tv Power Lunch CNBC April 13, 2016 1:00pm-3:01pm EDT
seeing fit bit shares finding some lift. all but left for dead for some -- >> interesting thing on the fit bit story is the fact that valuation, it is cheap. you can understand why it is moving higher. >> good to see you. that does it for you on the halftime report. nowlunch," which begins right now. >> thanks, melissa. we'll see you here on the set, "power lunch." welcome to "power lunch" with brian sullivan, i'm michelle caruso-cabrera, and tyler mathisen is off today. and a nice rally on our hands. the dow, the s&p 500 and nasdaq all in positive territory. the best performing sector, financials, jpmorgan, profits were down, however, better than expected, that led to a rally in that stock with the financials. let's get to bob pisani at the new york stock exchange. >> we have aally going here, michelle. so far it is holding up and a global rally. let's talk about the reasons why
we're getting the move. there is two primary ones. better china trade data, particularly on the exports. then bank earnings, jpmorgan, let's call it good enough. that's my phrase. people were expecting downbeat commentary. we didn't get that. that helped move the financials and the overall markets. high cash positions forcing a lot of people into the markets, short covering going on. look at the china trade data. the news on china has been relentlessly bearish for a year. everybody said, oh, my heavens, maybe the news isn't so bad. short covering rally and hang seng, up 3%. japan up, france up, everything up 3%. that's a nice move for all the global markets. it is spilling over into our markets as well as europe, china trade data, helping things like material stocks, all been strong, so you're steel stocks like midtall, bhp billiton, glen corp., all those stocks up here. banks in the u.s., jpmorgan strong and all of the other stocks in that group up about
4%. key point here, banks underperformed throughout the whole year, under 10%, underowned and unloved. this rally today is a nice reminder that there might be some value out there. back to you. >> bob, thank you very much. dom chu is joining us now. he's been doing digging and sector sorting looking into valuations and maybe potential warning signs. >> bob talked about the financials being a huge laggard and for such a long time throughout the course of modern market history people looked at them as dividend payers. i want to show you what i'm talking about here. it has been no secret we highlighted a number of times how consumer staples, the people who make soup and packaged food products have been doing really good in this market, near record highs because people want the dividend yield associated with them. if you look at the consumer staples sector it trading around 21 1/2 times earnings. on a trailing basis, but still to give you perspective, over the last 15 years, this thing
typically trades around 16 times earnings. a huge premium in the current market, where it has traded. perhaps a lot of that bid is pushing those stocks to a level that may not be as attractive from a valuation perspective. if you look at some of the names that really stand out, in terms of premium valuations versus discount ones, look at monster beverage energy drinks, it has gotten a high valuation in the past, 40 times earnings. kraft heinz, walmart as well. walmart and archer daniel midla midland. as we talk about some of the stocks, sectors are important. they provide a basis. we talk about the -- some of the stocks themselves within them and whether they present opportunities for some trades. >> dom, stick around. as you are, because you just sat down. you're not going anywhere, buddy. let's bring in the aforeseen, a little rub there, a good luck
pat-down, jon najarian. >> already knew he was here. >> hi, jon. and fast money trader tim seymour who is, you know, we cast him out, he's at the nasdaq. you heard his piece. we did this a little while aguy. soup valuations, 32 times forward earnings. what is your view on valuations with the consumer staples? >> i think the consumer space is extremely interesting now, especially because of the extra ka-ching that has been in people's pockets. how fast that disappears, though, dom, will be the thing -- the question going forward. in other words, as crude oil has come off a 26, moving to 43 now, and potentially with this doha meeting that you'll be telling us about, brian, that's something i think everybody will be watching for as to how much does that crimp the consumer as prices jump so quickly. >> we don't think it is going to crimp them that much, you recommended fit bit. $150 device. you don't believe the consumer will be so tapped out that they
can't afford one of those babies? >> no, but i say more of a durable, right? consumer durable. rather than some of something that you're buying on a daily basis like soup. it is also based on m&a. rumors swirling around about fit bit. for that reason, i'm excited about the potential upside after this big aggressive sell-off that that stock has suffered. >> if you want to buy consumer staples here, you got to be convinced a return to volatility or potential downside draft is coming back again at this point. if not, they're pretty expensive. if you think the market goes higher, wouldn't it be better to get into some other place that dom highlighted that doesn't have such stretch valuations. >> hard to argue that staples, not only are they expensive, hard to argue this say good time to be invested in them. also into the earnings season, it is such a crowded trade. i think you want to look at not only stocks that have earnings growth and have decent valuations but ones that have not been this dominant kind of
positioning trade, which we get why this is. i would just say i think staples are going to continue to trade more expensive than they should because of this obvious earnings yield environment. but the argument therefore then for financials and health care is that these are two sectors that are so wildly flagged for having head winds and head winds that, you know, today it is perfect day to kind of say you can't have it both ways with the financials. people are talking about how obviously the yield curve has been a big impact in terms of the net interest margins, but also talking about them in terms of the credit contagion from whether it is the commodities and energy sector or china or emerging markets. both sides of this trade don't work. if one is letting off, the other side should be getting better. financials were oversold into this. 1.2 times priced to tangible book. i think you have to think about that and jpmorgan told you there is best in breed out there. >> that's a great point to make about the financials. you're our resident in-house expert. one of the boosters for today is the data that has come out of
china? do you believe it? can we put that demon to rest or is there still uncertainty out there about china? >> a lot of uncertainty. but is it a demon i think is the question. it was demonized for first 6 to 8 weeks of the year as it was in august when they made noise about the currency. the currency is totally stabilized and if anything the pressure upward on the yen against the dollar has taken a lot of pressure off of china. the export numbers show the rest of the world is a little better. import numbers were better than terrible. fiscal policy is converting this economy. if anybody is expecting it to be a two-week change, it is a two to 20-year change. but i think the numbers are better out of china. this is positive beta for the market as opposed to the negative. i think the eight shares are cheap. the side will outperform big cap china. looks interesting. >> thanks, guys. >> thanks. >> a news alert from the bond
market. to rick santelli. >> watch the charts. i think this was such a good auction, it might move the markets a bit. let's go to the beginning. we're auctioned off 20 billion tens. second reopening, last reopening, original auction in february of this year. the yield at auction 1.765. that was the low yield in the one issue market. low yield, high price, this one off rich. we gave it an a, a for demand, everything about the auction was good. it was through the one issue. that's good. 2.75 bid to cover. much stronger than 2.62 ten auction average. 6 on indirects, 15.3 versus 12% ten auction average. best since march of 15, dealers take just shy of 25%. this was a good auction, all we have left of 56 billion in supply will be tomorrow's 12 billion of 29-year, ten-month securities known as 30-year
bonds. sully, back to you. >> thank you very much. jon najarian talking about the increase in consumer spending because gasoline prices have dropped. let's talk about what makes gasoline and that is oil. of course. there is a huge meeting on sunday, don't call it an opec meeting on sunday, a big meeting in doha, qatar, where many of the world's nations, possibly but not necessarily iran, michelle, as you know, will gather, potentially agree on some kind of a freeze or an output cut. the cut more unlikely. ahead of that meeting we're seeing brent and wti down a bit. i guess maybe a little less optimism today than yesterday about what may or may not happen at said meeting in doha. >> yeah, it is going to be a key event. melissa raised a good point yesterday, is there downside risk no matter what? the expectations are so high, if they do something, you might get -- buy on the rumor, sell on the news. if they don't, you may see decline because there is such disappointment. >> i think the iranian oil
minister gave a quote where he said he would go, quote, if he had time. or something to that effect. >> what else does he have to do? >> basically he has one job. that job is to be in doha on sunday. a lot of talk about what may happen there. on the u.s. side, the latest data shows it a mixed bag. we're below 9 million barrels a day. that's bullish. but kyle cooper points out, he's on the show later on, we're seeing imports continue to go up. >> right. getting below 9 million barrels per day, we have been waiting for that for months and months and months. started predicting it six months ago, took forever, it finally happened. it is a key event we should underline. >> we're not seeing a little more of a bid because of that. >> right. coming up next, puerto rico's bond holders say the u.s. government is trying to hose them. u.s. government says puerto rico debt holders are trying to host a taxpayer. both sides of the argument are
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and billions more in unfunded retirement promises. joining us is the representative who introduced the bill, shawn duffy of wisconsin. and also hector negroni of fundamental credit opportunities which owns puerto rico bonds. hector doesn't like the bill. he thinks it is dangerous for the municipal bond market. good to have you here. great to have you be able to talk to each other. representative duffy, you got mr. negroni sitting here, he doesn't like the bill. sell it to him. >> he can tell us why a little bit later, but i'm selling this to the american people, we all know that puerto rico is having a financial and economic crisis. and so what we have to do in congress, as one of our territories, we have to make sure we allow some very strict oversight so they can get their budget and finances in order, and then also we have to make sure we have a systematic approach to restructuring debt so our bond holders can be on the path to getting some repayment, and puerto rico can get back on the path to prosperity. and if congress doesn't act, i
think a lot of the bond holders who hold puerto rican debt, they don't want congress to act because if you have a humanitarian crisis on the island, they believe that the american taxpayer through the congress will send billions of dollars down to puerto rico. and the bonds that they bought at 50 or 60 cents on the dollar will now be worth 100 cents on the dollar and make a huge return on the investment. the bottom line is we need to protect the american taxpayer from a future taxpayer bailout and restructuring debt through this control board is the right approach. >> hector? >> i want to commend congressman duffy on his efforts to address this. i was a big fan of his original for a -- to do a simple fiscal control board combined with regular chapter nine and this might be a municipal liquidity crisis. it is a little heavy handed response now from the current
bill. i'm not going to deny the fact that prepare has an extraordinary number of challenges, but if you've been to puerto rico, as i was last week, it is a wonderful place, it is anemic. there is a bloated government that needs to be resized and there is very importantly the capacity performance some of the debt. i twha is different now is we have migrated from the original effort, which was put forth by both congressman lissi and chapter nine to something that is broader and more invasive and represents potential risks to the municipal marketplace which i would like to elaborate on. >> you have a specific issue with what is called a stay in this bill. can you explain what that is very quickly and why you don't like it? >> i have three specific issues. stay is near the top of the list. the issue with the stay is at the moment, the idea of time-out, people want there to be a cessation of activity. the stay is in balance. it is unilateral.
as soon as the law is enacted, creditors, bond holders only, cannot pursue the remedies. individual bond holders have no rights. it creates very little incentive. and they can default on their debt. they can default on that before the board is built. they can prioritize payments and put bond holders on the sidelines and freeze them out from pursuing remedies. that's a dangerous precedent. >> my experience covering greece for the last six years is that if you don't put pressure on a government to reform itself, and by the way, you could punish the bond holders to zero and puerto rico would still be in trouble because they still can't pay their debts. they have to do some very, very tough decisions, but thus far they have refused to do. and if you take the pressure off on the other payments, they're even less likely to do them. why would you want to give them that breathing room when they really need to make some hard decisions? >> we don't take the pressure
off. that's what our bill does. we have a very strong control board, that's going to impose some great fiscal restraint on the island. >> there is a huge window from when the bill gets signed to that control board exists that the puerto rican government can spend what it wants, right? >> the control board is going to have a great deal of power. we don't know the finances per hechter's point. if there is more money there than we think, which i doubt, but if there is, we're all going to have a chance to look and see what the revenue is and we can see if there is a restructuring of debt what it should be. and it will take time to figure out the finances of the island and if you don't allow a pause period, which ours gives us to february 15th of 17, they don't have the money to pay. they need to have this pause to allow the control board to get into place, to talk to creditors and from hector's point, he should be proud in a fact that if he doesn't find an honest partner in negotiating his debt
with the puerto rican people, the fiscal control board steps in and they have an honest partner to negotiate with. so we can get a resolution to this debt crisis. >> before you respond, i want to tell the viewers that the puerto rican government hasn't been able to file numbers and budgets for years. retroactively we're still trying to find out fiscally what has happened with puerto rico. that's how much of a mess their books are. >> the one problem to the congressman's point, very fair, you know, we would hope we could find a means and venue by which if they didn't honor the institution, we could find satisfaction in the court. the framework provides for a board to pursue remedies for bond holders that doesn't follow any -- >> that's not true. that's not true. look at the bill. there is a system to have an honest negotiation. but it doesn't work, there is the capability of going to court. this isn't a brup ankruptcy, buu
use bankruptcy courts to navigate the differences between the debtors and creditors. we won't exclude you from the courts -- >> the guideline for the priority of debts payment under the constitution of which investors made their investments aren't specified or honored in this process. unclear to me what priorities will be listed. if that was clarified, it would go a long way. it makes it difficult to understand how people would do business in puerto rico if puerto rico law can't be applied. >> that's the argument you can make to the courts if you can't negotiate a resolution. this is -- hecht erk i understand your concern. but if the congress does nothing, and we don't act, this crisis that will come to the island will be met with the call for the taxpayers to bail out the i'll. they don't have enough money to pay. we have schools closing down. kids that don't have school us abouts buses without gas.
either we're going to set up a forum for the bond holders and island to negotiate or you're going to send taxpayer money. our option in congress is going to be we got to facilitate a dialogue between those who made the investment in the island who bought bonds at 50, 60 cents on the dollar to come up with a resolution. but we are going to protect the citizens of the island and the american taxpayer from bailing out bond holders who potentially made really good investments. >> the vast majority of bond holders, well over $40 billion bought bonds at original issue. >> where do you get 50 and 60 cents. >> they may be trading there now. the idea that the bonds all rest in some hands of some vulture opportunityist doesn't stand up to the facts. at least $40 billion of the debt is held by individuals. but more importantly, by the commonwealth's own numbers, their only debt service requirements for july can be met and they say they have a billion 850. the fiscal control board is very important to address the expense
matters. we're conflating the expense with the debt. >> with no action, you have chaos on the island. chaos within the bond market chaos with the creditors. so let's stet up a systematic approach so we can walk through the debt, have the pause period, see what the finances are of the island because we don't know what they are right now. we want the congress to have an opportunity to see the finances, we want you to be able to see those finances so there is clarity and transparency. >> there say humanitarian crisis coming to puerto rico regardless. they just don't have the money. no matter what you do, you're going to tell pensioners, you're going to tell pensioners, they won't get as much as they thought they were going to get, people have to pay more for water and electricity and to them, no matter what, it is going to feel like the --
>> i think that's an overstatement of the facts. they undercollect revenues. they have some insolvent debt but the big factor is there is an opportunity on the table, using the primary obligation that they have, which is the general obligation, which allows for them to have time. by honoring their constitutional debt, by doing a deal with bond holders, they allow the government to be open, forestall litigation, it is a very successful outcome. this bill will chill that. >> representative duffy, thank you so much. hector, thank you so much. >> i noknow the congressman's office, they're wonderful people. >> we appreciate it. now to dom chu. >> such harmony there on puerto rico. fit bit shares now, we want to call your apension, surging double digits. analysts of both citigroup and pack crest pointing to sales for
fit bit's newest products, the blaze and ulta models. the stock has fallen more than 40% on year to date basis but gained 17% just in the last month. that's fit bit. we'll be back with more on "power lunch" after the break. i could get used to this. now you can, with the luxuriously transformed 2016 lexus es and es hybrid. ♪ i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company.
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tens. notice how yields started to fall. definitely. looks like 180 wasn't meant to be. open the chart up to february 1st. you can clearly see that whether it is towards the 168 to 170 level or 180 above us, we have a tight range going on here. two day dollar index, spectacular day. up about 7/8 of a cent. look at one year chart you can clearly see 94 is a big level. just like we had big levels in the yen. now, market watches, "power lunch" will return in 2.45 minutes. this is lulu, our newest dog. mom didn't want another dog. she said it's too much work. lulu's hair just floats. uhh help me! (doorbell) mom, check this out. wow. swiffer sweeper, and dusters. this is what i'm talking about. look at that. sticks to this better than it sticks to lulu. that's your hair lulu! mom, can we have another dog? (laughing) trap and lock up to 4x more dirt,
hello, i'm sue herera, here is your cnbc update for this hour. the texas teenager who used an affluenza defense has been ordered to spend nearly two years in jail. a judge sentencing ethan couch to 180 days in jail for each of the four people he killed in 2013. it was couch's first appearance in adult court since he violated his probation.
bernie sanders was endorsed by 42,000 transit workers, representing the new york region. it was announced a union hall in brooklyn this morning. >> i believe that we need legislation that makes it easy for workers to join unions, not harder. we're on a roll and your support today is enormously important to taking us a step further. an altercation between the charlotte transit police and a woman has been caught on cell phone video. the officers were talking to her about riding the train without a ticket after they got her name they discovered she had a warrant for carrying a concealed weapon. when they went to cuff her, she started hitting and biting them. chick-fil-a has gotten rid of iceberg lettuce for more nutritious options. it started shifting away from the lettuce in 2013 in favor of romijn and baby greens tass pursue s healthier menu options amid a lot of competition. that's the cnbc news update.
back to you. sue, thank you very much. the market rally holding just a bit as we head deep near the afternoon. so why not get back down to the new york stock exchange and bob by sa pisani. >> remember the key story, china trade data, better than expected, and jpmorgan, good enough for the time being. the s&p 500 is breaking out to a new high for the year. not quite a 52 week high, but for the moment, that's good enough. jpmorgan has been leading the stocks, the bank stocks underowned, underappreciated, nobody wants them. they're more in vogue. volume very strong in this group today, hasn't been for most of the year. china was a big source of the volatility. suddenly everybody is saying maybe china isn't so bad. volatility collapsed now. the vix trading at below 14 now. see the 13 handle there. have seen that in a while. new lows for the year. etf volatility products like the
vxx also on the down side. people bought volatility products. a lot of volume today. people getting out of those positions. finally, the big deal. could we get a real new high breakout in the s&p 500. remember that old hide, 2130 in the middle of may of 2015. seems like an awfully long time ago. we're only -- you do the math there, 50 points or so away. that's a few big days of trading. a lot of people starting to say maybe we break out of a trading range. >> remember in january, we were all doomed, how long ago that seems. >> yes. >> the recession did not happen. number one. and number two, the big sources of volatile, the fed quieted down, the dollar quieted down and oil quieted down and thatch was the fourth main cause of volatility. if that quiets down, that's why that volatility collapsed.
>> well said. bob pisani, thank you very much. we could have more market moves and volatility in just under 30 minutes time. that's when we get the fed's big read on the health of the entire u.s. economy. preclude to the fed, beige book. it is much more important than that. also a stock sitting near the highs. the question is in, how much more upside is there from here? that depends on your timeline. joining us is bruce mccain and brad mcmillan. bruce, i'll start with you. we say how much more upside, 50 years out or six months out, i guess. do you see an imminent turn down for the u.s. stock market? >> i think when you look at the probabilities of recession, severe economic downturn, those are pretty low. which limits the downside in most instances. the question though is what is the upside terms with the
fundamental progress. earnings growth and projections are just not that great through the end of the year relative to where we are. given the uncertainty you have from the difficult political cycle and some other issues with economic growth worldwide, you it just seems like the odds are you'll have more of a trading range to the market. >> the expectations are so low that everything is so stacked against earnings and stocks now that even a positive -- a tiny positive surprise to the upside could be a very beneficial thing for the stock market. do you agree with that or not? >> absolutely. that's one of the two positives. the other positive is that returns on bonds and other assets are so low at this point, that a lot of people in my grading equities because they offer the hope for some return even though they're weak returns. those are two big positives that could propel the market somewhat higher over the course of the year. >> we have seen brad a little turn in energy, a turn today by
the way, one day, in financials. are you a believer, though, in the real turn for those very two important sectors? >> i am a believer in the turn. let's start with energy. if you look at profit projections, the industry as a whole is projected to return to profit toward the end of this year. and valuations have just gotten absolutely hammered. so you got a double potential bonus here. you got a recovery to normality, plus you have relatively good valuations. i think that could make a lot of sense. to some extent, the same also applies to financials. if you look at jpmorgan, it is not that they did so well. it is that they did better than expected. as the economy continues to improve, we have avoided the recession that should continue to help as well. >> is less also the new good, brad? >> it is not great. but when you look at the reaction, if you look at the actual changes in expected earnings and revenue, for
financials in particular, and you compare that to the actual damage that has been done, you don't have to see a lot of improvement. in this case, yes, less bad can be pretty good because sentiment got so far ahead of what was happening. we need to see growth and we will. but for right now, this is good enough. >> that's the new investing in america. less bad is the new good. hardly the tightle f ltitle for. go to powerlunch.cnbc.com to see another large cap stock or one that bruce likes now. go to powerlunch.cnbc.com. just ahead, ensuring the down payment on your home. a new idea. we're going to tell you how it work and if it will even work. plus -- >> coming up, a startup offering a vet at your fingertips. >> no longer are your only alternatives rushing to the er or using doctor google. >> will the panel throw the founders a bone. >> how do you differentiate
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go long. welcome back to "power lunch." time for the power pitch, where entrepreneurs get 60 seconds to make their pitch and a panel of experts weighs in, asks questions and decides if they have what it takes to become the next big thing. >> we're curt and mason revelette. bid on demand is an app that alous pet owners to live video chat with a licensed veterinarian 24/7 from a mobile device. we started the company based on our own frustration where we wanted something on demand, convenient and affordable. >> there is a tremendous gap in coverage with the average pet parent only seeing a vet one and
a half times per year. we believe vet on demand can increase that number with a consistent conversation between vets and pet parents. coming out of beta with 15,000 registered users and vets in 16 states, we believe it is on track for explosive growth and have raised over $800,000 year to date. >> our ultimate goal is to provide health care coverage for all pets and fill this gap. >> welcome to today's power pitch. i'm melissa lee. you saw curt and mason's pitch. let's meet the panel. on the set, alicia syrett, investing in over 40 startups. joining us dr. catty nelson, host of the pet show with dr. katie. she runs a consultancy for startups. and from the bay area, david wu, with $1 billion under management. he has more than 30 companies in his personal portfolio. alicia, you kick it off.
>> i thought it was good in terms of your delivery and product information. but i give you a c because there were key details around market size, competition, your own background and how you're reaching consumers that were lacking. assuming other players come into the space with video conferencing capabilities, how do you differentiate yourselfs? >> we have talked about adding in dog trainers, behavioralists, other services that every pet parent will need at some point in time. >> dr. nelson? >> i wanted to hear more about how you were going to get the veterinary community involved. so because of that, i'm going for a b. i know how important it is to have the physical exam and medical records in front of you to give good solid advice. how are you going to overcome that with your veterinarians that you do have on call? >> we alou the pet owners to create profiles with age, weight, breed, spayed, neuters, outdoor, outdoor animals. going into the call with that information, we really set up the vet to answer the question as best they can. >> i bet you did a nice job
describing what the service does. but i wanted more specificity around what is the real issue around the current veterinarian system and how you solve the problems. i'm going to give your impeapit b. how often do your patients or pet owners call in? >> we're averaging ten calls a day on the platform. we came out of beta in november and what we're finding is the number of calls per day started at around two calls per day and we have seen that increase as the service and technology has continued to get better. >> alicia? >> for every call you charge for what percentage do you keep and what percentage goes to the veterinarian for performing the service? >> so we have two different pricing options. one is the 999 unlimited monthly access. and then we have a one off call feature for $40. for the one off call feature, we split evenly withvets, $20 for the vet, $20 for us.
we're starting from the current base now and then if their current vet is on the system, and they're speaking with the vet who they already have seen for months or years that vet will have information about that pet. >> so we will have to do some back work and bring up to speed where the current medical records are today. many veterinarians are using pen and paper in office and keeping records that way. so it will be a slower transition throughout the industry. >> seems like there is a fairly strong line between giving advice versus treatment over telepresence. do the end customers get confused or not understand the knee audience. >> we are giving consultation and health care advice. but there is many situations where people are just looking for peace of mind and looking for the correct questions to ask when they do go and make that in office visit. >> we heard what curt and mason had to say. we want to know if the panel is in or out.
alicia? >> as an investor, i love the pet space because honors love spending money on their pets. i think this is a viable business. whether these are the guys that make it successful or not, i don't know yet because i need to see more data around the actual calls that come in and more importantly the reoccurring purchases. for now i'm out. >> dr. nelson? >> i love the fact that there could be someone out there able to take those little silly calls that take so much of our time as a veterinarian. in its current state without having access to medical records, i feel as a treatment alternative i can't back this yet. but in the future, when that progresses, i could. at the moment, i am out. >> two outs so far. david, in or out? >> i like the idea of using technology and telepresence to increase the quality of care for people and pets. it is a great idea. but i think there is enough limitations in what you can and can't do now that you may not be able to get enough people signing up and paying enough money on the monthly pace is to
build a venture scale business here. i'm going to be out three outs. what is your reaction? >> tough to hear, but we appreciate the tuopportunity an solid feedback. >> best of luck. our thanks to curt and mason. >> are you in or out on vet on demand? follow the conversation on twitter, using #powerpitch. for more powerpitch, visit powerlunch.cnbc.com. can you hear them now? thousands of verizon workers going on strike today. what they want when they want it. and how it might impact you especially if you're a verizon customer. that's ahead on "power lunch." (announcer) need to hire fast?
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there is a new insurance product for home buyers that will protect their down payment if the value of the house falls. diana olick joins us now to explain how it works. >> if you're worried about the overheated home prices turning into another housing bust, you might consider this. starting today, dallas-based value insured is offering insurance on your down payment if your home value falls. here's how it works. say you're buying a $200,000
home and you put 10% down. that's $20,000. to protect that down payment, you pay value insured about $1200 and they insure you for seven years. three years later, you decide to sell, but the value of your home has fallen by $30,000. value insured will pay you the amount of the loss up to that $20,000 down payment. in other words, whatever skin you put in the game is insured. you only get the payout if you move. and you must be an owner occupant. if you're an investor, this is not for you. joining us now to discuss the product is a ceo of value insured, joe melendez and barry zigas. joe, i'll start with you. this sounds like something we could have used eight years ago. home prices are rising today. mortgage underrising is super strict and the risk of a downturn is small. why do i need your insurance. >> nobody has the crystal ball. if we look at the housing market
today, if you're in the community affected by the declining oil prices, or ge moving out of connecticut or the overbuilding going on in miami, we have home prices that are volatile. so our down payment protection protects you in the event that you have to move in a market where home values have declined. >> so you're basing this on the possibility of local downturns. part of the payout is based on a home price index that goes locally by state. and only pay out if that state index falls. but what about if my local neighborhood home price fall and i'm under water. you're saying you may not pay out if the state price hasn't fallen. >> that's a great question. the home price index for the state is composed of the local indexes. >> all real estate is super local.
>> the benefit of using the state level is the consumer will pay a lower premium, may have a lower payout in the event they sell, but paid a lower premium and they're benefiting from taking in the large numbers of the whole state. >> you've been around a long time and looked at products like this before. what do you think? >> thank you for having me join you. i'm not an insurance expert. i'm not a financial adviser but i've been working in the field a long time. as director of housing policy for consumer federation of america, all consumers should think about this insurance like they do any kind of insurance. that's to fully understand the risks and make the judgment about whether insuring against that risk is a good bet for your money. as you said, you know, house prices generally over a very long period of time have been consistently stable or rising. we just have been through, however, a pretty traumatic experience, very unusual almost unprecedented house price
decline nationwide and i think a lot of consumers are naturally suffering from a kind of pstd that makes them wary of getting back into the home market. consumers should understand that broadly speaking for a long period of time, house prices have been stable and with the reforms that followed the crash, house prices are not being fueled by cheap money and irresponsible mortgages, one of the big reasons house prices rose so rapidly in the early 2000s and came down so hard. having said that, as joe says, there might be some instances in which consumers should consider this, if you're in a community that is heavily dependent on a single industry, especially say an extracted industry like mining, there is recently stories about wyoming and oil shale areas that suffered significant economic reversals because of that heavy dependence on a single industry. as you consider wbuying a house see how volatile house prices have been in a community that you're seeking to buy in.
the question of what to ensure and for how much is a personal decision about how much risk you're willing to take. this product is not available for a payout for the first two years and only available for a payout for the seventh year. those may be years in which volatility takes place and may not be. part of what a consumer should consider is whether you would prefer to invest your own money in a bigger down payment, which means the difference between sales price and the mortgage will be smaller, will be great, i mean, and whether you want to pay down the mortgage more quickly by making larger payments to the principle once you get in the house so you're decreasing the -- >> all great points. joe, if i could jump in, this reminds me of when i buy a car, a new car and the dealer says to me, the second you drive it off the lot, it is going to be worth less. and if you owe money on the car, and you have an accident in the first weeks or months, you're not going to get paid back what you owe on it. underwater insurance, basically. except when it comes to housing, it is far less likely to happen.
i get it why they want to sell it to you with cars. have you done the actualial work? what are the chances this is actually ever going to pay out and not just be a waste of money for people paying insurance premiums? >> first of all, we have done extensive actuarial work, we're partners with one of the largest global ensurers. and the product -- in today's marketplace, products have to be designed to pay out. i was on that side of the fence. i was -- the market was going down, i know what it is like to have your money at risk. this product was always intended to pay out in the event that somebody needed to sell, due to conditions that required them to move through no fault of their own in a declining market. perfect example is up in connecticut, where ge just announced they're moving. 8400 jobs are leaving. through no fault of their own. those folks -- that local real estate market will be negatively
impacted. i think, you know, the product is absolutely designed to pay out. and as far as the -- what barry mentioned earlier, if you think about what he's saying, the more money you put in the home, that's fine and dandy. you go to sell that home, if the market is down, you just lose more money. you don't get -- we protect the home buyer in that -- >> that's not actually true. issue of an underwater mortgage is when it comes time to sell, you're fetching less than the mortgage amount. the smaller the mortgage amount, the lower the risk of that happening. >> thank you so much. thanks for bringing this to us. let's get to dom chu. >> we're near our -- our best levels of the day on this nice upday overall. look at who is leading the charge in terms of the dow jones industrial average, we have jpmorgan chase, goldman sachs. also caterpillar shares, as for the losers and the dow,
coca-cola, verizon, procter & gamble. to the s&p 500, look at the winners, so far today, look at tenet health care, transocean, and freeport-mcmoran. as for the losing side, reynolds american, philip morris and -- i should say altria, shows my age, guys. back to you. >> smokes and chicken are down. we're minutes away from some potential market moving news from the fed, your beige book. i'm here at the td ameritrade trader offices.
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i'm hampton pearson. the latest report says that national economic activity continue to expand in late february and march, the pace of growth was varied across the district. that expansion is expected to -- that economic growth be moderate to modest. and expecting that growth to remain in that range going forward, manufacturing activity, increase in most districts. construction and real estate activity also expanded. consumer spending in most districts increased modestly during that same time period with retailers remaining optimistic about the outlook for growth for the remainder of the year. however, there were contacts in
chicago who expressed disappointment that low gas prices and improving labor markets were not providing more of a boost to consumer spending there. nationwide, auto sales, strong in several districts. cleveland, chicago and new york, also seeing auto leasing on the uptick. the labor market conditions continue to strengthen in february and march. most districts reporting job gains, only cleveland indicating a decline in overall employment. manufacturing payrolls rose in bost boston, richmond and atlanta, but fell in philadelphia and cleveland, reducing their workforces with reports of layoffs coming. business spending generally expanding in most districts, capital spending remaining for the most part modest. looking ahead now, specifically to construction and real estate, activity generally expanding in february and march.
contacts in the district maintained a positive outlook for the rest of the year, residential real estate activity continued to strengthen on balance with robust growth in san francisco, cleveland, boston, and more mixed reports from dallas, kansas city and atlanta. looking ahead to prices -- excuse me, yes, wages and prices. retail prices increasing modestly across the majority of districts with some input cost pressures. wages increasing in all but one district, atlanta. several districts reporting signs of a pickup in wage growth over the last survey. the strongest wage pressures were for occupations where they were labor shortages and turnovers elevated. specifically high tech and highly skilled construction jobs. that's the latest snapshot from the fed beige book. back to you. >> hampton pearson, thank you very much. now reaction and what to do about it with jim paulson
joining us from minneapolis and melissa lee fresh off "the halftime report" back with us as well. let's summarize the fed snapshot. most things are good, some things aren't. low oil prices hurt oil jobs. did you take anything away from that other than things are kind of beige? >> i think this is a beige book -- >> it is a beige book. >> q1 growth did slow, they used the word moderate and modest a couple of times. they saw pickup in wages which if you're a worker is a good thing. chair yellen said she's working for the pickup. optimism looking ahead. >> jim paulson, i'm sitting here, supposed to look at the beige book and go, sex it up. i look at this thinking this is more of the same, which means what do we do about it? if anything? what do we change? >> well, i think it is sort of the same message they have been
touting. what was missing from the beige book, doesn't cover it, is what one thing the fed has been very concerned about of late and that's the global scene, which, if anything, has gotten a little bit better of late with better reports out of china and if you look at global, citigroup, economic surprise indices, they have been picking up across the globe throughout europe and the emerging world, for example, and as well as here. so i think that -- i'm paying most attention, maybe to some more timely data. and i kind of think the market is going to make a move at setting highs, new highs here, on the backdrop of earnings, which turn out a little better than feared on the backdrop of improving global trends, which we're starting to see on the backdrop that the deflation scare is seeming to end. and finally that there is a little fear around and i think we're starting to climb that wall of worry again. >> for investors, isn't the beige book the new black? wasn't this actually very good?
it confirms what investors believe in terms of base case scenario for the economy, which could lay the foundation for further gains here in the markets, particularly when you draw out some of the highlights of the beige book, auto sales and auto leasing continue to be strong, worried about peak autos, consumer spending up across most districts. these are the kinds of things you want to hear, aren't they? >> i think so. good outcome could be the muddle along outcome, which in some sense is at least it is good enough growth that we're not going to recess, but not too strong that you're going to have to speed up the fed's exit plan or force wages and other prices up to pressure profit margins. and that is a little bit of the message of the beige, which might be the best you can hope for here. >> to jim's original point, which is maybe the beige book just isn't enough information anymore when it comes to the fed. suddenly for years they told us we're focused on the u.s. economy. and now they're not. now they're focused on other
parts of the world and the beige book is about the u.s. economy. maybe it is just not good enough. what do we always ask you? based on the beige book, march and june, does the beige book tell us enough? jim is telling us no. >> that say good point. the yellen fed has been more up-front about the global developments impacting policy and you're right, that was a big factor probably in holding off on the march hike. the beige book is not going to directly tell you about the global economy. you'll pick up a bit with manufacturing and exports being hit, but the beige book 20 years ago was the playbook and you need more. >> let's follow up on that. by the way, the dow jones industrial average hasn't moved much. if you're just joining us or waking up in guam, good morning. the dollar is up 165 points. we have been in a rally mode. here's what ticks me off about the fed. i've been a little more vocal about this lately. they talk about global. in the last fed minutes, 25 pages long, the word global was
mentioned 23 times. the fed told us global developments, michelle, are important. the beige book is 45 pages long. just did a word scan. how often was the word global mentioned? twice. we have this bigger fed thing that suggests global means nothing. and then the fed minutes which says it is everything. that -- how do average investors navigate that? why am i yelling? >> i think on that point, i think if you have to pick, you read the minutes over the beige book. >> minutes trump beige. >> they distill the essence of what was occupying the committee in the meeting. >> the mission of the minutes is to tell you what they're discussing in the meeting. >> you would think some manufacturer in cleveland would say global developments are
screwing our pipe-makingis. >> unless you're a domestically focused company. >> jim, do you do anything differently after this? the u.s. economy is okay, but now what? >> yeah. i don't think so. i think that this probably doesn't change my opinion much on what to do. i do like some of the developments as i mentioned that are going to turn out positive here near term for the stock market overall. i think we're going to finally rebuild some optimism and if we break up toward new highs, maybe get excited if you will, and i would prepare for a little bit of a rally here in stocks going to new highs, getting a little more risk on if you will and taking some allocating away from the dividend aristocrats and consumer staples and getting a little more graggressive exposu. >> dividend arift criminstocraa
>> a new show. >> sounds like ratings gold. >> toulouse. 40,000 verizon workers going on strike today in nine east coast states. and washington, d.c. workers say they have been without a contract since last summer and negotiations stalled. union members are lobrying for better wages and keeping jobs from heading overseas. they claim that verizer have rv costs. this is one of the biggest strikes in the country in a long time. let's bring in bob master, one of the striking workers. welcome to "power lunch." we should note verizon declined our invitation to come on. bob, why are you on strike?
>> we're on strike because we're fighting to protect good jobs. that simple. as you mentioned, this is an enormously profitable company, they he got a of dividend aristocrats. 13.5 billion in stock buybacks and dividends last year. and yet they want to destroy good jobs in our communities and that's what we're -- >> what jobs are leaving in your opinion. what could go away? >> what they're looking to do is contract out a lot of the work done now by our tech anythingte. they're looks to close call centers and shift the work around possibly to non-union contractors elsewhere in the country and overseas to philippines and mexico where they have probably 5,000 call center workers. and finally they refuse to negotiate a reasonable first contract that would improve the wages and benefits and working conditions of the workers and the verizon retail stores, the
first wireless workers who have ever gone on strike, they organize to cwa two years ago. >> bob, bernie sanders joined the picket line this morning. do you feel like the tide has turned in just the past year. it was, what, last year, last summer, when the contract expired and you were holding negotiates, do you feel like now is the time where you might gain traction because the political tide has turned? >> it is a very interesting question. we went on strike in 2011, we felt something in the street then and it turned out it was about six weeks before occupy wall street happened. and the interesting thing to me and to the union is that the energy and the anger against corporate greed and the so-called 1% if i could be a little rhetorical has really endured and has a lot of depth and breadth and i think we're seeing that reflected in the political campaign this year for
sure and the incredible response to bernie sanders. and so, yes, we do see the tide as being in our favor. we feel like we're drawing the line on issues that really matter to millions of americans and that is to say corporations have to act as good citizens. they can't only line the pockets of their shareholders. >> they say to act as good citizens, a lot have to say they have to stay as competitive as possible. and while it is an uncomfortable thing, it is a thing that hurts your workers economically, the fact is there are other people in the world who can do that job for less money and the company in an effort to stay competitive has got to do that or else eventually they lose profits, and eventually you lose jobs anyway. to what degree are you not a victim of what verizon is doing and global factors in the world hurting all kinds of workers. >> well, you know, the truth of the matter is you can't offshore
the phone network. right? and you can't offshore even the wireless network. so, yes, there are global factors at work, but what we feel like is here is verizon, they made $18 billion in profits last year, 1.5 billion a month. they made 1.8 billion a month in the first three months of 2016. lowell mcadam makes $18 million a year. they're pretty competitive. and they can share some of that largess with their workers. and, by the way, they indicated to us that their main issue was addressing rising health care costs. we made proposals to limit health care costs by hundreds of millions of dollars. all we're saying is we want to hold on to those good jobs here in our communities. >> we have a statement from verizon. it says it regrettable that union leaders called a strike, a move that hurts all of our employees. and then they go on to say, unfortunately union leaders have
their own agenda rooted in the past and are ignoring today's digital realities calling a strike benefits no one and brings us no closer to resolution. they also say they have tried to go to arbitration and you refused. >> yeah. so there is a lot of untruths in what they're saying. our interests are not separate from the members. this thing about us being rooted in the past is a really aggravating claim because the truth is, they say to the wireline workers who are building a state of the art broadband system, you're in the past, in the era of the princess phone and you have to take cuts. when the verizon wireless workers join the union, because they want better wages and better working conditions, they want some fair treatment on the job, they turn around and say, oh, no, even if you're in the cutting edge industry, you're getting paid the industry standard. we can't raise your benefits. either way, whether we're antiques or cutting edge, we get the short end of the stick.
this thing about mediation say ruse. we were sitting in the hotel, our bargaining team, not me, i'm not on the bargaining team, but they were sitting in the thoel, waiting to meet with them. they called us up to the hilton in west chest and the location in philadelphia, they never came to meet with us. we don't -- we don't need a mediator to know what is going on. >> they stood you up? >> they stood us up. >> they told you to go somewhere at a specific time and literally ghosted you? >> that's correct. >> that's not uncommon in union negotiations, from the past, right? all kinds of things that happen -- is that rare? i'm not convinced it is rare. >> no, i think there are all kinds of tactics used in bargaining. the truth is they indicated to us that their most important issue was addressing health care
costs and we have really gone a long way down that road. and we expected them to re sip cate on the main issue which is jobs. they refuse to deal with the verizon retail -- wireless retail workers. and want to freeze the pension and they want to cut our accident benefits. there is no need for it. in the current labor cost structure, they made $18 billion last year. so we're helping them compete by addressing health care costs. what is the limit? $233 million for the top five executives in the last five years. i mean, this is what americans are angry about. >> bob, thank you for joining us. >> thank you for having me. >> bob masters with communication workers of america. thank you. and verizon, again, on every day, you're welcome to join us any single day here. on the menu for the rest of "power lunch," bank stocks lagging the markets.
today, they're leading. is now the time to get in on the financials? oil hitting new highs for the year. we'll look at what is really driving oil prices. how you can make money off of it. and what do the super rich do when they want to sell their mansions? they make a movie. we explain. ent management, we believe 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.
different from what we have seen for months. is there a future upside? let's bring in robert luna, ceo and cio of shervest wealth management. mark luccini believes utilities and telecoms still have further upside. this is the hot debate we have over and over again. do you stick with the things that have been winning because they pay dividends or have they gotten way too expensive? robert? >> i think, michelle, basically where we're at with this market, back above the break even for the year, admittedly utilities and telecoms, staples have gotten us to where we are today. valuations are far from cheap now. i think in order for the market to take the next leg up, you have to see areas like financials at a significantly underperformed or trading at a good valuation on a go forward basis. and 3% yield, you're not
collecting that much less income than what you're getting from the staples. so i think you have to look at financials right now if you believe that the markets are going to go forward, look at the beige book that came out. the economy is not doing bad. financials is the place to be on the go forward basis. >> convince me he wwhy i should up. >> i think valuations are pretty full in both the sectors you mentioned. but the fact remains i still think that we're in a low interest rate, low growth world in spite of some of the recent activity that has shown improvement domestically and things look less bad from the international arena, as is led by china. that all said, you're still looking at skeetingly exceedingly accommodative growth. i think the sectors that you mentioned, i think though it does merit a barbell approach, where you are not just hewn to
the dividend paying sectors, but particularly the home building stocks that will benefit from a continued migration as household formation continues, away from represe rental units. >> we argued that boring was the new sexy. if you make money, even boring can be sexy. nothing is more boring than insurance. why is chub a sexy investment? >> yeah. chub, back to the dividend aristocrat conversation, i think chub is one of those companies, they have consecutively raised their dividend for over the past 25 years. and i think that dividend growth right now is a more important factor going forward than just high yield. so chub is an interesting story because they have consolidated with ace and fireman just over the past year and a half, two of the top tier carriers for the up ire er end of the insurance market. valuations are reasonable.
you get good dividend growth versus going into a telecom or staple right now that you just get high yield, but not a lot of growth associated with it. >> got to go. got cut it off early. breaking news. sue herera, breaking news? >> thank you very much. we have breaking news on thranos. regulators are proposing to ban elizabeth holmes for at least two years. once again, regulators are banning -- suggesting a ban for the founder and ceo according to the wall street journal. elizabeth holmes. that's all we have now. it is a wall street journal report, but we'll continue to follow this story and what else is entailed in that. back to you guys. >> sue, thank you very much. big development there. also according to the report, the number two may be forced to step down. if you're just joining us, don't know who elizabeth holmes is, one of the youngest billionaires
in the united states, male or female, lauded for creating this company called theranos, reported to have changed the way blood testing is done. but a lot of criticism over how accurate those blood tests are. this could be a big step by the feds. >> you hear this report. we know few details at this moment. you think lights out for theranos, and a unicorn in silicon valley. people wanted to believe in this ceo. very rare, right? particularly in a medical industry. >> also 30 years old. >> yes. >> and founded the company at 22 years old. >> what isn't clear to me, ban her from what? an s.e.c. thing, an fd a thing. >> looking at the story in the commercial break ahead of it, banner from the company -- s.e.c. probably not involved. >> i have a voice in my head
that said ban the business -- >> banned from the blood testing industry. >> which is what her business is. >> yes. banned from the industry in which she operates. that's the takeaway. what do you do then? >> like banned from being on television. your job is gone. at least for what you do. she would move on. >> is there any hope, is there any hope for that company, which did attract millions of dollars in funding? >> billions, i believe. the late ev round of funding valued theranos or some shares traded in the market, giving it a valuation of $9 billion. elizabeth holmes, she is somebody that skeexcelled her we life. on the cover of fortune or forbes or both. >> hindsight is 2020. you wonder if she was a wonder kid. >> if the core part of the business is a falsehood at this point. that's unbelievable.
this incredible thing. she told an incredible story. i hated drawing blood. i hated how much blood they had to take. if only we could do it with just a pinprick, you would hear this over and over again, and it appears you can't do it with a pinprick. >> we don't know. i'll take the other side. testers suggested the results that theranos reported to have gotten from a series of tests did not align to what they got. they went back and said, you claim you found this off a small droplet of blood, we're unable to find the results, please explain how you got those results. >> it was enough for pharmacies to walk away from any relationship they had. bertha cooms pointing out, remember she was connected with the clinton campaign in hosting a fund-raiser. terminology got changed around when she fell under scrutiny. so she was just simply a person who participated in the
fund-raiser, but also that's an interesting side story. >> i vinted her on cn interview. she would argue there are more technology than medicine. and if this happens, obviously it a big blow to theranos and elizabeth holmes. >> she just sat down with jim cramer in the middle of the controversy. maybe dig that up and see what she said back then. don't move. ent. 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.
i'm sue herera. here is your cnbc update at this hour. the white house criticizing congressional efforts to combat the zika virus as inadequate but said the president would sign the measure into law. josh earnest saying the bill passed on tuesday did not include any funding to address the virus. a chicago task force releasing a report on police conduct saying that department has no regard for the sanctity of life when it comes to people of color and has alienated blacks and hispanics for decades. the panel was established by chicago mayor rahm emanuel in
response to an outcry over police shootings. toyota recalling nearly 17,000 2016 after lovalons. and sports broadcaster and former "today" show co-host joe garagiola was laid to rest. he died last month at the age of 90. he was inducted into the baseball hall of fame in 1991. that's the news update at this hour. back to you. >> sue, thank you. down a few cents now. earlier today, oil hitting a new high for the year. this all ahead of that huge oil summit in qatar this weekend. to jackie deangelis at the nymex. >> prices all over the board today because people are tentative ahead of that doha meeting. there still is hope there could be action out of it. it is event risk at this point. nobody knows exactly what is
going to happen. a lot would have to take place to have a coordinated effort to freeze or cut production. the closing price today, $41.76. we did end up in negative territory. but we did hit a fresh 2016 high, 4242. dollar weakness supportive of oil prices. we had that inventory report today, that was bearish. but buried within that, you had the production numbers which dropped under 9 million barrels a day, that's bullish. a lot of back and forth here in terms of the data as well. there are reasons to go down, certainly reasons to go higher from here. in terms of the ranges we're talking about, traders are telling me the move shouldn't be that big. upside, best case scenario, maybe 45 bucks if we see something happen on sunday. downside, worst case scenario, probably the mid-30s. we're not talking about the 20s again here, brian. back to you. >> not yet. thank you very much. speaking of data, the federal reserve likes to say it is, quote, data dependent. they ain't got nothing on the oil market. look at how prices reacted.
inventory data points in the past two days. around 4:30 p.m. yesterday, api data showing oil supplies climbing to 6 million barrels. that's this. pardon my sloppy circle aside. prices took a turn down. 10:00 a.m. this morning eastern time, eia inventory data reporting, 6.6 million rise in barrels and saw a move here as well. you see this. data dependency for now driving the price of oil. there is a lot going on this weekend in the middle east. let's bring in ken morris and kyle cooper. kent, i begin with you. doha, qatar, don't -- to quote llj, don't call it an opec, it is not an opec, but it is a big meeting. what do you expect to hear what do you want to hear? >> what i expect to hear, brian, is we're going to have the first stage of a tentative agreement on a production cap. there will be no cuts. the january figures will be used, but they were the highest
in recent record. we have russia there, we have most of opec there. and we will have others, mexico, for example, as observers. this is not a supply demand situation. because we have plenty of excessive demand, extractible demand globally that can easily fit into the market. what we're going to have here is a cap on traders expectations. and that's more important than the actual amount of oil that will be going into the market and that should sustain a 42 to $45 per barrel bridge in terms of the trading into the foreseeable future. >> so, kyle, if they come out, and we don't know how it is going to work actually, it is an unusual meeting, let's say some of the ministers come out, iran, russia, saudi arabia, they all come out together and say we have a freeze. what will happen to prices? >> well, certainly that will be
supportive. they have every incentive to say that. look at their history, though, and the reality is they rarely, rarely actually do what they say. but from ken's perspective and from that point, absolutely. it is going to be tough to be short because you won't see the actual physical data for another couple of months. if on sunday night they all smile, shake hands and say we cap production, really difficult to be short. >> if they don't say that, kyle. what if they say we can't make a deal? >> then that certainly is going to dampen expectations. it seems that since the february 2605 low, the market has been fixated on this thought of a production cap. as kent said, not a reduction, it is just a cap. but the market had been so oversupplied that we have gone almost straight up since that 26 bucks. if -- this very easily could be a situation too of buy the rumor, sell the fact. the fact is there is a freeze,
but no real cut. we billed 7 million barrels today in the u.s. that was even including a 600,000 barrel reduction in imports due to the keystone pipeline. >> incredible. the rest of the world continues to pump more oil, even as united states production comes down. do you really believe that iran is going to go with saudi arabia who, by the way, wants to cap production at near record output of more than 10 million barrels a day? do you think iran has any incentive to do that? >> iran has no real incentive because they want to increase to their export levels before the western sanctions were imposed. here is the problem, brian. even if they meet that, they will not be able to hold there very long. they have significant field and infrastructure problems. they have significant capital investment problems. at best, the iranians are going to be able to increase their
production in a steady fashion by about 250,000 barrels exported a month, and increase global demand will absorb all of that. so we're looking here at the intense possibility of setting a floor for oil prices moving in the future, but that's not going to mean we're rushing to $80 a barrel. we have a ceiling there that is guaranteed because of the known supply we can easily put on the market. >> well said. we got to leave it there. 1990 showed us that oil can hang around the low price for a long time. kent and kyle, thank you so much. >> other oil news, mexico's oil company pamex is supposed to give money to the government, the mexican government, but oil prices are so low that the opposite is happening. they're giving money to the oil company. which faces a big cash crunch. they just announced they're going to give more than $4 billion to pemex so they can meet pension payments. the company is behind by $7
billion in paying suppliers. the mexican government has been forced to cut its budget because pemex, 100% government owned and controlled, isn't supplying the amount of cash it used to do fund the federal government. up next, more on the news that broke just moments ago, regulators calling for at least a two-year ban on theranos founder elizabeth holmes. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ or the freedom to choose what doctor you want to see. so if you have medicare parts a and b,
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transport staging a powerful rally with csx shares jumping after earnings. let gaets the next move with the trading nation team. this say major gain does this bode well for the markets overall? >> yeah, i mean, look, the transports in general, nice to see them finally if you're a dow theorist, and see them come through here. i look and say, look, it kicked off last month, saw federal express, you saw u.p.s. come out, good numbers, starting to lift the group. today, csx, what it is showing you is in line is enough, but more importantly guidance is super important here. so they control costs well enough for investors to feel really comfortable about this. and, you know, given the real
sort of underweighting within a lot of portfolios, you start to see buyers step in here. norfolk and southern and nse is the next one to report, the 21st. there is a name we're confident in earnings. you can look at that and say that stock is 81, $90 stock. >> boris, do you buy this? on the conference call, csx talked about there is so much in productivity gains that can be gone. they need to see recovery in volume, especially for coal. >> you look at technicals and it looks great. you look at fundamentals, and it is a completely different story. i wonder if this whole rally could just be a catch-up rally or the fact that energy prices have been so favorable to the transports. >> thanks, guys. find more market insights on tradingnation.cnbc.com. more on this breaking story when "power lunch" comes right
back. and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> selling may go away. it is an old market adath you hear all the time but is there any truth to it? the period between may and september has been an underperforming period of time. don't let that divert you from your strategy. a better approach is to stick to your trading plan.
in case you're just joining us, a bombshell of a story reported by the wall street journal. federal health regulators are seeking to ban elizabeth helms, the ceo, the founder of thera s theranos, the blood testing company for at least two years from the industry and it stems from violations at its laboratory, the company got a chance to respond to those violations and see if they could cure those complaints with federal regulators. this is the letter back. this is the proposal. this is just shocking. >> so the letter is on the wall street journal's website, from march 18th. the wall street journal is very clear. they were warned, we could shut down your california lab and prohibit you and the president of the company, elizabeth holmes from being involved in your company for two years. now, theranos had a chance to respond. the wall street journal says they did respond, we're waiting
to see whether or not cms, centers for medicare and medicaid services actually decide that what they said is good enough to not impose that ban. they got a real issue now. we're waiting to find out. >> as we understand it, theranos has two major laboratories at the core of their revenue generation. revenue generation at this point. the california laboratory as well as the arizona laboratory, the arizona laboratory to continue operations, though h e holmes and the other executive may not be able to run it in any other, shape or form. >> tell me if you've seen this, we have been doing this a long time. if you go to theranos' board, that's not right. if you go he to theranos' website, under leadership, it says board and counselors, but if you look at the board, board,
those who meet every quarter, it is not kissinger, not fritz, not nun. david boyce is on there. but on the website, if you look at it, it fooled me, look at it and it says leadership, board members and counselors. >> and drill down and see which ones are labeled director. it is much smaller than the actual list. >> it seems as if theres definitely an intent to -- like, wow, look at all the big names, but they're not on the board. >> only the board members -- only the board members actually have fiduciary duty, so that line should be a bright line and it is not on the website. we should remind you all that just last week they beefed up their scientific and medical advisory board also to try and dispel some of these doubts about the company's technology. they added a number of very high profile doctors from across the country and then this bombshell breaks today. >> you read that press release, a lot of those advisers, one of
the advisory members came out and said it has -- one says it is clear that theranos has done what people thought was impossible. and they quote the director of the orthopedic trauma service. so somebody, again, to try to burnish the reputation, but trying to refute what the wall street journal has been reporting, which has been questioning does this technology work or not? can you take a tiny bit of blood and do all of this testing instead of big vials. >> and have it be accurate. and have it be accurate. that's the number one criteria of a blood test. that's the issue here. if you go off this blood test, they have found you can have serious diagnosis issues by going on these results because they're just -- they're not repeatable, not consistent. >> listen, you know, there is a chance that the stuff works or having some issues with it, that the company has fallen under this hard time, things have gone bad, the news cycle has gone against them.
playing devil's advocate here, based on the story, but if somebody in the federal government said, you need to step down and away from your entire industry for two years, me thinks they know more. >> methinks they know more. >> if this were a stock, this stock would be very a serious decline. >> closer to zero. >> it will be a zero right now. >> you point out david boyce is on the board of directors. >> actually on the board. >> they have expertise if they get sued, right? this is a very big name, very prominent within the legal world. >> i think bringing up the board is board. you have heavy hitters as councillors, but watch for board members to depart. there are draper, fitser engineering sene, or bill jerveson was a big supporter of theranos, so there's big venture
capital money in this company. >> to what extent is the board on the hook for whatever is going on at theranos. >> but they never thought they would get this kind of headache when they joined. another piece of breaking news out of the california, which is far less serious and unimportant to anybody except for the trojans is that lynn swann has been named the new athletic director for university of southern california. much more on theranos. power is back in two. which allergy? eees. bees? eese. trees? eese. xerox helps hospitals use electronic health records so doctors provide more personalized care. cheese? cheese! patient care can work better. with xerox. that's it. how was your commute? good. yours? good.
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welcome back. we're holding on to gains with the s&p 500. where we're seeing the most gains, financials leading the s&p 500, ten major sectors here, helped of course by jpmorgan. industrials, discretionaries also. the weakness in utilities and telecom. much more "power lunch" in two minutes. this car?
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you might say i am the serena williams of cloud-based cognitive systems. nah, i wouldn't go that far. when you want to sell your house, you call a real estate agent and they take a few pictures, but when you want to sell a mansion, you might want to call a movie director. robert frank joins us with another look at the secret lives of the super-rich. of course you would. >> we took a look at a house in the hollywood hills that has a hollywood-style move as a sales video. check it out. ♪ >> it is a very sexy, racy
video, but i think it's also tastefully done. let's be honest, we're in the city of sex. this is los angeles, the entertainment capital of the world. >> reporter: compared to the marketing budget of most, this is a holy with that blockbuster. >> >> a video like that could run you from 30 to $50,000. it's like a mini movie. >> the price of the video is worth every penny that we spent. people from all over are calling us, clients that live around the world have seen it. the video has gotten so many hits, it's unbelievable. >> they used five cameras, three drones and paid off. >> five women. >> at least. >> fich cameras, paid, they sold it for $28 million. so it works. >> the girls don't live there. >> they don't live there. >> they are professional actresses. >> oh, my god, that's his
teshal. >> how much money did it take to make? >> between 40 and 50,000, just for the video. it's the new arms race in luxury real estate. all these brokers want the next big video. the couple is making a production company to sell to other brokers. big business. >> thanks, robert. tune in tonight for a new episode of "secret lives of the super rich." love this stuff. back to the top story -- the federal government recordly, according to the "wall street journal," proposed banning theranos' cofounder elizabeth holmes and the number two executive for two years for basically not supervising some of the required fixes 'some of the theranos factories. nobody has banned, but there's a proposal to ban holmes for two years. >> if they got a letter on march 18th, which addressed this issue, theranos had a chance to come back and respond to try to stop the ban. the "wall street journal" says they responded, and now we are
awaiting to find out what it is that the regulatory body is going to decide. fascinating how quickly this thing has unravel. thanks for watching "power lunch." "closing bell" starts right now. hi, everybody. welcome to "closing bell." i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. banks have been a big story today. jpmorgan is leading the financials higher right now after the better than expected earns out this morning. it's now the best performing component of the dow jones industrial average, up more than 4%. we'll tell you the details on that, and what to expect now from bank of america and wells fargo, both of whom report tomorrow. >> also amazon building a fancy new kindal with a price tag nears $300. we'll show you the device and talk about whether this could move the needle for the