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tv   Power Lunch  CNBC  May 2, 2016 1:00pm-3:01pm EDT

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transitionst new directors. look at what an outside shareholder can do, coming in, recruiting a new ceo and felt comfortable. that's what brought him to the table. that's a great indication of the success. >> thank you for being here today. >> bill 5:ackman, that does it r us. "power lunch" begins right now. all right. welcome, everybody. scott, please do not go far. we got a big two hours of "power lunch" on tap including you and just a couple minutes and, two big power players. welcome, everybody. tyler mathisen along with michelle caruso cabrera. welcome home. >> thank you. >> wonderful work in iran last week. brian sullivan is live in beverly hills. we'll get to him. melissa lee is off today. we begin with the power player, maybe in the world of investing, that would be warren buffett. berkshire hathaway holding the annual meeting this week in
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omaha. class a stock up more than 11% so far this year and that, of course, outperforms the major averages. our becky quick is live in the aforementioned omaha. hi, becky. >> tyler, thank you very much. warren buffett is called the oracle of omaha for a reason, he made a lot of money for a lot of people. he had a gain of 24.8% in shares of berkshire. that may not sound like a lot but it crushed the return on the s&p 500. he built up millionaires over time and a lot of those people have loyalty to him. that doesn't mean every investment he makes is a winner. he is the first to admit he made a lot of mistakes. the winners start out looking like losers, too. the jury is still out on a stake he's been building up over the last 4 1/2 years, ibm. right now it looks like a huge
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loser. he built up an will 8.5% stake in the company itself and he's done that at the average price of 1 p$170 a share. for now, buffet is standing by ibm. >> we feel fine or we wouldn't own it. and we never sold a share of ibm. periodically we buy more. although we're up fairly close to 10%. so we have not been an aggressive buyer. we have been a buyer and we never sold a share and it's a company that has lots of tough competitors, one of them may show up here pretty soon in the studio, and it will always have competitors. we see them doing some interesting things. the competitors are doing interesting things, too. overall, we like it. you know, i think we would -- i think i can safely say we would be much more likely to buy more in the next 12 or 24 months than
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we would be to sell shares. but we will make that call as the time goes along. >> buffet also defended some of his other core holdings that underperformed over the last year. take a look at shares of american express. that stock down 15% just over the last 52 weeks. now he defended that stock, he said he still likes it, undervalued right now. went on to say that if he didn't like the stock, if he felt there was a huge change, if he thought there was a different outcome that he saw down the road, he would sell the stocks. even a lot of people say these are legacy stocks. you held on to them for a long time. maybe you don't see what's out there. he said, no, if i saw a better place for the money, i'd sell the stocks and get out of them. when you look at berkshire, because it's a corporate holding, because he's a long term investor and massive gains built up, there is a much higher bar than there might be for the average investor. >> you pay a 35% tax at the
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corporate level f we were to sell our coca-cola, it is almost all profit. he would have roughly 65 cent dollars to buy anything else. and that means the case for switching has to be more compelling. we still do it. i mean, we sell stocks with very substantial capital gains taxes involved. but as obviously a factor. >> buffet also staunchly defended coca-cola even at a basis of criticism from shareholders over the weekend questioning whether or not this was a health risk for people drinking it. you heard bill ackman making comments about that. he pointed out staendihe standi this stock. he also took time to dole out praise for spectacular business leaders as far as he's concerned. exhibit number one was jeff
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bez bezos. >> overwhelmingly, he's taken things you and i were buying before and he's figured out a way to make us happier buying those products either by fast delivery or prices or whatever it may be. and that's remarkable when you think about it. >> you know, all this praise of bezos, that is something that charlie munger chimed in over the weekend and earlier on "squawk box," too. he joked around because they lost a lot of money early in retail, you and warren buffett owned a department store, he said they're not in position to lose more money to him now. >> thank you so much. good to see you. let's dig in one more time on the big calls, amazon, gene munster has an overweight rating on amazon. gene, you heard everything that warren buffett had to say. all those things may be true about jeff bezos z that make the
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stock a buy at this point considering the levels it's trading at? >> i think it's a buy because they're not going to have much of any competition over the next decade. and they're building the new model for retail. and specifically taking online as be inspect a aspect and going to same day, same hour. and then there is ews and continuing to invest. that is how businesses are are going to be run over the next decade. and so i think that this is a unique story. if you had a great concept and went to private equity or venture capital, it is almost impossible to get funded. the competition has to come from the slow moving existing retail partners. and they just haven't got it together. >> aws being the cloud service, correct? >> that's right. >> okay. what do you think? you're a traditional retail guy. once a retail executive. warren buffett is bullish on jeff bezos. but what about the actual
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company? are you bullish? >> i'm very bullish on amazon as a company. i'm never sure about the valuation. but when i look at amazon, i say they're winning the game. they look like walmart looked 20 years ago. they're 3% of sales and gaining 40% or 26% or some number of all the new sales that go into retail. i'm a prime amazon member. i shop for a living in brick-and-mortar stores, i don't buy anything except online. i'm a huge fan of what amazon is doing. that doesn't change the fact that in the side of the business that is retail, they don't make any money. they put enormous pressure on all the rest of the retailing because of that. so i say all the time, amazon is the biggest threat to walmart as far as profitability goes. walmart is the biggest threat to amazon as far as growth and the retail side goes. i'm still a fan of walmart. i think walmart will do well. i like walmart right now at these prices. i do think they can be competitive with amazon. but do i think amazon is winning the game? do i think in 13 1/2 years half
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the business we do will be done online where it's 10% now? yes, i do. do i think there will be very little room for other kinds of retail at that point in time? i do. doesn't mean i don't like walmart right now and what they're doing. they're doing retailing 101 as well as it can be done. and theret biggest player online after amazon. >> got it. >> the beautiful thing to me about amazon is that every time i use it, somehow or other it exceeds my expectations. i can't really say that about any other retailer i deal with. >> i say that every day. amazon is never disappointing. other retailing when you go to shop, there is disappointment. as long as they are never disappointing, the website is very sticky. they get what you want, when you want it at the price you want it. it's really hard to beat that as a traditional brick-and-mortar retailer. it doesn't mean there will be winners, there will be just a lot less of them. >> where do you think it's
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going? >> we have an will $800 target and it's based on 17 times our 2017 numbers. these are big, long term secular theme thez have a pole position in. i think that this is going to continue to expand in terms of the market cap. >> all right. good to see you. gene and jan on amazon. thank you. we'll see jan in a little bit. >> gene, jan -- i know. >> we hear from another big power player, folks, here on cnbc within the past hour for a full hour. pershing square's bill ackman talking about valeant to the hedge fund market to herbalife and coke and much more. a fascinating wide-ranging conversation. >> we began really got right into the valeant story. at the annual meeting of berkshire hathaway over the weekend in which bill ackman did atte
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attend. charlie munger had some very harsh comments about valeant calling it a "sewer ". warren buffett said the business model is flawed. i asked mr. ackman to respond to that. >> company's made some mistakes. i think where munger is wrong, it's wrong to indict an entire company on the basis of a few mistakes and, you know, a leader that is no long we are the business now. >> today was the first day that new ceo was on the job. bill ackman having many poz things to say about where mr. papa can take the business from now. they've been the poster child on the issue of price hikes. lots of criticism bill ackman and the former ceo were on capitol hill answering questions about that very topic last week. in fact, i asked bl ackman if price rollbacks on some of those drugs was on the table and he said, yes, the board is considering that. here's what he said about asset sales which some have speculated
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could happen at valeant to deal with the $30 billion in debt. >> the company has no plans to sell any crown jewel type assets. the only things that we're considering are noncorps asset sales. and here there are assets in the company that have meaningful value that don't generate a lot of cash, perhaps lose money. you know, we bought a lot of assets over the time. in terms of core franchises of the business, these are not things we're considering selling. >> of course, we spent time talking about herbalife as well. 3 1/2 years after that initial investment, it still is $1 billion betting against herbalife. he still thinks they'll win that situation. herbalife said maybe it's time for bill ackman to just move on. we talked about the hedge fund business which has been incredibly tough. pershing is coming off the worst year ever. he thinks that activism is alive and well. >> so much interesting stuff in
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there interest from his very strong indictment of coca-cola to herbalife. let me linger there for a second. it sounds like he expects that bet of his to work out. if the government comes in and fundamentally dismantles the kpp? >> it's the only way kit work out. it's a binary thing. either the government shuts it down or it doesn't. it could make herbalife pay a sizable fine of some sort or make further changes to the business model. it's unclear. all we know now according to my sources is that the negotiations between herbalife and the government are currently on going. even as there has been some chatter that this whole thing could come to a resolution in the very near future whether that's weeks or months, we don't know. but it wouldn't surprise me. >> incredible about-face on pricing. he bought into valeant whether it was one kind of business model. we know what that business model was. an now to say in front of congress, you know, they're
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going to rethink that and to tell you they're going to roll back prices, that is a fundamental change from the original investment basis. >> he heard the criticism. i don't think there is anything like being called flovent congress and having to answer the questions. i think -- i don't know that he certainly didn't say it publicly. i don't think that he got all that he thought he was getting when he invested in valeant. he was very much attached to mike pierson, the business model they had at valeant. you justin to buy companies. and you acquire these drugs and you raise the prices. maybe he knew what he was getting into. but certainly didn't really understand the full magnitude. he said in his annual letter some weeks ago he wished he had done more due diligence on valeant before making the investment. he clearly said on our program he wish he never made the investment in some respects. maybe thing wobz different. >> very quickly, you pressed him on the pay package for mr.
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pierson. his answer did not sound con vi convincing to me. >> that's a tough one. he was not involved. >> bill ackman has been on the board for six weeks. he's only been an investor for 13 months. it feels like he's been in that stock for 13 years and that he's been on the board for equally as long. but it certainly has raised eyebrows. when you look at a pay package of $140 that, includes the stock incentives -- force. >> it may not be worth that now. >> but when he's awarded that pay package at a time when shareholders were hurt so badly the stock today ar there abouts is down 80% from the high, it raises eyebrows as to whether that sort of pay package is acceptable or not. i asked him about the current pay package of joe papa who i said has taken the job as ceo. today was the first day. he has a tremendous amount of potential stock awards at hand and some wonder whether he'll
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need to be as aggressive as pierson was to try to reach some of those incentives. big ackman says he will not. he is focused on the business at hand. taking valeant forward from where it is now. he made that clear as day on the show just a few moments ago. >> great stuff, scott. >> might even change the name of valeant. >> that's what he said. >> scott, thank you very much. just getting started here on "power lunch." a bold call on jcpenney plus a historic moment in had a v-- in havana. first brian sullivan. >> yeah, it's been a huge day on cnbc today. we had warren buffett and bill ackman, after the break, john chen is going to join us. we'll dive into their business and whether or not they're benefiting from some of apple's recent struggles. john chen coming up. who do you work for?
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your boss? yourself? your family? our financial advisors are free to realize a plan to fit your family's unique needs. we'll listen. we'll talk. we'll plan. baird. at ally bank, no branches equals great rates. it's a fact. kind of like bill splitting equals nitpicking. but i only had a salad. it was a buffalo chicken salad. salad.
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welcome back to "power lunch." i'm in beverly hills, california. we have the ceo of blackberry john chen us with. thank you for joining us. >> thank you. >> first off, your competitor, apple, bad quarter, first declining sales in apple. any evidence you're picking up wins from former apple customers? >> no. i haven't really seen that evidence yet. i wish i could.
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i think the whole high end market is softened. >> so do you view it as an industry issue or as an apple issue? >> i think it's a little bit of both. i think mostly because of industry. >> okay. so are you seeing this softening as well? >> yeah. last quarter we did see softening also. our numbers are probably more steady pt we do see it though. >> so unfair to say then that apple's quarter which, by the way, a lot of people would like to have a bad quarter like that, the number of phones they sold, is not attributable to blackberry taking share from them. >> i think that is a stretch. i'd love to say it. >> yeah. >> it's not true. >> okay. >> probably not true. >> in the last fiscal quarter, you had 27 corporate wins. any indication that you are
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seeing more enterprise wins in part because of the good deal? >> yes. that i see. we doubled our software revenue from a year ago. a lot of them has to do with both our own core businesses, especially with qnx auto driven cars and connected car world. that we see some good growth there. we see some good growth in mess enking. >> what growth do you see from the automobile side? it is rarely discussed with blackberry. >> we own a company called qnx. we have 60 million cars running out there with our software. and we're expanding our reach there. you know, you have other components like entertainment systems. there was an advantage driver assist, vehicle communications. so it just expand. today, a car is actually a software platform. it's no longer, you know, how
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many ccs and all that. so we're very bullish. >> so you have said the word software three times. i don't think you said hardware. a lot of people wonder is blackberry finished as a hardware maker. will you make hardware again? >> we have two new phones coming out between now and the end of the year. >> any plan after those two? >> absolutely. i think the key is could i get the business to make money? and i'm very close. i told that everybody um very close. now if for some reason, youi hao my shareholders, for some reason, doesn't matter how hard i try, i couldn't get it there because of the market dynamics or whatever it might be, which i don't believe that's the case. i truly believe that we're going to be a hardware business. >> so you're not getting out of hardware. last question unrelated to blackberry, you're a board member of disney, our parent company. just purchased dreamworks.
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did disney look at making a bid for dreamworks? >> i can't comment on that. that's not appropriate for board members to comment on. thank you for asking me. >> of course i'm going to ask you. >> i know you're going to try. >> what do you make of the deal? what does it do for pixar? >> i don't think it makes any difference whatsoever, personally. i think it's really inappropriate for me to comment on anything about disney. i know this is doing extremely well, as you know. they're hitting the ball out of the ballpark and all the movies have done extremely well. i'm sure you've seen all the numbers. so, you know, i don't think it's a major impact of that. but what do i know, right? >> as a board member, probably a lot. you know i had to ask you. john chen, ceo of black berry. we'll see you soon. folks, we have a lot more coming up from the milken institute. we have the always outspoken neil ferguson of harvard. he'll join us and we'll ask about the possibility of a
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british it from -- ex-exit from eu. for decades, investors have used a 60/40 stock and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪
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welcome back to "power lunch." rick santelli live on the floor of the cme group in chicago. look at an intraday of ten. compressed range. trading $1.84 to $1.86. it's all about foreign exchange.
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look at the dollar to index going back to january 2015. that is the last time the dollar index closed down here. let's go one year further back in time. see how much runway we have. so you see the dollar index january of '14. lots of room there. let's flip it around and look at the same day for the euro versus the dollar. it looks like it is popping to the upside. that makes sense. it's part of the dollar index. look at gold. not exactly the same pattern. but it looks like it's about trod clear the zone towards the 20 yard line, doesn't it? and last chart, the dollar-yen. this is a bit different. this doesn't look like it has as much runway. the left side is flat. that might have run out of runway. let's see how it cross spreads trade later in the session. back to you. >> all right. rick, thank you very much. a bullish call on jcpenney sending that stock higher today. what is the call? how much higher could that stock go? the company once left almost for dead. that's ahead on "power lunch."
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hi, everybody. here is your cnbc news update. a special administrator has been appointed to oversee the settlement of prince's estate. he died last month with no apparent will. under minnesota law, six siblgs will share his estate. michigan's governor cannot say when unfiltered water will be safe to drink in flint. they found lead water above federal standards. the governor hopes to meet with president obama when he visits the city on wednesday. the supreme court has declined a request from shareholders to revive the class action lawsuit against bp. in september of 2015 a lower
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court refused to certify a lawsuit brought by investors who bought shares in the company 2 1/2 years before the huge spill in the gulf. bp's share price plummeted after the disaster and cost the company more than $55 billion. are you looking to move? well, how about to another planet? scientists from mit detected three other planets that could potentially be habitable. the trio is outside of our solar system, a mere 40 light years away. they say they are similar to earth in size and in temperature. the researchers also say the discovery is like hitting the scientific jackpot. don't call those movers quite yet. that's the cnbc news update this hour. back to you. welcome back, by the way. >> thank you. something to be really tough commute. >> i think so. >> the final gold trades are crossing for the day. gold $1295. had been above $1300. we're talking about multiyear highs here. you saw rick santelli highlight.
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let's show you the rest of the metal complexes. declines generally speaking. silver is lower by .75%. palladium is lower and platinum is higher by .75%, tyler? >> thank you very much, michelle. barons out with a bold call over the weekend on jcpenney saying that stock could double in the next three years. let's bring back in retail expert and cnbc contributor jan roger nippen and alex berman. gentlemen, welcome back. jan, you like this company that was once as i mentioned a moment ago practically left for dead. why are you positive on it? >> i like what they're doing. i like the fact that marvin is doing retailing 101 as well as anybody can do it. i like the fact that they've got a strong cfo there that is taking care of all the numbers. i think they're going to be able to deleave edelever the company. i think they'll make their
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numbers. longer term, i have real concerns about the space as everybody does. but in the shorter term, they're in control of their own fate. i think they're controlling that fate pretty darn well. i'm a little concerned about everybody's first quarter. it was too cool for easter. it's been too cool this month. people are a little over inventory. the inventories are not as current as they were. i have concerns about q 1 itself. i don't have any concerns about the back half of 2016. i think penneys will be the big winner. i think they're taking share back and will be able to do that for the next couple of years much it's an interesting play. not quite as optimistic as barons, but still optimistic. >> alex, you have a hold rating on the stock. one of your concerns is one of the things jan mentioned but stepped over very quickly and that is the amount of debt. how big a problem is it? how will they be able as jan said to deleverage that company or will they? >> it's a significant amount of
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debt. i think to the points made earlier, j.c. penney has done a tremendous job of reducing costs and getting working capital under control and focusing on the higher margin, private label brands. wall street is already giving j.c. penney credit for the ambitious guidance this year. the street is looking for 18% growth. so when you factor in the debt, even with all that growth at the street's already baking into the forecast for next year, you're talking about a stock trading at six times next year's levels. piers are a 1/2 times. this is not an inexpensive stock even when you factor in all of that upside that's going to come to numbers in the next year or two. so i think given that debt, you know, this really makes it a tough apples to apples comparison with more consistently profitable department stores. >> alex doesn't quibble with your thought that they're doing a lot of things right. he's concerned that this stock is priced for perfection, jan.
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>> i don't quibble what he said either. what i would say, though, is that the other department stores are seeing some struggles themselves. penneys is taking share back. i think penneys deserves a little better multiple. more importantly, i think as they start to pay down debt, the street will get more excited about the equity and the fact that they look a little expensive right now will probably not keep the stock from going up. >> alex, what would you say to the ceo if you had one bit of advice to give him? >> i'd say keep going on the track you've been going on. you know, ultimately i think that a year ago we were all thinking that in order for j.c. penney to get to this level of profitability they need s6, 7, % sales growth over the next three or four years. that did not materialize. the company did a great job cutting costs and reigning in the growth and working capital to the point where, you know, i think creditors will have a lot to get excited about and there should be better opportunities
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for them to refinance this debt as time comes on. ultimately, you know, there is only so much senior management can do to get the consumer going. other department stores have certainly felt a the lot of the same pressures. that is not a management specific thing. keep cutting costs and there is every opportunity to do that. >> alex, thank you very much. we appreciate your time today, misch snell. >> stocks are at session highs right now as we kick off the first trading day in may. you know the old saying, sell in may and go away? is that going to work this year? joining us this year, a chief investment officer of oppenheimer funds. is that something that's going to work it year or no? >> i don't think so. i think this year second quarter and the summer is going to be better because i think we -- the situation is much better. i think in china, you're seeing a turn around in growth prospect
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even if it is temperature for airy. it turned around nevertheless. the fed is on hold. earnings have bottomed. >> ron, how about you? intellectually, every time i hear sell in may and go away, it has to be mularkey. how can this happen every year? when you look at the data, it has been a pretty good trade through the decades. what do you think, ron? >> well, let's see. in the past four years it worked twice and it didn't work twice. i think the rubber meets the road which is where we are with clients, we really dare of the client. and all of a sudden sell all injure stocks and pay the taxes and then kind of figure out when to get in? should i get in a week before, two weeks after? it never goes according to oil. i think it's a foolish play. ultimately, you and emotion take over. it won't be exactly as the numbers report by statisticians. >> you are bullish right now? what would you do with stocks right here? >> well, unfortunately, i think stocks are fairly priced right
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now. we all use pe ratios and the truth is we think pe is the crux or the father of all the other statistics and given the price of stocks, given their earnings, they're fairly priced. so we need more earnings before we get higher prices. you got to go hunt for bargains. it's not like we're not bullish. we think everything is fine and we don't think bonds are a place to be because of interest rates and, you know, all the federal banks keeping them down. but we think you got to pick your spots. and just don't be too much of a hero right now. >> okay. we showed people that you like apple and facebook. that's on the screen right now. i'll get back to you. what do you think about the market? he mentioned you feel like it's going to be a positive summer. what would you be doing specifically to capitalize on what you think is true for the marketed right here? >> i think emerging markets are the best position sector in the market. primarily because the growth impetus is really coming from china and emerging markets.
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u.s. should do okay. it's really dependent on how earnings turn around. i think it will be a good outlook. i think emerging markets is where we need to focus. and i believe the cyclical sector of the economy on a global basis probably has more to run. i think you'll see more growth surprises on a global basis zblflt okay. ron, tell me about apple which is down sharply. taking a big hit. how long you have owned it? are you worried? >> years. a lot of years. and that's actually because of it, it's an enormous growth. it's our single biggest holding. we watch it all the time and is the slower of the package of microsoft, facebook, google, and apple. and we added alibaba. basically, the companies the next three to five years are on a great growth trajectory. apple -- we're not selling it yet. i got to tell you, it's slower.
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we're watching it. as a basket, we're not trying to be a hero. >> got i. thank you for joining us. go to our website right now to see what they say is the biggest risk to global markets. still ahead, how 87 million potential buyers are financing their first home or not. we're talking millennials and mortgages. diana olick is live in washington. >> from millennials getting mortgages, who has the higher fica score? men or women? i'll tell you coming up. who are you? i'm vern, the orange money retirement rabbit from voya. vern from voya? yep, vern from voya. why are you orange? that's a little weird. really? that's the weird part in this scenario? look, orange money represents the money you put away for retirement. save a little here and there, and over time, your money could multiply. see? ah, ok.
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so, why are you orange? funny. see how voya can help you get organized at voya.com.
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welcome back to "power lunch," everybody. welcome back, michelle. home prices continue to rise, millennials continue to have difficulty moving from renting to owning. now new data out showing how first time home buyers are making the leap.
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>> diana oh, lick joins us with more. >> michelle, first here's a news flash. the urban millennial peaked that according to a new study from researcher at usc. after more than a decade of growing urban concentration, the millennial trend of downtown living is now beginning a decline. granted mshgs of the millennial who's are leaving cities will not be able to buy a home but will just rent out in the suburbs. the single family rental unit is larger than ever with millions of more homes added in the foreclosure crisis. for those who do want to buy, it now becomes all about the mortgage. there is a great debate going on about whether lending is too tight or whether it's just too hard for young buyers to save for that down payment. i'm not going to argue that here. i'll show you findings from a millennial mortgage tracker by le may. 37% of millennial mortgages in the past two years were government insured fha loans. women were listed as the primary
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borrower on 31% of those loans, the average score for female loan complicates was 724 and the average age is 30. let's compare to men who is listed as the primary borrower on 66% of loans. their average fica score, 727. just for context, fha is only 22% of the general loan population. young people are using fha because it is low down payment option which allows for slightly lower credit scores. but you do have to pay that mortgage insurance premium. >> all right. thank you very much. let's bring in joan caymans and nella richardson. welcome to you both. joan, are you seeing that millennials are less hesitant about buying or are they still hesitant? are they suffering sticker shock when they see what it costs to get a mortgage or what? >> i think i see a little bit of
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everything. it still comes down to their jobs and what they have saved and understanding the expecttations of what it takes to purchase a property. they don't really understand that in addition to the money you need save to put down, you need a the love money to close. transfer taxes, you know, all the things that go into it when we sit down and begin to evaluate credit scores and preapproval is one thing. but the excess money needed to close is above and beyond the down payment. >> a bigger closing cost on the seller side? >> not really. in pennsylvania, we have a 1% transfer tax to the buyer and seller. the seller, yes, they pay the commission. however, you have your fees from your lenders. you have title insurance. so there are a lot of hefty fees. it can be $8,000 or $10,000. >> it can really dent what you think you're going to make in profit. >> absolutely. >> what is the big move with millennials at this point? what is the big move? are they stepping up to buy here? >> no. they're not. but one good news from the data
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that we've seen and what we've seen here is that millennial buyers are very savvy buyers. they know what's out there. there are so many different tools on the internet now that they didn't ten years ago. so those who make it through are very well informed on the process. agents can help take them the rest of the way. the problem is that just enough are not making it through. it's not just the mortgage market. it's the chronically low supply of inventory much those two fast access and low supply are really big barriers along with student loans. >> there was a very interesting story on "60 minutes" about fintech and how millennials don't buy the idea of going to a bank and together paperwork and dealing with a teller. they've been uberized. they're accustomed to doing it on their own. will we get to a day where i am able to cut out a the love the
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costs that you just described, the closing costs, loan application fees, appraisal fees and all of that stuff and do it all on my cell phone and make it fast? >> i have seen people who have attempted use online access for their lending and there is a problem. there are document that's are required. and there's absolutely -- force. >> under the federal loan program. >> absolutely. there are disclosures retirquir and a lot of information that i've seen people try to go through this process and the loan falls apart. the question is become as a representative for a seller, if i'm representing them and getting a loan coming to me, they get to decide who they want to choose to purchase their home if there are multiple offers. who you would take? >> i'd take the person who -- who can bring the cash. >> you certainly could close. >> that's the evaluation that i present to my clients. i say what is the risk here? there's a lot of questions. >> but what i'm hearing you stla is a lot of law. there is a lot of regulation
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that stands between today and a day where it is much more frictionless. >> right. >> well, i think again online, there's a lot of gray matter that is not absolute and accurate. we have to get appraisals. we have to make sure the appraisals are completed. we have to make sure all the things are done to kbcomply to t the property to close. you need people to be doing this. this is a lot of industries making a lot of money. >> all right. thank you very much, joan. nela, thank you as well. talking about real estate. up next, a tale two of calls on one red hot pharma stock plus we're talking toothpaste and binge tv. a pair of household names hitting all time highs when "power lunch" return.
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welcome back to "power lunch." tale two of analyst calls on cerepta pharmacy. the stock is downgraded to underperform, $7 target. right now it's at $16.21. a gain $2. international paper plans to buy
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pulp business for 2.2 br billion. shares of ip are up on the day by about .5%. jim cramer will be sitting down with the ceo of international paper to night at 6:00 p.m. eastern time on "mad money." handful of stocks are hitting all time highs including time warner, colgate-palmolive and american waterworks. stocks are near the session highs. cnbc.com tweeted out that we're up triple digit when it comes to the dow jones industrial average. well now it's up 95 points. they were higher by 100. s&p 500 higher by 13%, .6%. nasdaq higher by 25 points at this hour. nine out of ten sectors -- excuse america seven out of eight -- excuse me, nine out of ten. i'm really tired today. energy is lower by just a little bit. for the first time since 1959, he must be tired, too. u.s. cruise ship is docking in cuba. simon hobbs is on that ship.
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simon? >> hey, michelle. the ship is now empty for the first time ever. american tourists are now holidaying effectively in cuba doing their special purpose activities. that's the only way can you get here, of course. more havana on your "power lunch" right after this break. my mom loves giving me advice. she even gives me advice...
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welcome back to "power lunch," everybody, historic moment in cube yachlt the first u.s. cruise ship in more than 50 years docks in havana. simon hobbs is one of 7 hundred people onboard. he joins us now live from havana. simon? >> hey, tyler, the europeans and canadians have been holidaying here for decades. this was a historic moment. let me show you video of us coming into port about 4 or 5 hours into havana. crowds of people lining the old town to wave us in. recognizing that it was an american ship for the first time in so many years, of course. it's historic because the first is it's coming from the u.s. mainland for the first time in 50 years. the reason they're able to do
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that and in the sense circumvent congress' ban, the strict ban on tourism from the united states to here is that there are 12 exemptions. and on this boat which is a carnival boat, they essentially make people promise to volunteer to do things that exempt them from that travel ban. they're within the 12 exceptions if you like. and that's why the ceo of carnival is so proud that he really is the first in. take a listen. >> we're delighted to be here. we feel fantastic. we're humbled. it's an honor and privilege to be here. we cant wait to get in. >> of course, the second reason why it's historic is cuban-born americans are able to travel by sea, by commercial ves he will h. will to cuba. they put a break on that, a directive on that a few decades ago to prevent people from escaping by raft and prevent americans from coming back.
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when carnival first started advertising this cruise last summer, cuban-americans were excluded. there was an outcry in miami. they threatened class actions and cuba said -- or the carnival said to cuba, you have to change the rules and they started accepting everybody onboard and then, of course, subsequently havana did move. and, again, if you are cuban born, you still have to have a different type of visa. this is how the ceo explained it. >> you know the reality is there was some controversy but we had confidence all along and we're all here and taking everyone with us. in term of cuban born, yes, if you were immigrated before january 1st, 1971, you have to have a special visa. after that, you have to have a cuban passport. but there are many cuban born who have flown to cuba. so that process is in place and takes a little time. >> essentially, of course, now they're going to start a cruise here every other weekend or every other week. it's a seven day cruise, guys.
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three ports, the question is whether the other rivals will also get got ahead. if they do, it's going to be a trickle of slots. >> what are some of the 12 exception that's you mentioned that get around some of the prohibitions against tourism, number one? and number two, did the guests on this first cruise have to pay some sort of premium price to be on that first ship and what on average did they pay or do you know? >> that's interesting. i spoke to people who booked right back at the end of last year and they were $1400, $1500 per person. i think the official line is it's about $3,000, $4,000 person. but if you were to check on line, it may go to will $8,000. it is a premium experience because it's a small ship. and those are more expensive. but importantly this is a very big island. and it's much cheaper they would argue to cruise around it than to book hotels or move around in any other way.
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in answer to the first question, that's removable. the 12 exemptions are religious, person to person, cultural. they are softening the rules because of what the white house is doing n a sense, can you argue -- and they will argue that if you're having dance lessons or architectural tour, you might go along way towards satisfying those. but importantly, you now are self satisfy. when they started this sh they said to people fall our rule. now you just take a form to say that you're in compliance. again, that's controversial, not least, of course, on capitol hill. >> all right. interesting. simon hobbs reporting from havana. and let's go out to brian in beverly hills. >> all right. welcome back. thank you. we're here at the global conference. there is so much going on today, a big day. cuba, warren buffett, bill ackman, we're joined by a guy we don't see a lot on cnbc, neil ferguson, harvard professor, author of like 14 books which is ridiculous. i don't know how you do i.
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now you're here. let's talk about first off britain. >> sure. >> okay. i hate the term brexit but i'll use it. do you think it will happen? >> i think not. but, of course, there is a risk as there always is in a referendum. people are being asked to vote on british membership of the european union. a lot of other things are likely to influence the decision to vote. although i think the polls have 5% or 6% lead to remain, i can imagine that narrowing between now and the vote on june 23rd simply because things will go wrong as they have gone wrong for the government. david cameron had a rough start to the year, so did the chancell chancellor. so i think one has to recognize there is a 30% to 40% risk that this could go in my view the wrong way. i say the wrong way not because i love european union and think all the bureaucrats are wonderful but because the economic consequences of britain lefrg the eu would be horrendous and not only for britain. i think they've been horrendous
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for europe. >> define horrendous. >> if you think about it, the uk has a large current account deficit, 7% of gdp on the last number. i can't believe that the capital will be pouring in to a country that has just voted to leave the eu. many major corporations are in the uk precisely because it gives them access to the single market. and at the beginning of a divorce, britain votes to exit, all of that will be called into question. it certainly would be impossible for britain to retain its current set of privileges. it's full membership of the single market if they voted to leave. so just that risk alone is a big risk not just in terms of starling but i think in terms of business confidence, investment and a significant knock to growth if britain votes to leave. >> do you think the voters, analyst say you don't want to knock individuals inening glanld, but do you think the voters truly understand the second and third derivative
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impacts? >> i it this debate going on will increasingly make them aware of the economic risks. but, of course, those campaigning for brexit are doing their best to muddy the waters by exaggerating the cost of eu membership to britain. the contribution, the net contribution to the eu is like .4% of gdp. it's trivial. of course, they underplay the costs of leaving. the debate has come one about immigration. there's a great deal of confusion in the uk about that issue as there is in the united states. and perceptions of what the eu does in terms of the control of immigration probably will play a bigger part in the debate. >> president obama made a stink in england a couple weeks ago. he said that england will be at the back of the line when it comes to trade deals. he took a lot of heat from that. was he right? >> i think he is right. i've been critical -- >> you have been critical. you have taken heat for being critical with him. >> i have, yes. and i'm glad to see him
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intervening as many foreign leaders have on this issue. it's not good for the west as a whole if britain leaves. britain has been a key part of making the eu more open, more of a free trade area than it was before britain joined. the fact that there is a single european market owes a lot to britain's influence in the 1980s. margaret thatcher was a proponent of british membership when britain joined in the 1970s. she was extremely good force for reforming the eu in the '80s. i it this president was right on one specific point. if britain leaves the eu, it will have to renegotiate not only its relationship with the remaining eu, but also the trading relationships with the rest of the world. and that kind of thing requires time. all of this could take years to play out, brian. there will be a great deal of investor uncertainty. >> we were talking about the cameras rolled and you made this point. isn't it sad we have a situation where the world seems to be getting better finally economically. we have this kind of lumbering
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along recovery. it feels commodities have strengthened, currencies stabilized. everything is kind of getting better. but now we've got migrant political distress in germany and england. will the political dysfunction ruin any economic recovery that we feel like we're on the cusp of? >> it could. after the financial crisis, i said shortly after there will be a political backlash once people have got over the macro shock. and the lag has been quite a long one if you think about it. seven, eight years before people finally get to this massive protest vote that donald trump has attracted. and the irony is that if i think we're beginning to see a significant turn around, as you said, in a lot of different indicators. i think we'll look back as economists and say that was the q-1, 2016 was its turning point. i think the inflation is beginning to pick up. labor markets are tightening,
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commodity markets and so on. yet this is the year that voters around the world decide i'm mad as hell and voting for a populous candidate. and that could be the risk that chokes off a global recovery not only in the united states but also -- >> donald trump could stop or slow down the recovery. >> it's not just donald trump. this is a global phenomenon. people have voted for or are are voting for a backlash against globalization. and it's happening in europe. it's happening in britain. and i think if all of this manifests itself as i fear it may, then we could end up with the year producing a real political shock. >> i know you don't have a view on puerto rico per se. we spoke beforehand. it just is all developing. i get that. do you have a point of view on sovereign -- we spoke with senator mark warner earlier today in a taped interview. he would support a restructuring basically a semibailout of port reek yoechlt he's on the record. he's a senator. what is the risk of sovereign bailouts generally. >> it's a really special case.
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it's an american colony that is not a state. >> the bonds of puerto rico are up 20 tor dtoday. >> this is a very, very special case. it has much more to do, i think, ultimately with how congress regards its responsibility to puerto rico and has to do with puerto rico itself. when we take a step back and as the question what is the story with sovereign defaults, we can see in the case of argentina that even a country with a terrible track record as a sovereign borrower that was responsible for one of the biggest defaults in recent years, can after a period in the populous wilderness make a comeback and indeed one of the biggest stories of 2016 has been argentina's return to financial markets. and it's really not that long ago that argentina was in the news as the bad boy of sovereign credit markets. so i think you have to remember that in the great sweep of history this is one of the things that happens periodically. we don't have a formal bankruptcy system for states. that's what makes them different
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from corporations and different from suborder nant entities like puerto rico. >> do you think that greece will do a full scale default? >> no. >> they have done semidefaults, you know nshgts la, in the last years. the problem with greece seems to be bubbling back up, folks. don't lose sight of greece. do you think they will hard default? >> no. i think greece has unsustainable debt. it will have to be restructured. in the world of sovereign debt, there are many different ways to ease the pain. you can extend. you can lure the interest that is paid on the bonds. there are ways in which this burden can be reduced without the pain and grief of default. i think that is the route that we'll see greece going down. they'll probably be a political trance in addition greece. that was a populistic experiment that didn't work. we're talking about pop lifts, they usually come along and say to hell with the debt and then
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crash the economy and then the smoke clears and ten years later the country returns to sanity. a lot of countries experimenting with populism right now should look at latin america where the experiment happened 10, 12 years ago. the whole thing folded for greece and back to where we were. >> we're going to end it there. you have written 700 books. you know about history. we are doomed to make the same mistakes over and over again. i'm going to leave the interview on that high note. >> on that high note. cheerful. thank you, brian. >> thank you. neil ferguson of harvard. you have the books on the wall there. a few of the 14 books. thanks for joining us. we'll try to have a better rest of the day. i'll send it back on that high note. thank you very much. we have a lot more coming up on puerto rico including whether concessions are made for that territory or commonwealth. what that will mean for the other heavily indebted cities and states like detroit,
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philadelphia, the state of illinois. all that and more with we continue our discussion on "power lunch." >> the list is long. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade. can an established bank move like a start-up? it's a question we get from some of our largest banking clients. the face of their business was tellers. then atm's. today it's their mobile app running on the ibm cloud. across every transaction, the hybrid cloud helps their data move quickly and securely. our clients are building out features and pushing updates faster, on five continents. with the ibm cloud,
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what is likely to be puerto rico's largest default yet due from the island's government development bank. by way of explaining the move, his move, he said that faced with the inability to meet the demands of our creditors and needs of our people, i had to make a choice. today's news while not unexpected shows the continuing fiscal crisis in puerto rico whose general obligation bonds are down again today 65 cents on the dollar. last summer garcia pe padilla said the debt load sun pis unpa. the hope was that help would come in the form of congressional assistance. a chance to restructure the island's debt or even the ability to go bankrupt, something puerto rico does not now have but so far a bill sponsored by wisconsin republican shawn duffy has struggled for support. looking head to a bigger payment due on october $1, they asked paul ryon to make good on his
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plan of assistance. hoped to deliver by march 31st. clearly sh taz taken far longer. there is no resolution yet. >> kate, thank you very much. let's bring in rafael fantauzi, president of the puerto rican coalition, a nonprofit representing the voice of eight million puerto ricans. are you encouraged by what is going on? discouraged? neither? >> we are extremely sad about the situation in puerto rico is right now. it's definitely not a day of glory for puerto rican leaders. it is also not a day of glory for wall street or the u.s. congress because there are at fault in this situation that puerto rico is in. and this is definitely not the situation that anybody wanted. so it's about time for everybody to come to the table and really take a very serious look at solving this problem. >> why is it everybody's fault when for years and years puerto rico spent more money than they had? why is it puerto rico's fault
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for not being able to balance the budget? >> i think that puerto rico will take the responsibility and it's taking responsibility. >> how? >> let's be real -- >> how? >> they're going to make the right cuts. they certainly have made the cuts. and actually the treasury has actually pointed out in congress that puerto rico has made the necessary cuts. let's be real here. puerto rico is in an economic unstable situation in the relatesship with the united states. and that is congress. how congress decided to build this relationship with puerto rico. and that is a failure. congress has given puerto rico but it has taken more away. and wall street, come on, you know, some of the hedge funds that are actually right now oenld some of the debt are the same one that's own the argentinian debt. they got their payout after ten years. puerto rico is a very, very, very different situation. >> if you didn't have to -- if puerto rico didn't have to pat bond holders anything, would they have a balanced budget? >> puerto rico should work towards a balanced budget.
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>> how long would it take them at the rate that they're going? >> they're going to have to. >> when? >> you have to take the responsibility and they. and if we the people of puerto rico -- >> they haven't for years. >> well, you no he what? that is irresponsible. and we know. and puerto rican leaders know that they're going to have to take that responsibility and the people of puerto rico will pay for. that but everybody here has to be responsible, not just the puerto rican people. >> all right. rafael fantauzzi, thank you very much. let's take a look at how we got to where we are. august 2015 puerto rico registered first default when it was only made a small partial payment to the $58 million due to bond holders and the public finance corporation. since that default, the pfc missed every monthly payment. another default, nearly $36 million due on the puerto rico infrastructure financing authority bonds. may 1st, yesterday, governor
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garcia padilla declared a moratorium on the debt service which will result in a default of at $367 million of debt. on july 1st 2016 this is the big one, debt payment spiked nearly $2 billion coming due. joining us is hector nagroni. they invest in puerto rican bonds. and the 10th governor of the commonwealth of puerto rico. guys, good to have you here. governor rs let me start with you, would you make the same decision if you were the governor of puerto rico? would you be defaulting? >> of course not. i acted very differently. i slashed expenses by $2 billion. that's why i'm practicing law now and not in corporate anymore. it's not popular but the right thing to do. and we all have to take responsibility to balance our budgets across the nation, every state and every territory. and this could have been averted. it doesn't mean that actually
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the relationship between puerto rico and the mainland is the best one. it's a territory. the founding fathers never intended for territory to last 120 years. there are some policies that are -- conditioned be applied. but by same token, puerto rico laz to take responsibility for its actions. >> how do you react to what you heard mr. fantauzzi say about the responsibility that lies with the people that lent the money to puerto rico? >> it's a little bit part of the general misrepresentation of the overall narrative which is that somehow puerto rico has exhausted every possibility in managing its obese government. it's impossible and unsustainable for one of every two people to live off the government. and so they have done very little to reform and fix that for a long period of time. and so the premise that somehow, you know, they're borrowing in the marketplace when they make in many cases real
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representations of seniority under the constitution to creditors, somehow the fault of creditors is a little bit, you know, a little apauling. i'm not a random guy who floated in from argentina. i've been in the marketplace for three decades. our entire marketplace relies on the rule of law, to live within means and to make amends to the creditors when they fall short. >> and what would you have them do now? how would you have them make amends? >> i would say this -- for a very long time i've talked about something that the government should do which is three things. one is they probably should improve the overall level of expenditures in the island and, of course, you're naturally vilified when you say that. somehow you're choosing between paying a bond holder and paying the policemen. we're not talking about that. there is a far larger number of expenses. a far greater number of inefficiencies on the island. just this weekend the mayor listed a number of them where there could be consolidations. the general -- there are 78 m e
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municipalities. they have 78 dmv equivalent. that doesn't work. that is the first thing. the second thing is they could collect taxes better. they collect taxes at a rate of nearly half of what -- a little more than half of what other state of municipalities gather. thirdly they have a debt stack. things like the general obligation deck are clearly sol vebt and enjoy protections. they need to deal with the reality of insolvency like they did with the psc and gdb and sort out the insolvent credits from the solvent credits so they can create a sustainable debt load but doing so within the priority of payments. twice ratified about it united states congress. >> governor, there is no doubt that, you know, i see puerto rico and to me it is the greece of the united states. there are so many similarities, so many vested interests that don't want to give up and all the things they were promised. but they're just never going to get that money because the money isn't there. you can't squeeze, you know, money if a rock.
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the former guest says eight million puerto ricans. only five million live on the island because so many left. how much more of an impact do you think this means when it comes to the municipal bond market overall? is there some bigger threat here that goes beyond puerto rico and that bond holders in the united states should be worried about? >> well, first of all, i'm concerned indeed that whatever is done in the case of puerto rico may be seen as a precedent for other states across the union. that should be -- i'm sure that it's a concern of congress. secondly, what has been done in greece and i heard previous section certainly hasn't worked. what works is restoring the rule of law. guaranteeing that there is an orderly process for only the credits that need to be restructured. and as the gentleman is stating, there are other credits that do not need restructuring because they have plenty of cash. so it's a matter of just not throwing everything into one
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basket. but guaranteeing that if you purchased something, you follow the rules that were established when you purchased it. and in some cases they're unsecured and if they're unsecured and there is not enough cash to pay you, they have to be restructured. but in other casecases, there i plenty of cash to paid. >> i would suggest there is an interesting sequence occurring. you have seen a deal being executed with the electric power authority. there is a deal with creditors and there's a deal on the table with general obligation creditors. all the distress ends with a consensual effort to work with the borrower. the opportunity exists here in puerto rico to avert an unnecessary default on july 1st. >> hector, thank you very much. fundamental credit opportunities and former puerto rico governor. just back from iran. i'm going to tell you what you couldn't see, step from behind
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the scenes when we come back right after this on "power lunch." now there's a way you can get crestor for $3. adding crestor, along with diet, lowers bad cholesterol. crestor is not for people with liver disease, or women who are nursing,pregnant, or may become pregnant. tell your doctor all medicines you take. call your doctor if you have muscle pain or weakness; feel unusually tired; have loss of appetite, upper belly pain, dark urine or yellowing of skin or eyes. these could be signs of serious side effects. ask for the crestor $3 card. ask your doctor about crestor.
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welcome back to "power lunch." the s&p 500 are near the highest levels of the day outperforming the s&p 500 and the dow.
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among the names helping power the index higher, genworth financial, u.s. industrial and j.c. penney. they extended gains after the company made progress on restructuring. genworth gained almost 38% over the last two trading days. "power lunch" will be back in two minutes.
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hello, everybody. here is your cnbc news update. mystery solved. australian tech entrepreneur craig wright is stepping forward as the creator of the digital currency bitcoin. he gave technical proof and members of the bitcoin community support the claim. it is believed he holds millions of dollars worth of the currency which could influence the price in the future. atlantic city avoided default making a $1.8 million bond payment. the mayor, however, says the city is financially running on fumes. the city lost nearly 70% of the property tax base since 2010. researchers say there has been a sharp increase in u.s. children hospitalized with firework-related burns. al thoet findings do not prove a direct link to relaxation in
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state laws, the researchers are suggesting it may be time for law makers to reassess the issue. and move over, disney pris sess, here come the brides, disney brides. couples can now get married inside walt disney world's magic kingdom in full view of the castle. a customized ceremony and reception for 100 guests starts at $75,000. compared to some weddings, that may be a bargain. back to you. >> thank you very much. oil is closing for the day. jackie deangelos is at nymex is up. >> we're closing under $45 a barrel because of the news out that opec production last month got closer and closer to 33 million barrels a day. we have a supply and demand problem here. on the demand side right now,
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things appear to be on the flat side. the supply continues to go higher. there are two options. we can either continue to keep pumping oil and not consume it in the right way. the prices will continue to stay depressed or look for a balance here. but yes, you're right, seasonally, gas prices on the rise. >> all right. thank you very much, jackie. two big names on our air talking about coca-cola, bill ackman sounding off on coke, warren buffett and munger defending it. >> unfortunately, coca-cola markets are a product that causes harm. i have no problem with adults making a choice about it. but the way the product is advertised, there is no disclosure about, you know, this is a product that can hurt children. i'm sure it's a great company. it's been a great investment for mr. warren buffett. i don't like the product. >> i drink probably five 12 ounce cokes a day and that is about 700 calories and i've been doing it more or less all my life.
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i can't imagine anybody that feels better than i do. i mean i'm happy. i enjoy life. i'm always wondered if i had a twin and he had to eat broccoli and asparagus and brussel sprouts and do it every day and ways drinking my coke and eating potato chips and there are some cookies that also have 100 calories per ounce, you know, which of us -- i think the other guy would be gone. >> i think the other guy would be gone. he owns about a 9% stake in coke. the stock is up about 5% this year. should you own it? let's bring in rbc capital markets nick mody. he is bullish on coke. and our bear is caroline levy, analyst with clsa. caroline, welcome. because mr. warren buffett set it up so he will consequently, i'll turn you to. you are among those who are concerned that coke doesn't necessarily have an issue facing
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it in terms of reliance on sugar drinks but that there are headwinds that are going to make making money harder for that company. explain. >> exactly. i think that around the globe if you look at how governments are behaving in mexico instituted a sugar tax a couple years back, there is a debate to how successful. it did impact the sales of suge yarred colas overall. and the uk is implementing one in 2018. and around the globe whether it's china or india, some of the emerging markets are ahead of the u.s. in being concerned about obesity epidemics. >> mr. ackman made the point of talking about how coca-cola markets most pointedly to children. he seemed to have a problem with "nondisclosure." my feeling is coke is pretty transparent that they sell sugared drinks. >> here's my issue. it's really not that they're pushing heavy sugary drinks on kids anymore.
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i think those days are really dwindling away. they've been out of schools for many, many years. i think the problem for coke is really a numbers game, 75% of their business globally is in ca carbon ated soft drinks mainly cola. i just think that the community is moving away from as large quantities of sugared or aspertame sweetened drinks. >> address what caroline just said there, nick. there's a big head wind in the form of maybe higher taxes or just a societal move away from sugar drinks. coke has tried to respond. they're pushing waters and nonaspertame sweetened beverages. but is the way clear for them? >> yeah, i think when you really look at consumption patterns, i
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think we focus on the carbon yated drinks but let's take starbucks. very good growth. 70% of what is sold in starbucks is not coffees, it is lattes and frappacino. i'm not sure this is about the sugar as much as it is about the branding. and that's why we've been a little bit more bullish than most. we met with the new chief marketing officer of coke. we saw his vision in terms of the new message that's out there now. it will take some time maybe a few months, quarter or two to really start impacting sales. but the bottlers are behind them. when they get behind coke, it becomes a very tough machine to stop. >> let's talk a little bit about product mix and one of the things that caroline mentions. compared with pepsi, coke is not as diversified a company. should it be, number one? number two, how do you grade its management teama vis-a-vis pepsi's? >> go in reverse order.
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pepsi's management order, they've done a great job. they've really steered the company. they've been focusing on the dominant snack franchise. coke, i think they had some stumbling blocks along the way. james quincey, the chief operating officer is a very capable executive. he can move coke into the right direction from an operational standpoint and really the marketing guy now, he is very, very impressive. investors will start to meet him soon. management team, that's what i would say. >> final thought. are you -- you're comfortable with them being a beverage only company? >> i am. focus matters versus scales. i think focus will matter. >> thank you both. we appreciate you being with us. different way to invest in technology stocks, how about a reit that specializes in office buildings for big tech companies? the ceo of hudson pacific will join us.
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we're so glad that michelle is back from iran, a historic trip over there. i have lots of questions for you as everyone does. so let's start, obviously whether you go to a state controlled country like iran, to
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try to do the job of a journalist, there are lots of stipulations. regulations, rules you have to play by that govern what you can say, what can you do, what you can't. but one of the things that was very obvious was the head scarf which you rocked like nobody else. did you have to wear it? >> yes. yes. as you mentioned, there are a lot of constraints. one of them is what are you going wear? it wasn't the desire of me going native, it is that women in iran are required by law to cover their heads. if you work for government or have any kind of office job, you wear one that was even more dramatic than the one i wore. can you not appear on international television from the country and breaking the law, you have to wear the starve. >> it's all about the scarf. >> what about the rest of the clothes you had to wear? i can imagine that they were stipulated as well? >> yes. you have to cover your legs all the way to your ankles. can you wear very, very long skirt or you wear pants. but if you're going to wear pants, there can't be a lot of
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definition in the rest of your body. so women wear very long tunic that's go to mid thigh as well. >> all right. let's talk about your id card that you had to get to go there. >> yes. >> you arrived i assume not bringing your head scarf? >> no. so they ask to submit photos in advance for the press passes. what we got there, the press pass showed us wearing scarves. they super imposed the scarf on the women in the crew. >> the wonders of photo shop. >> that's right. exactly. >> when you were talking -- >> i have it right there. i looked at it. i said did we submit -- the producer said, no, we didn't. >> they were able to fix that. >> that's right. >> imagine what they can do with passports. all right. let's talk a little bit about businesses that you talked tost how willing were they to speak with you? how candid were they willing to be when they did? >> we had a tougher time finding businesses to speak us to than we expected. there were businesses that had talked to the press in the past and now were not. there had been an article in one
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of the papers talking about -- it raised a lot of concern among business people there who got worried about speaking to the international press. so it was a little tougher than we had envisioned. there is a lot of vested interest there. >> and finally, access to social media. i remember you spoke to the tourism minister who poo-poo'd your concerns that millennial that's might want to come to the country would be restricted. >> if you're an international travel we are a phone, can you get on facebook and twitter. however, the minute you connect to the wi fi which is a much cheaper option, all the wi-fi is controlled by the government. you can't get on facebook or twitter ffrment you live in the country and have a local phone, you're not able to get on either. >> michelle, great to have you back. fascinating stuff. let's go to brian for "street talk." >> yeah, beverly hills not as exotic as iran. that was great stuff, michelle. really compelling reporting. glad to see you back. time now for "street talk," our
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daily dive into key wall street calls of the day. we're going to do three today. costco. jp morgan liked the stock already, now they love it. they're added to the focus list. the stock is facinging a rare period of uncertainty that we believe creates a 22% stock upside scenario until the end of the year. very bullish call there. the gas prices fell, costco was able to expand the market leading pricing. their target price on costco stock, $180 a share. stock number, two l-3 communications. lll, that was upgraded to buy from neutral at goldman sachs. the analyst says while the stock has underperformed, it has a collection of assets that should naturally have higher margins than current levels. analyst adds that there's more raising and upward guidance revisions likely coming from lll. they boost the target price to $156 from $138. the stock provides a lot of upside. finally, sort of smaller cap under the radar name, targa
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resources trgp, a houston based pipeline company. capital one upgraded it to an underweight from equal weight. over the past three months, targa posts impressive performance primarily against the bug mlp-etf. they like the valuation and boost the target on targa to $44 a share. it does pay a 9% dividend yield. with these oil and pipeline companies, what's here today may be gone tomorrow. so at 9% yield looks good if it continues. one of the reasons we like doing "street talk" is to dig out and find companies that you may not have heard about. so guess what? we did the same thing when coming to l.a., ran a stock screener and finding companies based around here that we didn't hear of that were doing well. and that brought us to your next guest which is hudson pacific properties, hpp. the ceo victor pullman joining us now, a cnbc exclusive.
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good to meet you. >> thank you. >> that's what we like to do is the run the stock screens, find stuff out. your stock, you have an interesting story. off your 17 million square feet, three fourth of it is in san francisco area. so as people thought, well, technology is rolling over in a bad way, your stock got whacked. it's come back. do people who are negative on the stock have the wrong idea about tech's impact on hudson pacific? >> i don't know if they have the wrong idea. everybody is monitoring tech. sent. around tech seems to be medium to negative. but if you really dig night, there is a couple factors that fall into place with our stock. first of all, you have big goi google, facebook, amazon. they're going up and down but take a lot of space and growing. the second major factor around this is what's happening around tech is all correlated to 2000. people say it's going to be the
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same thing. it's not even close to being the same thing. the use of space is different. the growth of the companies and stability and the amount of capital they have going forward really makes guys like me as landlords comfortable. >> what is the lease of one of the tenants? >> average went from five years now closer to 7 to 10 years. the larger the tenant, the more time they want. >> as long as a company doesn't go out of business, even if the stock goes down, they're paying hudson pacific the same amount every month. >> every month. so that is the thing. these guys are pretty prepared for long term growth. what's happening now in the valley, amongst everything else is not so much new technology that, is growing like wildfire. and we're seeing that direct result. >> why does that matter to you? >> because they're taking space. all the r & d are taking space in properties like ours and our competitors. they're growing fast. every major auto company in the country in and around the world are taking space for ip and r & d. >> the stock bounced back 30% over three months. the message is we're exposed to
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tech but it woept bring us down. >> absolutely. i think our long term growth over the next 12 to 18 months, our year over year growth is 40%. on the cash basis. over 60% in the gap basis. we're going to see that yields will really boost down the road zbhchlt your panel is basically, i'm going to summarize, finding value in real estate. david simon and other big names. where are you looking? what looks good in real estate to you right now? >> i think the urban play is where the world is sort of shaking out. suburban markets are okay. the urban market -- >> can you be more specific? >> i love seattle and the bay area and l.a. i think what you see with the content play in l.a. is the future growth. not only the netflix and the amazons and the youtubes coming to fruition, you know, you obviously have the hbos and showtimes and disneys and the likes. they're getting into the game. >> they need studios. >> they need office space and content. >> that's interesting.
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that's the side of the content growth story we didn't tell. all this booming content is helping real estate. >> and helping guys like me. i have studios. >> dividend yield is 4%. is that secure? >> very secure. yeah. and as i said, we have a nice long term growth in the next 12 to 18 months. cash flow coming online, free rent burning off. exciting stuff. >> victor coleman, we appreciate you joining us. >> thank you. >> that's one of the reasons we do it, folks, find companies that you may not have heard of that have an interesting story to tell. gold, how is that for a trance snigs gold hitting the highest level in more than a $1. is it time to get in? we'll talk about that coming up next. the heirloom tomato.
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gold, gold, gold, about $1,300 earlier today. can the run continue?
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let's ask the team. chad morganlander portfolio manager. >> gold has so much going for it. the ongoing collapse of the dollar, the ultra dovish fed and the erosion of confidential banks. and when we overlay it on top of a bullish chart, boom, it gets you, $1,300, $1,350. you see it. we get that textbook rounded base of support. once again a continuation pattern. we get that breakout just yesterday. i think that gets us up to $1,400, $1,440. look at that moving average, tyler. you've broken above that for the first time since 2013 where we got a good break. if the buy signal works half as
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good, you're getting close to that $1,400 and still making good money. >> even i can see where that chart goes from good to great. all right, chachltd would you buy gold here today at the more elevated prices? i agree with rich at 100%. we'd be allocators. we believe 5% to 10% over the next 12 months. a couple of reasons for that. you have negative interest rates, about 25% of the solve evan earns. we think financial conditions will start to titlen as the federal reserve starts to raise interest rates potentially after the election. so you want to have on a balance portfolio, our recommendation is roughly about a 5% to 7%al indication. >> how? i don't want to pay rental fees on gold. >> you're right. i would go with the exchange
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rated fund. get the liquidity. also based on the fact if you're trading with size, you can get in and out in a manner of minutes. that's how i would play it over the course of the next 10 or 12 months and if you start to see financial conditions improve, you may want to fade that trade. but for the time being, we would stay with the trade of gold and belong. >> rich, you used the phrase "collapse of the dollar" a few moments ago. i don't know if you literally mean that, but obviously the movement in that, the weakening of the dollar has helped here, but do you really see a collapse in the dollar? >> yeah, the word "collapse" has a different kind of connotation. the pay sow, you're looking at the exhaustive v-shaped bodies. it is a collapse against the emerging world and it's starting to gather steam.
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so, tyler, yes, i think collapse is a fair assessment. >> with all respect to rich, i think once the federal reserve starts to signal they're going to be tightening, that's going to reverse itself trend. quite a jolt to the market. >> all right, guys. thank you very much. we appreciate it. chad, rich, appreciate it. find more. power will be back in two minutes.
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anything worth pursuing hard work and a plan. at baird, we approach your wealth management
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strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird.
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on top of your health?ay ahh... ahh... cigna customers have plan choices and tools to take control. so they're more engaged, with fewer high health risks and lower medical costs. take control of your health at cigna dot com slash take control. when you think about it, it had to be one of the most revealed companies of all time, misleading investors. every day there was another negative article. it feels like this is the same moment for valiant, but it didn't stop them from making investment in the company. i have an enormous effect for them. they made some miss steaks, they
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owned up to them, they made appropriate changes in personnel, and the company continues. i think you don't indict goldman sachs on the actions of a few people or valiaeant on actions a few people. >> bill akmen on ""power lunch"" earlier today. interesting comment, i take his point. but in valeant's case, the fundamental business model as i understand was building around acquiring companies to get at single drugs that they thought, the then management team thought they could underprierks then jack up the price, three- four-, 10 times.
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>> it was back in 2014. >> way when they wanted to -- >> yeah. bients more than a year. i don't know. it get it if you think now would be the time, but he's been in in a lot longer than that. >> it's great to have you back. >> great to be back. >> thanks for watching "power lunch." >> "closing bell" starts right now. hi, everybody. welcome to "closing bell." i'm kelly evans. >> i'm bill grifgriffeth. so much for a sell in may. this hasn't been unusual lately during a rally of this kind during the month. since 2012 it was the last time that the major averages actually closed lower for the month of may. coming up we're going to look at the data and see whether this will continue that trend. up 111 points. >> investors are selling oil after a production by opec

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