tv Power Lunch CNBC August 15, 2016 1:00pm-3:01pm EDT
it's actually done well. had a nice run. >> the jet deal. >> yep. >> we like it. >> the question on jet is is it defensive or offensive? and i don't think we'll get a resolution to that until they actually incorporate it into their own e-commerce efforts. >> guys, good stuff. see you tomorrow. power starts well. yes, it does. i'm michelle caruso-cabrera on the "power lunch" menu, the $13 trillion warning sign in bond land as the stock market hits record highs. pimco's cio joins us. plus, don't stick a fork in the malls just yet because foodies may be to the rescue. we're going to dig in with r restaurateur tim love. and later, zip code insanity, a worker forced to quit her job on the palo alto planning commission because she and her software engineer husband can't afford to live there anymore. "power lunch" starts right now.
all right, michelle, welcome bark. by the way, everybody. can you guess the price of this house game coming up. hi. i'm brian sullivan, happy monday. it is a happy monday if you own stocks because a new week and new record highs, dow up about 76 points right now. 12 dow stocks now up more than 10% this year. four up more than 20% just so far in 2016. caterpillar and united health the best two performers so far this year. if you're wondering, only six dow names are down this year led by nike, which has lost 9%. melissa. >> speaking of nike we have a great interview with the ceo of under armour coming up. i'm melissa lee, here's what else is happening at this hour. $4 billion real estate deal to kick off the new week. mid america apartment communities buying post properties in a stock swap deal specializing apartments in sun belt states. weather conditions are improving slightly in coastal louisiana following days of deadly rains. we'll have the latest from the flood ravaged scene straight
ahead. team usa continues to dominate at the rio games with 70 medals in total, 26 are gold, tyler. >> melissa, thank you. i'm tyler mathisen. welcome everybody. as brian mentioned, dow, nasdaq and s&p all at record highs even as $13.4 trillion worth of bonds globally now have negative yields. so what should you do with your money right now? let's bripg in pimco's global credit cio mark kiesel. good to have you with us. if so many bonds are in negative interest rate positions right now, that would suggest that u.s. bonds are fairly well positioned because they have positive interest rates. >> tyler, that's correct. i mean, our thesis is then don't buy assets which are being subsidized. what's amazing about what's happening in the markets right now is as you said there's over $13 trillion of government bonds in developed markets at negative yields. central banks around the world are taking out income-producing
assets out of the marketplace. what's happening with the bank of england is amazing. over the next six months they're going to buy more government bonds on the central bank's balance sheet than they're even going to issue. the ecb is set to basically buy 12% of the stock of corporate bonds over the next year. i mean, this is simply amazing -- >> but mark, when i read through your notes what i found interesting is you pointed out when you hedge for the currency, foreigners actually lose all that advantage, right? we shouldn't expect foreigners to be buying the u.s. treasuries because once they send money hedging out the currency they don't gain anything, is that a correct understanding of what i read? >> yes, michelle. in fact, this is the first time this has happened in three years. it's a significant development. basically what's happened is the market starts to eventually price in fed rate hikes. and as other central banks are lowering ranks, the hedging costs increase significantly. so now u.s. treasuries to both japanese and european investors are no longer a pickup relative
to their own government bond markets. this is a huge development for markets. what it means is that 1.5% u.s. treasury, 10-year maturity, is actually zero to a foreign investor. so i think what will happen is foreign investors will over time move to credit. we think corporate bonds will continue to do well. we also have become more positive on emerging market bonds. >> so give me some sense of what sort of returns i might expect in u.s. bonds versus emerging markets bonds, corporates versus governments. >> sure, tyler. so this has really been the year of credit. and credit is outperformed equities. going forward we're looking at more modest returns. but interestingly enough in a world where you've got $13 trillion of negative yield in government bonds, corporate bonds even today at current valuations can deliver 3% to 4% for investment grade corporate bonds in the united states, and roughly 5% to 6% for high yield
bonds. and emerging markets, which we mentioned earlier, actually look very attractive on a relative basis. investors in emerging market bonds today can earn 5% to 7%. >> mark, if we got the boe and ecb stepping in and buying corporate bonds in their regions, what does that do to relative valuations to u.s. corporate bonds? >> hi, melissa. yeah, really good question. you know, the bonds in both europe and increasingly in the uk now are very rich. the corporate bonds. they're trading at a positive basis, which we haven't seen in a long time. it means those bonds are very rich. in contrast, the central bank of the u.s., the fed, is not buying corporate bonds. so corporate bonds in the u.s. are still attractive, and we think that will cause investors in europe and also in the uk and also in japan to have a preference for u.s. credit when they buy corporate bonds going forward. >> you know, mark, and there are those, and we know who they are, who say this is all going to end
terribly. that eventually the banks are going to have to sell. they'll be no buyers, everything is doomed. they may be right. but we've been on that train for a couple years now and it's paid off. how much longer will the strategy of get on the backs of the central bankers work? >> well, brian, i think that basically when you've got an economy in the u.s. where it's 70% the consumer and the consumer is as healthy as they've been in ten years with rising wages, declining unemployment rate, where the banks are lending. loan growth in the united states is up over 7%. and basically you've got a situation where risk assets, financial conditions continue to ease. so i actually think the recession risk is probably lower than what the markets priced in, at least in the united states. and therefore this income coming into credit will continue. the reason why it's coming in to credit is because the earnings are so extended for a lot of these equities. people are not going for growth.
they're going for income. so this income theme is huge for credit. and it's also, i think, going to pivot to emerging markets. >> mark, with the situation in yields in the world, stock investors in the united states have to pay attention to what's happening to overseas bonds. and i'm wondering what you think of what's happened to the japanese 10-year. if we bring up a chart over the last year, people are going to be able to see, well, it's still negative. it's risen very, very sharply in the last week. peter boockvar was on cnbc this morning saying, wondering, is that a canary in the coal mine? is that something that's going to signal we might see a rise in interest rates around the world as a result? which would be detrimental to the stock market. >> well, one thing it could signal is that monetary policy around the world is reaching its limits, or it's reaching its exhaustion. and it could mean that over time we are going to gradually tilt towards more fiscal. and if we do eventually get the fiscal engines to kick in around the world and people are going to be watching japan, they're going to be watching the united
states, then, yes, we could be at the lows end rates for these markets and we could see the rates go up and curves steepen particularly if the fiscal engines kick in. >> but what do you think that is? are we at that moment? are you willing to call it or no? >> i'm not so bold as to call it, but what i would say if you've got negative yield in government bonds, there's not a lot of value there. it's clear that japan wants to tilt more fiscal, the yields as you said on 10-year, jgbs in japan are 11 basis points negative, they're 10 basis points negative in germany. even in the united states where the 10-year yield is 1.5%, it's very clear with clinton and even trump although it looks like clinton will win, that both candidates want to engage the fiscal balance sheet. so over time what this means, and particularly with the hedging costs going up there will probably be less support for treasuries going forward. >> got it, thanks so much. mark kiesel of pimco, thanks. on the housing front the
nation's home builders are feeling better about their business and they have good reason to. diana olick is live in washington with that story. diana. >> well, right, because there's a severe shortage of existing homes for sale. the job market's improving, more households are forming and millennials are aging into their home buying years. here's the grand finale, mortgage rates not only sitting near record lows, freddie mac just revised down forecast rates for 2017 saying the 30-year fixed will average just 3.7% next year. who'd thought that last december when the fed made its first move higher? so builder sentiment rose two points this month to 60. 50 is the line between positive and negative. we were one point higher a year ago, and buyer traffic is still weakening, but current sales are improving as are sales expectations. now, the biggest issue for builders is weakening affordability. they're having trouble making money on entry level product, really just lennar and d horton
are in that market, which may be why starts are 25% below normal levels. fewer people are able to buy on what's being built today. >> we'll be watching for that. thanks, diana. speaking of housing, get to seema mody for market flash. >> let's get a check on the home builder stocks on the heels of that strong builders sentiment number. the spdr home builders etf ticker xhb gaining more than 1% at its highs of the session. shares of d.r. horton, lennar and pulte group seeing a lift all this ahead of home depot and lowe's later this week which likely could be market moving and provide another indicator for the health of the u.s. housing market. >> seema, thank you very much. here's a question, are foodies the new mall rats? we're going to take a look at the changing face of the american mall with restaurateur tim love. and later on, home prices gone wild. how much do you think each of these three california homes is up for sale for? we're going to play a little
game and see if my fellow anchors here can guess it right. and speaking of home prices in the golden state, unbelievable story of one planning commissioner who is also a lawyer who has to move because her and her engineer husband can't afford it. a lot more to do on "power lunch." stick around. when it comes to healthcare, seconds can mean the difference between life and death. for partners in health, time is life. we have 18,000 people around the world. the microsoft cloud helps our entire staff stay connected and work together in real time to help those that need it. the ability to collaborate changes how we work. what we do together changes how we live. this is my new alert system for whenever anything happens in the market. but thinkorswim already lets you create custom alerts for all the things that are important to you. i guess we don't need the kid anymore. custom alerts on thinkorswim.
very different. courtney reagan is looking at the changing face of the american mall. >> hi, michelle. so macy's, sears, ralph lauren and walmart and other numerous stores announce closures, the u.s. is overstored. it's a fact more than six times the square foot per person than many other countries. shopping center reits though surprisingly okay with the store closures too. anchor stores like sears and jc penney that used to be exactly what a mall wanted. but as the sector's productivity and traffic continues to fall, department stores are not always the most attractive tenants anymore. that mall shifting is to things like fitness, education, medical, government, food and beverage and even religious tenants. a decade ago food and beverage was just 5% of the mall's tenant mix. now it's 30%. this is according to jll, the new guard brings in new leases and higher rents. for example, a department store could be paying single digit rents per square foot, a new non-department store tenant
could pay double digits for the same space. the preference is also for much shorter leases. jll says in shopping centers with over 50,000 square feet, leases under a year in length have surged in popularity. now making up more than 16% of all leases with long leases half of that. you can see a big change even in just the last year. brian. >> all right, courtney, thank you. so are restaurants really going to rescue america's malls? let's bring in tim love, restaurateur, investors and cnbc contributor. tim, i don't think, i know you have a lot of business interest, you don't have anything in a mall, do you? >> not in a mall. i've got airports and i've been in strip malls as well. >> but would you go into a traditional mall right now? >> you know, i think that would be according to the landscape of the mall, i mean, i've seen a lot of malls, you know, shrinking just like she spoke of with retail fading quickly.
it's funny how people look to restaurants to be anchors these days whether it be in a new development, a new live entertainment center or like you said in malls, the good thing about a restaurant tenant is they come in and improve the property without a doubt. the value of the property goes up when a restaurant comes in as compared to retailer may just add some racks or lights. >> and it used to be, tim, you go to a mall and you get, we all know it, cinnabon, chick-fil-a, no offense to those companies, but now darden, they've gone higher in. do you think there's one or two d can you name one or two of these nicer chains that tim love would endorse or go to? say you see something and say i'm not a big restaurant guy, but i'd go there. >> that's very true. i'm not a big chain restaurant guy obviously. you know, i think you see malls going more towards independents, which is a bigger draw. there's a couple of i think higher end chains that are --
that have like a large selection of beers or something that has a little hook like that, i can't really think of them but i really like. most of the food like that i wouldn't really participate in except for chick-fil-a. otherwise most of the restaurants that i would sit down in tend to be somewhat regional or at least local as opposed to like a national chain. i have to say honestly though i really don't go to many malls for that reason. i prefer to be outside and shop the independents. >> so this underlying premise then that having a restaurant replace a big anchor tenant that used to be a department store, do you think that's going to work or it's not going to work? >> well, i think it's certainly going to do better than adding something like sears or jc penney. i mean, they take up a large amount of square footage, you don't hardly ever see anybody shopping in one when you go in to one except for like december 20th. whereas restaurants they're going to fill seats. and the idea of a mall if i was somebody who was planning on a mall, i want to find out what's
going to draw the most amount of people in to my facility. that's what's going to sell the rest of the tenants. so a restaurant is a great idea, especially one if you can draw people. that's why they love movie theaters and malls because it draws people. once you get people, you get tenants. >> you've got to figure out a way to make the mall a destination. it's either with entertainment or with dining or with any number of things, but that seems to me the way you do it. >> that's why you're seeing these new developments like l.a. live, one in arlington called texas live. all building a complex where that mall used to be, used to be a place where kids would hang out and not be scared -- >> tyler was going to tell you his ideas. you said this repeatedly. serve drinks. >> i say that the big chain stores would do a lot better if they had bars and cocktail hours. >> they're trying it. tim, i don't know if you know, remember urban outfitters, philadelphia based urban outfitters, young hip store,
they recently -- you probably know mark vetri, very famous philadelphia guy. >> correct. >> they bought his restaurant empire and pizza change for $100 million a year or two ago because they're going to put the p p pizzerias in, do you think that's going to work? >> 100% i think that's going to work. the thing is people love to drink and eat, if you can provide that in a place where you want to do other things. >> as simple as that, isn't it? people just love to eat and drink. >> you also need to or you will perish. >> that's right. >> my feeling is they used to be, and my mother when she would go out with the ladies to lunch, she'd go up to the restaurant at the top, that's not what i'm talking about. i'm talking about putting the bar right there on the -- >> on the rack. >> right next to the rack, exact pli. >> right next to the cash register. >> the more you drink, the more you're going to spend. >> the more you buy. >> yep.
>> i agree. you know, if you can provide food and beverage, people stay longer, they get into a better mood generally. >> yes. get drunk, go into a swim store, buy some goggles and you can actually say beer goggles. >> beer goggles. >> yeah, vegas has perfected that whole thing. >> it's the whole model. >> i used to waitress, and the best time to waitress if you worked an ihop, saturday night to midnight to 2:00 a.m., all the people came in hammered and left you huge tips. >> they can't count at that point. >> exactly. >> or ran out. >> tim, thank you. tim love. we appreciate it. showing us the love. >> thank you guys. still ahead, latest on the louisiana floods including this dramatic rescue of a woman and her dog trapped in a sinking car. you must see this. "power lunch" returns in two minutes. look at this. you both have a
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(doorbell) mom, check this out. wow. swiffer sweeper, and dusters. this is what i'm talking about. look at that. sticks to this better than it sticks to lulu. that's your hair lulu! mom, can we have another dog? (laughing) trap and lock up to 4x more dirt, dust and hair than the store brand stop cleaning. start swiffer ing (ee-e-e-oh-mum-oh-weh) (hush my darling...)
(don't fear my darling...) (the lion sleeps tonight.) (hush my darling...) man snoring (don't fear my darling...) (the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. dramatic video from baton rouge, louisiana, a woman and her dog being rescued from their car at the last possible second before it sinks beneath the water. rescuers attempt to smash the windows to free the woman before one of the rescuers, you see there, jumps into the water to cut away the car's convertible top with a knife. take a look at that. he pulls the woman out at the very last minute. and then the woman says, wait a minute, my dog's still in there. so the guy goes back into the water and you see there pulls out the dog.
this guy is an absolute superhero. >> we throw the word hero around a lot these days, that guy is a hero. >> absolutely. >> he risked his life. >> let's get to nbc's gabe gutierrez on the ground in baton rouge with the latest. >> reporter: president obama has declared several parishes federal disaster areas. the governor says more than 20,000 people have been rescued from their homes or their cars so far over the last few days some 10,000 or so spent part of the weekend in emergency shelters. now, this neighborhood that we're in in eastern baton rouge, residents here say this is unlike anything they've ever seen. the water rose here so quickly. the good news is that many of the rivers in louisiana have just crested. that means the water is starting to recede. however, other rifvers are expected to do so over the next few days. the governor again is calling this an historic event, unprecedented in parts of his state. the baton rouge police department is on hand in case
more water rescues are needed. there are parts of the state that received more than 31 inches of rain in a 48-hour period. back to you. >> that was gabe gutierrez in louisiana. by the way, louisiana as you know huge oil and gas state as well. more than 1 million barrels per day refined there. most of it near the mississippi river, or on the river. i've reached out today to most of the big refineries so far, nobody reported any slowdowns or problems at the refineries, motiva did have a fire on thursday, unrelated, slight slowdown there at its convent refinery, marathon petroleum, that's the big one, the gariville refinery one of the biggest in america, 540,000 barrel per day, just heard said we're not going to tell you if there's an operational issue, but basically there's no operational issue and if there was we have contingency plans, whatever that means. no disruption in refining right now. let's get a market flash with seema mody. >> hey, brian, rally on wall street continues.
keep in mind it's not just the large caps, the s&p 400 midcaps hitting intraday all-time highs today, post properties, denbury, supervalu, so far this year midcaps up double digits about 12% for 2016, michelle. >> thanks, seema. show you what's going on in the bond market today. across the board we've seen yields move in higher across the board, selling in every single 30-year, 10-year, 5-year, 2-year, 10-year yield up to a wloping 1.544% today. tyler. how do you save a failing brand? we're not talking about a product, we're talking about politics. trump style. what he needs to do to turn things around. the master of the brand having a little trouble with his political brand. and forget gold, silver, bronze. we'll tell you why rubber is the next big winner in brazil. that's next.
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for this hour. milwaukee police identifying the victim who was killed by police saturday night as 23-year-old sylville smith, they say he was killed when he turned towards an officer with a loaded gun and failed to comply with orders to drop his weapon. >> the issue that will be determined is whether or not when the officer used deadly force he faced a credible deadly force threat to himself or another person. ultimately that will be the conclusion of the investigation. i know what i saw on the video. i know what i see in the still. certainly appears to me that at the time he made that decision, it was a credible and legally protected decision. >> turkish authorities arresting more than 100 people in raids conducted at several istanbul courthouses. those raids are part of the investigation into the failed coup attempt last month. russian foreign minister sergey lavrov discussed resuming international talks on resolving the conflict in eastern ukraine, that's in light of escalating
tensions. and how is this for a nutty situation? oh, look at that poor squirrel. paramedics finding a connecticut squirrel with its head stuck in a cup. the squirrel was flipping and flying into the air in a vain effort to dislodge itself. it took two tries, but the rescuers were finally able to free it. there you go. run, little buddy, run. >> a lot of the olympic athletes like michael phelps engaging in cupping, okay. >> yes, that's right. this is cupping of a different kind. >> this is a squirrel that's gotten a little confused by some cupping there. >> i want to know why the paramedics rescued him versus animal control. >> i don't know. >> where were the animal control guys? >> i don't know. that's animal out of control. >> yes, it is. >> sue, thanks. >> you're welcome, guys. shall we take a look at the marke markets, at or near record highs, dow, s&p 500, nasdaq, they'll show them to you, s&p
500 up about a half percent and nasdaq up about 0.75 bank account. michelle. tyler, during the primaries, donald trump was outsider, builder, successful businessman, guy says it like it is, he beat more than a dozen would-be contenders for the gop ticket. while his brash style served him before the election, "the wall street journal," mr. trump alienated his party and trying to turn around his campaign. joining us ceo with fcb global. thanks for being here. you are not a campaign expert, you are a branding expert. but donald trump has prided himself on his brand. skb we thought was a really good branding expert, until now. what can he do? what's gone wrong here? >> well, i think donald trump was really the anti-establishment brand. i think it's a bit of red herring. we go to him as business brand. he was bigger than that. and i think millions of people got him the republican
nomination because he was the anti-establishment brand. and i think what we've seen recently is he's become the anti-individual brand. and i think that's tarnished him. i think when you're a brand that you're against the establishment, you're brave, when you start attacking people individually, you start to become rude, obnoxious, unlikable. so i think his brand has moved. and if he has any hope of coming back, i think he has to be bigger than donald trump. >> does he need to stop blaming the refs? if this was a basketball game, you'd say he's blaming the refs. and the refs in this case are the media. he's angry with the media. >> you know, i think how you use the media is something that donald trump doesn't need advice on when you see the amount of media coverage that he's got. i think his as a branding expert you look at why is he losing ground, why is he not succeeding. and i think if you look at who
propelled him into a successful position, it was by people being able to relate to someone. he wasn't just anti-establishment. he was against everything establishment. and people could relate to that. what people cannot relate to is a brand that does singular attacks on minorities, on women, on individuals. >> so if he just stops, can he fix it? if he stops being anti-individual, can he fix this? >> it's interesting. silence is a strategy in marketing and in life. and i think hillary is using that. i think she's going a little quiet. >> she's given one interview since the "new york times" and donald trump has done more than 70. should he stop talking? >> well, i think if he wants to -- i think we love america whether we're a republican or democrat, you need two parties. i think he has to stop talking for a period of time. but more importantly as a brand i think he has to get back to why millions of people voted for him. and i think it's because he represented the anti-establishment, not because
of his business accumen. >> to brian's point, if he hadn't said anything the last two weeks he might be ahead at this point. just don't talk. >> my friends here know that i'm obsessed with the show "hamilton." we stipulate that. the famous line in "hamilton," aaron burr to hamilton, talk less, smile more, never let them know what you're against or what you're for. i'm not saying he needs to do that, but he needs to talk less. and i don't know whether he needs to smile more, but he needs to talk less and take the focus, the hardest thing i think for him to do, is to take the focus off of me. and that's what he needs to do. he's brought the focus all onto him by saying all the things he has when he needs to put the focus on the issues, the economy and on her. >> it's ironic, isn't it? because it's a brand he thought or people might have thought it was donald trump the brand, but actually it was much more than that. it was donald trump the
anti-establishment figure. and there are millions of americans which you talk about who are not in d.c. or new york who haven't felt the benefits from 2008. >> right. >> who are angry. and frankly you have to understand -- and he tapped into that. they bought into him as the anti-establishment. >> that's his strongest argument. >> they didn't buy into somebody who targeted individuals of his own party, women, minorities, that's not what these people bought into. and i think that's why as a brand he's feeling some -- a lot of pain and in the polls. >> so you read all these press reports that those who surround him are trying to get to him to give him clarity on his talking points, what he should do. you deal with ceos and egos all the time, what can you do -- if you had him sitting here, what would you do, what would you say? >> that's the ultimate test, isn't it? so this is, you know, true character shows in your hardest hour. he's running for the most important office, his brand is damaged, there are some repercussions for his business that we're seeing in some
studies that are coming out. i think the ultimate decision has to be his. you can advise a ceo, you can advise a brand how to turn itself around. the real question is does he have the focus and the ability to do it. >> what can hillary do now to leverage what is going on? what can her brand do to capitalize on donald trump's woes? would you advise her to do anything different, or just sit back and watch the implosion? >> we talked about it a minute ago. if you think a marketing strategy sometimes silence is a strategy. i think we're not seeing huge noise out of her campaign right now. and i think she's allowing the donald trump brand to implode. and because frankly what he stood for, the anti-establishment, has now become the anti-individual. and if he can't get out of that hole, his brand will not recover, nor will the election. >> carter, good to have you on. thank you. >> great to be here. >> carter murray. all right, still ahead, keep guessing. how much do you think that each of these california homes is
worth? our sort of housing edition of "the price is right" is coming up next. we want you to play along and i'm going to pose the questions to everybody on this desk. prices in that area may be so out of control that one of the residents, one of the planning commissioners and lawyers had to move because her and her husband could not afford it. we're going to get more on this story and play a little guessing game coming up. was just a bottle. that no one would ever notice me. but i knew i could be more. that one day, i would make people smile. [woman speaking indistinctly] won't replace the full value of your totaled new car. the guy says you picked the wrong insurance plan. no, i picked the wrong insurance company.
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all right. there is a lot of talk about how expensive housing is becoming in silicon valley in the bay area. some say it's a bubble that must pop. who knows. time will tell. but to show you just how high some prices at least seem, we're going to call this can you guess the price. we're going to show you these three homes, give you a little more about them and have tyler and melissa guess the price. whoever's closest wins some jersey shore taffy i have in my pocket. >> i don't want it. >> if you're on the radio, you can't see the homes but i'll try to describe them to you. are contestants ready?
>> yes. >> let's play the game i'm actually calling who has to be a millionaire. let's start with house number one. located in beautiful suburban sun sunnyve sunnyvale, california, 2106 square feet near the highly rated homestead school. this all from zillow by the way, doesn't mean they'll sell for this amount but this is what they are listed for. everybody ready? i can't see, what do they say? >> we do price is right rules right? >> 325 million. >> 2.2 million. >> i would have overpaid. >> i won because the price is right rules, right? >> no, there's no lower otherwise -- >> that's what we do on "fast
money." >> i was going to put up a bid. >> house number two is in the epicenter of it all. it's right in palo alto. this is a bigger one than new one. this is a five-bedroom, five-bath, 4,500 square foot newly built home on 0.3 acre lot. small, not a lot to take care of. palo alto, california, nice house, one garage. what do you think? there's the music. >> $5 million. >> michelle says $5 million. >> 6.25 million. >> i say 4.5. >> melissa's completely reversed. melissa, you win, but you're not even close. 7.5 million dollars. >> really? >> $7.5 million. again, listed. don't know if it's going to sell or not. finally, home number three, we got -- did tyler win the first one? michelle -- melissa won the second one. number three in san francisco proper, row house between new construction, obviously it's a teardown. it's this one right here.
even says in the thing. forget pre-war, you know they say in new york pre-war building, this was pre-earthquake, it was built in 1895. so a teardown in telegraph hill, your guesses please? >> $3 million. >> oh, same. >> they want $3 million. tyler? >> $1.95 million. >> 2.5 million. >> wow. >> for a teardown, which looks like it's going to fall down at any given time. so, guys, i mean, just not picking on any of these homes but there you go. $2 million, $7.5 million and the mortgage on a $7.5 million is like $75,000 a month, if you put $20,000 down or. >> more, i think. >> who has to be a millionaire. >> the whole town does. >> i got your salt water taffy from the jersey shore right here. >> no takers. no takers. all right. so clearly homes in tech land are expensive, but they are so expensive that our next guest, lawyer and her husband, a software engineer, had to move
out of palo alto because prices were that high. kate downing joins us now, just resigned from volunteer position as planning and transportation commit e commissioner for palo alto. kate, thanks so much for joining us. you wrote a letter explaining your resignation as a planning commissioner and said this is a problem gripping our whole town. what do you think should be done about it? >> i think we really need to add housing. the bay area since 2010 has added 500,000 jobs and only 50,000 housing units. it's the reason why housing is so incredibly unaffordable within the bay area. and every part of the bay area needs to do their job to fix the job -- to fix the housing shortage. >> why hasn't that happened? >> yeah, what's the impediment? >> i think the impediment is that local city governments are not properly incentivized to actually permit housing. people who control the city governments are usually wealthy homeowners, they already have a home so it's not really in their self-interest to allow for more housing in their cities.
>> are you saying essentially they want to keep the prices of their own homes high and so therefore have no incentive to issue new housing permits? >> i think that's true in part. i think also people are much more concerned about, you know, a lot of people moved in to silicon valley before it was silicon valley. they moved in because it was a white picket fence suburb and they want to keep it as a nice suburb. they're not interested in their city's growing and they're not really interested in the growth of silicon valley. i mean, they kind of see the entire tech world as a major inconvenience to them. >> so, kate, give me an example of what a planning commission or a city council did or didn't do that would have led to more housing if they'd made a different decision? >> well, in palo alto particularly, i mean, there are many, many times now that residents have come to the city council and they've said, please, make housing a priority. please, build more housing around our train stations, build it near transit. the response from city council instead of building housing and
instead of exploring new creative forms of housing has actually been, well, we understand we have a jobs/housing imbalance, let's kill the jobs. >> okay. but when i read the letter that you wrote to the residents of the area, you said things like above malls, they've tried to come to you and say let's put some housing above the mall and they say no. and used to be right now there are lots of zoning rules that say you can only have one story and maybe you should allow two stories. those kinds of things keep getting negated? >> that's exactly right. i mean, palo alto has a four-story height limit everywhere in the city. and in most places it's three stories because it butts residential. only 3% of the city is actually zoned for multifamily housing. so the zoning code combined with the taxes on housing developments basically make it such that it is extraordinarily expensive to propose any housing in palo alto. in fact, during my time on the commission the last two years we've only had one 100% housing
project. and it was a mere 14 units that was three stories. and that was in our downtown right next to our train station. >> all right. fascinating topic. kate, thanks so much for joining us, telling us your plight. kate downing, former resident of palo alto. we've got breaking news on the markets. let's get to kate kelly for that. >> melissa, thank you so much. just going through the 13-f filings today of major investor in the market and what they're holding or not holding this quarter, david teper's appaloosa management appeared to have gotten rid of call on the spider etf bullish market positions potentially 2.7 million in the first quarter, now that position is gone suggesting a more neutral or bearish approach. what i'm told by someone familiar with tepper's thinking is he's taking a guarded approach to the market. he thinks that one should neither be too short nor too long. you'll recall from about two and a half years ago may of 2014 he jarred the market by don't be too long, around the time the
s&p around 1900 but apparently taking a cautious view. and he's told people that if you don't like where the market's going, you don't feel it's going to go higher, what you should essentially do is put money in cash. so interesting words, guys, in terms of tepper's mindset at the moment. i should note he manages about $19 billion at appaloosa. they're sightly up for this year but don't want to rule out further upside, at the same time they don't want to be overly short. >> do we have any details, kate, on how he's positioned within that supposedly neutral position? >> well, it's hard to get complete clarity. obviously i mean it sounds like they themselves at appaloosa are trying to occupy middle ground here. looks as though one thing they did so far this year is took about a 1.6 million share position in facebook in the first quarter that they then sold in the second taking some profits there perhaps. and they've also been active in airlines. they've downsized a little bit of their delta position, paired
a little bit of their southwest position, they've gone longer on some pipeline companies that they like. so those are some of the different things they're doing. i don't see a big sec torl theme here. it was that 3 million call option position in the spider stuck out when you saw the absence of that in this filing leading to questions about whether they're bearish. from what i'm told they're definitely not bearish, guarded is more of the word. thinking about risk management, expecting further upside. one other point is that many people have said from paul singer to this person familiar with tepper's thinking that they feel the central banks have distorted the bond market. i think that's a fairly accepted premise among a lot of investors that we talk to. now that trend may be starting in the stock market as well. and the question is how far along are we in that so-called distortion, where will it end? i've heard a comparison of the period 1998 to 2000 when you had into the system because of the ltcm crisis and desire to avert disaster there. and maybe that's a comparison in
terms of who knew when that nasdaq bubble was going to pop. turned out it was march 2000, but we didn't know that on the way up. >> yeah, thank you, kate. good point. a lot of people don't realize how much stocks central banks of the world are actually buying as well. >> bank of japan is the biggest single owner of 50 stocks of the nikkei 225. can you imagine if the u.s. federal reserve and said we're now the largest holder of microsoft, amazon and everything? that's what's happening in japan right now. >> the swiss central bank is one of the biggest holders of apple. >> wow. >> they had a huge increase in position in u.s. equities specifically since the first quarter. >> want to know who's buying. >> agree badly but we asked ki serks, el in the beginning, aren't you happy to ride that train as long as you can. people say the market is up -- so, as long as the 401(k) goes up, you're probably happy about it. >> until it all -- >> until it doesn't. >> right. that's the question. week two of the olympics is in full swing. and we have a look at why rubber
is the big winner in rio, andrew. >> i'm going to spare you my feet this time, but when we come back, we're going to talk about these -- oh, you know what, i don't know if we're coming back or not. we're doing it right now. we're doing it right now. i was going to show you my feet, but i'm going to save you that. are we really doing this now?
forget gold, silver and bronze, rubber is the big winner in brazil. we're live in rio with that story. hi, andrew. >> it's great to see you, tyler. i will be showing off my feet in just a minute, but in the meantime visa saying tourists during the olympic games now spending twice as much per visit as regular tourists. during london games u.s. visitors spent $175 million, the french coming in silver spending $125 million and the australians spent nearly $50 million. so you might be saying to yourself what are they buying here in rio, well, a lot of javiana flip-flops. >> as athletes and tourists explore rio, they may be trading in their running shoes for footwear made famous here. it's just two straps and a piece
of rubber, they're flip-flops. and the brand that has become synonymous with them was born right here in brazil. havaianas, they are everywhere you look in rio. created in brazil in 1962, the brand has grown to a global footwear powerhouse. >> brazilians don't say i'm wearing flip-flops, they say i'm wearing havaianas. >> the north mern director. >> tourists went to brazil in the past decade and got to learn the brand and took a pair home. we grow organically and internationally. >> since 1962 3 pn.5 billion pa have been sold around the world in a combination of 500 company owned and licensed stores. that's 220 million pairs a year. >> we produce about eight pairs per second. >> now, that's an olympic pace which may continue as the rio games bring even more attention to the made in brazil brand. pretty incredible success story,
havaianas branded with the olympic ripgs, like mine, these are mine. they are flying off the shelves here at the olympic park. we saw crowds pushing their way into a pack of customers just to find their sizes. all while workers try to replenish supply. i should say it is now 96 degrees outside. so i'm happy that i'm wearing these opposed to regular shoes, guys. >> looks really cool. >> they look good. thank you. >> i hate them. you're being so nice. you are going off about how these are so -- >> all right. >> one other thing -- >> mine fell apart, but i'm also, andrew, to be fair, i'm heavy, i'm flat footed so i'm probably tearing the heck out of them. >> here's what i don't understand, andrew, why is a brazilian brand calling itself -- when i saw that brand, i thought they were from havana, cuba. totally confusing to me in terms of marketing. >> that is confusing. i should tell you by the way and i'm going to wear these later, but we're going to have the ceo of under armour on the show literally in about half an hour.
so you got to watch that. he may not like the fact we're going to have these -- i'm going to have these on my feet. kevin plank is going to be with us, did want to tease that. >> you can only buy those flip-flops through their branded stores or can you get them elsewhere? >> these i think you might only be able to get -- i can get you a pair, tyler. >> bring me a pair. >> what size, tyler? >> 11s. >> what size? >> men's 11. >> all right. there you have it. you got a deal, my friend. >> must be nice. that's a cool down, 96 degrees, comfortable compared to here. airlines are falling, as is phil lebeau, free falling to be exact. he went sky diving over the weekend. there's the picture. we've got both stories straight ahead. ♪
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welcome back folks. hour number two of "power lunch." all four of us in the house. here's what's on the menu for this hour. we're all over the market, stocks at all-time highs. can you still ride this rally? we'll talk about that one. plus, we'll hear from a billionaire who's holding his nose and backing donald trump. but he's got some advice for mr. trump coming up and how to right the ship. and the ceo of under armour will join us live from rio where his
company is trying to crash nike's party. the second hour of "power" begins right now. and i'm michelle caruso-cabrera. let's get your check on the markets with two hours to go until the closing bell. as tyler mentioned stocks hitting new all-time highs across the board, dow, nasdaq and s&p 500 as you can see higher across the board with the dow up another nearly 77 points. brian. hey, michelle, thank you very much. i am brian. in your headlines this hour donald trump, the aforementioned, speaking sportily in youngstown, ohio, amid new calls for him to either change his ways or get out of the way. massive wildfires burning in lower lake, california, more than 175 structures destroyed including an historic firehouse. and aig is close to selling its mortgage guarantee unit to arch capital group for more than $3 billion. melissa. well, brian, as michelle mentioned stocks are hitting new
highs today. and the underlying trends look good too, so is this the perfect market? bob pisani at the new york stock exchange. >> forget the narrow trading range and weak volume and whole august doldrums things, the market is holding up well. let me show you some of the positive indicators we've seen just in the last week or so. number one, most important thing advance/decline line keeps going up, so more stocks keep advancing than declining every day. nearly 75% of stocks are in up trend. we've got breakouts from the trading ranges. so more stocks are emerging from trading ranges or really weak trading patterns like energy. and we've seen very modest second half earnings revisions, not a lot of dramatic downward revisions we saw in the first and second quarter particularly with energy stocks. and finally, we're seeing a healthy rotation into growth and cyclical names and out of defensive names like utilities and telecoms and consumer staples. the leaders this quarter, we've been talking about techs, things like semiconductors, metals and material and mining stocks, internet stocks as well.
things like microsoft, tremendous earnings recently. they've been powering forward. and some of those fang names we used to talk about, alphabet, amazon, facebook, all with great quarters so far. they're helping move the nasdaq to new highs right now. laggards, you know them, utilities and telecom and consumer staples, names everybody was going after largely for defensive purposes and largely for their dividends. now falling back a little bit. now we've got a new leader in addition to technology and some material names as oil's been hitting $45, we're seeing some of the big enp companies like concho, apache and murphy oil all up 2% or 3% right now. bottom line healthy sector rotation and a lot of interest in moving into the tech names. i think the one thing that could corral this or derail is some kind of concern about the u.s. consumer. that's not on the horizon, at least not now. back to you. >> thank you, bob pisani. let's bring in david kelly, chief global strategist at j.p. morgan funds and john solstice,
chief strategist at oppenheimer strategists. bob was making the case that some in the markets think this is actually the perfect market. david, you actually say this is far from it. why not? >> well, of course the markets done very well, but when you buy into a market, you think about future returns. i do think the market can still go up, but obviously it's not as cheap as it was. so i think in the short run i think the outlook's pretty good. over the next five years i actually prefer some international markets to the u.s. equity market right now. we've come a long way. >> yeah, the expensive part of the markets, john, i think is what the argument that a lot of people put forth that right now it's banging up against this historical high in terms of p/es. when you look at the rotation that's happening, people are rotating out of the more expensive sectors of the market like utilities as well as consumer staples, telecom stocks and moving into the lower valued areas of the market. isn't this all healthy market action? >> well, you know, i certainly think it is, melissa. the way i've looked at it, we've wanted to be in cyclicals and
have been in cyclicals for a long time. so we sort of reap rewards on that. we think defensives have been overvalued for quite a while. it's a normal knee jerk reaction for people to be in them. it indicates desperation for yield in many cases. but at this point the economic growth and fed dovishness will likely give some protection there to the defensive issues. the healthy thing is the move into cyclicals and the diversification into international, we've been seeing the emerging markets are up already 14% on a year-to-date basis the last i looked. and now we're even beginning to see efa get some lift. that looks good to us. >> david kelly, i've heard for decades that interest rates have to go up. it finally feels like consensus has arrived at rates are lower for longer, everybody's cried uncle, oh, this is the way it's going to be for a very long time. but when you get to those consensus moments, that's precisely when everything turns. what's your view on what's going on with interest rates?
lower for longer the truth? >> no. i mean, i don't think this is going to last for more than a year at this stage. i don't know if the fed's going to raise rates in september. i can't think of a single reason why they shouldn't, but they are very dovish. the problem is that underlying inflation pressures are rising and the labor market is tightening. and you could see a pickup in inflation next year, and as we move into next year, you know, we're going to be over 2% year over year on the consumption deflate tor by early next year. if the fed finally loses its nerve and finally begins to raise rates, you could have a bit of a regime change here. i think the u.s. economy is going to gradually overheat here. >> so, david, what level do you think the 10-year bond -- just to pick one, will be at two years from now? >> two years from now -- well, i wish you would ask me a year from now. a year from now could be 50 to 100 basis points. two years from now is really hard to say because i think what's going to happen is the
fed is going to finally get scared about inflation, raise rates and then the economy will accelerate because the big thing the federal reserve is missing the first few rate hikes will generate more demand in the economy. so you think see actually i think acceleration in interest rate increases late in 2017 going into '18, but then the question is at what point does the economy cry uncle as rates go up further. so it's quite difficult call two years out, but what you know is in the long run if you're getting 1.50 on a 10-year treasury with underlying core, it's bad value. you don't want to be in that asset. >> john, i want to ask you about a headline that we just brought to our audience regarding david tepper of appaloosa management eliminated giant call position, 2.7 million in calls as of june 30th filing indicating according to kate kelly's reporting he's more guarded when it comes to the markets. neither too long or too short at this point. you as well as david faber, cyclicals, does that necessarily mean you are bullish in the markets. where do you stand overall as we sit here with a trifecta of record highs today?
>> well, we've got to think where we stand right now is the economy is doing better. the federal reserve is showing remarkable sensitivity. we expect they're going to raise once this year just to keep animal spirits in check. and that will probably happen in december. so we want to own cyclicals. and when we say cyclicals, we're talking about information technology, consumer discretionary, materials and industrials primarily. >> all right, guys, thanks so much for joining us. appreciate it. david kelly, john, go to powerlunch.cnbc.com right now to see what john is underweight in this market. let's get to seema mody for market flash sfwl tracking all pockets of strength as major indices trade in record high territory. et merging market etf up 1% today, it's eight positive session in the past nine trading days. and for the year it's up nearly 18% on pace to break a three-year losing streak as investors bet on the recovery and commodity prices and low rates. if 2016 by the way were to end
today, this would be the emerging market etf's best year since 2009. best emerging market within that etf, brazil, yes, the home of this year's olympics and the country going through of course some major political reform. the stock market there up about 36% year-to-date, tyler. >> seema, thank you. i'll take 36% any day. coming up, we'll talk to a billionaire who is also a trump supporter, but not an enthusiastic one. was not a trump supporter, we'll find out what changed his mind and brought him into the trump camp. that's next. the heirloom tomato. when you cook with incredible ingredients... you make incredible meals. fresh ingredients, step-by-step recipies, delivered to your door for less than $9 a meal. get $30 off your first delivery blueapron.com/cook.
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welcome back. you're looking live to event in youngstown, ohio, where former new york city mayor rudy giuliani is speaking at a donald trump rally. mr. trump expected to take the stage at any moment for an expected address on the war on islamic terror. mr. giuliani introducing mr. trump. meantime, billionaire media mogul stanley hubbard recently threw his support and sizable bank account behind the republican candidate for president. because he backs mr. trump, doesn't mean he has to like the guy. mr. hubbard, glad to have you with us. our intro might have been cryptic to some individuals, but that's because before you were for trump, you were against him. you tried to stop him. you had a pac that said never trump and you favored other candidates, all of whom mr. trump vanquished. i say that by way of clarity for
the viewers' sake. you probably have in your business career had to turn around failing stations, turn around failing businesses. what advice would you give mr. trump now to turn around his campaign? >> well, the advice i would give mr. trump is when you talk, hey, you're not talking to friends at dinner. you're talking to voters, the public. and you can't be just talking off the top of your head and saying flip things. you've got to be serious. this is serious. you're running for the presidency of the united states. and this is not just a coffee fab, this is a competition for the presidency. and you got to be serious, or realize that what you say has meaning. >> there has been -- i agree with you on that actually, not that anybody cares what my view is, but he says things off the top of his head in my word, not yours, wise-ass new yorky way that ends up getting him into hot water. >> that's right. it's like talking to friends around the dinner table, and you can't do that. you've got to stop and realize when you're going to be
president or run for president, everything you say is news. and don't blame the media for so-called twisting what you say. don't give them bait. don't give them things they can twist. be serious and stick to the message. >> why are you backing him? >> why am i backing him? because i don't want mrs. clinton to pick a supreme court justice. we don't need more regulations on our country. we don't need anymore of this global warming nonsense which is costing everybody in the country just tons of money buying fuel and doing everything else. that's why i'm backing mr. trump. >> you know what his critics say he's so dangerous. you don't know what he's going to do. in your view who's more dangerous, donald trump or hillary clinton? >> well, i think hillary clinton's more dangerous because we know what mr. trump is going to do. he's going to pick a conservative for the supreme court. he's going to cut needless regulations and stop wasting the taxpayers' time and money on global warming. so i know what he's going to do.
and what she's going to do is the opposite. she's going to raise taxes, put on more regulations, she's going to pick a supreme court justice who will do what she wants. and i can read plain english, and i can read the constitution, and nowhere in the constitution does it say we should prohibit free speech. >> and mr. hubbard, how far are you willing to go? let's say the polls continue to stretch, hillary clinton's lead gets bigger and bigger. at what point do you throw in the towel, if at all? >> i'm not a quitter. i never throw in the towel because, you know, only a fool or a clairvoyant would predict what's going to happen in this election. and a lot of things can happen between now and november 7th, so i'm hanging in there. and hoping the american people will realize that whether they like trump or not, he's going to be the best for them. >> do you think the polls are bunk? >> i'm not going to say they're bunk. i believe in polling, but i think they may be polling the general population rather than those who are going to vote. registered voters are one thing
going to the polls and who knows who's going to the polls this year cht it's a real big question. >> do you think he can turn this around? >> yeah, i do, if he uses his head. >> do you know mr. trump personally? and do you like him? >> i met him once. he's not my favorite person. all my candidates lost. now he's my favorite candidate. >> but let me ask you this, it comes down -- it comes down to this. a candidate on the democratic side who's policies you disagree with and clearly don't like, and a guy on the republican side who's policies you kind of agree with but you also don't like. don't you wish it were different? >> well, we all wish a lot of things were different in the world, but the world is as it is. and the most important decision that a new president's going to make in my opinion is selecting a supreme court justice. so that alone sells it in favor of mr. trump, from my standpoint. >> all right. mr. hubbard, thank you very much. we appreciate your time. we'll have you back.
ceo of -- >> nice speaking to you. thank you. >> thank you. it was fun. it is fascinating because you got to wonder how many people's votes are being decided by the fact there are vacancies and potential vacancies on the court and that is the deciding. if there were a court of 42-year-olds -- >> i said this -- it would be a different story. >> i said this recently, being in wisconsin all summer, a lot of the summer, everybody you meet, that's what they say, supreme court, supreme court, supreme court. >> uh-huh. >> we'll have to see what happens with the polls. i don't know if i trust the polls because brexit for example, who was the more animated voter? the leave camp. so they were undercounted because people didn't expect when you read what happened with the polls there, they didn't expect the turnout disparity that happened on either side. he has very animated supporters, she has have been apathetic supporters. so who's going to show up to vote? >> in the polling you don't want to sort of trash the polls, obviously. everybody seems to have one, but what i've heard from some people
involved in polling is that there are people even on the phone, even somewhat anonymously who will not say -- >> will not admit. >> they're voting for trump, even though they are because they don't want to be judged even on the telephone potentially anonymously. and they feel like they will be. >> that happened in the uk election with the conservative. >> we've asked a couple times does he have time to turn it around. i say absolutely. >> yes. a million years until the election. >> it is very early. it ain't even going to start until labor day. >> two things that are -- a lot more political talk though. two things are falling recently, airline ticket prices and phil lebeau out of planes. look at that. you're crazy, man. we're going to talk about those low air fares and asked phil why he jumped out of that plane next, on "power lunch." we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud,
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anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade phil lebeau went sky diving this weekend. and we've got the pictures to prove it. but before we get to that we want to talk about falling air fares and that of course good for fliers unless you also happen to own stock in the airlines, phil. >> yeah, and if you're an investor in the airlines, this is an example of why you're frustrated right now. they're still profitable, they're still making huge profits relative to where they were a few years ago. but this fall you're going to see lower air fares, combination
of things impacting this. hopper, travel website, has put together its forecast for fall air fares, says they're going to be down about 8%. the low coming october, november, december around $213 for round trip domestic ticket. you can blame this on excess capacity and the fact it is a slow season. so you've got these extra seats and the airlines would rather sell a seat at a lower price than to let it go empty on a flight. take a look at what we've seen with domestic airfares over the last three years. they have been trending lower, yeah, those spikes up there that's when you go into the summer season, the high travel season and then it starts to come back down. keep in mind for the airlines they can charge lower ticket prices and still be profitable because of lower jet fuel prices. but keep in mind it also means that the passenger revenue per available seat mile, it's going to be lower. and there's no confidence they have found the bottom yet. in fact, it's supposed to be down anywhere from 3% to 6% for the third quarter. and some people are saying, look, that's going to stretch into the fourth quarter as well
depending on the carrier. that's why all of these stocks, guys, we've talked about for some time, you have got to get that passenger revenue climbing again before you have confidence from investors that the stocks will move higher. >> all right. phil, we showed the picture a few times. we need to know why did you go sky diving this weekend. >> i was goaded into it by a 20-year-old daughter. she said, come on, let's go sky diving. she went first. and when i saw her drop like a rock with her instructor, i sat there and said, well, there's not much i can do now. i'm at the door, i might as well go. i have to be honest, i loved it. and if you've done it, you know what i'm talki ining about. >> what was it like? >> the free fall is fantastic. the free fall is great. >> were you sitting there going okay, pull, pull, pull. >> you go at 14,000 feet is when you leave the plane. and you're free falling for about 50 seconds to a minute before you pull the canopy. >> awesome. >> once you do that it's kind of a nice, gentle drift down to the land. it was great.
i will do it again. >> had your daughter done it before? >> no, she was a first-timer as well. i think she was worried that i wasn't going to go through with it. she looked at me before she went out and the look on her face said it all, like you can't turn back now. and i didn't. >> how hard was it to take that initial step off the plane? >> not too bad. once you're up there you're kind of like let's go. and, look, you've got an instructor who's with you. the last thing he said to me before he went he said we're together for better or worse, we're strapped together. >> that's a motivator. >> that's not a confidence inducing statement. >> he was great. >> did you talk to him at all on the way down? >> not during free fall, tyler. all you hear is the wind. >> how cold was it at 14,000 feet? >> very. it's cold when you first go out. i had shorts on and thinking i don't know if this feels too good. but once you're down there and your chute opens and you're drifting around, it's great.
it's relaxing. >> next time you do it strap a camera on your head. >> oh, i will. >> exactly. >> cool stuff, phil, thanks. >> very cool. >> see you guys. let's talk more about the falling airfares phil brought up. our next guest believes they're going to continue to fall especially if fuel prices continue downward. bring in seth kaplan, you heard the average price phil was talking about domestic ticket little over $200. do you think it falls further and when and how do i get it? >> yeah, it will level off here at some point. but, yeah, that's exactly what phil described. basically airlines are trying to get their hands around the falling unit revenues. it's basically been a race to the bottom for a couple years now between falling fuel prices, that's the good news for airlines, falling revenues essentially falling airfares that's the bad news for them, good news for consumers. in terms of how to get it, be patient. i think a lot of people know that if you wait until the last minute to buy, you're going to pay a lot. whatnot as many people know is that the opposite of that is not
exactly true. it's not the early bird, somebody who books 10, 11 months out who get the very cheap airline ticket. generally a month or two before you travel kind of that sweet spot, more often than not, not always, in terms of cheap ticket. >> and should i believe all these sites out there that it's best just to go to a travel website? do they really aggregate all the fares? is that the most efficient way or not? >> they aggregate most of them. sites like expedia or a medi search site like kayak which searches all the other searches. but southwest fares are not in there. a giant domestic airline, not going to see allegiance either. keep those in mind in particular if you live in a market where they're relevant go straight to their sites to look for their fares. >> seth, thank you. for the news you can use of airline weekly. >> you got it, michelle. the olympics are supposed to be nike's big event, but under armour trying to crash the party with some high profile athletes. coming up, we'll talk to under
hello everybody. i'm sue herera. here's your cnbc news update at this hour. a fast moving wildfire has destroyed at least 175 structures in the northern california town of lower lake. it's about 90 miles north of san francisco. at least 1,500 structures are threatened, about 1,000 firefighters are battling the blaze. but it is only about 5% contained. closing arguments began in the perjury trial of pennsylvania attorney general kathleen kane. her defense team argued about what they called inconsistencies in the prosecution's testimony. kane did not take the stand in her own defense. neighbors in the north carolina town of garner are expressing concerns about controversial flyers placed near their homes. they found kkk flyers in plastic bags placed around a neighborhood. they say the flyers are unwelcome and unwanted. and today is check the chip day. that is the day when pet owners are encouraged to microchip
their pets, have the vet scan that chip and then make sure they enroll and have records up-to-date. it can mean the difference between reuniting with your lost pet if it's stolen or not. both of mine are microchipped. that's the cnbc news update this hour. back to you guys. >> i microchipped brian the other day. >> yes, because we ailes need to know where he is. >> at all times. >> i'm just joking. he has no chip in him, as far as i know. thank you. checking with the markets 90 minutes to the closing bell, new all-time highs once again for all three major averages. we should note that the nasdaq 100, the qqqs you might have in your portfolio the highest level since march of 2000. so we have some green arrows. oil meantime closing up for the day up 2.8%. 45.73 is the level. more speck lake in the market today that producers will cut back on supply. well, under armour is going for gold when it comes to stock performance during the olympics. under armour shares up more than
9% since the start of the games on august 5th. and so far beating its rival and official olympic sponsor nike up only 4% in that same time. let's head back to rio de janeiro where andrew ross sorkin is joined by the ceo of under armour, kevin plank. andrew, all yours. >> hey, tyler, we are with kevin plank, ceo of under armour. and the olympics big for under armour. if you've seen michael phelps and you've seen those ads, you know it. it's great to have you here. thank you for coming in. >> hi, andrew. >> tell us this, what do the olympics mean for you economically? >> it's a bigger brand play than that. so our ambition's to be a global brand, not a nice little local or regional or national but really to be one of the major players globally. >> so 73% of your business still in the u.s. >> it's actually probably 85% of what we do is still in the u.s. today. so finding ways to become global we've got to win at home. again, our competition is very good at what they do.
they're not going to give up on anything. so we've got to win, you know, really where we're making our dollars which is in the united states, we have to find ways to parse off dollars that we can utilize and stretch on a global basis. so the olympics is a great example of that. is there an immediate return? it's a much bigger and longer global play i'd say. >> we're all talking about michael phelps and his amazing performance at the olympics. you've used him in these ads and because of something called rule 40, you've been allowed to much more cleverly and aggressively been able to use phelps than you have historically, what's that meant for you? >> number one, personally, as a company we're just so proud of, you know, what michael's done. frankly as an american i'm so proud of what michael's been able to do. you know, when we made that commercial and launched that spot, you know, it's what you do in the dark that puts you into the light, and just showed the regime of what michael goes through of getting ready, getting prepared for something like an olympics. and a lot of people going is he done, is he too old, is he really coming back. and watching the way he put all those concerns away.
and doing it in an under armour capacity, everybody betting against him but some way, some how he found a way. and going home with five more golds and the most decorated olympian of all "time" probably forever. >> you raised the issue is he going to come back, is this the end? have you talked to him? >> i don't know, but if i'm him i'm doing the same thing. drama is incredible. >> what does it mean by the way for his business and yours? if this is it? >> look, michael, i think his legacy is established. that's something you have frankly coming into these games. >> in terms of your ability to use him and leverage his brand going forward if he's not going to be in japan, for example, in 2020. >> i mean, stars fade. there's no doubt about it. but it's what they do after that. michael will be fixture in swimming for a long time. but his brand, i think, is bigger than just his competing on a day-to-day basis. the olympics speak to that. and i know he says he's not coming back, but look, i'm going
to be one there saying come on, you're really coming back, aren't you? >> maryland boys i would think you'd be working on projects already. >> we're in ka hoots, are you kitd e kidding? >> by the way this rule of 40, what does that actually do to the value of the sponsorship for everybody else? so dare i say nike? >> so in partnership with our friends at droga 5 and what we've built with this campaign, you know, we ran it five months ahead of the olympics before then which gives us the ability to share the spot, still show the p.o.p. if you use it for a certain period of time before the games begin and before the blackout period begins you don't have to take things down. so in the past you weren't allowed to show any olympic athlete for any reason. you had to take p.o.p. down and dick's sporting goods in des moines, iowa, and say they're not allowed to show an image of lindsay vaughn or michael phelps and really unfair to them. and of course almost impossible -- >> looking at this experience, would you ever say to yourself no matter how big you get, is it
worth becoming a sponsor anymore? given what you've now proven is possible. >> well, i mean, we made a bet on michael this year. again, when we did that five months ago, it wasn't a sure thing that michael was going to have the games that he has, and i think he's obviously the story. and coming out with more medals than anybody else. as it relates from a dollars and cents standpoint, yeah, this is the -- michael phelps is the most talked about athlete on the planet. maybe the most talked about human being on the planet save for american politics. >> there is upside, there has been downside over the years, there was experience with the sochi and the speed skaters. >> yeah. >> how much do you worry about that? >> every day, but it can happen anywhere. you can't plan for it. you know, it's like my favorite quotes of all time great american philosopher mike tyson, yeah, you got a plan right until you get punched in the face. i think we act pretty good when we've gotten punched in the face. we're pretty tough. we bleed a little bit, but we get back aup and keep coming.
>> i should tell you michael phelps has been wearing one of these bands for fitness strategy, where does this all go? we talk about the shoes, the clothes, but how much of this -- you know, you look out five, ten years, is this the business? or is it all the other stuff? >> look, in my office i keep these white boards very simple and they speak of the culture of our brand, say things like overpromise and deliver, dictate the tempo, walk with a purpose, the one thing anchored in the center, don't forget to sell shorts and shoes. at the end of the day the brand is putting greater shirts on athletes backs. take with a community we've announced over 175 million people logging in and telling us what they ate, how much they slept, what exercise they did and when they perform. and we think that gives us a great position to be able to meet the consumer where they want to transact. >> two final questions, are you happy, unhappy, disappointed that jordan spieth is not here? >> look, jordan is americana.
>> there is no zika. there is no zika. >> look, there's lots of things that go into those types of decisions. the thing i'm probably most proud of -- >> do you get to weigh in on that? does he call you guys? >> of course we want his opinion. we want to do what's best with him. with stefan curry, him getting -- without two of our highest profile athletes here, still having the bang for the buck that we have for this olympics i think we're pretty proud of the company that's been built and we're bigger than any one individual, any one person myself included. we're just getting started, andrew. >> final question because every american is getting it asked here no matter where you are around here whether on stage or not, politics. you a donald or hillary person? >> i'm an american. i believe in america. and i do think there's one thing that is said if you question or doubt just how great our country is, like look around. like it is, we're in the medal count -- >> is there one candidate that's
better for under armour? >> everybody buys shirts and shoes, so look, i love my country. i'm going to root. no, are you kidding, i'm not -- no way. >> kevin plank, thank you. appreciate it very much. guys, back to you. >> all right, andrew, thank you very much. and, kevin, thank you as well. it's interesting, you know, spieth is one of their highest profile guys, curry one of their highest profile guys, but the greatest athlete of all time may well be michael phelps, a baltimore guy like kevin. >> yeah, both baltimore guys. >> i hope he does compete in the next olympics. i hope kevin plank convinces him to do so. i thought that was pretty newsy. >> yeah, he'll push him. >> i think katie ledecky has the ability to win more than michael phelps. >> she's very young. >> she's 19 years old. phelps was a little bit younger, but if she stays healthy, that's a big if, she could win -- >> so much can happen though. >> maybe more golds.
>> think of missy franklin who was the big star coming out of london, swimming star. she has not been able to keep it up this time around. she may come back next time. >> ledecky also in maryland, the fish. >> literally. >> couple gold medal winners in the water for maryland. still ahead, we're talking water, jam and pills. the good, the bad and the ugly next. ♪ [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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welcome back to "power lunch." time for the good, the bad and the ugly in today's trade. first to the good, xylum, water treatment company buying privately held census for about $1.7 million in cash. one of the stocks we highlighted after hitting a string of all-time highs, we actually had the ceo on "power lunch." on to the bad, shares of smuckers in the red today, and it is an ugly day for endo pharmaceuticals. that stock one of the worst performers in the s&p 500 right now. michelle. sticking with market movers, today's the day the big hedge funds have to disclose their holdings. kate kelly's doing what we call whale watching. hey, kate. >> you got it. and some whales are coming to the surface. big moves in technology today as
investors signal that despite a rising market, there could be some attractive buys here still. third point on friday added nearly 4 million shares of facebook, i should say they reported it on friday that is. tepper's appaloosa fund sold about 1.6 million shares of the same name dissolving a position appaloosa built in the first quarter, though from what i understand may have been additional buying of late in that name. omega fund adding more than 370 million shares of netflix per filings. on the media side a new 5 million share stake in time inc. seems to be contributing to lifting the share sizably so far today or at least in the last couple of hours. while huge sale of sirius xm holdings by cooperman who's been reducing that stake over time and now has sold a final 21 million share slug doesn't seem to be spooking other investors too badly. then in airlines a bunch of ins and outs there with appaloosa selling delta, peairing
southwest, now at this point with a 2.4 million stake share. on markets broadly this quarter so far really defined categorization, stan lobe already compared things in the market to "game of thrones," david tepper nearly 3 million call option position in the spider etf disappeared from the first quarter to this one suggesting perhaps a bearish tone on markets. he's telling people he's guarded on the markets but actually leery, guys, of going too short. >> definition of uncertainty there. >> it really is a sort of middle ground position. >> and keep your -- go into cash. >> go into cash if you don't think there's further upside here, however valuations aren't overly rich. they're highish, but they're not too high. >> i would think in this particular filing period it's also important to keep in mind the context in which the managers are making these moves. some of these funds may be under duress, they might be selling winners because they have to sell winners, they're in that sort of position. as opposed to selling in winners simply to lock in gains, we
don't believe there are more gains ahead sort of sale. >> for sure. when you look at some of these charts you can see, facebook is a good example, it's up so handsomely this year that if you wanted to take some profits, who could blame you whether you're under duress or not. and the thing you know well, melissa, we have to make the caveat things could have happened since the june 30th filing date. they may have gotten in or out of positions. also we don't know what's there on the short side that they may be hedging. we don't know what's on the derivative side. not all the options positions are always obvious. >> never know the whole -- >> right, it's a nuanced picture. >> they know the pictures were not seeing a whole lot of hedge funds kick butt. there's not a lot of hedge funds trounsing the market for 2% of assets and 20% of profits. and you can buy an index fund and do better. a lot of hedge funds are going to have, as we say, splainin' to do at the end of this year. >> indeed. the dow, the nasdaq and s&p 500 all hitting record highs today, but one index that is not
all right. time for street talk, our daily dive into the key wall street calls of the day. here we go, american eagle outfitters, your number one stock. deutsche bank upgrades it to a buy. they admit they are late to the party, but, quote, there is still time to dance. part becau stores are noting strength in apparel and they believe deutsche to strict l down to american eagle, as well. they think it's reduced risk and will beat expectations. the target to 22 which is about another 13 to 14% upside on a stock already up 22% this year. >> yep. next stock, valaent to a neutral from underperform. some of the price targets reliant on management's outlook. essentially mizuho had a short and now relax and analyst doesn't think it matters much to miss guidance and they move to the sidelines here.
>> with the gain down only 78% this year. all right. i normally hate talking about neutrals but dollar general is downgraded to a neutral saying the money is made in the stock. there is increased risk of competitive pricing threats, especially from walmart. the analyst says it's less favorable and they have an increase of pricing activity and note that family dollar could be in the pricing war, as well. i said it before. made money and jeffrey's saying, go on and take the money and run. not fly like an american eagle. it's all steve miller. cut the target. don't do that. >> another downgrade of jeffries in the retail space and mentioning walmart as a reason here. best buy getting a cut to a hold. primary reason being the tv cycle. the average price have dropped another 30% and there's more competition from walmart and target. no other merchant category of
connected home or virtual reality enough to outset the slower growth in tvs. tvs, by the way, huge part of sale. 33% of annual domestic sales of best buy. about two thirds of that from tvs and that could mean that second half sales might be in jeopardy. >> 16 years ago in 2000 best buy because $34 stock. today -- >> $34 stock. >> 16 years of nothing. all right. your final call of the day is smaller cup under the radar. esl, a bellevue, washington, defense contractor. upgraded to a buy from a hold at drexel hamilton. the note is titled the light at the end of the tunnel. analyst downgraded it last february and now working to be focused and a bunch of one-off initiatives are coming to an end. that $86 target bullish. nine analysts cover the target. so they're ten bucks above the
target and 20% more upside. ester line. with that, we round out the monday "street talk." well, speaking of small caps, russell 2000 small cap index not making new highs. in fact, about 4% from the all-tie time. will small caps follow suit and join the party? welcome to "trading nation." joined by ari wald, tim seymour. tim, what say you? why are the small caps underperforming? do you expect them to catch up? >> totally outperforming since the market lows in february 11th. up since those lows. s&p up 20. remove the fed and credit concerns and get an idea that they can see the broadening and small caps should outperform. certainly due to high yield. to emerging markets and asset classes outperforming the s&p. do they go higher? tell me what the fed will do. that will affect the small cap
trajectory. >> let me ask you a different way. do you believe the russell 2000 sooner than later will make that new high and join the s&p 500 and dow? >> yes. i think in the current market conditions we have, small caps still will see i think allocations and people reaching out the risk curve. small cap, the labor market and small businesses in the country. that's where the strength of the index will come from. >> supposed to be a domestic play. ari, you look at the chart of the 2000. does that indicate that more gains and maybe new highs are on the way? >> yes, brian. indeed. to put it quite simply, we're in a bull market right here. you have all the signs pointing to that. strength across capitalizations and if you mix in some disbelief we are still seeing despite the new highs, you have a set-up of risk to continue to do well. small caps, terrific proxy and we think they end up making new highs. rather than the russell, we have
been recommending to buy in etf that tracks the s&p. small cap index. 600 ticker ijr. it is breaking out to the upside. ijr breakout at 120 is now support. projects to 140. how we see it. bull market, brian. keep buying. >> can't be more clear than that. gentlemen, both, and thank you. >> thank you. >> for more, go to the website tradingnation.cnbc.com. our final thoughts on the day, we call it "check please" and it's next.
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when the ceo said he wants michael phelps to compete in the next olympics and i hope he listens. >> i bet he will. >> write a check? >> not. he'll writing big fat checks to him. i bet he does come back. >> all right. mine is silicon valley and i don't know if it's a housing bubble. we showed our view earls some of the prices. i'll say this. most people don't work for google or apple. if you're a teacher or a police officer, where do you live? if it's not a bubble, it's something to rewrite the real estate history books. >> so mad at the city councils not making the changes to allow more housing out there. >> wouldn't it naturally happen? if they move out prices go down. >> if rates go up, watch prices, too. you buy on the monthly payment, not on the overall cost. >> sitting here, watch the ibb. this is one that's gained more than 8% in just the past month.
certainly a sector out of favor from investors and coming back with the tech trade and the more higher data areas of the market. >> even as hillary clinton climbed in the polls. >> even that. >> nice to have all four of us back together. first time in about -- >> one more and we would have an olympic ring. >> thank you for watching. >> "closing bell" starts right now. hi and welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> welcome back. >> thank you. >> i'm bill griffeth. go to twitter. you can see what kelly general lou rously brought me back from iceland. you shouldn't have. no, really. you shouldn't have. >> i shouldn't have. >> while you were gone, we set some new highs. again today. the dow, s&p and nasdaq all on track to close at record highs. as this market just keeps grinding ever higher. but coming up, we'll hear from somebody who says investors should really brace