tv Power Lunch CNBC May 3, 2016 1:00pm-3:01pm EDT
john but it's been a great story for us but you've got to buy them quickly? >> joe. >> no interest in biotech. wouldn't touch it. >> good to have all of you with us today as well. let's send it over to "power lunch" which starts right now. >> scott, gentlemen, thank you very much. it's 1:00 on wall street. it's been a rough day out there. if you are of the bullish persuasion. welcome, everybody, to "power lunch." i'm tyler mathisen. and michelle caruso-cabrera is here with us, melissa lee is off today and brian sullivan, a very big lineup out from the milken conference out in beverly hills. >> the tuesday tumble as we're calling it on wall street. stocks getting hit hard and as we head deeper into the afternoon, all ten s&p sectors, all negative. the least bad, least selloff, consumer staples almost flat and energy and materials lower by about 1.8% and 1.5% respectively when it comes to energy in particular so that's a big drag
on what we're seeing on major heat waves. >> we'll be exploring the markets all afternoon for the next two hours and beyond. let's get more now on today's slide from bob pisani on the floor of the new york stock exchange. bob? >> hello, tyler, and what we're seeing is a little bit of a reversal of some trading trends, specifically around the dollar and also to a trading around the dollar. modest rally. look at the dollar index moving down all throughout the quarter here. the lows recently. that's reversed a little bit today and some people are debating. the dollar may have bottomed and that may have factored. energy financial materials were weak today. you know what the market leaders are. energy financials and materials this quarter and a very specific reap. those are cyclical stocks. very specific reasons why cyclicals have done well this quarter. let me show you the q2 trade, the trade everybody is doing. you have the weaker dollar and combine it with a stable china and you combine that with oil
bottom and you put up the next full screen and have an accommodative fed and what you got is buy cyclicals, energies and industrials and that's exactly what everybody has been doing. today, things are just a little bit under strain with this whole thesis. first off, everybody has been buying the cyclicals like crazy so they are overbought. 21, 22 times forward. that's a problem. second problem, china's data has been choppy. overnight we saw the manufacturing data weak. it's been very hard to read and then you throw in the dollar reversings, and you've got a little reversal of trend. here's the big question. is this the start of something big? so far it's not. just remember, nokes, 2100, that's where we were at the end of april. right now we're only 40 points off of that or so, so we're about 2% from where we were on the recent high. so far-ins just a garden variety move to the downside. not very aggressive, but we want to keep a close eye on whether we get any breakouts to the downside on the cyclicals. guys, back for you.
>> sure do. thanks, bob. one stock that is holding up in today's slide, apple. the shares are higher following eight straight days of losses. you can see higher by 1.5%. a lot of the concern over apple recently is squarely focused on china. you might israel of the week billionaire investor carl icahn made a bombshell announcement on apple right here on "power lunch." >> i got out for the purposech -- because i'm worried about china and i have a huge profit. being that said, i hope one day to get back into it. >> last night apple's ceo tim cook came out swinging defending apple's sales in china and in an exclusive interview with jim cramer. >> here's what i see in china, we see in china is the middle class there is booming, and so you look back just five years ago. there were about 50 million people in the chinese middle class. five years from now that number is going to be almost 500
million. i mean, this is an unprecedented growth of the middle class. >> but you left that out on the corner on the conference call. parsed every word and you did not talk about middle class which made us thing there was something wrong. >> my error for not talking about it. i could not be more optimistic about china. >> okay. >> i think the long-term thesis is intact. there's never been anything like it in the history of the world, and i'm still as optimistic as i've ever been. >> tim cook also telling cramer that he sees huge opportunities in india, and seema mody is here with more on that. hey, seema? >> reporter: tyler, that's right. apple and tim cook remain bullish on china, but there are signs that demand is slowing. just take a look at this bar chart. sales in the latest quarter in greater china falling by $4.3 billion. that's in the second quarter and now apple is looking to india for growth. currently the world's fastest growing smartphone market with
an emerging middle class and compelling demographic trends. you're talking about a young -- young audience as well. tim cook, the ceo of apple mentioned that when he spoke to jim cramer. >> india today has about 50% of their population at 25 years of age or younger. it's a very young country. people really want smartphones there. really want smartphones, and this year the first year lte begins to roll out. huge market potential. >> okay. but india has only roughly 2% of india's smartphone market, but a growing number of skeptics say india will be challenging to break into. first off it's a crowded market, competition, samsung and micromax offering more cheaper and cost effective options. some are sold under $200. analysts say price point is such an important part of apple's success. one strategy was to sell refurbished cheaper phones in india, but today the indian
government rejected apple's request to do so, so while india might have a young digital savvy audience, apple's reach into the country will require time and perhaps a local partner that can guide the company through these hurdles. guys? >> seema, thank you very much. >> all right. >> let's bring you back -- let's bring it back to the investor. what do you do with apple right now? should you buy it? let's bring in channing smith, an apple shareholder who says apple presents the perfect buying apple right now, an apple analyst at btig cut his price target to $115 which is higher than where it is right now. to that in a second, but walter, first, let me ask you, you have cut your estimates for how many phones you think apple is going to sell over the next couple of years? by pretty significant amount. why is that? is that due to china? are you fearing loss of market share, why the lower expectations and their ability to sell phones? >> for those recisions for us it was about the upgrade cycle. saw a dramatic change in the first quarter. little evidence of that in the december quarter but in the
march quarter the upgrade rates for the developed markets, particularly in the u.s. really came in, and people are just holding on to their phones longer. the reference to china and india, true huge opportunity, but we have seen lte in other emerging markets like brazil where lte pentation has gone from 13% to 26%. not necessarily to the benefit of apple there because people are buying, as seema was saying, phones that are less than $200 of an asp and even with the se, still an expensive phone with that type of market. >> the newer, cheaper, smaller model. but you still have a price target of 115 which is higher than where it is now. is that a buy? >> so the belief that you have to have, which we still do, is that they can return to growth in this december quarter. there's concerns there that there is a structural change in the upgrade -- the upgrade rates of the developed markets, but we still believe that they can return to growth in this december quarter, so if you look at the valuation of the stock, the significant discount to the market multiple, if you believe that they can return a growth in
the next fiscal year, then you should be owning the stock. the pressure then is, you know, what is it about this phone that's going to get people to buy more phones in this december quarter than what they did in the past december quarter, and by the way, you know, when tim cook said that he was going to grow phones in the december quarter, it was marginal, and that can be impacted by changes in your inventory, so this time around it's going to have to be more than beating last year's number by a couple hundred thousand units. >> i guess when you're talking about india, what will it take for apple to be successful in this market? does it all come down to price point, because just from having conversations? >> let's ask channing that question. >> absolutely. what will it take for apple to be successful in india, just speaking to people on the ground and this morning, apple doesn't seem to have the same brand identity that samsung has and cheaper may not be enough to cut it. >> i think you're right and if you look at india and the price
points, 4/5 of the phones are priced at under $100 so it's a challenging market but like you said it's only 2%. a bigger addressable market in the near term for india. it will be tough for them to have numbers that impress over the years and in the near term we think they can see growth out of india. 77% last quarter and fell to 56%. we'll look at china and still think the markets are going to be attractive. we think the price point of the lower cost phone will come down so it's really just getting market share, but the bigger point that we see is, yeah, it was a horrible quarter. probably one of the worst quarters we've seen in a long time and we're more optimistic on that september and october quarter. we think they return to sequential growth and the analysts are becoming way too bearish. a rough sledding for the next month or two but we think you'll see a very impressive quarter in september and december. >> channing, do you think then -- do you think that the refresh cycle is going to pick up then in contrast to what walter sees? >> you know, walter makes a good
point. we're at the point in the technology cycle where you don't see a lot of innovation. we're two years removed from the big foreign factor and a number of users in the 5 and 5s so we think you'll see a pretty good upgrade cycle starting in september. >> all right. >> apple is not the same growth company that it was, but it's still going to drive, you know, very good revenue and earnings growth. in a rut right here but we expect that investors will look forward to that starting this summer. >> seema and thanks to all of you. many apple suppliers are under pressure today as you see that list right there, all in the red. already down more than 10% this year, many of them, so what could be next? brian blair is gray's peak capital head of research and follows the suppliers. we just looked at a list of four. there are probably many more. >> right. >> all of them feeling some of the pullback. have the stocks pulled back sufficiently that now or soon they might be on your buy list?
>> i think they have pulled back enough. there's really only one major company that's left to report that has, you know, significant exposure to apple and we hear from that this week and that's corvo and go back over the last few weeks of earnings and look at the results from synaptics and cirrus logic and a handful of others, we've already seen the impact of the supply chain from apple's lower numbers. many companies reported after apple did. some like jable on the manufacturing side reported a bit earlier. we had a bit of an early look and then we've seen a lot of key supplier reports and i do think expectations have been appropriately lowered. many of these companies reported dismal june guidance which really matched apple, you know, in many regards. the only ones that did better were the ones more diversified away from their exposure to apple with you a lot are being cautious about the comments in the back half of the year, and it's because there's some uncertainty exactly about what the iphone 7 is going to look like and what demand will be like, so what we're doing at
gray's peak is paying a lot of attention to the supply chain and we're trying to pay attention to exactly what's happening there. that's going to be the best indicator of what's going to occur. >> so, they have lowered the bar across the board. are you more inclined to put money to work in one of the companies that you just described as more diversified and less strictly tied to apple, or are you more inclined to go with ones that are more dependant on business with apple? >> we like the ones more diversified, but what we pier focused on are the ones tied to the emerging technologies that we're seeing. a lot of exciting things happening right now in voice and voice at an interface, so we're looking at a lot of companies that are supplying key microphones and audio features we think will be an important part of the supply chain, not just for apple but also for samsung and we're paying attention to those technologies. >> and more diversified would mean more names. give me two of them. >> samsung and the guys exposed to the high end of china are doing exceptionally well.
the same guys who are hurting apple in china. they are seeing growth right now and seeing growth they are seeing declines in china. >> not a zero sum game. brian, thanks so much. brian blair, thanks. april, another big month for auto sales. phil lebeau live in chicago. >> michelle, she is numbers will ease the concerns we saw coming after march numbers that were weaker than expected. let's run down what we're hearing from all of the automakers right now. most of them were in line with expectations with the exception of fiat chrysler which beast estimates coming in at a 5.6% gain. what drove sales, trucks and suvs small once again, pickup trucks, jeeps, sales up 17% last month. talked about it for some time. jeep has been on a roll. in terms of what the showrooms were offering and what people were paying month to month, incentives, now averaging $3,021 for the month from true car and that's an increase of 13%
compared to april of last year. take a look at shares of the major automakers. remember, we get the final sales rate a little bit later on this afternoon. most believe it's going to come in at about 17.3 or 17.4 million. guys, back to you. >> got it, phil. thanks. ahead, a bold call from bill gates on your taxes. first though, brian sullivan is live in beverly hills with a huge lineup of power players. hey, brian. >> hey, michelle. thanks very much. we're about to kick off two or just under two big hours hat the milken global conference in los angeles. we'll talk about infrastructure spending. is there a chance for a real spend and build. we'll talk with one of the biggest engineering nirms in the world, eric cantor, former prime minister tony blair and will talk to us about everything about the u.s. election and some of the problems in england right now and the chief economist for jeffrey's, doesn't do a lot of
let's talk about a company that's trying to fix that. they are a huge infrastructure builder, engineering firm, design firm. you do it all, mike. you can tell i have no passion about this topic at all. >> right. >> it is, infrastructure does represent a country. and you come to america and see the state of our airports and roads. it's kind of sad, at least to me. do you believe that in the next year or so, new administration, that we will get a huge new infrastructure bill passed in this country. >> i do, brian. seen the early indicators of it. both parties of the presidential election are talking significantly about infrastructure. we've seen momentum, the first bipartisan significant action in the fast act, the new transportation bill. we saw there year $300 billion dedicated to transportation infrastructure. we're seeing momentum. seeing a vast, vast attention to the -- the problems that you're talking about. >> if words built things, we'd have the greatest infrastructure in the world. there's been a lot of talk and everyone seems to agree we need to do something.
they all say it. we've got a transportation bill in december done. do you have real optimism though that these sides are going to come together and get something done, a couple hundred billion, $1 trillion, putting people to work building new things? >> for decades we've underinvested in infrastructure in the united states. and spend 2.5% of our gdp on infrastructure. europe is spending 5%, china 9%, so clearly we're underinvested, but we're seeing momentum and seeing the fast act that you mentioned. a lot of states are now putting in place specific tax measures addressed at transportation funding alone. we're seeing the private sector coming into the public sector through public/private partnerships, so there's a lot of momentum, and i'm confident that that momentum will continue. >> you guys are not a household name, no offense, but everyone probably knows the stadiums that you guys build. you're in the oil business, drilling rigs. taking that down and building ports all around the world. you kind of do everything. where is money being spent, either geographically or on
certain projects? >> right now the vertical construction, high rise construction is booming more than it's ever been in the past 15 years. seeing in the major metropolitan markets a significant amount of high rise construction. although it's certainly in the late innings of that cycle. >> is it slowing, because a lot of people say we're basically in a real estate bubble in new york hand san fran and others. >> it's starting to slow a bit and we're starting one in vanderbilt, new york, the third tallest building in new york city after we built the world trade center, seeing activity there. it will slow down over time. sports, as you mentioned sports, it's a big market for us around the world. >> yeah. >> we've designed or built two-thirds of all the major league sports arena or stadium here in the united states. >> you going to get the l.a. stadium? >> hoping, hoping. >> bids are in? >> the bids are the in the process right now and we're hopeful on that. >> do a lot of stuff in the middle east. just got back from qatar two weeks ago, building a port, some of the stadiums for the world cup. they are exposed to commodities. any sign that the middle eastern
customers are cutting back or slashing projects because of what's happened to oil. >> in the middle east, especially in the petro-dollar fueled countries, a little bit of a pause but those countries have significant financial reserves and are investing in infrastructure for the long time. recently in doha, a fabulous $8 billion port, the largest new greenfield port in the world. diversifying their economy and trying to engage more in global commerce, not just in the oil business, so we're hopeful in that market also. >> just incredible, you go to due buy and everything is new, everything is brand new. mike burke and chairman of acome, thank you so much. pushing for a infrastructure bill. >> thank you. by no means close to being done at the milken conference. coming up in 45 minutes former england prime minister tony blair will talk about. we'll talk about the labor party scandal and a potential british exit and u.s. election and former house majority leader eric cantor will join us as
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welcome back to "power lunch." i'm michelle caruso-cabrera. the final gold trades crossing for the day with the recovery. seeing a little bit in the dollar and see the retreat across the entire metals complex. gold lower by roughly 5 bucks, retreating from the 1,300 level that it crossed over yesterday, 1,290.70 per ounce. platinum, palladium, silver all in negative territory by at least 1%.
copper and palladium lower by 2% and palladium lower by 2.5%. let's find out what's going on with interest rates. to the bond market and rick santelli checking the action at the cme. richter. >> michelle, down eight basis points in tens and seven in 50s. if we close at this level, a two and a half week low yield close. last time we closed down here was around the 18th of april. the same april 11st start to boons. same pattern. you know, we had the double bottom in yields and now it looks like it's terng into a wedge. in english that means more sideways action but definitely at lower yields. all about foreign exchange. maybe too much volatility and part of the reason all the equities are under pressure. look a may 4th start of 2015 to the aussie dollar, aussie versus the dollar. of course, they lowered rates today. you could see the response was rather swift. october 11st of 2014, last time dollar/yen was here. that's been a swift dollar weakening trade, and if we look
at year to date. remember when brexit was under pressure, the dollar has reversed. seems as though we all wanted a weaker dollar, but maybe we got too much too soon too fast. back to you. >> got it. thanks, rick. >> as a result of that seeing a big move in oil. right now crude is trading down by more than 23.5%. coming up next, you'll hear from one big money manager who says that oil is at a bottom. the one big bet that he's making right now when "power lunch" returns. mary buys a little lamb. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of the at&t network, a network that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t.
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>> this man is a pathological liar. he doesn't know the difference between truth and lies. he lies practically every word that comes out of his mouth, and in a pattern that i think is straight out of a psychology textbook. his response is to accuse everybody else of lying. >> trump responding by calling cruz a desperate candidate trying to save his failing campaign. he says it proves once again that cruz doesn't have the temperament, in his opinion, to be president of the united states. mass teacher sickouts have forced dozens of detroit public schools to shut their doors for a second day in it a row. teachers gathering for a rally at the headquarters of the city's public school system and the district says it won't be able to pay teacher salaries past june 30th. thousands of people gathering in central paris to call on lawmakers to vote against the government's controversial reform of france's labor laws. several trade union leaders and
musicians took to the stage during the two-hour protest. that is the cnbc news update this hour. i'll send it back to you, michelle. don't touch the labor laws. as you well know in france. >> good forbid they work. >> stocks are well off the lows of the day, but we're still deep in the red. right now the dow jones industrial average is lower by about 1111 points, almost 112. the s&p lower by 15 and the nasdaq lower by 35 which is a decline of half a percent or three-quarters of a percent. let's bring in bill stone and the chief investment strategy at janney montgomery scott. bill, i'll start with you. we rallied a lot after those february lows. i mean, are we due for a pause here or is this more than that? >> i think as much has anything we're due for a pause, and i also think the market is kind of waiting on the news that the u.s. economy is actually going to start picking up again. you know, i think it forgave the low first quarter in terms of
economic growth and we all know the rest of the world is pretty slow as well, but we really haven't seen a whole lot of evidence of the pickup. >> the wait and see game in terms of defending the multiples here, justifying them. >> i think so. the hard part is you're in a fight against really low interest rates which make, you know, stocks more attractive. >> i mean, where else are you going to put your money. >> still the winning place to be. it's just, you kind of have to wait it out because we do think you're going to see at least a u.s. economy pick up here. >> mark, what do you think of the markets right here? >> largely the same thing as bill had mentioned. we think we might lose a couple of battles before ultimately we win the war with equities and expect continued volatility and some of what we saw in february is in fact the new normal. that said i expect that we'll see earnings, sometimes in the third or fourth quarter this year as the base effects begin to lap and both strengthen the u.s. dollar and oil prices, and as a consequence i think that's enough for equity investors to begin to bite off on an
improving earnings picture, something we don't have at the moment which will at least help to resume the advance if not necessarily at a terrific pace, at least that which outpaces that return that you can expect to get from bonds or cash. >> i'm reading here you think oil prices have found a durable bottom. that's a bold call because commodities is tough. if you believe that, what are you doing in terms of your portfolio? >> quality names in the energy patch clear will, the major integrated, the exxon, chevron, exploration and production companies that will benefit. 18 to 24 months hence in terms of the amount of capital expenditure destruction that's taking place that will ultimately benefit or spend an up cycle or spending on the oil services and the equipment that's been obviously obliterated because of the appropriate to us decline in oil prices. at the end of the day xle and etf, exchange-traded fund captures all of those kinds of securities in a simple boston death and offers a little bit better than a 3% yield and investors will be rewarded at 12
to 24 months from now as the oil markets come into balance. >> bill, what do you think of energy? is that where you put money or other sectors you like better? you think the economy is going to improve later so maybe energy isn't bad? >> don't mind it too much. we're not overweight. like consumer discretionary for a few reasons. one is you've got even in a weak first quarter, consumer still spending, maybe not as much as people would have liked but the fact is they are there and we'll see today vehicle sales will have hit their all-time april high had. i think you are seeing the consumer side and that's the bouncedback and if you're looking at earnings as we was talking about, the earnings season isn't looking that great but actually consumer discretionary is probably going to be the top year over year growth rate of any of them, so, you know, again, interestingly you have to be careful where you are. it was really -- i went to the berkshire hathaway meeting and maybe buffeted it out. >> you and 40,000 other friends. >> exmarketly, but the interesting thing is he spent a lot of time talking about the
disruption so you do have to watch where you are. we like names like home depot where it's really difficult to dislocate them via some sort of mobile or something like that. >> buying lumber on an app is still difficult. >> probably can, but still have to get it delivered and o'reilly automotive, auto parts are difficult as well to dislocate. >> right. got to go in and get them. thanks, guys. bill stone in studio with us and mark lachenney. go to powerlunch.cnbc.com and see how they are investing globally. powerlunch.cnbc.com. now, back to brian in beverly hills. brian? >> tough gig, michelle, tough gig. thanks very much. because we have all these great guest interviews not forgotten about street talk, our daily dive into the key analyst calls we think you need to hear about. three stocks, let's bang it out right now. first one is a two-for bd and a tail of two retailers, rbc
capital is initiating walmart as an underperform. analysts see more competition from e-commerce, especially on the grocery side and same analyst initiating costco as an outperform, high growth traffic year so basically sell walmart, price target is 66 and buy costco, second day in a row for positive commentary on costco. next up, republic services, barclays upgrading this to an overweight to equal weight and a better than expected first-quarter results and numbers were released last week and analysts also likes the favorable valuation relative to the other waste. the 10% upside seen on rsg and swiss re, the biggest under the radar name that we've talked about because it's a $33 billion market cap company. a swiss-based insurance. the u.s. adr and trids under the ticker ssrey, five letters, adr,
jpmorgan upgrading the stock from a buy to a hold and keep the target at 104 swiss franks. stocks at 16, so about 20% upside. they posted blowout earnings last week, profit growth in all categories and the company says it remains well capitalized. there is your trunk ate the l.a. version of street talk. back to tyler mathisen and in cold, rainy new jersey. cold and raw, but i don't feel cheated even though it was three stocks. very good stuff. let's get another quick check on the markets now on this down day. a bit of a comeback, a bit of one. the dow had cut half its losses for the day, and it's still down very sharply. a couple of sectors turning into the green from the top of the hour, as you see. consumer staples and health care. the gains are really miniscule. 1/100 of 5% and 1/10 of 1% for consumer staples.
leading the downside is energy, off more than 2%, but that is a slight rebound from the lows of the day. still to come, a bold call from bill gates. he says he'd like to see a tax hike aimed squarely at wealthy investors like him. we'll tell you what he's talking about, plus the fight over florida begins. the latest in the world of electoral college politics. "power lunch" returns in two minutes. you won't see these folks at the post office. they have businesses to run. they have passions to pursue. how do they avoid trips to the post office? stamps.com mail letters,
welcome back to "power lunch." i'm tothsion. the capital gains tax, a much contested top earning over the years in this country, particularly in election seasons like this one. bill gates chiming in on the issue on cnbc's "squawk box" yesterday. listen. >> always been the question of whether taxes on capital should be a lot lower than taxes on labor. you know, i tend to think that
they should be pretty much the same and that that's an opportunity to be a bit more progressive. >> cnbc's robert frank is here. maybe a surprising bold call from bill gates? >> surprising given who it is and the fact that he's probably one of the largest investors in the world, calling for the rich to really pay more, and he said he would start, of course, with increasing the tax rates on capital gains. basically capital should be taxed the same rate as labor. capital gains are taxed at 20% and you add that 3.8% health care levy, 23.8% and while the top tax for salaries and wages, that's 39.6%. cap gains are mainly earned by the wealthy. for the bottom 99% of americans, more than three-quarters of their income comes from salaries and a few percent from cap gains. look at those making more than 10 million, cap gains accounts for more than half of their earnings and add on dividends to that, almost three-quarters.
gates, of course, one of the world's biggest investors through his private fund cascade investments and through the bill and melinda gates foundation with more than $40 billion in assets. >> can i just check with one little thing. >> larry is here, larry kudlow is here. >> going to introduce you but the man needs no introduction. >> i'm larry from cnbc. list of all, first of all, it's not a rich man's gas. cap tail gains is a double tax on corporate profits. >> yes. >> a double tax on corporate profits so you've got to really say 20% times two, plus the surtax from obamacare. second, lots and lots and lots of middle class people, including unions, most particularly government union people, are invested in pension funds. >> right. >> which are invested heavily in stocks. >> that's true. >> stocks would react very adversely if you increased the double tax on profits. stock value has to come down, so it isn't just a rich person's
tax. >> we have gnarled bernstein with us, a senior fellow on the center of budget and policy priorities. larry, your problem, like mine, isn't with the idea that labor and capital might well be taxed at the same rate. >> yes. >> it's just bring the rate on labor down. >> listen -- >> to match capital. >> there you go. that's -- >> and gates mentioned that as a possibility but said that would ruin the revenues. >> it would be the ruin the revenues. every time you lower the capital gains tax the revenue goes up. would i like to see all taxes equal. i'm a steve forbes, art laugher flat tax guy, have been for 40 years and boy say take them all down to 15% or 20%, corporate, capital, dividends, individual, personal. >> and don't let people hide income. >> right. >> get rid of all the loopholes. >> mortgages, everything. >> exactly. >> clean it up. >> all the cronyism. >> jared, we'll get you in one of these days. >> clean this thing up. >> i think jared might have a
different point of view, jared? >> actually, my point of view is not as different as you might think in the sense that we waste a ton of resources in this country by people seeking to avoid paying the highest rate, which, you know, i understand, that's built into the code, particularly taking advantage of the very gap here that bill gates is very smartly trying to get rid of, so on this -- this may surprise you, but i agree with larry kudlow's idea that equalizing rates is a good idea, not because of the supply side growth effects which really won't happen, but because of all -- but because of all the tax avoidance that you would obviate. >> okay. >> where we disagree though is on the level. if you went to 15% or 20%, you'd kill revenue collection, so here's the idea. we have to make sure that we harmonize these rates at a level that's better than revenue neutral. i have a deal for layer. bring up the capital gains rate, can't really do much on the personal side and bring down the
corporate rite. >> i think you're definitions of better than revenue neutral would be different from what i would say. >> this is the 3,102nd time jared and i have debated this, and i just have to point out -- >> them again. >> just did in in the great metropolis of richfield, connecticut, and i love jared, one of my totally favorite people in the world. >> agreed. >> i mean, i'll just say it for the 1,000th time, growth would rise. get 4%, 5% growth for half a dozen, ten years and revenues would rise and all the rest of it, but i do want to note this thing, too. capital gains tax, soap studies, a huge tax not just on growth but on investment, and we desperately need new business investment. we are virtually in a business recession right now. if you look at the four-quarter change of business fix the investments, structures and equipment it's gone negative and ditto for the industrial production index so in a business recession i don't want
to be jacking up a tax which is a primary supplier of the investment for new businesses and jobs. >> look, there's a large body of research on the impact of capital tax gains taxes on investment and what it finds is a big boost. finds about zero. i've done some of that research myself. let me quote warren buffett. warren buffett said i've never seen an investment that someone would pass up based on a tweak in the capital gains tax rate. that's just not the way investors think and the data bear that out. the real problem is that these differential -- bill gates is actually really nailing an important point. the differentials trigger people to get into all kinds of tax avoidance behavior that's really economically wasteful so that kind of equalization. >> that's true, so the same could be said for all of the deductions and tax preferences that people use. >> that's a great point, too. >> we waste a lot of money that
way. >> all it is is cronyism and corporate welfare. >> look, i -- look, warren buffett is a genius, okay. bill gates is a genius, believe me. i understand that. we just disagree on the political economic debate. that's all, and i get that. and mr. buffet's been on this side for a long time. however, i'm going to buy jared a subscription -- i'm going to buy jared a subscription to twurnl -- "the wall street journal" editorial page and stop reading the "new york times." >> i don't understand why there should be any capital gains taxes at all. you have to start the company, you've paid fees and paid taxes on everything you've bott. there's so many places along the value chain that you have paid taxes on and now the government's got to take a big chunk again now that you've actually made some money. >> i'm speechless because there's not one comma that you said with which i disagree. >> excellent. >> i'm speechless hon that, but
i do think, look -- >> so -- >> i want to make this associated point. business looks to be in a mild recession. that's not good and that includes profits, okay, which have fallen three straight quarters. this ain't the time, believe me, to talk about raising the double tax on business and investment. this is not the time for in a. >> all right. for the 4,2774th time we have to leave it there. >> one of the problems -- let me just one quick thing. we have to be mindful of the revenue impacts. we can have all great conversations about how we'd all love to have our tax cut but at the end of the day there is obligations, challenges, government faces and we can't ignore them. >> revenues will go up, jared, trust me. they will go up. >> can we move to florida, is that when we're doing? >> i wish it were that simple. >> there's no free lunch. >> let's talk a little bit about florida. an interesting article that i want to lay out there that indicates in a race between hillary clinton and basically anyone on the gop side all
hillary has to do is win florida if, if, if the states that over the past, what is it, six elections. >> six elections have reliably gone democratic continue to go democratic. she doesn't have to flip any other state. >> except florida. >> except florida, which has vacillated between democrat and republican. >> if the map holds. okay. i just want to say this. we always go through this, and i agree, by the way, the dwop needs to expand its state base. >> it's a much harder electoral map for the gop. >> it is, but having said that, you know, take a look at your national polls the last couple of weeks. the battleground poll which is bipartisan have clinton and trump even. she's plus three, that's inside the error of margin. the rasmussen poll has them flat even and ibd poll gives her a seven-point lead and it was 15 not long ago, and all i want to say it's way too early to talk about who will win states in the general election, way too early
and the other thing i would make is this. trump's appeal. i'm going to assume is the nominee and i think it will be clinched tonight. trump's appeal is just different from a lot of prior republican candidates, and by the way, it's different in one way that's good and one way that's not so good. very good that he's the outsider and wants to shake up the establishment, and ornish use like immigration and trade he is a hi peeling to both white and blue collar middle class people, okay. that's his advantage. he may pull in independents and democrats. on the other hand, i do not disagree with chris cillizza's article, mr. trump has to pay more attention to non-white voters. i think with respect to hispanics who favor legal immigration and also african-americans. now, he's done rather well in the republican primary, but not the numbers overall, so that's his challenge, frankly. >> you look at florida, over 20 million people now, half of that growth over the past five years is non-white voters. >> i agree, i agree. >> also a lot of wealth that's
moved there. >> as a tax avoidance structure. >> that's a new group of voters, people from the northeast. >> can i make a comment on this. >> sure, sure. >> i think there are two critical populations to consider in answering this question about florida. hispanics, immigrants and retirement security, think about social security and medicare. which candidate is likely to do better with immigrants and hispanics in particular and protecting social security in terms of social security and medicare, got to be hillary clinton over donald trump and in both of those cases so i think those are huge factors that make this a very heavy lift for donald trump. >> i don't disagree about the heavy lift. i think it's up for grabs, i really do. i think the trump candidacy which has always surprised is going to continue to surprise, but i acknowledge the non-white population, but let me just add. on this point though. you've got a lot of republican governors, 311 or 32 if i'm not mistaken and they have switched
around states like nevada and maryland and illinois and massachusetts. >> wisconsin. >> wisconsin, thank you. >> those could be leading indicators, and trump -- primaries don't determine general elections, i get that, but trump has done extremely well in these primary states in the northeast which is a big surprise and won big in florida, so i'm just saying net, net, net, it's a little early to start making these prognostications. >> i agree. look, that's a great point about how early it is. i will say that donald trump tends to do better with an angry working class who has been really hit hard by trade and by wage stagnation. that's probably less an issue in florida where, again, immigration and preserving social insurance, medicare and social security, that's got to help the democrat in my view, but larry is right about it's being early. >> it absolutely is, but it's getting late for ted cruz. i mean -- >> that's true. >> the issue of trump's success is partly that he's done it without really appealing to what
we would call the gop party faithful, right? >> probably so, but, i mean, he's carried enormous amount of republicans in these primaries, you know, frankly several million more than senator cruz. >> to tyler's point this morning, the president of the club for growth was on and so anti-trump and thinks he can't beat hill pare. >> a dear old friend of mine, on the board that have club for many, many, many years, they have hated trump from day one, that's all i can say and they have been lost and they have the short end of the stick. this is an election that is going to continue to surprise a whole lot of people. that's all i want to say, and this outsider business, this outsider crush the establishment, get rid of michelle's phony loopholes she discussed so eloquently before that. stuff matters a lot so we will see. >> folks, thanks. jared, thank you very much from california, robert, thank you. >> love you, jared. >> larry works needs no introduction. >> love you, buddy. >> late day comeback continuing there as you see, still in the
red but not by as much as we were at noon or 1:00. nasdaq highest level of the day. but still in the red. we'll be right back. you're down with crestor. alright! 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;
welcome back to "power lunch." shares of adp are recovering from an intraday fall after a report from the circuit court blog saying that the payroll processor had a possible data breach in which identity thieves reportedly stole tax and salary data affecting more than a dozen customer firms. the report going on to say adp says the incidents happened because companies mistakenly published sensitive information online themselves making them possibly easy targets. the breach appears to affect 6,000 of the small customer companies of adp. shares are now back to where they were before the circulation of that report. now, stay tuned here because a big story line coming up, your way here on "power lunch," the likes of which include tony blair, eric cantor and david zervos. all of that on "power lunch." back after this quick break. this just got interesting. so why pause to take a pill?
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what was the worst selling stocks here, a lot of energy and material down here in the lower right-hand corner. some financials as well. let's get to bob picksy on the floor of the new york stock exchange with more on maybe why we're coming off the bottom. bob? >> michelle, things are look hag little better midday. hard to keep a lot of the sectors down. remember the player here, buy cyclicals has been the big story. take a look at the major sectors, energy, financial materials and industrials. these were all the stock sectors moving up this quarter on the cyclical play so today a bit of a reversal. china manufacturing data was not great. oil has been down and the dollar weakness, big trend this quarter, kind of reversed a little bit. some people talking about a dollar maybe bottoming. that's why you're seeing the commodities etfs, countries like brazil and south africa and the oil production etf and the metals hand mining etf all weak here today because a lot of people bhig cyclicals, that's been reversing a little bit. call it the return of the old
deflation worry, particularly companies like the metal industry, iron ore moving up aggressively this quarter and yet it's been flobbling and metal names running up on hopes that china would stabilize and have come down a bit. is this something big? not at the moment. 22800 is where were at the end of april on the s&p, 40 points, 2% to the downside. i would say that it's not big yet but cope an eye on whether that deflation worries continue. guys, back for you? >> thank you very much, bob. our next guest thinks market fundamentals remain positive. hank smith is cio at haverford trust and joined by david lafferty with a global asset management company. gentlemen, couple to both of you. david, why don't i start with you. the third longest bull market in the post-world era and may
become the second longest. why don't people trust it? why has money flowed more out of money equity incomes than the opposite? >> well, i think risk tolerance has changed on a secular basis. i think two bear markets in the last 15 or so years has -- has really changed the mindset. i think it's scarred people. we used to see mutual fund flows follow past performance and haven't seen as much of that in the past few years and some regret behind it. people don't necessarily want to jump back in. missed the beginning of the real the first five or six years and it's tough to jump back in at 18 times earnings. we don't hate stocks, but they are certainly not cheap at 18 times forward earnings. >> you know, hank. give me a chicken investor's recipe for putting my money to work and not keeping so much in your phrase my powder dry which in this environment basically means my powder is looting money, certainly in inflation
terms. >> the chicken investment strategy, tyler, which i think has been in play throughout this entire bull market is using stocks as your primary source of income. in other words, you can create a diversified high-quality portfolio and having representation and every s&p sector with companies that have dividend yields better than bond yields and better than not only the uncompetitive ten-year treasury and many cases better than what they have to pay on their own ten-year debt and here we are into the eighth year of a bull market, as you said, one of the strongest bull markets, and that opportunity still sits in front of investors and selloffs like today and the last week only enhance the yield opportunity that equities give investors. >> yeah. i've thought a lot about that. you know, david, the conversation you had with tyler reminds me of way back, go to that business week comfort, the defendant equities, everybody so fearful. i mean, these are generally the
moments when it's best to be in, right, when you talk about that secular square that everybody has had from living through -- you call them a bear market, they were bad, right, worse than bear markets. i know you think the market is expensive here, but generally speaking longer term, when you talk about that kind of sentiment, oftentimes that's the best time to get in? >> yeah, certainly. you certainly don't want to get in when, you know, the view is euphoric and everybody is jumping in. i would say you have to pay attention to the fundamentals though. in terms of equities, as i mentioned earlier, price earnings ratios are sort of capping the market out at about 18 times earnings and 2100 on the s&p and when and if the fed ever decides to raise rates, it's not likely multiples will expand, then have you to look at the other side of the equation which is the earnings, and earnings were down a little bit in 2015. they look like they are going to be flattish at best in 2016 and
so i think it's hard for investors to get real excited about stocks. i wouldn't be selling out of them at this point, but i do think, you know, maybe more of a dip your toe strategy and stay closer to your sort of long-term target allocations. i don't know if this is where you want to be sticking your neck out in equities. >> hank, a lot of people might like to take your advice and buy those blue chip paying stocks, but they don't trust themselves to be the stock picker necessarily. they would rather do it for a mutual fund. what kind of fund would you suggest that they look at under those circumstances? >> well, we've been dividend investors since 1979 so i would look at our fund hhvgx. ivg, if you want international reputation, developed international representation focusing more on higher yielding stocks but the key you is need to focus on the dividend and the
increases of dividend and not worry so much about the -- the ups and downs of the stock price. look at it more like fixed income. you buy a quality bond and don't worry about whether it's trading up or down. >> give me a specific name. i think about this a lot actually, where the company's dividend is way higher than even the bond, that if you bought a bond from the same company. must have some names that you've thought about. >> absolutely. exxon would be a good example and chevron would be a good example. wells fargo and jpmorgan are examples there and pepsi, coke, attila examples, really you can go right throughout the entire spectrum of s&p sectors and find examples of that. >> you can keep reciting those names as we go to break.
we'll keep listening. that will be good. hank, thank you very much. david, thank you as much. power is back in two when we expect to be joined by the former uk prime minister tony blair. sic plays throughout) ♪ the first stock index was created over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? it's time to bench the benchmarks.
man 1:man 2: i am. woman: ex-military? man 2: four tours. woman: you worked with computers? man 2: that's classified, ma'am. man 1: but you're job was network security? man 2: that's classified, sir. woman: let's cut to the chase, here... man 1: what's you're assessment of our security? man 2: [ gasps ] porous. woman: porous? man 2: the old solutions aren't working. man 2: the world has changed. man 1: meaning? man 2: it's not just security. it's defense. it's not just security. it's defense. bae systems. we're here at the milken global conference in beverly hills. with us our special guest the former prime minister of britain, tony blair. welcome. >> thank you. >> let's start out with a very
serious topic, labor party scandal, more than 50 labor party ministers have been suspended for anti-semitic comments in england. your response? >> there's been an inquiry established by the leadership now. i'm sure that will come out with some very strong conclusions, and let me say as somebody who has been a member of the labor party for the best part of 40 years there's no place for anti-semitism of any sort. i detest that prejudice and we should make sure it's rooted out of the labor party in whatever way we can because we've always been, you know, campaigners against this. when i was leader of the labor party had a very, very strong and clear position on it, so, anyway. >> you both the party to the center left, known for bringing people together. this is not two people. this is 50 people reportedly, that's a systemic issue. >> there are obviously real issues that are going to have to be gone into here because we can't have any taint of this at all. any suspicious of it, so, look,
the leadership, we should let it the take its course but just to make it, again, absolutely clear, this has got no place in our politics and there are many, and i'm sure i speak for the majority of the labor party members here when i say whatever is the situation, you know, there is no place for that type of thing in our party. >> what should happen to jeremy corbett? >> he's taken the decision to set up the review and he needs to do everything he needs to do and by the way i believe the whole of the labor party will want this to happen to route this problem out. >> do you think it's important? >> it's important to do everything that we can. let's put it like that. >> let's talk about another big issue facing britain, the vote. five, six weeks off right now. the polls leave the eu, stay in the eu are within a margin of error, mr. prime minister. how is that going to go down? will britain leave the eu? >> i want to say confidently
that i think we will stay. >> okay. >> but you've got to look around the world today, and it's -- and it's an unpredictable place politically. i believe that's the rational thing. the biggest commercial market in the world and it's the biggest political alliance in the world. our allies around the world, people here at this conference would regard it as a very foolish and unwise risk to take to leave so i believe we will stay but you've got to qualify this today by saying politics is in an uncertain state. you can see it here. >> the brexit, as they call it, i detest that term, but the breksist is one of the biggest topics here because this is not an england issue. this is a global issue, real fear among some of the nokes we've talked to last night, dinner panel that we will have. our federal reserve waiting to see what happens in england. what do you think would happen if the vote is approved? what happens to the british economy, to the eu and to the united states? >> i think we face a prolonged
period of uncertainty, and you're absolutely right. it doesn't just affect us in britain. it affects europe and affects the global economy, and one of the things i think is actually quite important is that people back home see what comes out of conferences like this when here you've got probably some of the biggest investment institutions, pension funds, you know, the big institutional investors. most of them globally are here and as far as i can make out there only is one view is this would be a really bad idea. >> but yet it's so close, and we had a conversation yesterday where it was suggested that perhaps the -- the pro leaving portion of great britain is selling -- is selling the people false hope on what it would mean, that they are overstating the costs of england being in the eu. do you agree with that? >> of course. i mean, they are massively overstating that and minimizing the costs of going because one of the really absurd things is that if you -- if we left the
european union, because we have to get back into the single market in europe, because our trade is with europe, we would then have painstakingly to renegotiate every single item in order to get back into where we were, so, you know, there's no doubt what the sensible thing to do is, but, you know, there are very powerful voices, some in the media, for example, who are pushing this and very, very hard and there is a -- there is a dissatisfaction with politics which is i think a global ge nom none and in addition to that, you know, it's not that europe doesn't require form. now, because there's lots of things that should change in europe, but the best way to do that is for britain to be in europe leading that case for change and out of it. >> there is a wave of populism around the world and you look at europe and you look at the rise of the far right in france and to a point in germany. you look at golden dawn in greece, basically a neo-nazi party that actually has members
in parliament. you've got this migrant crisis, millions of people dislocated. how does it look five years from now? >> well, that's a really good question. that depends on the decision we take, but i think in europe we've got to take the big decisions that are necessary to sort out the eurozone, you know, continuing anxieties and worries about the economy and the banking system and i think it requires a big plan to do that hand not just a series of incremental steps, and then i think on the security side, you know, we have to -- to have the right combination of measures, military and others, that are going to take on the security issue and really deal with it, but, you know, these are big challenges, and they are challenges unlike when i was first starting in politics and it was after the fall of the berlin wall and, you know, the global economy looked in reasonable shape, decision-making at that point looked relatively steady and relatively predictable. if you fast forward 20 years to
today, we live in an era of almost extraordinary unpredi unpredictability. >> also i would say at that time it was an era of -- it seemed like extraordinary optimism. the wall is down, countries are opening up and there's work to do, but we're rising. it feels like we're caught in this global wave of pessimism and negativity. how do we get out of that? >> well, i think we partly get out of it, by the way in, taking a step back and understanding that if you look at the broad sweep of history, even over the last 20 years, there's been hundreds of millions of people globally lifted out of poverty. >> okay. >> but if you take our societies, i think there is a real sense amongst middle hand lower income families that incomes are flat lining, that their children do better than them and there are two types of politics in the world today. there are one i call the politics of the anger and the politics of the answer and the politics of the anger are very easy for populists to ride, left
and right and the curious thing which i notice both sides of the atlantic is the populism of the left and right at seven points they meet but they aren't answers. the answer is not to try and -- globalization is a fact, right, technological things are a fact and these things will carry on changing the world and the real questions is what are the solutions and answers that allow us to access the opportunities and minimize the risk? >> it's a hard story to sell. tell somebody out of work in indiana, sorry, your job is in mexico, but don't worry you're enriching a mexican family hat your expense, a hard political story to sell and very hard. >> you've got to add something to that at least which is to say we're going to equip you with the skills and the opportunities you need in order to be able to function in this global economy. >> to do a better job. >> to sell them false hope saying we can stop this process of change happening. you know, look, i know there's big arguments around free trade here as there are on the other
sides of the atlantic, but you look back in history, the one thing for sure is that the more the world is trading and open with each other, the more you create jobs and opportunities. and so, you know, these are very, very difficult arguments, but there are arguments that have got to be made and one thing that i spend a lot of time studying, because as you rightly say there's a problem in america and europe, how does the center right and the center left, you know, how do we get our mojo back? how do we recover? >> think figured that out? >> well, i'm thinking about it hard because for sure. >> if you figure it out let everyone know because that's -- that's the problem. >> we need -- we need to really -- one of the things that's fascinating to me about politics today is when i look at the mainstream political parties, i often think we're not even asking the right questions, never mind giving the right answers. >> so. >> who is the next president of the united states? >> that's your decision and not mine. >> what would would you like to see? >> one thing i learned very early on is not for me to tell
you how to vote. i mean, look, i'm on the labor party and democrat side of the line so it's pretty obvious, but -- >> let's get back to your panel pretty quickly. the cover of barron's was isis will be defeated soon basically and haven't heard that in a while, "baron's ", financial publication and do you believe isis is on the retreat and can be and will be defeated? >> i believe isis will be defeated, yes, but i don't think that ends the problem because i don't think the problem is not just isis and these groups engaged in violence and extremism, it's the ideology. >> lurched from the taliban to al qaeda to isis and just in that part of the world. >> and al news rah and boko haram and the one in the philippines and a whole series of these groups so what i focus on with the work i do in my foundation is to say we've got to tackle the ideology, the
education of large, large numbers of young people, millions of them every day, to a view of the world that is hostile to those that are different, to a view of the world that isn't about educating young people to think creatively and openly towards others but is, you know, based on a warped view of religion and a very narrow view of the reading of the religion of islam and a false view of the religion of islam and it's happening day in and day out at a scale that we haven't yet understood. we've got to take the action necessary to defeat isis and any of these other groups but if you don't deal with this problem of ideology you won't deal with the root of the problem. >> left us with a note of optimism and we need that right now, sir. thanks very much, the honorable tony blair, appreciate it, mr. prime minister, thanks so much for sitting down with cnbc. >> pleasure, thank you. up next david zervos will talk about some of the stuff we spoke about and frame it from an economic perspective. all the stuff going on in the world, how will it affect you and your money?
whatever. these are big issues and tie it back to our viewers and our listeners and their money. if the eu, if britain decides to vote to leave the eu, what happens to the u.s. dollar? ? >> so i think the dollar would strengthen and i think the story line is we have to go a couple different directions. not a british story line. one that goes to europe and one that threatens the integrity of the eu project. for us it's more about people leaving europe because one of the premiere members of the club just said see you later, i'm out and when one of your best club members goings. >> the quality doesn't look as good. >> exactly. >> we think that could send some people away from the euro currency into the dollar which is a natural place to go and the problem and what we've seen in august and january is when the dollar strengthens the chinese go, hey, wait a minute, we don't want that so they loosen the beg and we get this nasty side effect of dollar strength. >> i don't want to call it a currency war but maybe a currency water fall. >> we which will is chexit, the
chinese exit from the dollar and china is linked to the u.s. in the zone and trying to break that and it's very difficult in the market. for us the brexit trade triggers the risk of the chexit trade. >> could you see euro dollar parrot. >> i think we could and the question becomes what does the ecb do about it because it would like a weaker euro but they don't want to be seen as a manipulator and they don't want to do it and with a brexit they get a free right. the upside it brings a lot of financial instability and relive august and january and not very good. >> and that's the point, so if you're sitting at home watching cnbc, i don't care, own shares of ge because that will crush ge's earnings. >> exactly. >> if the dollar spikes a lot in a quarter's time. >> everybody is having a good time for the last 6 to 8 to 12 weeks because the dollar is not going up anymore.
that's really what's happened and whether there was a concerted effort out of the g-20 in shanghai as we've alluded to in our writings or whatever it is or just happened to work for everybody, the point is that's what sent oil higher. that's what stopped the em route and what saved most people's portfolios out there from had a really bad start or the worst start. >> if they vote no and they don't leave and everything stays the same after june 23rd what happens? >> it becomes a sort of question of trump versus hillary and if you get trade negotiation issues with a sort of surge by trump you could have similar dollar spike issues that get people nervous, not a good dollar real, but a sort of safety dollar rally. >> if trump looks like he might win, a lot of anti-china rhetoric and china my react how, or the market may move china how? >>i mean, i think tin creases the tension so that the split between the currency really could happen sending the dollar
much stronger and emerging weaker and it sort of fits the trump story line, so, look, i think -- a lot of the reason geopolitically behind the scenes why the dollar has been stable for the last two or three months is that the establishment knows the dollar strength probably brings donald trump's poll ratings up and the establishment doesn't like it, so that's another overriding theme in all of this. look, the two big events to me with brexit and the election and they really make it a tough trading environment but investors should key themselves off dollar strength. dollar strength is the thing that's driving us into a complicated place for exit. the case in january, off the table now and everybody is happy but it can come back. >> i don't know how anybody can tie together the british exit vote, the dollar, china. >> you had tony blair on it.
>> david zervos, thank you very much. now we go to shearon epperson. >> democratic presidential candidate addressing the drug overdose epidemic in the u.s. during a substance abuse discussion in west virginia saying treatment and recovery are the keys, not incarceration. >> on average it costs around $3,000 for treatment, recovery, drug court, the kind of non-incarceration solution. on average it costs from $18,000 to $33,000 a year to put somebody in jail or prison. >> clinton rival bernie sanders having breakfast with labor leaders in indianapolis meanwhile as the state's voters head to the polls. afterwards we talked about trade hand how important the issue is to indiana voters claiming he's the best candidate to reform trade policies. nine people accused by federal prosecutors of a scheme to manipulate the price of a
worthless penny stock resulting in $131 million of losses for the investors. the new charges come one year after the company's chairman was accused of improperly inflating the stock. and under armour announcing a multi-year partnership with bryce harper, the national league's reigning most valuable league player. espn reporting the deal is for ten years and is believed to be the biggest endorsement deal ever for a major league baseball player. that's the cnbc news update at this hour. back to you, michelle. >> ka-ching. >> exactly. >> thanks, sharon. oil market closing for the day and jackie deangelis is live with the details. >> that's right, 2.5% slide on oil prices today though we're closing off of session lows just under $44 a barrel. the dollar index, the major culprit, the little bit of a rebound certainly pushing prices down but not enough is changing quickly enough is what i'm hearing out there. u.s. production is coming down slightly, but, remember, it's taken almost a year to move the needle and international
producers. they continue to bump oil and have the saudi and iran standoff so it doesn't appear that anything will change on the horizon and we have the opec meeting on june 2nd, trading the range and 40 to 45 is probably where we're going to be. back to you. >> small businesses all over the condition try are competing with much larger companies and succeeding. kate rogers has the story of one woman taking on lululemon and nicky. >> hi, tyler. tyler hane grew up running, biking and never liked the look or feel of traditional athletic clothes so she made her own. take a look. >> people used to be scared of working out in gray but a gray that doesn't make you sweat. >> can't see any sweat through this. >> better, faster, stronger, it motivates some but doesn't work for everyone. tyler haney never quite got it. >> while you're running over hurdles in high school track, that makes sense but realize
that there was a powerful combination about being membernism and athletic that wasn't embodied in the blond. >> another thing that never worked the materials in most athletic lines. >> sick of the shiny thin black spandex. >> she was meant to go to college to hurdle but took a year off to attend parsons in new york city and. >> and while in school became obsessed with materials. >> from there outdoor voices was born. launched it out of college selling in boutiques. >> outdoor voices comes like when you're little and your mom says use your inner voice and the brand has youthful energy. being young without experience was helpful at the time because i would ask to be in people's offices that probably if i had more experience i wouldn't have. there weren't boundaries. there weren't rules. >> unlike the uber competitive nature of the athleisure business and many of its biggest
consumers today the 27-year-old haney is running her own race and it's working. in the last year sales have increased eightfold. >> i tell this to the team. my mom was like the best kind of coach growing up, and she had this saying tybb, try your best, baby. >> and trbb, for us there's no start or finish in activity, it's very much like the participation award, getting out there and working for you yody for your mind is a lot of what we've seen. >> in the same price range as nike, lululemon and a bit more fashion forward and toned down when it comes to colors. one of the celebrities is lena dunn hamm. >> who carries them? >> a pop-up shop in new york
city, so successful, getting set to open a physical retail store in good in the city and also in austin, texas. >> kate, good to have you back. >> for all of our make it stories visit cnbc.com/makeit. >> martin shkreli appeared in court and may soon have new legal troubles today and so might these guys. we'll explain what's happening in this video when "power lunch" returns.
the former pharma ceo who has become a lightning rod for the outrage over soaring drug prices appeared in court today and meg terrell has the latest. >> reporter: the big news is u.s. prosecutors may file more charges against martin shkreli and his former attorney. this in a very, very short court appearance, u.s. prosecutors saying this, that they may fight charges in the next 30 days. as a reminder shkreli was arrested in december and charged with seven counts of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. left the courthouse after his hearing with his lawyer and
here's what they had to say. >> today was a good day for martin shkreli. we were before a judge who clearly understands the complexity of preparing this case, and we are pleased that the judge was willing to work reasonably about scheduling. substantively we do not believe that this indictment will change in any way that affects mr. shkreli in a negative fashion. >> now, he wouldn't comment on any new indictments. michelle, back to you. >> put it on the calendar. thanks, meg. energy stocks tumbling today as crude oil drops. let's discuss with the trading nation team, craig johnson with piper jaffrey and boris schlossberg is a strategist with bk asset management. craig, you're charting the energy etf. what does the chart tell you?
>> michelle, when you look at the etf here on the xle, from my perspective we're starting to reverse a longer-term downtrend, a downtrend that's been in place since 2014 and for us this kind of downtrend reversal in combination with moving above 50% on the rsri suggests that a trend change is starting to happen. also pretty interesting that in our work that we do, total return and relative strength work, this is the first time in about five years we've actually started to see improvement in that work and in this fact morning we went from the u.n. weight to neutral on the technical tools for the first time since 2011. again, good things are really starting to happen here in the energy sector, and it looks like perhaps there's more room for the energy stocks to work. >> what do you think of what craig just said when it comes to the fundamentals? were rewitnessing the end of the commodity bottom, or have we actually got a real bounce here? >> i think the opposite. it's interesting. even if we have -- we may have a trend change. there's always a correction off of this very, very strong bounce that we've had and from the
fundamental point of view what's happening here is that all of the commodity movement has really been much more of a short covering movement rather than demand drive. if you look at china which is really the key driver of commodity demand, their economic fundamentals have actually deteriorated over the last couple of months and the other thing that's interesting is last night reserve bank of australia, the most commodity sensitive of all the central banks actually lowered its interest rates. part of is because the australian dollar has gotten so strong and another reason they may be anticipating the fact that the commodity sector will stay there and they want to increase their credit -- ease the credit for them, so for all these reasons the fundamentals are showing we may have peaked in this commodity rally and we're due for a correction. >> two sides to that story, so to speak. thanks, guys. got the chart and a fundamental view. find more at tradingnation.cnbc.com. coming up on "power lunch," former house majority leader eric cantor is going to weigh in on the presidential race, and then as we head to break take a
look. it has some of the most wildly traded stocks are on this down day, alphabet, known as google, apple, apple bouncing back from an eight-day losing streak. we'll be right back. and now the latest from tradingnation.cnbc.com and a word from our sponsor. >> trading on margin is a process that involves borrowing money in order to purchase stock and while margin trading can be very effective if the stocks you buy go up,ful stocks you buy go down your losses can count very quickly, but the most important thing about trading on margin is to make sure that you never use all of your available credit.
a huge fight in turkey parliament. that's how they do it over there between the ruling party and the pro-kurdish opposition, the meeting had been postponed from last week because of fighting. the matter at hand, a proposal to take away immunity from lawmakers. now, if anybody needs immunity it's these guys. they are going to need it because they are subject to assault charges. back to brian in beverly hills. >> much more sedate here, i can assure you. that was something, tyler, thank you. okay. the presidential candidates
entering the remaining primaries all ahead of the convention this summer. let's get color and insight with everything going on. we're joined now by eric cantor, former house majority leader and now a managing director at the investment bank. good to have you on. >> nice to be here. >> did it ever get that bad in the u.s. congress? almost to blows? >> almost. it was not that bad though. >> we talk about the dysfunction. how bad was it? >> you know, there's a little bit more decorum than that. clearly there's just real differences in terms of the direction of the policy-making in this country. we've seen sort of a dysfunction set in and really over the last seven years so hopefully we'll see a breakthrough come november. >> and it's amazing, and i know it's probably an uncomfortable topic but your defeat saying what happened to congressman cantor. this is just the first step. this was a turning point.
>> i would say a populist, not so sure to the right but populist and there are similarities and what donald trump is experiencing now because he does best when it's open primaries, where he gets indpersons and those who feel disaffected. same thing that happened in the primary. overwhelmingly one-third of the votes in my primary were democratic primary voters and independents, and, again, i think there's a sense in our country right now, real anger, people feeling like they have been left out and look what's going on in washington. there's not much happening. solutions to problems have not made their way into law, and there's just a general frustration and i think that's what we're seeing. >> you're still close to party leaders. we go to cleveland. what's going to happen? will donald trump be the republican nominee? >> i think today will provide the answer to that, i believe. >> even if he goes to cleveland, you've got some who have said no way. you've got these unbound delegates. how is it going to go down? >> i think if he wins indiana today, most are saying that he'll get to the magic 1,237
votes and at that point he would be the nominee. >> about a month ago on "squawk box" you were saying basically, and i'll summarize, screw the rules, we'll do what we want. we're going to vote how we want. basically the primary voters' vote didn't matter. that's what i took away from the interview. could they do what they wanted and go rogue and pick up paul ryan? >> they being who? >> the delegates, some of whom have to vote for somebody and some whom doesn't. >> but they are the people that will make up the rules committee that will set the blueprint for the operation. convention and that rules committee will meet a week before the actual convention begins. they being the delegates, trump and cruz delegates for the most mart. i do not think that the party is going to change the rules and deny an individual if it's donald trump that gets to 1,237. they can't. >> you believe if he gets 1,237 he'll go up against hillary clinton.
>> yes. >> does donald trump have a real chance to become president of the united states? >> i was predicting way back when that donald trump had a chance and many of us were. i was, you know, jeb bush's effort in virginia and didn't think donald trump had a chance. i've stopped the business of predicting, and i think, you never know. hillary clinton is not a strong candidate. clearly she's not inspiring those on the democratic side of the aisle and bernie sanders has got the intensity, and donald trump has sort of the changed the rules of the game here so -- >> we talk about it as a natural story. realistically is it a four or five-state story, virginia, ohio, maybe pennsylvania, florida, maybe colorado, i mean, are there other states that matter or we have to focus on that? >> that's the conventional way of looking at it and i'm not so sure when you have a donald trump in the race that you look at it in a convexal race. i think more states could be in play because i do not think that the american people overall want to see more of the clintons. i mean, and that's what hillary
clinton is up against, and -- and you've seen her from a policy position drifting further and further left because bernie sanders is out there breathing down her neck, and then you've got somebody, you know, on the republican side saying we don't need that. >> you think trump could take some democratic votes from some guy who hasn't had a raise in ten years, working in the assembly line, ticked off about trade, you know, ostensibly he's a democrat, do you think that vote could go to trump? >> look at the numbers. it goes back to the primaries. look at the numbers and the turnout in the primaries. many states are shattering records in terms of primary participation. these are voters who are not typically involved in primacy processes. the question will be whether that translates into an increased turnout in november. >> have you backed anybody? >> i was for jeb. >> and he's not there any more and sat it out until now and we'll see. >> we'll see. eric cantor, thank you very much for your time. do appreciate that. thanks to eric cantor, former house majority leader.
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points. had been down 220 points, so off the lows -- off the highs as well. s&p lower by 18 points, the nasdaq lower by 47 points. what sectors are in the red? all of them. health care the best performer. down the least. energies is the worst performer. we had the dollar improving today, which has pushed all of the commodities lower. that's one reason why oils are lower. materials down pretty sharply as well. next up, aeropostale preparing to file for bankruptcy. just the latest retailer do so. can you still make money in this space, or is it just a teenage wasteland? that's next on "power lunch." but not every insurance company understands the life behind it. for those who've served and the families that have supported them, we offer our best service in return.
five years ago it was a $25 stock. air postel now reportedly preparing to file for bankruptcy and closing more than 400 stores. other teen retails have done the same. >> others have filed bankruptcy in the past two years. so why is teen retail in such trouble? joining us is liz dunn. liz, what's the problem? why are so many of these companies going bust? >> ily are so many problems. overstoring is a start. a big problem for air postell and also discounting. i think new competitors, the fact that so much of the
business has moved to digital and the consumer has changed. they're looking to different brands and not really as enamored with some of the traditional tee age brands that there once were. >> so it's not a shortage of teenagers. >> no, i don't think that's it. >> who are the good ones that have gotten it writer than not and what are the ones that haven't? >> i think american eagle and abercrombie & fitch have been two of the better kind of addressing some of the changes in the marketplace. abercrombie & fitch is particularly interesting because they started closing stores a lot earlier than others, and so now they've really streamlined their store base quite a bit, and so you look at some of these others that are having to announce hundreds of closers and take huge charges. i think that was a smart move. they've also tried to get into the dna of how the consumer is
changing, and they've brought some new fresh talent to the organization. >> how are they changing? how are the tastes different now? what do teenagers want? >> you know, i think past generations wanted to fit in a lot more than the current generation of teenagers. so what i mean by that is there's like a teenage uniform of a t-shirt and jeans and you don't want to stand out too much. that was my generation. but these days teenagers do want to be a lot more individual lis tick. they want to discover things that not everyone is wearing and they don't want a brand to dictate to them. >> really? i walk into a room and i feel like every guy is wearing a plaid shirt with the tails that hang out the back and the pants that go to the knees. to me -- i laugh at them. because they think they're such individuals and to me they all look the same. >> there are subtle details that you're not picking up on that make those outfits unique and inspired by some celebrity or some blogger or something that
is not starting in a mall-based retailer. >> got it. okay. i missed nuances, got it. >> i miss them sometimes too. >> liz dunn, thank you. we're going to go to dom chu for a market flash. >> we talked about a breach. adp has issued a statement. a small number have been victimized by fraudulent information. anyone who has had their information compromised previously prior to adp. they go on to tell how this happened with their own -- the clien clients' portals. they go on to say that a combination of unsecured company registration codes also with that stolen information is what caused the fraudulent access. they have no access that its
systems housing employee situation has been compromised. additionally they're working with federal law enforcement to work with it. just a statement from adp on that. they say their systems were not hacked. back over to you guys. >> that's it for "power lunch." thanks for watching. >> "closing bell" starts right now. hi, everybody, and welcome to the "closing bell." i'm kelly evans with the no. >> new york stock exchange. >> and i'm bill grif equity. this looks like it has more conviction than yesterday's rally. the energy sector so far is the biggest loser today, materials and financials are not far behind or ahead depending how you look at it. we're well off the lows. >> also coming up, hedge fund giant kyle bas