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

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that's indication of a weakening global economy, then the importance of it picks up to a much greater extent and will drag the markdown with it to the extent they believe it may be technical and that it will bounce back, get through it and leakage will be less. >> we will continue to watch that ever so closely. so will "power lunch." by the way, it begins now. and thank you so much, scott. i'm melissa lee. here's what's on the menu at this hour. one of the biggest pow players on wall street, j.p. morgan chairman, president and ceo jamie dimon minutes away from exclusive interview here on "power lunch." two of elon musk companies joining forces in a stock deal, but will tesla get burned by solarcity? and stick around to find out. "power lunch" starts right now. nchtsz welcome everybody to "power lunch." welcome back, melissa. and welcome to august.
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i am brian sullivan. and we come into the month on a six-month win streak for the dow. but that's not how this month is starting. here's a look at how your money looks right now. the dow down a lot, not a lot $47 points, given what is going on with oil, tyler, it is no surprise that chevron and exxon are two worst performers in the dow. much more coming up. oil a big story today, brian, as you point out. welcome everybody. i'm tyler mathisen. here's what else is happening this hour in your financial world. crude oil falling below $40 a barrel for the first time since april. oversupply and economic worries continue to pressure crude. it's down more than 20% from june's 2016 highs. and the gaming slump continues in macau. the chinese territory reported its 26th consecutive month of declining gambling revenue in july. the slide has impacted u.s. companies that operate over in macau, like las vegas sans and wynn resorts. and google's next goal,
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searching for cures for disease. google's parent alphabet teaming up with glaxo, they have formed a new $70 million company which focuses on bioelectronics seeks to cure diseases by electrical impulses in the body. we will get our exclusive interview with jamie dimon moments from now. but first, to the falling price of crude oil dropping below $40 a barrel for the first time since april. jackie deangelis live at the nymex for us. >> good afternoon, tyler. what's special about this move and rare is the fact it happened so early within the season. of course we see that summer driving season come on, you expect demand to increase. we've got the refiners making more product. but what happened this year is we have a glut, not only in crude inventories but also in that gasoline. and i will say demand has been very strong but just not strong enough to work through the product that we have. that's what took us up to about $50.
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and now we're back down to 40. remember what we saw last year. look at the chart. up to 60 in june, then we came under 40 in late august. then we went all the way back down to $26 in february. now, we're not necessarily saying that will be the case again, but again, the timeline here seems to be a little bit accelerated. and that's because of the inventory glut that people are concerned about. another thing people have been warning for some time is the fact that when prices go a little higher, producers get ahead of themselves. they get excited about pumping again. rig counts go up. and that in and of itself could take prices down, which could be part of the problem here. now, there is some good news for consumers. gas prices have come down sharply. and, again, very early in the season. $2.13 according to aaa. some saying we could see $2 gas as the average by labor day. and one trader telling me he thinks gas prices could go to $1.50 by around christmas time. so a lot of significant moves here. that second half rebalance doesn't seem like it's happening on the timeline many were
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expecting. back to you. >> jackie, thank you very much. let's get right away to our big newsmaker of the day, cnbc's wilfred frost live now with j.p. morgan chairman and ceo jamie dimon. wilfred. >> guys, how are you? >>. >> tyler, thank you very much. and a very good afternoon to all our viewers on the east coast from irvine, california. but a very good morning to my guest, the ceo and chairman of j.p. morgan, jamie dimon. great to be with you, jamie. >> pleasure to be here. thank you. >> of course on your bustle, your annual bustle, this year it's in california and you get to go and see employees, visit brunches at source. what's that for? is it a bit of a morale booster? >> we've been doing road trips forever. the bus was a new idea, kind of visit operating centers and see different types of customers. we've done it in the midwest, detroit, florida, texas, where they always say texas what america used to be, and it is the -- like you said, customers,
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employees, all types of customers. they're entrepreneurs, high-tech, small tech, big companies. >> you also invite your employees on to the bus with you. >> yeah. >> you give them immunity and they can tell you anything that they want. i'm interested to see how that goes because i'd be terrified doing the same thing with my own ceo. are they a bit scared of you? >> they totally opened up. we say we give them a beer and immunity and we ask what can we do better. it's an amazing thing. if you ask your employees good for any business out there what can you do better, they'll give you a long list. on the first bus trip we had 1,000 things and we make it fun for them. we're trying to do a better job for our customers, our employees. and just now i just got a couple ideas. like we don't have mandarin websites yet. it's a little thing, but big thing for people that speak mandarin. >> a little thing but complicated to translate. we're here in california as well. you're growing fast in california or chase is growing fast in california. albeit from a small base.
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does it annoy you that you're not number one here? and can you catch wells fargo? they're a long ways ahead. >> the important thing is we bought wamu. i think you had 600 branches, virtually no small businesses and no middle market. and now we have 7 million consumer customers in california, 700,000 businesses which is like 400,000 small business, a huge private bank, a very good investment bank. and so we're doing great in california. we love the state. the state's been very, very good to us. and so we're going to go and expand. you saw the enthusiasm last night for j.p. morgan chase, all the things we can do. on the bus i was just with one of the ladies been here for two years, she's immigrant from china. she brought her parents here. she's among our top personal bankers like in a retail branch. and if you saw her, you'd be amazed at what this country still offers to people in terms of opportunity. and that all three of them pretty much started at a teller and now middle market manager, one of our best branch managers in the country. it's unbelievable stuff. >> and so the consumer part of the business growing fast in
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california. it's growing very fast across the board. we saw that in the recent q-2 earnings for j.p. morgan. and it's highlighted as well from some of the other banks. if we look at the gdp number last week, there was a clear lack of investment from businesses. what does that tell you about the fundamental strength of the u.s. economy right now? is it late cycle? >> i think -- i don't believe that. what we see is a strong consumer, asset prices are up, 13 million more people working, wages are going up, household spending is up. a lot of businesses capital expenditures is when they see books grow and need to build a new plan. it is a little disappointing, but they have the money, they have the wherewithal, profits are down, huge capability, markets are open, i wouldn't react to short-term data. i'm not sure the gdp data is actually that accurate anymore. what we see is more household formation, more people buying homes, more people with jobs, those things are good and hopefully keep the economy growing, wish it was faster, but
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around 2%. >> oil price falling. >> it makes no difference to me. we look at -- we build for the long run. we're in california forever. we're in 100 countries. we're going to be there forever. wobbles in prices to me are not a reason we would do something different. obviously have customers in the oil business it effects them and they would like to see a more stable oil price, i wouldn't overreact to short-term pricing. >> what about the yield curve? because as you know all too well it's very low. it's very flat. does that suggest that there are concerns ahead for the u.s. economy? if people's expectations suddenly shift to being inflationary, could it move very quickly? i mean, is the bond market somewhat of a bubble at the moment? >> look, i'm not a buyer of ten-year bonds. i would be a little worried about drastic actions in the ten-year bond. the more important thing, and the fed talks about it is are we -- if we have proper growth in the united states, it will start to normalize interest rates. think of the short end, 25 basis points doesn't matter that much, but the fact is if we start to
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normalize, i personally think it's a good thing. if that happens, my view you start to see the ten-year go up to a more normal price. we don't look at today's prices in normal price. it's a very low price for a whole bunch of different reasons won't get into right now. >> if we think more broadly about the stock market itself, we've hit record all-time highs, but if you look at almost any timeframe since the financial crisis, ten years, five years, this year, banks have been left behind yet loan growth is good, you're positive on the economy. is this a once in a lifetime buying opportunity for bank stocks in the united states? >> look, the american banking system's in great shape. tons of capital. tons of liquidity. they're starting to expand again. and a healthy financial market is kind of part of the spinning wheel that makes the country grow. still legal and regulatory pressure on banks, and bank stocks may not do great, but i think it will be good for everyone if it happens, but i don't count on that. what we try to do is build the company, serve the clients. you can see behind me, right now you may not know this, we have
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100,000 people screens around the world, philippines, hong kong, london, china, all around the united states who are watching this and i want them to have them proud of them because they do a great job serving their clients every single day. and our clients are happy. that's what i worry about. build the company today and the stock price will take care of itself tomorrow. >> if we think about one of the big themes in q-1 and q-2 for banks this year, it's been cost cutting. and you've done very well in that and did it well in the last set of earnings. i'm not so interested to hear about cost cutting plans if you can save an extra billion here or there over the next year or two. what about in five years' time? could j.p. morgan be operating on 30% less costs? >> no. so i've always separate waste cutting, getting rid of bad stuff from good expenses like building systems, technology, mobile applications. we don't cost cut just to cost cut. if we can find a good place to open a branch, we'll open a branch. if we can find a new good application to serve you, a
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trader, around the world, we build it. i'm not interested in saying the cost has to be $56 billion down to 55. we find good market opportunities, we're going to spend the money. so we look at it as a full business. we've always been finding ways, usually technology and automation to reduce costs. meanwhile you always find ways to invest it too. so to me it's an ongoing, it will never stop, i call that capitalism. that is the way of business. >> let's talk a little bit about the political situation. we're coming to the end of the obama administration. on economics itself alone, rate his performance out of ten for us? >> look, he inherited a terrible thing. so i think the american government before president bush, president obama, paulson, geithner, bernanke, i think they did a lot to stabilize it. i wish we'd been growing a lot faster since then. it's been moderate. what i would worry about more is the next president, whoever it is, focuses on the right things.
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i think we can go to 4%. and those right things are proper immigration reform, proper infrastructure spending. democrats say spend a lot of money, i kind of agree with that, republicans say it shouldn't be bridges to nowhere and no pork barrel. i agree with that too. so proper infrastructure spending on roads, infrastructures, schools, airports would be great for the united states. you know, we need corporate tax reform. i would also expand things like the earned income tax credit to help the lower pay. so i think there are a lot of ways, education, that we can make this country boom. and i think that's what we should be focusing on and not just pointing fingers at each other and getting mad all the time. >> you mentioned immigration reform. is there an immigration problem in the united states at the moment? >> there is -- chuck schumer and john mccain had a bill, which i believe passed the senate that dealt with proper security at the border, proper pathway to legalizing undocumented citizen -- immigrants who by the way most of them have jobs, most
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are doing fine and it's at the back like 13 or 15 years and allowing all these kids from around the world who get advanced degrees here, our best universities in the world, science, technology, and we send them home. let them stay and let them build companies. a lot of these companies were built by immigrants. three of my grandparents are born overseas. i was just on a bus with people and they were all born overseas and they're fabulous americans. >> we talk about the candidates and, you know, donald trump and hillary clinton, they're miles apart on certain issues. but there's one area that they seem to be uniting on and that's pretty tough rhetoric against the banks including both have mentioned they might bring back glass/st glass/steagall, does that surprise you? >> it's kind of innocuous on the past. i assume regulators, politicians do what we're doing every day, lend to small corporations,
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small businesses, lend to individuals, move their money safely, build cyber security, and we do it in 150 countries around the world. we bank with countries -- we bank california for god's sake, we hem edhelped them in the mid the crisis. isn't that our job? we're doing it quite well. i think we should focus on that. i know there's nothing we can do about the past other than look behind me and look at what these people do. they serve 7 million consumers every day and they do a great job at it. i want to thank you all personally. i wish i could come see every one of you every year. i know i can't, but if i could, i would. >> you talked about lending, that's your job, to keep lending. have you ever lent to donald trump or any of his businesses? >> i can't speak about individuals when it comes to something like that. >> okay. fair enough. let's move on in terms of what should be on the top of the agenda. you talked a little bit about tax reform. we've also heard both sides of the political debate talk a
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little bit about anti-free trade rhetoric, and this is something that's very close to my heart having seen the same issues come up in the united kingdom. in your opinion would it be a mistake for the next president to restrict free trade? >> yes. i think there are legitimate issues around what we call fair trade. proper protection of the workers, proper protection of the environment, nontrade, nontariffed barriers. they talk about making fair, i understand that. but, you know, china is going to trade with the world whether we like it or not. either we're going to set the terms of that trade or they're going to set it. so trade and technology have been generally wonderful things for the world. i do understand that every now and then they cause pain and suffering in very specific place. what we need and i think it's in the bill by the way is better trade assistance. if people are hurt by something like trade, we should have relocation, re-education, income assistance, all those things which help the people get hurt by it but still get huge broad
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benefit. >> with that in mind, do you think the decision that the british people recently took to vote for brexit, was that a step backwards? >> it's hard to say, if you speak to the british people, you know better than me, some voted for brexit because they wanted cokind of put up a wall. but a lot of them immediately came to the united states and went around the world and said this is so britain can be open season free trade and not constrained. so you can actually argue either point. we just don't know how it's going to turn out because there are many parties involved. that to me is the uncertainty around it. we have to wait and see. >> when you did your pre-brexit vote contingency planning, did you ever expect that in the instance of an exit vote as we had that markets would have shrugged it off so easily? i mean, other than some uk centeric assets, we've moved on and hitting new highs. >> yeah, because we always knew the effect of brexit wasn't really what the markets might do in the short run. what is the ultimate outcome, and we simply don't know. and we're probably not going to
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know for years. so that uncertainty will have an effect and you're going to read everyday about different people saying, you know, not going to have trade in the eu without immigration or free moving of people around. so, look, we have to be prepared for whatever the outcomes are. since we don't know, we'll work on it. i don't think it's going to happen tomorrow. we'll look at it. it's not up to j.p. morgan chase. i read every now and then people say j.p. morgan is threatening -- we're not threatening anything. whatever the laws of the land are is what we follow. >> various scenarios you've looked at longer term, five years in advance, are there any scenarios where you consider the breakdown of the eurozone? >> you know, unfortunately that could be one of the fat tail outcomes of a brexit. because when you go to europe, and i was in italy recently, netherlands going to have a vote, italy has a very important referendum, germany's going to have a vote, new leadership in
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britain, those things cause a lot of uncertainty about what do people want. netherlands have referendum like brexit. that's to me is one of those things out there that could possibly happen. it may take more than five years, but it may very well happen. >> on your investor call the cfo mary ann lake specifically referring to brexit said, we're not going to be at a competitive disadvantage, if anything we feel like we're in a position of strength. so this uncertainty in europe, is it an opportunity for j.p. morgan to take market share? >> i think what she's referring to is that whatever the competitive situation, it will be equal for everyone. that we're in a pretty good position. and we'll have to just adapt to new roles. it's unlikely the new rules will hurt us like many people, is what she may have meant. may cause more money and cause more strain on clients, we want to be there for clients regardless of how it comes down. we're going to have to mold ourselves to the political they
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come up with. not up to j.p. morgan at all. actually, if you wanted, we would want to keep our job to london and be able to passport financial services to the eu like today. for the average person out there that really means we can bank a german company in germany using people, research, sales, train out of london. if those rules change, and they could, then we have to change where we are and how we function. >> how much of a hit to your costs would it have to be for you to actually go through that upheaval of moving people abroad? >> it is what it is. i can say it will cost us a lot more money, but it's what we're told to do. it is not what i want to do. it is what we are simply told to do by the governments of the eu. >> how difficult more broadly -- >> we don't know how much duplicate costs are. it will create one-time costs and a lot of duplicate costs. and those duplicate costs i hate to say will eventually be bought by the customers in europe. if you build a system where your costs are much higher, people have to build it in to how they price their products and
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services. >> we just had the stress test results for european banks last friday. how difficult is the situation there? i mean, do you look at the european bank situation and think, oh, at least we're not too heavily in there, deutsche bank and italian banks, they're really struggling. >> the way you should look at that is that they did the stress test and most of the banks did fine. and i think it's time that europe if i was the european regulators and european government, i would let the banks do their job. continue to pound them and have change the rules and requirements you know five years out, six years out is not good for the people of those countries because you're destabilizing a financial system. they're including a bunch of banks that need to be recapitalized a little bit. in our view and as you know j.p. morgan because we've been public is we had a consortium to help. that would be great for italy. >> let's move on and talk a little bit about yourself if we may, jamie. you've had an outstanding career already. but you've had some tough issues in your personal life over the
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last couple of years. does that make you reassess how important work is? i mean, what still keeps you coming back to do the job every single day? >> i imagine i woke up tomorrow and i love my children, i spend a lot of time with them, i have a barbell life, family and job, i love the job. i love the people of this company. i love what i do. i miss the camaraderie, i miss the fighting for something, i miss meeting our employees in all parts of the world. and not getting to deal with presidents and prime ministers and employees from tellers on up. and i love it. and i think j.p. morgan makes it a better world. every single day in 2,000 careers around the world trying to do our job well, responsible lending, opening branches, serving small businesses and so i would miss it terribly. >> but you wouldn't miss having to do live cnbc interviews. that wasn't in your list there. just to dive a little deeper if i may. it's been a crazy few months, brexit, stress test, we've touched on all of those things. at the same time you have the
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awful eventuality of losing both of your parents. and sadly, you know, i've been through a similar personal hit in recent years. and that would have totally floored me. and i wonder, are you coping? how are you coping? are you getting through it? and are you all right? >> no, i'm all right. my parents have been ill for a while, so you have some time to get prepared. and you're mentioning something that this is the first probably cnbc interview i'm doing that my mother's not watching. and she would always call me or send me a note afterwards. she was proud of me and what we did and stuff like that. so you miss your parents, your life has changed and every event as you know better than me every event is a new feeling someone's not there you should be there. but my family is very tight. we're all there right to the end. it was as nice as it could have possibly been. >> it's great to see you doing so well, jamie. my final question, we focus every day on the weekly data points, jobs numbers, the quarterly earnings, long-term though how is the u.s. economy? >> great point. so here's the most important
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thing. so we don't like bet on stocks, bonds -- even trading books we don't do that. we are there steadfast long term. when i just got back from italy, we had our 75th anniversary there, j.p. morgan himself actually died there. we were in italy, germany, spain, ireland, portugal, right through the crisis. we had argentina for the last 12 years right through the crisis. we never waived. we added more credit. in the middle of the crisis, it wasn't just j.p. morgan, all these banks out there rolled over loans. so here's the important long-term theme. and look at the united states patriotically for a second, we have the best military in the planet, best military built call the atlantic and pacific very peaceful and neighbors called mexico and canada. some of the best universities on the planet, best businesses on the planet, great work ethic, great rule of law other than how it often applies to banks, the wise and deepest financial markets the world's ever seen. you don't get that in brazil, russia, india, china. i'm not making fun of them.
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we have all the food, water and energy we should need. again, you don't get that. i'm saying this out of respect for china. they don't have enough food, water and energy. they have 5 million people living in poverty and a lot of very tough neighbors in the neighborhood. america should look at what we do very well. our future is going to be unbelievable. but it's not a divine right. we don't have a divine right to success. i agree with a lot of politicians they say we've got serious issues. we do, immigration, infrastructure, income inequality is one of them. which is why we recently are changing our wage rates at j.p. morgan. so let's get together, collaborate and fix the problem so that beautiful future we have is the one we accomplished. >> jamie, it's been a pleasure talking to you. thank you very much for your time. the chairman and ceo of j.p. morgan jamie dimon. from irvine, california, for now, i'll send it back to headquarters, brian. >> wilfred frost, thank you very much. okay, guys, a lot to get there. he made a lot of good stuff, a lot of patriotic stuff.
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i get that man an eagle on his shoulder for some of the comments about america. but he said two things that stuck out to me. number one, when wilfred asked him about gdp data, we had a discussion and i said i didn't necessarily believe the gdp either. he said he wasn't sure how sort of relevant it was. >> how accurate it was. >> hats off to him for that for agreeing with me, which is always a great thing. >> obviously a brilliant man. >> and i saw you scribbling furiously, melissa, said i would not be a buyer of ten-year bonds. >> i think that's interesting on the s&p 500 hits a fresh record intraday high, we have bonds holding on. so you have this situation, this environment where stocks are up, but so are bonds. bonds are still managing to hold onto gains. so it's refreshing to hear somebody speak so plainly about what is going on in the bond market and how bonds can still maintain these gains even with the stock market gains. >> i'd love to be on the j.p. morgan treasury desk when he said sell, sell, sell. >> you wouldn't be a buyer. >> as i was listening to him i did not know he had gone through
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sort of such personal tremendous va -- tri vails. they called hubert humphrey a happy warrior, i listened to him, he sounded like a happy warrior. the economy is okay. he sees a possibility, a path to a 4% economy if we do the right things. one of the right things being common sense immigration reform. he was not terribly worried about brexit. he was not overly worried about the threats against the banks by those who bring back glass/steagall and he said quite the opposite, if you thought it led to the crisis, it would be wrong and bringing it back would not avert that kind of thing. i think he was really positive, which he really is. the happy warrior. >> i also thought what was interesting was the question about stock prices even though the environment has theoretically been decent for banks in general, he spoke about the economy sort of chugging along. and he made it sound like he believed that it was the legal
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and regulatory environment that was the biggest noose around bank stocks right now. that is the one thing that is puzzling a lot of investors out there. the environment can be great. the balance sheets look great. and yet the stocks can get out of their own ways. he did make a great purchase, remember, in february the lows, stock up about $10 a share since then but overall a very rough ride. >> and start-ups. you always hear this that small business is the job creator. that's technically incorrect. it is new businesses that are the job creators and new businesses by nature tend to be small. the kaufman foundation showing the number of start-ups per 100,000 citizens in america is near a 20-year low. so either people just don't have the ideas, the money, the credit or there's too much regulation. still ahead on "power lunch," wall street's top banking analyst mike mayo will join us. he's been listening to jamie dimon. he's here, we'll get his reaction. and the professor, steve liesman, stick around. r in vest,
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breaking news on the zika outbreak. let's get to meg tirrell with all the details. >> melissa, that's right. we learned friday of the first local transmissions via mosquito of the zika virus in the united states in an area north of downtown miami. there were just four cases on friday, today another ten have been identified. the cdc now says it is issuing a travel advisory very specifically to that one square-mile area north of downtown miami for any pregnant
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women who have traveled to that area since june 15th they should talk with their health care providers. they're also saying to pregnant women and their partners who live in that area they should take steps to protect themselves, also visit their health care providers. but this is very specifically a travel advisory for that one-square-mile area north of downtown miami where cdc says efforts to control the mosquito population that spreads zika are not working as well as they would have expected them to. they're trying to figure out exactly why now, m melissa. >> yeah, it's not miami beach, it's an area called wynnwood, am i right about that? >> it's in miami-dade county, but not miami beach. an area north of downtown miami. meg, thank you very much. to the bond market and rick santelli tracking the action at the cme. >> hi, tyler. a two-day of tens shows us as jamie said the unimportant gdp number had a rather important effect, but to think we're at
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1.49 yields we're actually up four basis points. jamie said he wouldn't buy bonds, question down here isn't whether you'd buy them, it's whether you sell them or not. two-day of the dollar index, a bit of a drift but here's some interesting. look at a chart starting january 26th. we made the high for the dollar index on the 29th, 99.60. made the low in may. 92.60. you know what that average is? 96. darn close to where we're trading and according to many traders i talk to going to be pivot point for quite a while. brian sullivan, back to you. rick santelli, thank you very much. up next, instant analysis of our exclusive interview with jamie dimon. you just heard that, top banking analyst mike mayo is here with his reaction. stick around. 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,
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the american banking system's in great shape. you know, tons of capital, tons of liquidity. they're starting to expand again. and a healthy financial market is kind of part of the spinning wheel that makes the country grow. there's still legal and regulatory pressure on banks. bank stocks may not do great. our clients are happy, that's what i worry about. build the company today, and the
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stock price will take care of itself tomorrow. >> that was j.p. morgan jamie dimon speaking moments ago to our own wilfred frost, mike mayo joins us now with some reaction. mike, yeah, you build a stock for the long term. investors like that too, but they are wondering what is going on with the stock. he made it seem like it was the regulatory and legal environment right now that's really the difficulty. do you share that view? >> well, the u.s. banking system's balance sheet is better than it's been in 80 years. record capital. record liquidity. very resilient. and you saw that resiliency with second quarter earnings. having said that, earnings are depressed, there's headwinds due to rates, revenues and regulations. so regulation is one of those factors. you know, the industry and j.p. morgan, it's poised to do better, but you need that spark, that catalyst. and that's tough to time specifically. >> that's a lot of things that have to go right. >> no, not a lot of things -- >> rates, regulatory environment, growth. >> two of the three they can't really control. >> control.
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>> well, i think the regulatory pendulum has swung a little too far. and i think the politicians will realize if you want the u.s. economy to grow, you need the banks to help facilitate that growth. >> do you think we're going to get that though? because i just heard a convention where you get a lot of it's wall street's fault, the banks need more regulation, they're too big. why would we have any optimism that anything is going to loosen up for the banks? >> with either candidate winning. with either candidate winning. >> correct. >> you say there's things to getting elected, but when you want the economy to grow faster, you need to have the banks do their job and make it easier for them to do so. let's key in on j.p. morgan if we can for a second. what i thought was interesting about j.p. morgan specifically, we call them the lebron james of banking because they have offense including the best r.o.e. among the global banks for the last six quarters. and they also have defense, better credit, good cost control. but what his interview was about, jamie dimon, was about staying in shape. and the sign of a good company is when the top of the house, the likes of jamie dimon, speaks
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to the bottom of the house, the tellers and everybody else. he's doing a bus tour talking to employees, giving them a beer tell me what we can do better, wearing a blue polo shirt. looks like he came from a backyard barbecue. maybe we can call him middle class jamie, but you need that top of the house to bottom of the house communication. you need that tone at the top that permeates throughout the organization. that's what i thought was positive. going back to the presidential election, i think it's important that there's a positive tone at the top that makes it easier to do business in the country. and that means making sure you have effective regulation. >> he didn't seem when wolff asked him about return of glass/steagall, he didn't seem overly concerned about that, are you? >> it's not happening. i've covered this industry for decades. i'm not even talking about merits. i'm not sure how you would
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actually impawlenty le meant it. >> putting the government's funds at risk versus serving your customer. if you're a corporation and i give you a loan or underrate your debt, that's not make or break. >> you're making an important point, i think, because we say the word bank like it's this monolithic thing when in reality you've got the banking like he's talking about, which is you come in, i give you a check, you give me cash, i deposit money. and then there's trading. that's the stuff that got us in trouble back in 2007 and 2008. based on the breakdown of revenue and profit, is j.p. morgan chase a bank that has trading? or is a trading house that also has a bank? >> i think the entire banking industry you have the volcker rule in place now, banks aren't taking this sort of proprietary risk they took before. remember the mantra of some of the pure play investment banks were in the moving business, not the storage business, you might have remembered that from the crisis, turned out a lot of the banks were and the storage
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business got stuck with bad bonds, blew up, government had to bail them out. that's not the state of the industry today. >> so did you answer his question? >> well, i don't like the way he framed it exactly, but they're a big bank. and they trade on behalf of their clients primarily. >> all right. mike, thank you. great to see you, as always. let's get to sue herera for a cnbc news update. >> hi, ty. and we have more details now on those new zika warnings from the cdc. the cdc is warning pregnant women to avoid traveling to a zika-stricken part of miami. it is urging expectant mothers who frequented that area after june 15th to get tested for the virus. and it said men and women who have recently visited that area wait at least eight weeks before trying to conceive a child. the libyan government announcing the u.s. military has begun conducting air strikes against the islamic state at libya's request. it said american jets attacked
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the bastian of sert. mcdonald's completed the shift in u.s. supply chain to only using chickens raised without antibiotics. the company previousliest mated the change would be completed by march of 2017, so they're way ahead of schedule. and a pocket version of the u.s. constitution has become a best seller on amazon after kizhir khan whose son was killed after serving in iraq, flashed a pocket size of the constitution during his address criticizing donald trump at the dnc. that is the cnbc news update this hour. brian, back to you. sue, thank you very much. fired up over a solar deal. why herb greenberg is burning red over the tesla/solarcity news. he'll join us when "power lunch" returns.
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it is the deal that has
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everybody talking today and much of it not for good reasons. elon musk's tesla is buying elon musk's solarcity in an all-stock deal worth $2.6 billion. not surprisingly some tesla shareholders are feeling a bit burned. phil lebeau joining us now with more. >> those shareholders are wondering if this makes sense given the fact solarcity has been a money losing venture although the ceo says they're going to be cash flow positive by the fourth quarter. here are the particulars of this deal, as you mentioned $2.6 billion all stock deal. so basically you have tesla paying solarcity shareholders 0.11 shares of tesla. tesla says that works out to $25.37 per solarcity share. that's below what they originally expected it to come in at back in june between $26.50 and $28.50 a share. the deal is expected to close in the fourth quarter according to both tesla and solarcity. but there is a go shop option here for solarcity where they can pursue an alternative bid, a higher bid. today on the conference call tesla's ceo elon musk was asked
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what he would do if there was a higher bid for solarcity. >> if someone were to come in and make a higher offer, you know, like a more than one penny higher offer, then i guess the independent board members would be compelled to accept that and we'd have to find another path. >> the path that elon musk is headed downright now with tesla and solarcity as one company is basically one stop clean energy option for tesla. in other words you go in and buy your tesla. at the same time you get your power wall unit for your home. you have this solar panels installed. you do it all in one stop as opposed to having several different companies do the installation and making you more of an ev ready household. by the way they believe in the next three to five years, guys, is really when we start to see the growth in terms of electric vehicles, solar generation, energy storage all come together. that's the plan according to
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tesla and solarcity. guys, back to you. >> that is the idea. phil lebeau, stick around. let's now bring in herb greenberg, cnbc contributor a. herb, in your valued and trusted opinion, is this anything other than elon musk bailing out elon musk? >> no, i think he's bailing himself out. i think he said if somebody came along said a penny more or whatever, i always had this cynical view he put this thing out there because if he didn't get it, somebody else will, in other words somebody has to come along to save the day for solarcity which in the end has tons of competition and really nothing more than a finance company that also puts solar panels on your roof. that's a tough business. >> why would you say it's elon musk bailing elon musk out? since the day before the deal was announced, herb, tesla stock up 7% compared to s&p's 4% gain. all in all have the shareholders spoken by bidding the stock higher? >> the shareholders of solarcity must be thrilled because they were owning something --
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>> well, any target that's taken over those people are thrilled of course. but it's more rare, right -- >> not in this case. it was a $52 stock to start the deal. this deal is done half of what it was six months ago. >> there was a slide. there was a comment on the conference call and it's slide, slide number 12 in the presentation today. and it's all about substantial cost deficiencies, $150 million in synergies in year one. and the question i have is, okay, what happens in year two? it's one thing to throw up synergies, it's another thing to really turn this into a great business. without the subsidies, or as tesla calls them incentives, what do you really have after this goes through? look, people want to sit here and say elon musk is a genius. he's brilliant. we all agree with that. steve jobs, going to be another steve jobs, look at the slides today talk about how disruptive they are. they want to keep people moving along and believing in them. but in the end what kind of a business will this be? what kind of investment will
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this be? are they going to always have the new, you know, grand master plan number three? they going to keep pushing us forward? i think the big thing now if you talk to the bulls they've got the mid level car coming out. this is going to really, really jump start this company. it's going to really bring the mainstream in, but as i think phil could say other companies are trying to do the same thing. >> well, let me ask phil, herb has made the case that basically this helps elon musk but doesn't help tesla much. is there a case, phil, that this is a good deal for tesla? how does this acquisition help tesla? and do you think it will? >> if you buy into elon musk's long-term vision which is that the gigafactory at the heart of the master plan is about energy generation with solar, there you have solarcity, and then you have storage, which is the tesla power wall, power packs sold to utilities, and then you have the
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consumer element with the tesla electric vehicles. if you buy that vision, and what he is saying is that over time this integration from top to bottom with one stop shopping for those people who want to have this electric lifestyle, if you will, or a green lifestyle, he believes that it will make sense. there's no arguing with what herb is saying in terms of the near-term because almost every analyst has put out a note saying, look, we don't think this makes sense in the near-term but we understand where elon is coming from. whether or not you think that makes sense as an investor, clearly tesla shareholders do, but jim cramer's been on the air many times and said this is a cold stock. you can't always put a rationale behind the way people are bidding up this stock. but in terms of this vision, that's elon musk's vision over the next three to five years. >> and that's exactly why i pointed out the stock price since the day before the deal. i mean, the fact of the matter the stock is higher by about 7%, herb, so they are buying into elon musk as a visionary, not just as a car company clearly. but i'm surprised at you, herb,
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you did not mention the corporate governance issue in terms of the special committee that evaluated this deal was made up of two individuals because the rest of the board members recused themselves. and you know what, phil mentioned if they get a higher offer, who's going to consider the bid, the new bid? two people. >> i actually mentioned that. >> before, yeah. >> that was the story a few weeks ago. so, yes, obvious conflicts of interest, we all see this. by the way we're in a marketplace where we're seeing some of these what i would call crummy deals being done. where was elon musk talking about the possibility of this four months ago or three months ago? it just seems like, again, it looks like a bailout. it feels like a bailout. you can buy into visions. >> you're saying he should have been talking about a deal three or four months ago? >> no, no, they weren't. because where were they talking about this becoming this sustainable energy company? this is a car company. it was a car company. it was an innovative car company. it was starting to get a lot of competition from other innovative potential competitors
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out there, whether it's google, apple. you have solarcity with competition from everywhere. so he pulls it all together. it's masterful from the perspective of a promoter, but elon musk is sort of like donald trump. you can look at the two of them from the same way. they sort of talk about the future, you've got to make the future happen. it's easier to -- >> hold on, phil, are we being a little too hard on musk given that last week larry ellison's oracle bought larry ellison's net suite. it's a bit different, he doesn't run net suite but is the bigger shareholder, all of a sudden larry gets rich again and moves on. we didn't have a segment like this on it. is that because the businesses were more sla? what's the difference? >> i want to say something here because you have two types of promotors, right? elon musk now is far more what larry ellison was perceived to be years ago. and i must say at pacific square research we just did a 25-page red flag report on oracle and the net suite deal we think is
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literally, you know, try to create the perception of something that may not really be real so to speak. but i think it's an interesting concept about ellison doesn't get the same play that musk does, but it is sort of the same thing. >> wow, i think you and i know some people that might be very short oracle. just throwing it out there. don't say anything. >> all right. herb, phil, thanks. and up next, the latest buy in verizon's big spending spree. we'll talk about that and more on "power lunch." my mom loves giving me advice. she even gives me advice...
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another big merger monday deal today. verizon announcing it will buy the gps vehicle tracking company fleetmatics for $2.4 million in cash. morgan brennan is here to break down verizon's spending spree. they are feeling less like telecom and something very different. >> they are expanding beyond the wireless carrier concept everybody's come to love and know, or maybe not so much love but know. really got the cash keep coming here. the top u.s. wireless carrier buying fleetmatics for $50 a share. look at shares of fltx up nearly 40% today.
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the dublin based company provides fleet management services, so developing software that shows vehicle locations, fuel usage, mileage, driver hours, et cetera. this is right on the heels of verizon's purchase of another fleet management firm, for an undisclosed sum that closed last friday. so what makes trucking software so sexy? this is part of a larger long-term plan for verizon to keep expanding its internet of things businesses, which grew 25% last quarter to $205 million. and that's still a modest sum for the telecom giant, but this is one of its fastest growing segments. to fleetmatics will provide small service carrier and of course long haul trucking. this is only the latest in the buying spree over the last several months. aol for $4.4 billion, yahoo for $4.8 billion. so analyst points out that with the smartphone market maturing,
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all of the acquisitions from tech to media to fleet management enable verizon to not only provide the network but now the software to run on the network and the content to attract and keep users, and should also mention advertisers, as well. so this is part of a theme over the next decade will really center as around as he put it managing multiple connected devices intelligently. moving beyond the whole smartphone carrier concept. >> all right. morgan, thank you. >> one quick thing, congratulations on the baby. >> hey, thank you. >> welcome back by the way. >> i feel like we need to cue the aerosmith "back in the saddle". >> is she good? >> she's great. >> only you could ask the question what makes trucking software sexy. >> and answer it. >> morgan, thank you. good to have you back. uber is the latest american company to hit the great wall of china, so what do u.s. companies need to do to succeed there? we will debate that when "power lunch" returns.
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fresh ingredients. step-by-step-recipes. delivered to your door, for less than $9 a meal. get $30 off your first delivery blueapron.com/cook. welcome back. i'm brian sullivan. here's what is on the rest of your "power lunch" menu. oil briefly falling below $40 a barrel. where does citi group's top oil analyst think oil prices are headed from here? uber selling its china business after losing billions.
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we ask, why is it so hard for u.s. companies to do business in china? and can anyone really make money there? and the video that you absolutely have to see. a sky diver falling 25,000 feet without a parachute. he survived. the amazing free fall coming up. the second hour of "power lunch" begins right now. all right. welcome everybody. the second hour. let's get a check on the markets as we are just two hours away from the end of the first trading day of august. minor minuses there for the dow industrials and s&p 500, the dow off 20, s&p off about 1.5 points. nasdaq higher by about 25 points. oil trading down briefly falling below $30 a barrel today, lowest levels since mid april. the ibb index at a high, biogen
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helping to push. and look at ionis, a drug that works with biogen to treat a muscle disease, that one met the goal in a trial and the stock is up 32% at 38.71. melissa. thanks, tyler. in the headlines at this hour, the first two economic reports across the tape in august not so upbeat. the ism's monthly index showed dipping in july and construction spending posted a bigger than expected drop for the month of june. while solarcity is getting much of today's take over spotlight, another solar stock jumping on news, being bought by consort m consortium. and democratic presidential nominee hillary clinton is in omaha where she'll be introduced at a campaign event by billionaire warren buffett. they will highlight a study showing positive effects of her economic proposals. big interview of the day here on "power lunch" with jamie
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dimon. he made a pretty big prediction in terms of that 4% number. >> that's a big number. the chairman of america's biggest bank saying he remains hopeful the u.s. can grow more strongly and the business capital spending, one of the big problem areas in the economy that it can bounce back. >> a lot of businesses capital expenditures is when they see their books grow and need to build a new plan. so it is a little disappointing, but they have the money, they have the where with all, but profits are down, huge capability, markets are open, i wouldn't react to short-term data. >> that short-term data jamie is talking about there is becoming more long-term. cap x fallen for three straight quarters. that's the biggest amount since the great rescission in the last quarter. part is oil and gas expenditures big part of cap x falling kind of sharply. other areas lackluster as well, computers, manufacturing and inventories a big $8 billion change there on the second quarter. dimon thinks the u.s. he said
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can grow 4% but going to need immigration, tax reform along with infrastructure spending. might read politicians in the media seem to be talking about everything but concrete plans to wrap up economic growth. at least jamie dimon is. >> yeah. at the same time he's saying he would not be a buyer of bonds which i think is sort of interesting because that would imply that he doesn't think the price is going to go much higher and therefore yields will stay low. >> you know, jamie's a really smart guy. i would point out that everybody's been wrong about that. and i'm not sure that he would say he brings any particular accumen to the idea -- some of the smartest economists, some of the smartest hedge fund guys out there all thought we had reached the day when we had come so low and those numbers are like 175, 180, 2 on the ten-year and now they plummeted to levels like 140 and 150. one of the things i heard him say is his job is not to do short-term trading on long bond. >> one thing i loved obviously because he sort of agreed with
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me is last week we had the debate and the gdp why the economy was better but the gdp growth rate hadn't really moved at all. and he kind of said i don't know how accurate the gdp report is anymore. i believe that's almost direct quote. >> right. >> well, of course it's something that i've worked on the last two years including if i might point out causing -- or helping part with the first quarter calculate growth in this country. look, here's what we know, brian, the average quarterly report has an error rate of plus or minus 1.3 percentage points. >> which is what you brought up. >> 1.2, could be minus 0.1. >> we might actually have no growth given the margin of error. if. >> what we find is accuracy improves when you include prior quarters. we have a problem here and the problem could be everything like regulation. it could be uncertainty surrounding the election.
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we're not quite in a post-brexit data feed here. be a little careful on that. we know the first quarter was weak, but to have the weak second quarter that's an eye opener, something you want to pay attention to plus the downgrades. what i worry about is that we were happy to have 2%. we were kind of counting our lucky stars. if now the average is 1%, i think that gets to your problem. >> is precision the problem? or is it -- are we -- are those data better on the direction of the economy than they are in measuring the absolute level of the -- you get what i mean? >> yeah, i do. i think if i'm not mistaken they get the direction right about 70% of the time, which means 30% of the time you could be on the wrong side of the zero line. look, it's a $17 trillion economy. >> yeah. >> it is very hard to count the change from quarter to quarter. and the way we calculate it exaggerates it. i will say there was an international comparison, the u.s. ranks about middle of the pack in terms of how accurate our data is.
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if i could turn to the camera, folks, we can do better. we can spend a little bit more money. and we can use computers and technology to gather better data. we need to do that. and we'd have a better market. we would have a better economy. because we would know in realtime better how it's happening. there is no advocate except for i believe myself nationally and the national commission for economist -- >> and you are doing your best -- >> i've done it. >> amen. >> almost certainly they won't have me back onto scream about the need for better data. but at least i did it and i go out. >> make the data right again. >> right again. or right once. >> thank you, sandy. >> you ever see apocalypse now? >> many times. >> you remember kurts at the end when he sent the note, sell the house, sell the car, sell the kids, i'm never coming home. that goes to this next story. steve, thank you. jeff gunlock, not colonel kurts, says sell everything.
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maybe not the kids. that's just one example of the bearish settlement creeping back into the market. bob pisani live from the new york stock exchange. bob. >> never one for understatement. he did say sell everything because nothing here looks good. that's a quote from him. he said on friday many assets look frothy and firm continues to hold gold along with gold miner stocks. gundlach calling out the weak spot flat to down corporate earnings, he says big money may be made on the short side if stocks stay near current highs. now, he's made some very pressing calls in the past including rates would be lower for longer. but his flagship line total return fund has underperformed most other bond funds this year including the one you're looking at the top the barclays aggregate bond index. that's the real benchmark. no love from goldman either recommending investors underweight stocks for the next three months. they are keeping their year end target not far from where we are right now.
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what's the issues for goldman? say the rising u.s. and global political uncertainty, negative earnings revisions, decelerating buybacks and overly dovish policy expectations for the fed given wage inflation trends. by the way, gundlach may say sell everything, but he's not doing that. at least not in his main fund. he did change the duration. obviously he has to stay largely invested. guys, back to you. >> another bearish sign for investors is crude has been sliding along the way today dropping below $40 a barrel. we're watching the close less than half an hour away, about 20 minutes. so is it time to bail on that one or time to buy stocks? joining us scott wren, senior global equity strategist at wells fargo investment institute and bruce mccain, chief investment strategist at key private bank. i assume you just heard, gentlemen, bob pisani's report
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about gundlach, he says nothing looks good. scott wren, do you agree or disagree? >> ty, i do not agree. certainly it will maybe be some time down the road where you want to sell everything, but at least based on the work that we're doing that's not the case. we've been telling investors for five years on pullbacks to buy stocks. i think the market's going to finish between 21.90 and 22.90 on the s&p by the end of the year. i think september and october could be rocky and more volatile. but if it goes down, we're going to be doing the same thing we've been doing which is suggesting our clients buy stocks because we think they're going to finish higher at the end of the year. >> do you see it that way, bruce? >> yes, i think you have to differentiate your timeframe. if you're talking about the next three months, then i think prices are probably a little on the high side simply because we've hit new highs in the earnings progress hasn't been that great. but if you're looking over the next year to 18 months, i think prices will be higher. and that's where you do want to take advantage of dips to add to your positions. >> where do you see value today, bruce? what stocks or what categories?
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>> i think you've seen a major run in the bond substitute, utilities, some of the others with higher yields. as a result some of the great growth franchises have lagged in terms of price. and yet they still have good underlying fundamentals. so picking up some of those often you can get a fair dividend yield in addition to a stock that probably has much better growth than the average stock and will do well over the longer term as well. >> two of the names you're highlighting are starbucks and thermofisher. scott, how about you? you say if there are pullbacks over the next couple months you'd use it as a buying opportunity. where would the buying opportunities be most pronounced? >> well, tyler, i think what the pattern since the february 11th lows have been basically all the cyclical sectors have been outperforming the defensives have been down. so i think utilities, staples, telecom, those are all overvalued, we're underweight every one of those. what we like are industrials, consumer discretionary.
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we also like the health care sector on kind of a value play. technology. so the sectors that are sensitive to a continuation of this recovery are where we have the most interest in. you'll notice, and this has happened really over the course of the last couple quarters, not that we're paying that much attention to second quarter earnings, but industrials and consumer discretionary they're leading the charge in terms of earning growth, industrials are leading in terms of surprises or close to it. so that's the kind of pattern we think that's going to play out over the course of at least the balance of this year and into 2017. >> scott wren with wells fargo investment institute and bruce mccain with key private bank. thank you both. go to powerlunch.cnbc.com to see another large tech stock that bruce recommends now. that is powerlunch.cnbc.com. coming up, uber sells its china business to a rival after losing billions of dollars on it. why is it so hard for u.s. companies to do business there?
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and oil as we mentioned below $40 a barrel at one point earlier today. there you see it $39.93 down below it right now. how low might oil go? citi's ed morris will join us when "power lunch" returns.
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uber selling its china business to china's didi, what went wrong for uber in china? >> you can't say uber didn't try because they filtered and funneled a lot of money into trying to win this epic battle.
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china in fact was a high priority for uber's founder who just a few months ago called china the company's number one global priority as they poured in more than $1 billion. now, kalanick after three-year campaign uber and co-founder conceded saying china is only possible with profitability. main catalyst being the rule changes that were implemented last week in china that legalized ride hailing but then also stipulated that companies could not subsidize each and every ride, which really gives the advantage to the bigger player. and in china's case that is didi, so in this deal uber now sells uber china to didi for close to 20% stake in the company now making uber the biggest shareholder in didi. meantime didi invested $1 billion into uber. and uber joins a powerhouse list of investors in didi. apple, alibaba, baidu, the
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interesting part is didi owns a stake in lyft, so people are thinking now that uber owns a stake in didi, they essentially own a stake in lyft, what happens to that. but the main takeaway u.s. based internet companies can't seem to compete and crack into the chinese market. e-bay, remember them going up against a small company back then in the early 2000s called alibaba. google going up against baidu, we know how that played out. it's a reminder guys of how hard china is to crack for a u.s. based silicon company. >> let's continue this discussion bring in john rutledge, honorary professor at the chinese academy of sciences and global traveler. john, we look at uber, there's many more ubers out there. is it possible for a u.s. or western corporation to go into china and compete and win fairly? >> it's very difficult for a
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u.s. company to go in and set up if you don't have a technology advantage that can't be copied or taken away from you. that's really the problem. you know, china's got an overall strategy now of shrinking their manufacturing sector and increasing their service sector because that's where you'll end up with the most jobs productivity and growth. and that means that a service company comes in like uber and they try and, again, get a piece of it. which is what happened here. it's an increasingly hostile environment for american companies right now. >> don't we need to make a clear distinction though, john? because there have been a number of u.s. companies that have been very successful in china, but they found a local partner. that seems to be the difference between all of these companies that littered the field of u.s. companies that have failed in china. susan had mentioned some of them. home depot is another one pulling out of china entirely. microsoft, yahoo, i mean, the list goes on and on. these companies didn't have partners. you take the likes of a gm for instance, found a local partner,
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look where they are now. >> you know, that's really the key, susan, because it's not only having a partner, it's having a partner that's connected in the right way back to the government. in china your partner's job is to protect you from regulations that could hurt you. just making a partnership with a public company doesn't really accomplish very much. and i see people do this the wrong way all the time. >> right. >> if you want to go into china, you need to spend money, spend time on the ground, get to know the people, get to be friends in the government. >> but then even in the case of walmart they did that as well, and look how well they're doing? they're losing against the hypermarkets. the list goes on and on, mattel, opened $30 million shiny new barbie house in the most expensive street in shanghai and just a few years later had to shut it down because no one bought barbies. >> yeah. absolutely. well, you have to know that market also where, you know, disney in shanghai is just the opposite story because there's a huge backed up demand for that
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in the growing middle class. but the key to this, i think, is that in the last two years the new government in china has had a rollback of democratic reforms. and it's because they're either worried or paranoid, depending on your persuasion, about instability inside china. so they're doing all sorts of things now to contain that. stock market regulations, they're worried about hong kong, they're worried about shin jang in the west, worried about migrant workers sending money back to villages, worried about young kids with cell phones. that paranoia together with their new size is making them a real problem for the u.s. this is going to come to a head in november at the g20 meeting, which is the first time china has ever chaired the g20. and it's not going to be a very happy conversation. >> how does apple fit into this construct that you've just described, john? in other words, you need a partner or you need the right partner who is connected to the government or basically you're probably not going to succeed because the chinese want chinese
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companies to win. >> well, you know, there are really two chinas, is the answer. there's the pre-culture revolution china, which is people 50, 60 years old and up. they speak chinese, they don't speak english, they went to school in moscow. and they're the princelings. the younger generation is very, very pro-western. they wear jeans, they know all about the western news. those are the kids that buy the iphones. so i think in terms of a customer base the upper middle class, younger kids, have incomes growing 10% a year. so the demand is going to be there. but there are some fierce competitors there, too. wawai among them and they're attacking with government help apple's market. so what do i think? i think apple is a huge market for -- china's a huge market for apple. it's just going to be a market where they have a lot of headwinds coming and government backed competitors. >> will china let them capture that market?
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or what would sort of all things else being equal naturally be their market share? >> china's not an exact science. and it's not black and white. so it's not that they won't let them capture the market. it's how much of the market will they allow them to capture. they will capture an amount which is very big and important for apple, but they will also be growth of a domestic chise firm. if you talk with chinese leaders, they're trying to find a way to get from assembling things to doing branding, managing, marketing, technology and all that. so these companies have government backing and a government advantage. it's very tough to do business there. and it's gotten tougher in the last two years. >> john rutledge, it was a pleasure, we could go on forever but we can't due to time. thank you. >> nice to talk with you. >> susan li, thank you. coming up, a man sky dives -- rather sky falls from over 20,000 feet and survives. >> you just gave away the story.
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>> we wouldn't show it if he didn't survive. >> okay. >> that would be not good. we're back right after this. it's time for the your business entrepreneur of the week. john grew up in his parent's grocery store, but with competition from the big chains, old world grocery could no longer compete. so now they don't. now they focus on one thing only, soda. they sell over 750 kinds.
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♪ now i'm free ♪
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♪ free falling >> free falling from 25,000 feet. couple of those guys have parachutes, but not him. boom. splash. and he survives. luke akins becomes the first person to survive a sky dive without -- >> wow. >> -- a parachute. he didn't have much room for margin there. >> he was right near the edge. >> he's walking around no whiplash. >> i call this a binary event. >> exactly. either you win or you lose. he turned over, landed on his back. the net was 100 by 100 feet and stronger than saran wrap. >> i wonder how high that net had to be in order to absorb him and sink but not hit the ground. it was 200 feet high, we are told. >> 200 feet off the ground. >> does the whole thing -- paid for by mac and cheese?
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because mondelez, the food company, has logoed this. >> look at that. >> oh, maybe it was sponsored -- >> maybe they have a new product coming out like net-os or something like that. i don't know. >> perhaps. >> parachute tarts. okay. big market story today. oil falls -- >> welcome back. >> yes, thank you. good to be back, i think. oil falling below $40 a again. where will it close? how much lower can it go? we'll have those answers in just two minutes and 50 seconds. stay tuned. [announcer] is it a force of nature? or a sales event? the summer of audi sales event is here. get up to a $5,000 bonus on select audi models.
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hi everybody. i'm sue herera. and here is your cnbc news update at this hour. president obama touting strides in reducing homelessness among military veterans as his administration reaches the halfway point in building a massive database on veterans' health. he addressed the annual convention of the disabled american veterans in atlanta. >> dav, i know that your service has also been defined by another battle. this is a group that understands sacrifice. you've been defined by the battle here at home. you've been defined by the
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battle here at home to persevere through wounds and disabilities. southwest pilots union is asking the carrier to replace ceo gary kelly because of the technology outage that caused the airline to cancel or delay thousands of flights in july. it says southwest is spending too much on buying back its shares, not enough on updating its technology. washington state's attorney general is suing comcast for $100 million alleging 1.8 million violations of consumer protection laws. comcast indicated the dispute involves its service protection plan. comcast is the parent of this network. and the most stolen car in the u.s. is the 1996 honda accord. more than 52,000 of them were stolen in 2015. their parts are highly sought after. coming in second, the 1998 honda civic followed by the 2006 full-sized ford pickup. the list courtesy of the national insurance crime bureau. that's the news update. back to you, melissa.
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thank you so much, sue herera. oil market is closing for the day. let's get straight to jackie deangelis at the nymex. >> good afternoon, melissa. it was a rough day for oil prices as you all have been reporting and so have i, we dropped under $40 a barrel. $39.82 was the intraday low. i think we're going to close just over 40. i don't have a final print, but it's an average the last two minutes. and it appeared like we were trading just above that mark. of course this is all about the supply/demand story. right now an oversupply not just in crude but also gasoline and concerns after summer driving comes off in the united states that we're not going to see the kind of demand growth in the second half of the year that most analysts were expecting. also remember as we've seen rig counts go up, you create a situation where producers take advantage of those high prices to pump more only to push them down. add to that the fact that seasonally in the back half of the year we see a drop and all signs point lower at this point. a close under 40 if we get it this week will definitely push us a little bit lower in terms of momentum. the next support level is around $36.
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back to you, brian. jackie, thank you very much. what she talked about is having a big impact on the oil stocks. why are you at my desk? i want to bring you facts and what we're looking at. this is realtime data. red obviously stocks are down. big cap oil here, bakken focused stacks here, ealingford shale stocks here. we've got day change, week-to-date, one month, whatever. this is the column you've got to look at. marathon down 5%. all the big cap names are down, whiting petroleum getting a lot of attention today, wll, that stock is down 11.5%. you've got e.p. energy resources down as well. but you can see, and don't worry about the names. you can see with the exception of a couple of really small players all of these stocks, guys, are down some of them down 9% like wpx energy, oasis down 9%, matador down 7%, hess down 4%. so, again, guys, not only a rough day today but a rough week and a rough month.
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this the kind of stuff we're looking at all the time. so, tyler, you don't have a standup desk. >> those stocks not just down but down by significant amounts as those numbers show, brian, thanks. >> yeah. let's bring in ed morris, managing director and global head of commodities research at citi. ed, welcome. you just saw the carnage in the oil stocks that brian pointed out on the screen there. and the crude itself down 20% in what a month and a half, something like that? >> little bit less than a month and a half. most of the carnage was in the month of july. we're seeing remnants of it through momentum and a record short position cftc told us about last friday. >> walk me through what you see on a fundamental basis for oil and technical basis for oil. >> sure. fundamentally we're in a structural transition in the market. we had an incredible amount of crude oil coming in the market at the end of last year. and through the beginning of this year with iran ramping up
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by more than 800,000 barrels a day. but we see the supply ramp upcoming to an end. last year we had u.s. production up year over year up 2015 over 2014 and now seeing riel remnants of a low price environment through lower capital spending really impacting the supply side. we think by the end of the year non-opec production could be down by 1 million 300 thousand barrels a day. you talked about demand earlier, demand is up, but we're seeing a year on year situation playing against the seasonal situation. and to be sure december demand is going to be lower than august and july demand. that's just a fact of life. but the big expected gasoline demand season that was supposed to replicate last year's season didn't happen and it didn't happen again not because demand wasn't there but essentially because it was too much supply. refiners around the world encouraged by margins that were pretty decent just produced a lot more gasoline than they
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should have. >> and you see -- >> u.s. refiners in particular. >> you see supply coming off through the end of the year? oil supply, oil barrels coming off? >> we see crude oil supply coming off between now and the end of the year. the momentum is there. chinese supply is down over 200,000 barrels a day year on year. u.s. supply probably will be down 800,000 barrels a day from the beginning to the end of the year. already year on year june on june july versus july u.s. production is down by close to 1 million barrels a day. so, you know, the bears in the market are not perceiving this underlying structural change that's unfolding. and it's likely to make this dip a lot more temporary than those who are shorting the market now believe it to be. >> yeah, so button it up for me. you see supply coming off. you see demand going down between now and year end, or as we move into the less peak driving season. what does that do for prices through year end and into 2017? >> well, we're going to have a bumpy ride as refiners go into
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maintenance. but we're going to likely see product inventories falling at a pretty hefty rate given the expected depth and length of the refinery maintenances. and the short answer is we would not be surprised to see brent flirting with $50 by the end of the year. and going up above $65 by the end of 2017. >> thank you so much. very clear. elizabeth holmes of theranos speaking today. we'll go live to philadelphia next on power. system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore.
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like at&t. theranos founder elizabeth holmes is speaking for the first time since being banned from the blood test industry. i would anticipate lines out the door. >> that's right, melissa. we were just receiving an e-mail recommending we arrive an hour early to the talk because there's not just the biggest room here reserved for this but also another room for overflow. a lot of people lining up to hear what elizabeth holmes is going to say. she's scheduled to present at 4:30 for 45 minutes for the
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first time on the data underlying their technology. then she's going to take questions for another 45 minutes. and that's the part people are really looking forward to hearing. this is the biggest conference of laboratory medicine experts in the world. we talked with a few of them. some people aren't actually that happy she's been given this platform here. we talked with people on friday as well as some experts here on the ground. here's a little snapshot of what they said. >> theranos and their approach have been shown to be an e knit ma to the way we practice laboratory medicine. so she's gone about it incorrectly. >> nothing speaks louder than data at this point, right? there's no amount of spin that's going to change anybody's mind it's going to be data. and it's going to be, not, you know, presenting data but summaryize from maeb a study they run internally but they're going to need to release data, right, to the public. >> when the federal authorities like the cms came in to inspect
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and found that they have a lot of deficiency, they got a lot of people thinking that this system probably is not ready for primetime. >> so transparency, data, these are the kinds of things people want to hear about. there is a lot of skepticism, but there's also a lot of hope that maybe this technology will work, melissa. >> meg, stay right there. let's also bring in professor of engineering at carnegie mellon campus. is there anything she can say or show in terms of data that would convince you perhaps there's hope for this company down the road, if not maybe at this moment in time? >> no matter what the data says, theranos already said they have tens of thousands of tests they had to invalidate. imagine being one of those tens of thousands of people who were misdiagnosed who now had treatments that they didn't need or who basically didn't get treated for diseases they might
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have had. they've already possibly harmed thousands of people. how can the person who did all this still be running this company? it really baffles me. it shouldn't be like this. this company's been using its star power. what they're doing right now with this overbacked audience is the same thing. it's more of the star power saying, hey, look at me. i'm so famous, therefore trust me. no, it doesn't work like that. >> you know, i think, meg, that vivek brings up a good point in one of the people you interviewed brings up a good point. it's all about the data, but the problems the company had data before and it wasn't krengt. it didn't accurately show what the tests were capable of. so at this point how is one to be sure? how is an expert to be sure that the data she is presenting is actually factual and accurately represents the accuracy of the blood tests? >> that's a great question, melissa. one of the biggest issues that people have with what theranos has done in the past is it hasn't presented in these
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scientific situations. they haven't come to this meeting. they haven't had their research peer reviewed. they haven't submitted to journals. it's all been very behind the scenes and cloaked in secrecy. one thing i've heard from people that struck me today is they think maybe they're turning a corner, but it's only after all of this has happened to them and they're getting investigated by the government and they're going through all of this that they finally started to maybe become more transparent. so people are still very reserved about it. >> are you surprised, meg, that she's doing this? and i'm surprised that her lawyers would let her. >> i am a little surprised, tyler. and i think the hope today is that we'll see something very different. that we'll see some real concrete data. and i'm very excited to talk with these experts again and to hear their reflections on what they hear today because there is hope that this technology could be very useful. but nobody's convinced yet that it works after all we've seen. >> i'm going to push back a little bit to vivek. i hear what you're saying, there is a little bit of cult of
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personality here but i guess in a sense of why they're doing it to me this is a possibly a save the company moment. so this is what they have to do. i don't think this is about star power. i think this is about savior. >> we should have had -- >> theranos for this, you criticize elizabeth holmes. >> exactly. she should no longer be leading this company. and there should be investigations as to what went wrong here to make sure it doesn't happen again because literally they put thousands of lives at risk. this is not a software product where you can issue a new release and everything will be okay. this is human lives being put at risk. it's not acceptable. they've violated ethics and there's no turning back. once you cross a line on ethics, there's no turning back. that's the problem i have with all of this is star power will not make up for what they've done already. >> vivek, what if she comes out and says i apologize, this is
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what i did wrong and here's the hard data to prove we are going in the right direction? >> what i'd like to see her doing is go to the hospitals and volunteer her time looking after the patients that, you know, have been affected negatively. and to be doing some real social service versus more star power and having people lined up outside for 45 minutes, an hour, to go and listen to her. this is exactly what's wrong with theranos and with silicon valley, that it thinks its star power celebrity status makes up for ethical issues and that they can have such low corporate governance. not acceptable. >> well, we look forward to hearing what she has so say. vivek, thanks so much. our thanks to you as well, meg tirrell. let's look at shares of etsy, big pop today. what is driving that stock and give you four other calls in street talk. apple had a nice run lately up 10% in the last month. can apple's run continue? trading nation and street talk both coming up. you're here to
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time now for street talk, our daily dive into the key analyst calls of the day. call number one, harley davidson, the hog. bmo upgrading shares and raising
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the price target. they say that hog is a, quote, good contrarian play. and the analyst likes what he calls the setup. he notes the extremely negative sentiment, multiple downgrades by their analysts and loves the fact 16% of the stock has16% of short and could see a bounce and adds critical of management in the past they like the move to a more consumer to cansed and less reliance on discounting at harley-davidson. new target $66. up 25% upside. >> an upgrade and the stock is down. >> didn't help. >> yep. comcast with a bullish call on the company. parent company of cnbc. $75 up from 69 better than expected q2. reiterates the outperform rating. the analyst points out 40% of the video subscription base is penetrated and another 40% to go and also a new quad play could be on the way with comcast potentially adding mobile to the suite of products. >> right now, our parent company
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with the number one and two movie globally. "bourn" and "secret life of pets" is number two. third stock, continental suntrust. they note the stack it's where it's at. the stack is an acronym for a part of oklahoma where as we have talked about with the scoop, another acronym, costs are lower of anywhere of drilling in america. suntrust notes continental more efficient and focusing on high rate of return assets with strong well results and the target on clr 60 from 46. about 35% upside on a stock nearly doubled this year. >> you talked to the ceo a number of times this company. can they survive, if oil goes down to 36 which is what the next stop is supposed to be. >> depends on the area. maybe not certain areas and
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reduced dramatically in north dakota. >> interesting. >> all about the region. >> interesting call. >> it is. well, scoop stack and two okay no anymores of oklahoma, lowest cost production. >> best position relative 0 their -- >> yeah. get to know those okay kro anymores. >> etsy. citi is above the street on revenues for both 2016 and 2017. driven primarily by assumptions for the seller services and citi says etsy made progress and sellers adopt to the additive seller services product. the price target is $14. that is about 40% above yesterday's close. what a pop on that stock. >> if you timed it, too, back in february at the $6 lows, you're doing well. maxim group is positive, as well. big move today. all right. only four names today. >> all right. >> couldn't find a good gift one. apple hitting the highest
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level since april. today, max wolf and ari wald. ari, it's been a hot stock the last 30 days. how does the chart look longer term? >> sure thing, brian. admittedly, we haven't been there with apple. i wouldn't consider it a top pick but we have to say, though, that the positives are starting to mount here and when i look at the chart, what stands out to me here, i want to use technical jargon here. watch out. but there's an island reversal in the chart pattern. what i mean by this, 101 level in april, the stock gapped below that level and now more recently following the july earnings gapped above it. and usually when you see that type of behavior, it's typical of selling exhaustion. i think could be marking bullish reversal in its trend and i think from a trading perspective, sets up a rally into 112 resistance. that was the high from earlier this year. >> okay. island reversal. islands in the stream. we're watching apple.
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you're not totally positive on it but something to watch. max wolf, your take on apple? >> there's sweetness and not much sour in the vinegar. the seven is a huge disappointment before it came out. a game changer? no. is 6 a tough comparison? yeah. we have seen that in units shipped and sales and still a cash machine, still a huge margin story. we like the growth in services and the long standing weakness in ipad and the mac and more to go here. also, as the market cools and everyone doesn't just going to scarf up all the risk they can, this is a huge company, top global brand, tons of cash on book. we see this as a winner going forward. as a safer place for your money with still some more room to run. >> incredible. writing off the 7 and we haven't seen it yet. thank you. for more, head to tradingnation.cnbc.com. up next, the final hour of the trading day.
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that is all when "power lunch" returns.
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welcome back. we began our two hours today or basically did hearing from jamie dimon, ceo and chairman of jpmorgan chase. he not only made the point you made last week, brian, that the gdp numbers may not be that good but ventured that they could be a lot better, in other words, 4% economic growth, if things break right and we are sensible about some pollties he sees as important. i thought he was remarkably optimistic. >> i thought he was, as well. just the point was that gdp not getter in five years but the economy clearly gotten better and some disconnect. >> and then a disconnect of what he's saying of 4% of gdp done right and saying that the numbers aren't accurate. >> aren't accurate. >> that's an irony in and of itself. >> you don't like the outcome, change the data, right? >> optimistic overall. >> what are you watching? >> oil. i think, again, listen, unfortunately, we are back to the balance sheet game.
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looking at oil stocks that, you know, we are getting back to that point in time, 40 bucks a barrel, where you have to dig through, can't buy a basket of oil names. dig through and say whose cost of production is what? they have come down last couple of years and still 40 bucks many companies, trust me, that are not profitable. and by the way, recent data out of the cftc and energy risk showing short positions of hedge funds in oil is surging. so, once again, the market is betting on oil falling. >> the screen of red you showed is amazing. as i mentioned at that time, not a half percent decline. it was 8%, 9%, 10%. today. today. >> while the markets seem like they're not doing much today, the overall percentage numbers, seeing below the surface is s&p 500 hit a fresh intraday high powering higher is technology and within technology sleepy areas of the market are catching up. take a look at apple.
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a $89 stock just in may. now up 1.6% in the past month up to about 10% and also take a look at the highest level in six months. and in the past one month, it is up 12%. >> and amazon likely end the day with a higher market cap than exxon. >> could be. thank you for watching "power lunch." >> "closing bell" starts now. hi and welcome to "the closing bell" on a monday. i'm kely evans at the new york stock exchange. >> feels like a friday almost. i'm bill griffeth. oil, the story, hit hard today. with names like exxon and chevron dragging the dow lower as a result. we'll look at what happens if the commodity continues to decline. >> and jpmorgan ceo jamie dimon telling cnbc he thinks the next president could help the u.s. economy grow at a rate of 4%. more on what he s

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