say -- >> -- by undercutting wages is shortsighted. >> i agree with most of that statement, but i would point out that u.s. manufacturing output has never been higher. and we're not going to be competitive by putting tariffs on things like steel that u.s. carmakers need, that u.s. construction workers need, we need to be cutting tariffs on inputs that are used by u.s.
manufacturers, not throwing up new barriers. there say reason that americans are the most competitive workers in the world and that u.s. manufacturing output has never been higher. we need to work to reduce government barriers, not have more minimum wage barriers to entry. not have more deficit spending. that's exactly the wrong approach. >> i think we -- i think we all agree that america's great, american workers are great. other than that, not sure. thank you very much. >> thank you. >> thank you. most market watchers are expected earnings to fall this quarter. and decline could be even bigger for the banks. dom chu has been previewing the bank earnings for us. they kick off soon. >> most of these things happen in week and there say big reason why a lot of people are focused on the banks, the financial secretary, the second biggest in the s&p 500. overall, earnings expectations are for an over 7.5% drop. if you look overall at the calendar for this week, we kind
of start that large cap earnings season on wednesday with jpmorgan chase. citi on friday and morgan stanley and goldman sachs monday and tuesday, respectively. as for these big banks, this week, what should you expect in terms of earnings. jpmorgan chase, 13% drop in earnings per share over the same time last year. that's according to thompson reuters ibis estimates. wells fargo down by 6%. b of a, 24% drop. and citigroup, 30% drop. now, overall, again, for the season, the earnings expectations for the seconder as a whole looking for a 9.5% drop in earnings, over the same time last year, and just very, very modest. almost flat revenue growth the same time. melissa, bank will be huge in focus this week, only because mau most of the big guys report
early this week and next. >> dom, thank you very much. we asked is there opportunity in the banks or should you just simply avoid the space? let's bring in our banking bull, charles burbinski and bank bear steven masoka. good to see you. steve, i'll start off with you. as a bear, you say everybody knows the yield curve is not going to steepen much. doesn't everybody know that? isn't that risk already out there? why is that a problem for the bank stocks? >> well, i think the problem for the bank stops, banks could use higher interest rates now. net interest margin expansion, any kind of adjustable debt they have out would be benefited by this. and i just don't -- i'm just a bear on interest rates. i think rates will stay lower for longer. i think the fed will be on the sideline by the ecb and the boj, being very aggressive. even though the u.s. economy is improving, that hemmed the fed in, not going to be able to raise rates. >> this is the one reason why you're bearish the banks, steve?
>> no, no. i have other reasons as well. number two, the regulatory environment is very much against the banks now coming out of dodd frank and out of the great financial crisis. there has been all kinds of regulatory handcuffs put on the banks, they had had to abandon certain markets, largely leaving the middle market, market shares dropped tremendously in that area and finally i would say they had a lot of energy loans out as well. i think those are going to be very, very damaging going forward. >> charlie, i want to get to you and ask you what metrics you us. it can yield very different results. kbw came out on citi and said they did not trade above tangible book value for several years, so they need restructuring to make it profitable. based on your metric you say citi is inexpensive and looks interesting. >> i got to be careful, i don't own citi, i think it is the
hardest to analyze and it is the most black boxy of all of the big banks. but many of the other banks have much more transparent books and in my opinion, something like morgan stanley trading at 70% of book value is just ridiculously cheap. there aren't a lot of absolute rules in investing, but the one thing that is absolute is you want to invest in industries that have well identified short-term problems. what steve talked about was a regulatory environment clearly horrible, but it is going to get better. it can't be as bad as it has been the last couple of years. interest rate environment, interest on loans has been positive for thousands of years. this zero interest rate environment that we're in right now is temporary. it is not going to last forever. so, yes, this is a terrible time for earnings, but going to get better. >> how can you say with confidence that the regulatory environment is not going to get better. we witnessed a treasury department that enacted regulations, which will hurt inversion efforts, which is and has been a source of m&a revenue
for banks. >> but the 200 billion in fines is what is really hurt these companies for the last few years. we are getting to the end of that, even mrs. clinton, if she becomes president, is not going to be as anti-bank with the fines that the obama administration has put on these banks. that is going to get better. and interest rates, the curve is very important. their product is lending money and right now the price that they can charge for that is the lowest level it has been since george washington was president. this is a temporary time when interest rates, what they're able to get for their product, which is making a loan, is an artificially low level and going to be getting better. >> steve, this is not your bag, but forced to choose, would you be long the bang banks or shor banks at this point. i ask that question, as a bear, the sentiment is extremely bear itch, the worst performing sector year to date. at this point, isn't that downside case well factored in?
>> i would say to the prior point, in terms of where they are for intrinsic book or price multiples, whatever you want to look at electronicit, i don't t they're short. interest rates will stay low. it is bad for banks. that's going to continue. i don't think the regulatory environment will turn on a dime. maybe five year some day it will be better. as you point out, this inversion rule will put a real hickey into m&a. look at what is going on in equity trading, what is going on in fixed income trading, those margins are coming down for years. equity trading is terrible margins now. i don't see this environment getting better. i don't know i would be short. i wouldn't be long them. i think there is stuff equally che cheap. >> -- less than 10%, less than 5% of m&a. it is an overrated factor in terms of looking at m&a going
forward. >> got to leave it there. thanks, guys. charlie and steve. the unofficial start to earnings season kicks off tonight after the bell when alcoa reports. the ceo will be on the closing bell when earnings hit the street. good news to all you mortgage bargain hunters out there. if you feel like you might have missed the low end rates, don't worry. you might get another chance. diana olick joining u.ss now. >> how about this, from matthew graham of mortgage news daily, i definitely see the ingredients in place for new all time lows sometime soon. question answered. why? ask the ten year mortgage rates followed bonds that follow that yield and it has been falling over the u.s. and the economy. oil prices are making no gains.
add it all up and you get a big drop. the interest rate on the 30 year fixed, already below 4%, headed even lower last week, 3.59% according to freddie mac. that's down from close to from 4.25% last summer. it did nothing for mortgage applications to buy a home, because even near record low rates are not canceling out the big jumps we have seen in home prices and the hit to affordability. so, where do rates go next? we get some data on the economy wednesday and thursday. but it has been taking a lot lately to move rates even a smidge higher. >> diana, thank you. so here is what else is coming up on "power lunch," america the beautiful turning into regulation nation and stifling business in the process. we debate if that's the plight of american business. and the ipo freeze is starting to melt. should a trendy regional fitness company like soul cycle ever even go public? plus, millennials appear to
nobody" but some argue we need more rules because we are a larger more complex nation than at any time in years past. this is the topic of the third part of our america the beautiful series. we're joined by cnbc contributor jared bernstein. no surprise, philip, i'm a big fan of your book, the ideas you're putting forth, but i'll take the other side if i can which is to jared's point, what is wrong with too many laws? we're a huge nation, we're super complex. why should we reduce the number of laws that are on the books? >> because they're not effective. we're governing america with effectively a 19th century industrial age machine. a complex world needs more government oversight to make sure we have clean air and toys don't have lead paint on them. we have the system where it takes 6 to 10 years to get an infrastructure project approved and well meaning programs like special ed end up consuming 25%
of the total budget. we're wasting -- pick a number, 25% conservatively of the amount of money that we spend just in ineffective regulation. >> you know, jared, i think philip's point is, look at the harbor of charleston, south carolina. finally getting deep, but the first conversations were held about it in the early to mid1990s. china is not taking 20 years to dig a harbor deeper to bring in bigger ships to be more competitive. >> i think philip makes some good points, however, it is not that i think we have the optimal number of laws or regulations. it is that philip's solution is, i think, too broad in some ways. that is what he proposes is every decade, every law, every regulation with the budgetary impact with sunset and congress and some sort of public commission would get together
and figure out which ones to put back. that's not workable at all and a formula for a lot more gridlock. so we have to figure out a way to find more efficiencies within the system. let me just tell you one factual point that conflict contradict what has been said. we had infrastructure projects in the field in a matter of weeks. now, i grant you that doesn't always happen, but it can be done. >> philip, your response. he does put forth some good ideas, though you point out in your book that the bridge renewal taking years because teamsters are suing under environmental laws just to get a new contract. >> well, first, the u.s. now rafrnz ranks 47th in the world. that's a serious problem. secondly, congress doesn't even have the idea that it is in charge of all of the old laws. if you poll members of congress, they wouldn't realize the programs from the 50s, 60s, 70s, 80s are their responsibility. if there is another suggestion other than sunset laws, then i would be happy to hear it.
the reality is every program, even the best of them, is broken. and broken because congress never goes back to fix them. they're all out of date, they're not -- if modernized society -- >> jared, if i have a really good lawyer, i might be able to go to a law passed in the '50s that has no application to anything today and hold up some valuable project because i can pull the law out of my you know what and say, hey, we need to resolve tortoise crossing because we can't build a bridge. >> leave your you know what out of this. but the point is, look, we definitely have areas precisely where you and philip say we need to find efficiencies where there is terrible ways. but if you actually read philip's piece, he's talking about sunsetting social security. and medicare. and actually those programs work really well. you got to be too careful -- got to be careful where you're going to make this sunset applicable. look, again, the problem is if you go back to something like the recovery act, where we had
infrastructure projects in the field in a month and you try to figure out what we did there, one of the things we did is we did some on the ground work. we went to places and we found out where projects had blueprints, where they he were ready to go, where labor and governors agreed with each other. that takes a type of leg work that this dysfunctional congress doesn't do. that's the kind of rollup your sleep sleeves kind of work that needs to be done. >> it is a lot more than sunsetting. we need a spring cleaning of all of the programs, especially independent citizen committees to make recommendations in each area of regulation, not to get rid of them, but to make them work better because they're all -- every single one of them, or virtually all of them, are out of date. and on medicare and social security, the idea of sunset is not to get rid of a program. the idea is to take for example, the fee for service, reimbursement model which was written over a weekend in 1965,
and weighs 15% of the money, that's $150 billion a year, and skews the incentives of doctors and nurses toward doing the most possible care and get paid more. >> what i would argue there is that if you actually look at the numbers, medicare in particular, but also medicaid, run considerably more efficiently than the private sector. you can tell me there is lots of inefficiencies over there. the growth rate is considerably slower. by the way, my experience with government is if you can't figure out how to do something, and you don't have any good ideas, you kick it through commission and hope they'll figure it out, and nine times out of ten, they don't. i don't think that's a way out either. >> it is a good discussion, guys, good debate, not going away anytime soon. thank you for coming on. philip k. howard, jared bernstein, we'll see you again. coming up next, our under the radar stock call today. a company probably you've never heard of, but one analyst thinks could rise by as much as 50%.
always digging out opportunities for you. that's coming up on street talk. . . that was a long time ago. you know, they made a movie about it. you were shown to be quite skilled at fraud. times change. now i help catch the bad guys. me too. i help banks detect fraud by applying cognitive analytics to public financial records and social media. so if somebody said, "catch me if you can...?" we can. let's do a sequel. it could be a buddy movie. i would like to have a buddy. approaching medicare eligibility? 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.
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about. stock number one, beacon roofing. the note saying game on. got a $50 target on the company, implying 15% upside. the upgrade is based on expectations for strong volumes, higher selling prices, and deals and synergies, 58% of revenues from new residential construction. if you're a bull on construction, he says you should be a bull on beacon roofing, not helping the stock today. >> and presumably the rest of the balance is also from renovations and improvements, and so that part of the equation, within the housing trade, has been working. second stock here, apple. everybody knows about that barons article over the weekend, giving it a lift. drexel says the indicators point to stronger march sales. they all reported market sales all stronger than the 11 year average and mark sales for what it calls its apple monitor increased by 42% month on month, supporting the meetings in taipei. the analyst visit to the flag ship store highlights a very
strong demand for the new se at a stock. drexel has a $200 price target on this. >> you wonder if they will have inventory issues. >> not a bad problem. >> too much demand, said nobody. third stock, total system services. upgraded to outperform from market perform. this company is basically a credit card and bought a company called transfers. that deal is done. the analyst says it should drive revenue growth, like the stock's valuation, even after the stock has bounced off earlier in the year. adverse impact from prepaid overdraft regulations should be manageable. a legal overhang. target on total system services, 58 bucks, not changed. but still about less than -- 18% upside. >> that's a great one year return, 30% in payments. fourth stock, restaurant brands
international, upgrade at rbc to outperform to sector perform. qsr, parent of burger king and tim horton's. cost cutting potential at tim horton's. consensus may not be factoring in the benefit from the weaker u.s. dollar in estimates. the price gets hiked to $48, more than 25% higher from friday's close. >> hot stock off the february lows. so hot, only one major restaurant chain has done better in the stock market over three months than quick service. >> three months. >> cracker barrel. >> really? >> coming out with a new champ -- holler and dash. finally, today's under the radar name, ariftia networks, not the record label, santa clara router and switching company, guggenheim partners reiterating the target. a new product cometing o incomi give them -- until now, the
analyst notes that market was cisco and juniper. the analyst thinks, by the way, smaller companies are making inroads into that market. target price implies 50% upside. >> rough chart there. that does it for street talk for monday. michelle, to you. >> big update on the spread of the zika virus. the deputy director of the cdc says the type of mosquito that carries the virus is in more u.s. states than initially thought. going on to say, what they're learning about the virus is, quote, scarier than we initially thought. the cdc underlining its warning to women today about traveling to brazil for the olympics. the deputy director of the cdc saying if athletes know they're pregnant, they should defer travel to brazil for the summer's olympics. >> in terms of the athletes, you know, we know the olympics is just a wonderful event and athletes have been training for their whole lives to go there. we want to make sure people know that if they're pregnant they
should defer travel. >> the cdc says they have given that direct warning to the u.s. olympic committee and, guys, if you're thinking about getting pregnant or trying to get pregnant, in the early days, you don't know. i think this would exclude a lot of women, especially if they're young. >> not just women. we had the ceo of intrexen on who is making the genetically modified mosquito and we asked them, would you go to brazil for the olympics and he said no. >> as a male? >> yes, as a male. >> which is tough, by the way, for a country we already know is suffering. they got to fill the seats. some article that the government of brazil might have to buy up tens or hundreds of thousands of tickets to give them to underprivileged schoolchildren to feed the stands because they don't want the cameras, nbc sports to look at the stadiums and see it be a quarter or half empty. >> intrexen. will raise all kinds of questions about why brazil got the olympics in the first place, as we constantly ask that question related to the big event. after a brief dip, oil is
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hello, i'm you herera. here is your cnbc news update. as you saw on cnbc, health officials warn the spread and impact of the zika virus is wider than initially anticipated. and the first vaccine candidate should be available in september. they say the types of mosquito in which that virus carried is present in more states than previously thought. tesla voluntarily recalling 2700 model x suvs after the automaker's own tests showed the third row seats could snap forward in a crash. the recall involves suvs made before march 26th sold in the u.s. speaking before the house of commons, british prime minister david cameron says he accepts all the criticism that has been directed at him for not responding more quickly to the issue surrounding his late father's offshore company, but -- >> as i said, i was angry about the way my father's memory was being produced.
i know he was a hard working man and a wonderful dad and i'm proud of everything he did to build a business and provide for his family. >> a florida sheriff says the only person who survived after a boat capsized off the coast of florida survived because he clung to the vessel overnight. 45-year-old robert stewart was taken to a hospital after he was found walking on a beach. the bodies of two adults and a child were recovered earlier today. that's the cnbc news update this hour. michelle, i'll send it back to you. >> thanks, sue. oil market closing for the day. let's get to jackie de angelis. >> it looks like we'll close just about under 40 1/2 here. sessi we haven't seen these levels since early march. 40 is a psychological level, key technical level, some of the support is coming from this meeting in doha, this coming
sunday. the speculation that there is event risk there, something could potentially happen where we get a freeze or get a cut that could support this market, but, remember, the majority of you view this is all up to the iranians and saudi arabians and iranians are not going to want to freeze or cut production. we're watching the weaker dollar supportive of oil prices as well. on wednesday, we'll hear from the department of energy and see if u.s. production has broken under 9 million barrels a day. if it has, that's pretty significant. the demand picture now still mixed out there. soft demand now. we have outages across the country. but -- and some seasonal, you know, overhang as well we're trying to work through. still, those out there saying demand will pick up in the second half of the year, bernstein in a note saying we could see $60 oil again. back to you. >> good place to leave it. thank you. you saw jackie's report, oil is higher, today is the beginning of a bigger rally or are we headed down from here? rob thumble is managing director
of ftortoise capital advisers. good to have you here. where do you think we get another $10 per barrel? >> here is a reason why. oil prices have bottomed. here is the number one reason why. u.s. production has actually fallen and it continues to fall. nine out of the last ten weeks oil production in the u.s. has fallen. we think it will continue to fall as we move throughout the year. and that will help balance the supply and demand and balance globally. that's where you get your extra $10. >> talking about oil being below production in the united states, falling below 9 million barrels per day. however, if prices rise, doesn't that bring oil back on? >> we don't thinkt does. we think the producers will be very disciplined this time because they need substantially higher prices. so rather than increase their capital, and grow their production, instead, what are they going to do, use the excess
cash flow to pay down the debt. so they're not so leveraged. next time we go into another commodity price cycle. >> bob, you say we could see oil in the 20s again. why? >> i think we could see daily prints down into the 20s and tesla, the low 30 level, for the same reason we sold off last year. and that is that the oil market is global. it is not just in the u.s. last year iraq and saudi arabia alone more than offset the decline in shale oil production. and this year, iran, opec ngls, iraq is up, they are keeping pace with shale declines. so the real question is are you going to see outages of supply, voluntarily or not, outside the u.s.? that's what you need to get these stocks to stop building. i think this 50% rally since mid-february has been the most successful case of verbal intervention, money for nothing, in the history of the oil market. i mean, they -- without a shred
of a hint of a cut to say they're going to freeze at january's levels, when russia made all time highs since then, when iraq made all time highs since then -- >> in production. >> in production. i think it is an outstandingly successful case of literally scaring traders out of their shorts so the rally is clearly there, but i think it is going to get tested when we don't see those barrels come off and stocks continue to build. >> financially and physically, i assume we're talking about the shorts. mr. thumble, what is wrong with his argument? you think we're going to get anything out of doha when all the guys get together and agree to a freeze and in the past opec has always cheated. you can't believe them. >> here is how we look at it longer term. we don't need anything out of doha. long-term demand for oil will rise by a billion dollars a day for now for the next several years. over 100 million barrels of oil. where is that supply going to
come from? that long-term supply will come right here from the u.s. >> talking six months. >> as a long-term investor, in energy, and at tortoise we have been investing in the energy sector for decades, we look at a time span of a year if not decades. so we're in a great time to be looking at stocks in the energy sector now because they have been punished because of the low uprise environment we have been in. >> that's a little different argument than coming to the place of oil. thanks so much. rob is of tortoise capital adviser and bob mcnally of the rap rapidan group. have millennials defeated wall street? that's next on "power lunch." if you have medicare
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[ dolphin chatters ] so when you need a little house painting or a complete remodel, we'll help you get the job done right, guaranteed. get started today at angie's list, because your home is where our heart is. wall street's biggest banks are rewarding young employees faster than ever to prevent them from leaving their jobs. that's according to a new report from the wall street journal. daniel wang is here with us and jean meister. how are the banks reward the
millennials so they stay on longer? what are they doing? >> 23 if you look at the list of the biggest banks, a lot of them have their own package of rules. each one is announcing a different version of shorter hours, shorter time of promotions, you know, some of them are saying we're going to invest in more technology so younger bankers don't have to do as much drone-like tasks. everyone has their own stamp on it. >> this isn't about adding ping-pong tables and trophy for everyone as i said earlier on? >> no, it is not. they're not really taking those lessons from startups. a lot more of it is what is it that these young people are actually saying. it is not just tweaking little things here and there that are coming out and saying -- >> why shouldn't i call them complainers? >> these younger people? >> yes, life is hard, have to get to work, you first start out, work is hard. >> yeah, that's a valid point. the story that i wrote came out online on friday. if you look at the comments section, there is a lot of people who share that point of view. the reality is -- >> never do that. never look at the comments
section. you're an experienced reporter. >> i always look at the comments section. >> that's where they live. >> wall street journal commenters they have interesting points of view. but if you, you know, there is a fair segment of comments that say, you know, back in my day we're modeling uphill and snow barefoot, but there are people who are saying, god forbid the junger generation wants to leverage some of the power they have. they grew up in a different set of circumstances and a lot of employers recognize that. >> is there a reason the banks, jean, should be concerned about or any employer should be concerned, there won't be anybody to fill the positions and, by the way, they're well paying positions. that's not the point. they're being paid to do the grunt work where -- you don't even get paid to do the grunt work. are they worried they won't get anybody? >> first of all, goldman sachs was very unimaginative in their solution with pencils down. the real solution is to
understand what young people want to stay engaged in the workplace. the worst thing you want is a disengaged or unengaged employee and goldman sachs already spent thousands of dollars finding the exact right employee. so i think one of the very imaginative solutions from fidelity and pwc is companies are paying millennials student debt loan repayment. the average student debt now is $30,000. it is a $1.4 trillion problem for our country. and -- >> i think -- >> i think michelle's point was we of a certain age view this as, hey, these kids want to play at work, goofing off, i want to be fully honest, i'm jealous, i wish it was like this when i was coming up. you made copies and got people coffee and did nothing of value until you're 25, 26 years old.
how much of this is envy? >> it is one of demographics. there aren't really enough millennials with the skills that some of these banks need to be successful. so if you spent all that money to find them -- >> hold on. >> do you want them to just -- >> i don't understand. when i graduate -- i'm clearly not a millennial. when i graduate from college, you get recruit ed because you went to a decent liberal arts college, didn't necessarily know how to model but they would teach you. if you engaged, it is because you were interested in the work. why aren't there millennials who want to do that for the pure -- for the joy of learning about whatever sector they're covering or the deals they're covering. >> it is still an attractive industry. the issue now is less of these banks aren't -- it is not that the banks aren't doing well in terms of recruiting new talent, it is the fact that the younger people see, well, you know, i can work for a startup that is offering sometimes just as much money, but these people actually care about am i hitting my
personal growth targets, you know, am i feeling like i'm being valued, am i not being told to make logos. to your point earlier, you're saying, you know, like -- >> listen, i also went to law school and people that graduated from law school with literally have eight, ten years of advanced education and are making copies, you know. they're being paid a couple hundred grand a year, but at the printer on deals that -- >> you're saying that a lot of the banks, pain point among people who did rise up the ranks, five or ten years earlier. people who basically just missed that wave of reforms and these are the people who are also managing these younger employees now. they're not very happy. you talk to the -- >> they wanted it too. >> they weren't happy with it. they took it. so you have the people at the very top saying we care about millennials, we want to understand what the young guys want, but the younger people are getting managed day to day by the people above them, so there is this disconnect. >> there is a lot of conflict,
generational conflict, because millennials come in with a certain set of expectations. and even gen xors are saying, didn't happen when i was there. >> i'm okay with that. >> i'm not. i'm not. that's not the way it works. >> you're jealous. it is great now. things are great. >> on wall street, you get paid crazy money when you graduate from college. you can't make that kind of money anywhere else, even if you're mediocre. go do something else. >> this was fun, jean. >> everything in life you can learn from the movie caddyshack. i want a burgburger, i want a s you'll get none and like it. >> you don't have to put on a suit when you go to -- >> that's great. why am i wearing a tie? this is a relic of the croatian
army. >> i would have put on a tie for you guys. >> thanks so much. shares of apple have perked up lately, still only up about 4% so far this year. is the stock about to have a major breakout? that's next in trading nation. (boy) ma, pa - why do we settle for cable? (mom) because we're settlers and that's what we do. (girl) but with directv and at&t, you can get your tv and wireless service from one provider. (dad) are not we your providers? do we not provide you with this succulent jackrabbit pie? this delicious graywater soup? and a single lick of the family lolli every harvest moon? (vo) don't be a settler, get a $100 reward card when you switch to directv. (ee-e-e-oh-mum-oh-weh) (hush my darling...) (don't fear my darling...) (the lion sleeps tonight.)
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built for business. it is time for trading nation, where traders trade better together and let's talk apple. rising today after baron said the stock had soon hit 150. max, it is a great publication. i read barons religiously. nice picture of bill gross on the cover this month, but come on, are you buying the baron story. 150? >> i do buy the strength of the name. i think it has been a little over beat up. we know there will be a downyear in terms of the recent growth rate. worst case scenario, 38% profitability. still, icon, best global brand in the world. we think is 125 to 140 is more our comfort zone.
it has become the buy the rumor, sell the fact story. >> you're bullish. not that bullish. >> long-term we think the smartphones probably reached its apex, will be a long, slow gentle downside for decades but think short-term this name is oversold, lots of upside, not too much downside. >> you to see 150 in the technical cards? anything in the charts saying that's achievable in the near term? >> we don't see 150. what is interesting here is that we love large caps. we love tech. but we're so-so on apple here. the trends are a bit mixed here. been making lower highs since last year. coming into its down trend marking resistance at 112, our hunch that it can get through is simply based on the market overall. we think the market continues to grind higher over the coming months. if you get through that downtrend at 112, next resistance at 122. that would be the upside i'm looking for. >> there you go. 122, max bullish, not quite as
bullish as the barons article, but we're watching apple stock because we have been known to talk about it once or twice. thank you. >> for more trading nation, head to our website, don't head to anybody else's, nation.cnbc.co spring time could help thaw out this winter's ipo freeze. could companies like sole cycle go public? or are they better off private? we'll talk about that next.
once driven, there's no going back. it's more than it's multi-layered security and flexibility. with centurylink you get advanced technology solutions. including cloud and hosting services - all from a trusted it partner. centurylink. your link to what's next. >> we've got a jam packed afternoon. coming up on "closing bell", a $5 billion mortgage related settlement with goldman sachs and we talked about the oil rally earlier. is it for real? we'll ask dennis gartman if it was, since february lows up 50%. >> is it going to stick? >> it's been two months since the bottom of the market for 2016 with several hot companies preparing to go public at long last ipo freeze appears to be coming to an end.
bob pisani joins us with more. >> there's a thought coming but i'll believe it when the flowers go public. we've got a big one announced today and that's secure works, dell's security spinoff here. that's a healthy company, could be valued at $1.4 billion. this is the fourth company to announce terms in the last week or so. take a look at our ipo thaw, we're expecting first one to go public pricing on thursday for trading on friday. and the following week we'll have a couple of others put up ipo, mgm growth properties and american renal and also potentially out there, they haven't announced terms, u.s. foods and soulcycle. four companies on the calendar right now. they have different spaces but do have a few things in common. this is what investors are looking for right now.
they've got significant market share and they've got growth and finally and perhaps more importantly, they are profitable and all have a clear path to profitability. the only thing that could derail this right now, a sudden soon in the market that looks increasingly unlikely for the week. >> thank you so much. we want to focus on soul cycle's ipo, others have disappointed after their ipos. town sports international plumeting 23% since the market debut and planet fitness down 5% since its ipo in august. should anyone investterested in investing make a move. kathleen, we are really asking on soul cycle because of the news last week its co-founders are leaving the day to day jobs. soul cycle has a ceo placed for
some time but could this be a red flag for potential investors? >> i like your comment about doing soul searching for soul cycle. there's going to be a little concern the fact that the founders are retiring from the souls sole cycle and i think that's a little concern. we've seen companies where this has happened so i don't think it's a -- a life changer for the upcoming ipo but it will be a consideration they are not as critical to the company as they need to be to have this continue to continue to grow. >> how convincing are the profitability trends and the reason i ask, i'm a huge soul cycle fan, did it for years. when it started and when it was new, it was impossible to find a bike. you would walk into a room, 70 bikes, every single person in the room had to pay 30 bucks tore in there for 45 minutes and some paid as much as 75 bucks. they seem to be printing money
yet they expanded so fast now it's easy to find a bike. >> and their intention is to grow very fast. it's important to keep that interest in these studios and also just the idea that they can pack so many customers into one session. i think that's really important to the unit economics have have been so impressive, they make about $4 million in revenue per sunt and bring down a contribution margin of over 50%, very i am prisive and grown 50% year over year. it's fast growing but it's important they keep up the branch so to speak, the interest among customers. >> $4 million per unit. i start to do the math and that's pretty impressive. >> why do they need the capital of going public if they are making that kind of money? >> that's a very good point. >> can you charge as much
outside new york city? >> that's a very good point because they even say in the prospectus that the break even for them is a two-year time frame for the urban centers but when they get in the suburban areas it's more like a three-year break even. so the company is going to have these challenges to keep the -- it costs at least about $40 for a 40-minute session that comes out to a dollar a minute by my math. that's a lot and maybe in the cities and suburbs you might spend something like that but i'm not so sure if you can get in a bike and ride outside and how it will play beyond cities in peoria so to speak. >> what do you think will happen here the company fits the criteria for what the investors want. they have a growth and fanatical base. how do you anticipate the ipo will do? >> we actually think that the
despite these concerns, the company has done a great job so far and we think that it's the kind of profile that ought to get a lot of attention in the ipo market. plus we're at a point in time where the ipos being done, growth companies like this that are profitable, will be done to attract valuations, they are going to look at these risks and this is one that fits and we think that should probably come out at a pretty good valuation. >> i wonder if the whole industry will be disrupted where you can take classes at home for $40 a month. >> and they can stay private. >> that's all. >> there are competitors not the least of which is to note that equinox has a cycling studios inside its own -- >> i've got a cycling studio inside night house. >> a lot of places to cycle. >> we'll leave it there. good discussion. so that does it for us here. it will be interesting to watch
tesla update, stock is about flat, it lost about 2.3% on the news of the model x recall. we'll watch that going into the close. >> i speak for the three of us when i say thanks for watching "power lunch". >> closing bell" starts right now. ♪ >> little air guitar going on there, right? >> that's pretty awesome. welcome to "the closing bell." i'm kelly evans back at the new york stock exchange. >> i think you grew too. >> i'm bill griffeth, happening right now, president obama is meeting with fed chair janet yellen at the white house. she's due to arrive right now and get this, this is only the second time she has met with the president for a one on one since she took the position back in 2014. we'll bring you more details about that meeting as we get them. a lot of speculation. >> tes