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tv   Power Lunch  CNBC  September 6, 2016 1:00pm-3:01pm EDT

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>> you're a headline writer. >> you're a headline writer. >> if the stock is higher, they'll say apple wows them with new device. if it's lower they'll say apple's out of innovation and tim cook's the worst. >> i just don't think it matters for the stock though. >> me either. >> we'll be watching and i know all of you will be as well. i know you'll be watching power, which starts now. i'm melissa lee, here's what's on the menu. false start, official and bubble some words donald trump used to describe the economy. where he's pointing the blame. and inside the numbers of $27 billion pipeline deal. and hitting the car lot to see what's really driving red hot auto deals. "power lunch" starts right now. put your motor in. i'm brian sullivan. here's what's happening at this hour. stocks slightly higher deeper into the day. despite some big deals out there overall stock investors may still be waiting on the fed.
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right now the dow jones industrial average is slightly higher along with the other indexes. the nasdaq is up for a third day. also in the news, i.t.t. educational services shutting down all of its schools, this after the government banned the company from enrolling students who get financial aid. the move will affect about 8,000 itt employees. and hurricane neuthen is barrelling up the golf of california, expected to make landfall over mexico's mainland before hitting the u.s. later tomorrow. melissa. well, we've got a very busy two hours coming your way, but we start off with the race for the white house. 62 days to go until election day, and donald trump is on the attack over the economy. cnbc's eamon javers kicking things off for us on this tuesday. eamon. >> hi, melissa. get you started with a polling snapshot so you can get a sense of where we are as of right now the new nbc/survey monkey poll out this morning shows hillary clinton ahead 48% to 42% in a
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head-to-head matchup against donald trump. other polls show the race tighter than that. there's a four-way poll that shows donald trump actually ahead. meanwhile trump taking on interest rates and the fed in comments over the weekend. his comments over the weekend talked about the ideal of low -- of high interest rates compared to what he said back in may talking about low interest rates. so let me play these sound bites for you directly butted against each other so you can hear what donald trump said about interest rates back in may and what he said over the weekend. two very different things. here you go. >> if we start raising rates, i've always been a low interest rate person. now, if inflation starts coming in and we don't see any signs of that, but inflation starts coming in, that's a different story. then you have to go up and you have to slow things down. but right now i am for low interest rates. and i think we keep them low. and we have to compete. keeping rates artificially low so the economy doesn't go down so obama can say he did a good job. we have a false economy. we have a bad economy.
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everyone understands that. but it's a false economy. the only reason the rates are low is so he can leave office and he can say, see, i told you. but at some point the rates will have to change. >> and, guys, i am told just while we were playing that sound bite just literally moments ago hillary clinton addressed these comments that donald trump made about the fed saying that these comments show that donald trump should not be president. we're going to go rewind the tape. we'll pull those comments and have them for you as soon as we can get those rewound. but obviously the fed becoming a central focus point here of the presidential debate, guys. >> all right. eamon javers. thank you very much. >> you bet. >> let's now bring in cnbc contributors jared bernstein and larry kudlow. senior fellow on the budget and policy, larry of course informal advisor to donald trump and author of this new book. a lot to get into. larry, do you agree with donald
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trump's assertion this is a false economy? >> i think he's got a point. i wouldn't say it's 100% false economy. i think he's got a point though because, look, federal reserve said this artificial stimulus and they've kept rates low. by the way, none of it's worked. by the way, i wouldn't raise rates now. there's no inflation. they should have raised them in 2011 when there was inflation. maybe 2014. but, look, there were some -- american business produced a lot of profits. give them credit for that. they did what they had to do coming out of a dreadful recession. got to give them credit for that. the profits now are falling, so that thing is in reverse. in fact, i think we're in a business recession right now, which could take its toll. but, yeah, there's been a lot of artificial stuff going on here for many years. the point is, let me just make this overriding point. and i wish mr. trump would too. my book argues, i argue there's
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a sound way to promote prosperity for everybody. one is a stable dollar. you've heard me say king dollar for many years. number two, lower marginal tax rates. lower marginal tax rates to create incentives. now, kennedy did it and succeeded. reagan did it and succeeded. today, i'd love to see a simpler personal tax system. but the big problem, the big obstacle today is high uncompetitive business tax rates, the lack of cash expensing and the failure to get the money back home. so that's where you have to go. all i want to do if trump follows through on his plan, mrs. clinton has forgotten the legacy of jfk. >> right. >> she's forgotten that legacy. if mr. trump stays with that legacy, then we will have a boom. and then the fed can follow rates higher. >> i want to bring jared in because eamon was talking about comments made moments ago by secretary clinton.
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these headlines read, presidential candidates should not comment on fed actions. would you agree with her? is that the right response to these comments? don't presidents have a right to talk about how the economy has been hurt or helped by the federal reserve? >> yeah, i think what secretary clinton is say tlg ing there is you shouldn't comment on the day-to-day fed's next move. but the broader picture that's fodder for discussion. >> we're in a hiking cycle, supposedly, jared. and these day-to-day comments are very big. it's not whether or not the fed should meet or this or that. it's whether or not to engage in the second rate increase in this hiking cycle. that's not a small matter. >> well, yeah, no, i mean, i think the idea that -- i think the idea that engaging donald trump around federal reserve policy is more about his comments that this is a bad economy and the fed is creating some sort of falsehoods. and i think that's completely
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wrong. so let's go back to trump's comments. i mean, trump said it is a bad economy. okay. i mean, that's a quote from what i just heard on our station. okay. now, there are definitely corners of this economy that could and should be doing better. we're not at full employment yet, but does anybody really think this is a bad economy, especially compared to every other advanced -- >> larry's raising his hand. he wants to be called on. >> okay. i think that's fundamentally wrong. i think the unemployment rate is 5%. the fed thinks we're about at full employment. we're not there yet. we're adding jobs at a solid clip around 200,000 per month if you average out some of the noise. inflation is low and steady. larry's right profitable is down a bit, but it should be down a bit because it was record highs a few quarters ago. as the job market tightens up we're finally seeing wage gains for ordinary workers, the pay of blue collar workers is up 1.7% real over the past year. that's a very important positive. so the economy certainly has some areas of difficulty, but
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there's no question it's not a bad economy. there's no recession out there. i never know what larry means when he says there's a business recession. >> look, everybody knows this is the slowest recovery since world war ii. so that's point number one. it's about 2%. unfortunately, what we are seeing now is a slump within a slump. and the last seven quarters we've nose dived down to just above 1%. sdp i agree with jared, of course. profits and business investment and productivity are all slumping. we've seen some lousy ism numbers from manufacturing and services. i think we are perilously close to a recession if the business recession spreads. so it's never been a good economy. participation rates in the labor markets have been low. people dropping out of the labor force left and right. see, the problem here is the fed shenanigans, i don't approve of them, i don't approve what they've done, they've had very little effect. business has tried to create some economic growth. we added -- >> i'm sorry to interrupt, but the fed keeping rates lower for
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longer has had very little effect -- >> very little effect. >> even inflation of other assets like the stock market? you don't think -- we would see utilities or tel kom trading aez theet levels -- >> let me answer this question. i would say this, the stock market rise is probably about maybe two-thirds -- >> searching for yield. >> no, no, i'm making a different point. >> okay. >> over the last whatever six, seven years, i would say two-thirds of it because of profits. profits are the mother's milk of stocks. i would say one-third of it because of artificial fed holding down rates and pumping in liquidity. the bizarre thing is the fed's experiment didn't work. the liquidity was horarded. everyone is risk averse. what we must focus on, this is -- >> i think you're full republican -- i need to have a chance to respond. >> lower tax rates. lower regulatory burdens. we've got to particularly focus
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on the business tax cut. mrs. clinton has nothing to say. >> okay. >> mrs. clinton has left the jfk democratic philosophy. she has left it. and i think -- >> jump in here, jared. >> okay. let's just keep this on the economy. before this segment i made a little table of how we're doing relative to where we were four years ago. okay. this is a ronald reagan question, one that liz clam lar who used to work for reagan might appreciate. gas prices down 40% relative to four years ago. jobs growing at a rate of 100,000 jobs per month faster, unemployment rate three percentage points lower, underemployment rate five percentage points lower. real wage of blue collar workers up 2%, real median house income up 7% relative to four years ago. those are real variables. there's nothing false about any of them. now, i totally agree with you. let me just say i totally agree with you that gdp is growing too slow and we have a productivity problem. >> and you have a labor force problem. >> and the fed has helped
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considerably with that by the way. >> comparing this to the weakest recovery is really not a genuine comparison. that's my point. >> i just gave you about six -- >> yeah, but jared -- >> how are you relative to four years ago? >> you're comparing like in the u.s. open and tennis player, well, the guy played well in the last five games but overall it was a terrible match. so you can't really say he's played well. he got beat. that's the problem with this story. all i'm saying is this in my book, kennedy, reagan, kennedy was the democrat, he wanted a strong dollar and lower marginal tax rates to create incentives for growth. he was right. it worked. 20 years later after we screwed it up in the 1970s, reagan duplicated the kennedy plan. i'm not arguing democrats. i'm not arguing republicans. i'm saying we know what works for all america. and the point of this book is to suggest that if we get together and both parties and look at the history, those two gigantic
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figures should be replicated and duplicated. >> 2016 is not 1960. we could have a great argument about how the economy has changed there and how kennedy absolutely needed to take marginal rates down from the stratosphere to where they are today. but where they are today is so much lower that the kind of adjustments you're talking about won't have -- >> no, i'm talking major business tax cuts, plus a heavy dose of regulation with respect to health care. the principles here can be bipartisan. that's what i'm suggesting. we know what works. why has mrs. clinton rejected jfk? >> larry -- larry, we actually could agree that the corporate tax code is a big mess. look at the apple state subsidy problem. >> right. >> so there is room, i think, there for a compromise. >> right. >> in fact, president obama has a corporate tax plan. i suspect that hillary clinton will have one too. >> and she doesn't. >> no, not yet.
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but i suspect you'll see something in a couple weeks. >> taxing the rich and taxing corporations and taxing the gains, john f. kennedy didn't do that, he lowered tax rates for everybody across the board. ronald reagan never spoke that way. he wanted to give incentives for growth. i'm trying to bring that back. >> you and your friend trump put way too much emphasis on this idea that you're going to see all kinds of economic growth through cuts in top marginal tax rates. that's the supply side trickledown stuff consistently disproven. if you go to your book -- >> disproven in the -- >> disproven in the '80s and '9d 0s. i beg your pardon. we know what works. >> so if donald trump -- >> it was a disaster. let's go back to what works and try to be bipartisan about it. this is an american solution. the big spending, high taxing, jared, has not worked in this
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cycle. >> no, i think it's very unfortunate that we're still having the same old trickle down debate when you and i could absolutely agree -- >> incentive -- >> hold on, jared's got to get the last word in then we got to go. >> you and i could absolutely agree that we can take down the corporate and broaden the base just as president obama has planned and i suspect we'll hear something from hillary clinton. i don't know that, that's my suspicion. but the idea of -- >> that was the last word, larry. >> allowing for expenses with interest deductions, that's a mess. >> just what we need. fabulous. >> spirited debate from jared bernstein, larry, by the way you have the book. can we show it to our audience quickly because you kept referencing it. we might as well inform people. >> a giant graphic. >> "jfk anded reagan revolution". >> thank you for giving me a shot at it. and i love jared. i always do. >> still ahead, fracking and earthquakes, oklahoma hit with a record quake saturday. the governor declaring a state of emergency. what role is fracking playing in the sieismic events? a live report ahead.
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and a megadeal in the energy space has everyone talking today. what it means for the industry, that's next. just g who bhat k.
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oklahoma hit by a magnitude 5.6 earthquake on saturday. it ties the largest on record for the state and is the latest in a groeg number of quakes that some are blaming on oil and gas fracking. morgan brennan is here now with more on the story. >> so in oklahoma there were 890 3.0 magnitude quakes last year. that's versus just one in 2005. now, the earthquake that struck
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is the strongest in the continental u.s. so far this year. no one was seriously injured. in response to the quake state regulators order injection wells be shut down. the wells used to dispose of toxic waste water from fracking could have triggered that quake. that's because the wells are drilled deep into the earth's crust where the increased pressure can actually cause existing fault lines to shift. so the usgs has linked a dramatic surge in seismic activity in oklahoma and other states like texas and kansas to the disposal wells drilled too deep. there's only a small fraction of them that are. the wells are a crucial part of the fracking process. this raises questions about the state's oil output, which is nearly 5% of the total u.s. production. this could also impact the broader u.s. energy industry which according to again capital's two-thirds of the country's natural gas supply and more than half of its oil from fracking. he says the areas major
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producers using injection wells like these sandridge energy, chesapeake energy and range resources also worrisome. this trembler struck, currently 64 million barrels stored there. operators report no damage, but as we continue to see this surge in earthquakes throughout the area, i think a lot of experts are starting to question when we could potentially see something like that affect cushing. >> we'll see if they're going to just shut down as you said the 37 waste water wells or take it further. so the industry is moving more toward carbon, co2 fracking, trying to pull away from water. >> which is less damaging or --? >> well, it's just less expensive and water is hard to get in certain spots. and perhaps also less damaging as well. >> so two thoughts on that. the first is in oklahoma specifically you have basically oceans that are buried deep
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under the ground in oklahoma. so when you are extracting oil and gas, whether you're doing it through horizontal hydraulic fracturing or more traditional means, you're pulling up something like 10 barrels of waste water for every one barrel of oil. so tons of water coming out of the ground in oklahoma, more than other parts of the country. the other thing i note is that the occ has really come down swiftly on diz pose sal wells. last year when i had been reporting on this they'd only been limiting some of the waste water injection activity, now they have something like 700 wells shut in out of 4,000. so big change in terms of how regulators are approaching this. >> morgan brennan, the question of course is are they going to go further, will it still be a hot oil thing? guess what, i'm following in your footsteps as usual. i shall be in oklahoma in two days. >> so excited. >> we're going to be going to oklahoma. we're going to not only talk about what morgan hit on, but really introduce you to some of the hottest oil and gas plays in america. some say oklahoma may have a
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lower cost of production than the permian basin. we're going to go there and introduce you to some of the big players in oklahoma. morgan named a few. we have a couple surprise ceos as well. so we'll be in the okc. morgan, thank you. spectra energy shares surging after enbridge announced merger. the combined company will be the largest energy infrastructure operator in north america. joining us is the managing director. great to have you with us. morgan was talking about the earthquake on saturday. any fallout on your coverage? >> in terms of the earthquake in oklahoma? >> no. not really. i mean, ultimately this is a longer term macro question and i would suggest at the margin we're talking about an incremental cost if you can't dispose of waste water from fracking, then perhaps the next best alternative is to process it so incremental cost but no material change. >> got it. let's talk about the deal. all about diversification, from
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enbridge's standpoint is the benefit that they're adding on nat gas pipelines chr, which ar viewed probably more favorably by investors given what nat gas has done over the past year or so? >> yeah. i think that's exactly right. so strategic driver here for enbridge is to diversify both into the u.s. and specifically natural gas infrastructure. and the kicker there is that spectra largely has demand driven natural gas infrastructure as opposed to infrastructure that's driven by producer needs. so certainly the safest of the asset classes in midstream in terms of expected growth over the next call it decade. so nice diversification play from enbridge on the spectra side they combine into a larger entity. they have at the margin access to some incremental capital, particularly from canadian investors. and that incremental capital, you know, again, at the margin but important when you're
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talking about a growth backlog that at a minimum is $20 billion and kind of as possibilities range all the way up to about $60 billion. >> brandon -- >> very sizable. >> hey, brandon, it's brian. i got to jump in. there was something else that happened a few days ago we did not cover, didn't get any attention because it was enbridge and a partner buying a piece of a piece. but to me it might be more interesting and relative more long term than this deal that is enbridge and eep buying a controlling stake in the dakota access pipeline from the bakken. all the hype over the keystone, right? you can't get the keystone done. won't this deal give enbridge the ability to bring canadian and bakken crude down to the gulf coast of mexico? something that the keystone wanted to do but couldn't get done. has enbridge kind of quietly gone around the bend to get it done? >> i would say, you know, that is a plus. and part of a bigger strategy. the bigger strategy here, and i think this deal, this
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spectra-enbridge deal highlights this that for the next three to five years let's call it the integrated systems, the systems that can carry product whether it's crude, liquids or natural gas from the well head to the ultimate end user or an export terminal, those systems will win. so you're seeing enbridge do just that in connecting a crude system. they already pull oil sans crude into the u.s., but to be able to get it all the way down one way or the other in a variety of products. this is all fairly fungible all the way to the gulf coast would be a positive. >> brandon, thank you so much for your time. brandon blossman. up next, teen fashion, a health care provider in serious need of a doctor and mozart in the jungle. it's the good, the bad and the ugly coming up.
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welcome back to "power lunch." i'm melissa lee. time for the good, the bad and the ugly. and the ugly in today's trade -- get to the good. amazon hitting highest level since 1997 ipo up 1.8%. shares of amazon have gained more than 15% this year alone. now, on to the bad, bad day for the retailers, s&p retail etf, the xrt in the red, led lower by nordstrom, urban outfitters and gap. and it is a very ugly day for shares of centene, that stock in fact the worst performer on the s&p 500 down 7% following a downgrade to market perform from
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outperform over at leering swan. there it is. good, bad and ugly. "power lunch" back in two. ere were. precng bdiveity.ywhee . ating malari. imimovenergyffiency.ywhee . rning e bfus.ducirgy bobob he develinworld. mang cargo fther made the g.♪inthe globat energyives here. ou wry iyove d gh fetem arspse62 or olr? vent-backed rerseemogage les u tn equi u've bui theetirent u derve.with heore nessinree allo tmpeeeerof. li in yo hd get th iomu ed
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iseiui pion. les tbo and delid tor for-by-step rie e raodsshan meal. hi everyone. i'm sue herera.
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here's your cnbc news update for this hour. new york attorney general eric schneiderman has opened a probe into whether mylan pharmaceuticals broke antitrust laws in writing contracts to sell epipens to some school systems. he has subpoenaed dock yums from mylan over epipen pricing. a radical preacher in britain has been sentenced choud ri sentenced at a court in london. he was convicted in july. authorities see him as a key voice in radicalizing young muslims. the u.s. capital rotunda reopening for visitors. it had been closed for six weeks as part of a $60 million dome restoration project. the rotunda is used for ceremonial events such as the lying in state of prominent citizens. and apps now account for half the time that we spend online. according to media analytics company com score, as of july smartphone apps account for 50% of users' time online for the
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very first time. that's the news update. you are up-to-date, brian. back to you. >> sue, thank you very much. let's get a check on your markets. again, real thirst, real sort of trading day, but melissa, doesn't really feel like that, does it? we're all kind of waiting to come back from the weekend. maybe people are still caught in the terrible hermine storm, which didn't happen. let's get now to the bond market. rick santelli tracking the action at the cme. rick. >> well, there's a bit of a storm in the marketplace post-ism. anybody who isn't watching, service sector dropped to the lowest level since february of 2010. if we look at how the markets responded, it was swift and it was global. if you look at twos, they were at 78. they dropped five basis points. 10s were at 159. they dropped five basis points. bunds at minus 8, they dropped three basis points. and dollar index maybe the best weather vane to keep it simple,
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dropped three quarters of a cent. what does this mean on the long end? probably means more of a growth indicator, short end more policy central bank indicator. when you put it all together it's a glide path indicator as now many recall for recession. i think that's a little extreme, butted market did move extremely aggressively after that weak number. melissa lee, back to you. >> thank you, rick santelli. interesting news out in the auto world. you think that people with top credit scores in the market for a new car would indeed buy a new car, but that isn't happening. phil lebeau's live in chicago with that story. hey, phil. >> hey, melissa. it's all about the used car lately, primarily because we're looking at a couple of things. you have a lot of leased vehicles coming off lease. so there's a nice supply of fairly new vehicles coming into the market and new car prices keep rising. even if you have a good credit rating, you're looking and saying what makes sense in terms of taking out a loan. the average loan according to experian for a used car hit a
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new high 55% of all vehicle loans were for used vehicles. the average monthly payment if you bought used in the second quarter $401. but here's the most interesting thing. take a look at the data regarding super prime and prime credit holders. these are the people with the best credit records, 43% of the super prime borrowers, they weren't buying new, they were buying used. that's an increase of 10% compared to the second quarter a year ago. and 59% of the prime borrowers bought used vehicles. that's also a big increase compared to the second quarter of 2015. so take a look at the auto dealers stocks. and why we're showing you these, you've got auto nation, car max and group one. why do you think car max is higher? because primarily you're looking at used vehicle prices or used vehicles being sold there. and that's why that stock has broken away just a little bit compared to auto nation and group one. what i find interesting, melissa, auto nation and group one will tell you they sell a
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lot of used cars because there's a lot of profit in used vehicles, not just new vehicles but the perception among investors may be that car max because it's used vehicles primarily that are being sold there. that's the play as far as the investment goes. >> phil, stay with us here because i want to bring in another voice in this conversation, someone who knows from which he speaks about cars, that is earl hesterberg, ceo of group one automotive. they're the third largest dealership group in the country. earl, are you seeing that as well? that the top credit people are saying, you know, no offense, earl, but i want a three-year-old car? >> yes, brian, we are seeing that. and i think that data's valid. there may be also a little bit of economic uncertainty with the elections and such. so people may be a little more pragmatic. but there's a great supply of these used vehicles, as phil just mentioned. and the leasing market has gotten about as big as it's going to get in the u.s. it's a high percentage of new vehicle sales, so there's a lot of off lease cars now coming on
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to the market. so the auto manufacturers are very aggressively marketing these nearly new or two and three-year-old used cars. >> so let me ask you this, i'll flip it, earl. who is your new car buyer if it's not the top credit folks? >> well, it's still a lot of the top credit folks. there's always kind of a swing vote in auto sales. people who are looking for the relative value, and they could go either way. they have a budget, a certain monthly payment they're looking to adhere to. and right now that swing vote seems to be moving a little more toward used than new car purchases. >> so, phil, when does the tipping point happen? i mean, at some point i would imagine that maybe the automakers will, i don't know, unleash some more incentives to get buyers back looking at the new car lot as opposed to the used car lot? >> i'm not sure what's going to be that tipping point. i'm sorry, earl, did you have something you wanted to say there? >> no, go ahead, phil.
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i'll follow up. >> i guess, melissa, and earl can play off this. i think what's interesting is when you look at new car transaction prices, that's the transaction between how much you pay to a dealership when you drive off the lot with a new vehicle. it topped $34,000 in august. that is a new record high. and we're pretty close to where a lot of people are saying, look, we've seen steady increases over the last six years, maybe it's time that we see a pause. and if we don't see that pause, that might be the trigger point at which more automakers say, look, we'd like to see a little more sales. so we're going to raise the incentives more. and we've already seen them go up a bit. >> earl? >> yeah, i think that's true. but the other thing you're seeing in the new vehicle market is auto manufacturers are balancing their supply a bit. both of these segments, new and used, are driven by supply and demand. the demand is quite good on the used side. we were oversupplied on the new vehicle side through the end of last year and all the way up until this summer. and you'll see many automakers are trying to get that supply
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and demand balance back in line. >> i know a lot of the automakers, phil, are trying to reduce sales to the fleet, to the fleets, to the rental cars for instance. but if now is a good time for used car sales, one would think that might be a good time for fleets to be updated. does that necessarily follow? >> no. not usually. go ahead, earl. i think little hard to hear on both ends. melissa, my perspective from talking with automakers is that those fleet sales, they're not driven by whether or not there's this excess in the used market. a lot of those have to do with contracts, have to do with what kind of demand they're seeing for the rental car companies. and then obviously if you're looking at a corporate or government fleets, there are other factors that tend to drive those sales. >> well, earl, how long -- sorry, earl. how long can this go on? because if leasing is hurting the new car sales business, then the folks like you who sell new cars, i'm guessing have a pretty
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big beef with the automotive manufacturers, you want everybody to be happy, but you need to be happy as well. >> well, that's true. but they recognize that. i think leasing is just a method of financing. and what is still the strongest factor other than consumer confidence in our ability to sell new and used cars these days is the availability of credit. and whether it's a lease or a traditional auto loan, that availability is still very high and a very strong positive factor in the market. >> since you've got your finger on the pulse of the economy because nobody buys a car if things are really bad, earl, how is the economy? have you noticed any sign of it slowing down? is it staying strong? where do you see it? >> overall on a historical basis i would say it's very strong. i will admit that it's not as strong as it was a year ago in terms of new vehicle sales. you know, we were probably running in the high 17 million at the end of last year we're probably now running more in the low to mid 17 million pace on
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new vehicles. but historically speaking i would have to say the consumer economy is pretty strong and auto sales are in pretty good shape at the moment. >> earl, great to speak with you. thanks so much. >> my pleasure. >> phil, before we let you go, we want to talk about tesla. those shares up about 2%. the reports that elon musk, ceo of tesla, sent out an internal memo to employees last week essentially saying start cutting costs, want to produce as many cars as possible, this might be our last chance to present a great third quarter before we raise capital in the fourth quarter. >> not surprised. and this is not the first time that we've heard this type of a message from elon musk to the employees at tesla. i seem to remember a couple of years ago that there was a similar memo that went out saying, look, we need to show that we can deliver. the chips are coming down in terms of, hey, the people are doubting whether or not we can be a profitable company. so i'm not surprised that this memo was set out. and, look, they are going into
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capital raising mode. and we all know that that's coming in the fourth quarter between the giga factory between solarcity and ramp up for model 3 production next year, they've got big bills coming due and needing to borrow for it. >> yeah, stakes could be higher though with this internal memo, phil. >> yes. oh far higher than they were a couple of years ago. >> yeah, phil, thank you. phil lebeau. >> you bet. well, he had a high profile career in politics then gave it all up for, well, you're taking a look at it, chocolate. it's now a $24 million company. we'll talk to the co-ceo of edward mark. that's next. ♪n ov 100 yin the rst stk indescrea t of peol d portlios with strategies tht ace ncarks.
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welcome back to "power lunch." edward marc, chock la tier is both a 100-year-old family business and a hot start-up. what started as a mom and pop chocolate shop making $360,000 a
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year is now a $24 million giant. the secret behind their sweet success, three siblings who gave up high profile political careers to revitalize their family business. joining us now is one of those siblings, chris edwards, the co-ceo of edward marc brands. thank you for joining us onset. >> thanks for having me. >> what a path it's been. you started your career in politics at the white house. >> yeah, we have a really interesting story about being a 102-year-old family business and making the transition into the role working for the president that i think got our competitive spirit to return to the candy industry and transform our own family business to, you know, really change our strategy, be able to move forward and have this growth. >> i think i've figured out your secret to success. >> what's that? >> they're stupidly good. >> that's good. that is really important. >> they sent us a bag. >> and you ate the whole bag. >> literally all morning i'm doing this. i literally had these snappers for breakfast. >> i know, that's the thing. we eat them all day long.
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>> not trying to give you a commercial, but they are good. how did you come across it? did you go to the local cho chocola chocolatier. >> our family, we made pecan, terrapins, that was what we had made for years and years and it was really famous. it's famous in the candy industry. so we saw a trend there was a snackable chocolates were becoming much more popular, so we wanted to put the pretzel and caramel together and it was a winning combination at the time. took off. so we really -- it's the snappers came out of the -- inspired -- >> snappers from terp pirapins, it. >> what are the latest trends you're looking at? >> so everything is still more mass consumable and snackable, and that's really what we're looking at. >> so pieces as opposed to bars. >> pieces and things that people can consume much easier in a bag rather than -- >> in the passenger seat and just do this the whole way to
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work. >> during commercial breaks like brian does all the time with candy. >> having to open up little individually wrapped pieces. people just want to have consumable -- >> can we play a little "shark tank"? >> yeah. >> why not? on cnbc, a successful show. how do you get into costco? i'm sure we have viewers that say i want to be on costco shelves? >> it's like the holy grail of retailers. give us the ability to grow our company and reform our company strategy. and to get into costco, i mean, we got a call from costco, so we got really k lucky. >> you got a call from costco. you didn't call and say hello put us on the shelves. >> no, because of our retail store in washington, d.c., they read about us and because of our chocolate in politics background and they asked us to come in and meet with them. just happened to be the new candy bar she grew up in pittsburgh so she knew about our story and she said get the siblings in to meet with me.
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and then we went in and presented snappers. she said what do you do best? we say we make caramel better than anybody. so at that time that's when we, you know, had the idea for snappers. >> so obviously you and your family have a political bent as well. in politics, in full disclosure worked for george w. bush during his administration. >> yes. >> also for sarah palin. so you're obviously republican. >> i worked for john mccain, sarah palin in the 2008 campaign. >> so in terms of environment for small business, are you a trump backer? do you think that the environment created by a candidate really makes a difference for small business like yours? >> for small businesses i think there are some issues that definitely effect small businesses. but we've been fortunate that we've been able to because of costco, we've been able to be insulated from those issues. and there's a lot of small business -- >> because you have a big enough customer. >> we have a bodyguard. costco does that. the volume we've been able to produce, we've been able to increase efficiencies in production, really streamline our strategy to simplify our business model and make one product and make it really well
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and now investing in new products. we look -- the political -- we used to think, you know, we look at the leave the politics to the politicians because we are focused on our small business and growing it and we're insulated from that because of cost costco. >> does that mean you can't get into walmart? we love you, but we better not see your snappers? i'm serious. >> are there exclusivity agreements. >> that's what i'm saying. >> you can but we do not and costco doesn't ask that of us. they're good about helping us build our business. they don't put restrictions on us but ask us how are we going to help build you? come to us with the best products. >> how much do they squeeze you on margins? you're going to be in costco but only make x -- >> it's no secret they want the best value for their member and that's why so many members. you told me you signed up for costco recently, it's something that -- >> i said i hadn't been to one. so we signed up last week. >> the costco business model is incredible and that's why people
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love it. they also they're committed to ordering the most product from us. >> do you view amazon as an important distribution channel for yourself? >> i think in the future it will be. for us right now at our size it is not. we're just getting into that. what we did in here one we're with costco, we diversified and got national distribution in almost every major grocery store chain in the united states and year three we're focused on velocity and getting more household penetration so then we'll be able to, you know, have more name recognition and people get more -- >> there's another chocolate. what is the name of that chocolatier they got a town named after them in pennsylvania, got a park, couple lodges? >> you mean hershey? >> yeah, so you have a little competition on the local end. i wonder if hershey had made an offer to buy you. >> no, no offers from anybody. >> from anyone. >> not yet. hershey started somewhere too. >> would you entertain an offer? >> really right now we're focused on our family business. we're not looking to sell. >> what's your top selling? >> top selling of course we have
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our snappers, our dark sea salt snappers are number one and coconut almonds we just launched these in costco last month. >> i'm going to tell you, don't even start eating them. maybe i have no will power. only thing i can't resist is temptation. >> you like -- this is in the midwest right now. >> i do have a coconut -- i like coconut flavor. but literally like 15 of them this morning. >> this is our new innovation for 2017. you'll see this on the shelves soon too. >> that's not e out there yet. >> in costco it is in the midwest, you'll see it soon in grocery stores. >> thanks for bringing that. >> look out for all this. thank you, chris. great to meet you, chris edwards. >> thanks for having me. have to run home now. >> run off all those snappers. >> not kidding. kate with a market flash. >> hey, brian, msci, ticker eem, near session highs up more than 2% right now. big components like tencent, alibaba and samsung helping to lift the etf lift higher.
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the etf also on track for a third straight day of gains, guys, back to you. >> kate, thank you very much. kind of interestingly, melissa, tencent now the biggest market cap company in china. well, this is the biggest video game franchise for activision and maybe anyone, call of duty. how much might help those stocks? we're going to find out after we stop eating next. i'justhotsto b
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welcome back to "power lunch." i'm kate rogers. russell 2000 setting new 52-week high in today's trade. navistar lifting for best day ever on news that volkswagen has agreed to supply engines in exchange for a 16.6% stake. meanwhile, the russell 2000 is up 10% year-to-date. back over to you guys. kate, thank you very much. well, shares of activision and electronic arts both hitting all-time highs today. and just coming off a big fan event for the biggest video franchise in the company. also launching new digital content today. julia boorstin joining us from l.a. with a look at what this
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means for the company. >> activision "call of duty" has already sold $15 billion worth of games and the brand is getting bigger than those games by expanding into a year round phenomenon. today launching digital content packs for which customers will pay between $15 and $50 for bonus content for last year's game. over labor day weekend over 10,000 fans paid between $50 and $200 for access to "call of duty xp," watching teams compete in the "call of duty" world league championships for a $2 million prize pool along with performances by snoop dog. attendees also got to preview the upcoming warfare call of duty game. reviews of that game are so positive analyst just raised price target on activision stock and reiterated buy rating saying the new game's customizable details will drive microtransaction, which removes the ceiling for how much players
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can spend. now analysts are bullish that the new sony play station and microsoft should bolster as well as rival ea's all of this helping activision rebound from disappointing results, shares up about 38% over the past six months. now, analysts also bullish on the potential for east boards to not only drive incremental revenue for activision but also to get more gamers engaged in big brands like "call of duty" year round. brian. >> it's kind of one of those things, julia, where if you don't play the game, as -- i don't, i'm sure melissa does not. you said you do not play video games. >> i do not. >> we do not understand the magnitude of the scale here, julia. i mean, honestly, what are we talking about? bigger than "star wars"? >> it's just a different kind of thing than "star wars." "star wars" people pay $10 to go to a movie, maybe they buy some merchandise. but this is a different kind of
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economic process here because you'll buy a $60 game and the game comes out in november. and then you might pay $50 for access to all of this digital content year round. and then the biggest fans, they're going to be willing to pay $200 to get to go to an event like this and get early access to a game. >> wow. $200. julia, thank you. julia boorstin in los angeles. amazing what people will pay. >> i'm telling you e-sports, it's in stadiums, it's not for us, but they are -- it is booming. >> it's for the yute. it's been years since the iphone 6 release, in less than 24 hours apple is set to unveil the iphone 7. the question is will it live up to the hype?
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all right. welcome back. i'm brian sullivan. here's what's on the "power lunch" menu the rest of the hour. the countdown is on for apple's big launch event tomorrow. what will we get? a new phone? no headphone jack in a phone? a flying car? we're going to go inside the hype. it's a big cap energy stock up more than 45% this year, the outgoing and incoming ceos of pioneer natural resources are here. and do you need a rich maybe
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looking for the plumbing aisle, bathroom, lowe's has new helpers, but they're not humans. they're robots. the second hour of "power lunch" with real people begins right now. real, or so you think. i'm melissa lee, let's get a check on the markets with about two hours until the closing bell. stocks posting modest gains. we were in the red as the dow could finish the day higher would be third straight day of gains. we also haven't seen a move of 1% or more in either direction in the s&p 500 since july 8th. in the headlines this hour, amazon trading at all-time high levels last seen since its ipo may 1997. new york's attorney general launching antitrust investigations into epipen maker mylan. and paypal striking a deal with mastercard to allow payments in retail stores, brian. all right. it has been two years now since the iphone 6 was released all the way back in september 2014, because that was two years ago. apple stock up about 9% in that
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time. that's it. that's underperforming google, microsoft, facebook and amazon. now, in less than 24 hours apple expected to unveil its new iphone 7. but do not expect a major upgrade. josh lipton joining us now with more on what we should expect from apple, josh. >> well, brian, it is september, which means it's time for apple's ceo tim cook to announce new hardware. and here's what that new iphone 7 is expected to boast. so new faster processor, pressure sensitive home button, improved water resistance and dual lens camera for higher quality photos. it's also anticipated to be slimmer. and that could be because apple might remove the phone's headphone jack forcing users to adopt wireless headphones or plug headphones into that lightning port. if it does, that could generate some controversy. apple could argue that, listen, wireless headphones are simply the future and that it wants its products to reflect that trend.
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but a lot of consumers do love their traditional wired headphones. in fact, some are saying they might abandon apple if cook really does remove that jack. they're heading into the event tomorrow apple stock up some 10% over the past three months. though down some 13% from that 52-week high. given the backdrop of tempered expectations for tomorrow, rbc thinks the event could surprise investors on the upside. remember, it's not just the iphone. apple is also expected to update its watch, faster processor, longer battery life and gps. analysts say that would be an important feature allowing the watch to be more functional as an independent device. guys, back to you. >> josh lipton, thank you. more on what the street is expecting from apple. let's bring in an apple shareholder, jason weir, also with us our very own jon fortt. jason, kick it off to you.
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i think it's a good point, it feels like expectations are so low going into this event that it's markedly different from past events. >> yeah, i would agree with that. it's been quite surprising as you underscore basically the tempered expectations into the product launch. typically we see the opposite, going into the launch of iphone 6 there was a lot of anticipation. i think this time around the hurdle is much lower as we feel like we have our hands around what josh mentioned as far as the hardware upgrade. pretty low expectations, but that's a good thing for apple stock because of course with lower expectations, if there's anything that comes out that might excite folks or get people to upgrade at a faster rate than the street is expecting, stock around 11 times earnings, that's good news. >> that's a glass half full view. jon fortt, what we do know the next generation of iphone, that's supposed to be the great one, the one when apple's really not going to hold back. that's sort of the expectation. >> i don't know how that rumor
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got started. >> all right. that's just a rumor? >> well, people are saying, oh, well ten years, surely -- >> right, the anniversary. >> it's like that sign in the irish bars, free beer tomorrow. >> yes. >> it's never tomorrow. and you're always waiting and we're always -- i feel sorry for apple. honestly. because the expectations are too high. >> here's the factor that i'm wondering about though. that headphone port right there. and if that goes away, it will make this iphone upgrade the most controversial design decision that apple has ever made, i would argue. because, yes, they've gotten rid of the floppy disk drive before, gotten rid of optical drives before but tended to do that on one particular model of a pc, of a computer, of a mac. and people had other models to choose from. they were able to gradually move people along. plus, those have upgrades cycles of three to four years on a shorter end, phones we're used to upgradinge ining every coupl.
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this is one factor that could cause die hard fans to say maybe i won't upgrade this year. or maybe if i've got an iphone 5s or a 6, i'll upgrade to the 6s instead of the 7 if like me they use the auxiliary jack in the car. >> i am one of those guys. i'm going to editorialize here. i will not buy a phone without a headphone jack until the quality of bluetooth headsets he said -- i got chalk under my teeth from those snappers, gets better. and it's not something else you have to charge all the time. that's the problem. there's nothing wrong with a wire. i don't have to plug it in. halfway through a run the bluetooth headphone dies. >> right. >> on my monthly jog. >> there's no company better positioned to solve that problem than apple. they do the chip in this phone. they work on the wireless, they do the software, they do the design, they do headphones as well. >> some would argue that also wireless charging is another rumored feature and that is a feature, jason, maybe that could also remedy the charging worry
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about wireless headphones. but how big of a concern, jason, is it of yours that getting rid of this headphone jack is really going to cause that much timult among the apple base? >> it's not a big concern for us. i think jon makes some good points. i agree with a lot of what he says, but at the same time i think with regards to apple there's a cult brand equity that they have. and i don't think you're going to see too many people shifting away from the ecosystem that apple certainly provides their customer base just because they lose, you know, the jack. and i think if anything what we look at is some of these other elements that we're expecting like upgraded storage tiers, upgraded processor, which i hear the a10 is quite impressive, upgraded camera, perhaps new colors. more water resistant. >> i disagree. i disagree, jason, as a customer. as a 20-year apple guy, i was the king of apple. i'll tell you why. talk about the ecosystem, i'm as dialed in it as anybody else, right? 25,000 songs, thousands of
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pictures, i should be the guy that could never ever think about changing. but here's the thing, now you've got amazon drive, google drive, smug mug for photographs, amazon music, spotify. there are other options out there that i do not believe -- and, jon, you're the tech expert, do not tie you to the phone like even three years ago, right or wrong, jon? >> well, i think that is right. and i'm not sure -- >> wrong, let me know, buddy. i've looked around and said i could change phone providers and be okay. >> i don't think you will though. you might just wait longer -- >> is that a dare? >> yes, i'm daring you. >> he's daring me. >> it would take a lot of effort -- >> i'll be here with a flip phone next week because of that. >> the danger here for apple is not that people will switch to some other provider. it's that they'll wait to upgrade. >> right. >> and force apple to come up with better technology solutions to make this move more palatable. maybe that's a calculated risk. maybe with the next generation of phone, which knowing apple is already at least designed. they know they needed to do this and decided to take their lumps
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this year. we'll see. >> jason -- >> brian, i have much respect for you, but you're a fantastic in of one. i think for the most part majority of apple users are not going to change because of that. i think there are other things that excite them about the phone. going back to the point about the lengthening product cycle, i think that actually starts to work in apple's favor because as we all know and it was reported earlier, i think it was in "the wall street journal," there's something like 300 million of apple's iphone user base now have phones that are getting two and three years old. and there's going to have to be almost a forced upgrade at some point. maybe it's not going to be some dramatic push this time around. we don't expect that. but i think a healthy upgrade is enough to move the needle. >> yes, jason, but that's the problem. that's the problem, jason, they've been waiting so long to upgrade, they could easily upgrade to the s. >> a lot of letters and numbers here, jason. i appreciate the semi-compliment, but i'm at least a party of two. i'll tell you why, over the weekend i read an article by
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some guy i think it was fast company who said degree the article was titled why i'll never buy an iphone again and he listed some of the same beeves i h -- beefs i have. i don't think the argument was as strong as it used to be. that was the point i was trying to make. >> right. lots of hand wringing but we think at the end of the day a lot of people will stay in apple that want to be there. i think the biggest risk to be honest is iphone 8 next year. if that starts to look really, really attractive, there could be delays from people saying why do 7 when i can wait for 8 because it's really going to be a sea change from what we see now. i think that's probably the biggest risk to be honest. we're probably not there yet in terms of visibility. >> got it. thank you, jason. and thanks to our jon fortt. all right. news alert in the race for the white house. let's get back to eamon javers. >> yeah, hi, brian. hillary clinton has landed in tampa, florida, on the way down on her airplane she was asked by
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reporters about donald trump's comments over the weekend about the fed. you remember that donald trump said over the weekend that the fed is keeping rates artificially low and he said that that's creating ultimately a false economy. here's what hillary clinton had to say about those comments a few moments ago on her airplane. >> another example why you shouldn't be anywhere near the white house. you should not be commenting on fed actions when you are either running for president or you are president. words have consequences. words move markets. words can be misinterpreted. words can have effects and people's 401(k)s, pension funds, stock portfolios. and i'm not going to comment on trump's comment. other than to say that he should not be trying to talk up or talk down the economy. and he should not be adding the fed to his long list of institutions and individuals
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that he is maligning. >> and, guys, we know donald trump has said in the past that he would replace fed chair janet yellen at some point if he's elected president of the united states. so this battle over the fed and interest rates will continue into the fall, guys. back over to you. >> it's almost ironic, eamon, hillary clinton says words have consequences, words can move markets. it's really her words that have moved the markets perhaps more so than donald trump when it concerns health care stocks and biotech stocks. >> yeah, look, i mean, presidential candidates, presidents themselves are very aware that any comment they make whether it's about the fed, whether it's about the dollar, can move markets and sometimes those lessons are hard learned. but clearly donald trump is a guy who doesn't care about that precedent. he wants to make the point that he wants to make about the fed. he feels that interest rates are too low. ironically back in may he said that he was a low interest rate guy and that he was in favor of low interest rates, thought it was the right policy. in the previous november, you
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know, he had a different point of view altogether. so this is somebody who has changed his stance on where interest rates should be all the way through this campaign. >> all right. eamon, thank you. eamon javers in d.c. >> you bet. pioneer natural resources shares are up 45% this year. they are one of the best performing energy stocks in the s&p 500. they've got a big ceo change coming. we are going to speak with both the outgoing and incoming ceos of pxd when plc continues. gugu, 's ppg hey nile thmy w aler gugu, 's ppg hey nile thmy for whevinppen t market. w aler gugd's tul. ppg hey nile buinrswim adadle cr ctom for whevinppen t market. w aler for althe thgsthre impornto ts oythit al. noon t ycuom arthinkorswim. ont a ari. oneheidmomo.
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welcome back to "power lunch." i'm kate rogers. s&p 500 gaining, mostly driven by canadian pipeline giant and enbridge acquisition of spectra energy, a deal worth about $28 billion. that creates the largest energy infrastructure company in north america. shares of spectra up more than 16% while enbridge gaining 7%. whenever you ask investors in the top oil ceos in america, the name scott sheffield always comes up in the conversation. since then as pioneer was created at that time, investors have made more than a 350% return, about triple that of the s&p 500 in the same time. but scott is stepping down at the end of the year, and tim dove, long-time lieutenant, will step in. both are here for a "power lunch" exclusive. thank you. >> brian, great to see you
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again. >> it's interesting. it's been rocky for everybody doing this, but what's interesting is i looked at the price of oil and the price of oil in '97 -- you've been in the industry longer, but when pioneer was created through a deal, price of oil was about $21, which is about $35 in today's dollars according to the inflation adjustment calculator. in other words, we're not that much higher now than we were then. are you surprised at how volatile oil's been over 20 years, scott? >> yes, i am. i'm speaking all the time still about how volatile it's going to be even more in the future. because saudis not going to try to market the price or try to keep the price down. >> i bet if i went back to '97 and we went to our time machine and said, scott, in today's dollars oil will be five or six bucks higher, you'd said i'd been drinking or was insane, but that's where we are. why? >> exactly. we've seen it move up. i remember when going around saying oil would be $15 a barrel right after our merger, we had
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the price collapse. and it just doesn't happen. and you need these other areas to produce, exploration, you need l & g, you need other products. now we're finding out with lower demand, we got too much oil in the world that the permian shale's come out on top, they're comparable to saudi, iran, iraq and so on. >> i guess, tim, your job now is going to be -- and you've been working there -- so it's not like a new game to you, but as ceo now your job is going to be asked by guys like me where the price of oil is going, not where it's been because we know that. a lot of people are bullish, but every time oil ticks up we can't get out of our own way. >> i think what happens as producers, as drillers we're so efficient at what we do we shoot ourselves in the foot at some point. especially the very efficient producers like ourselves. so it will have to be seen going forward whether or not that will be the perpetual cycle we're in, boom, bust, boom, bust. >> we've seen it --
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>> we've seen it for 30 years. i wouldn't expect it to not occur again. >> where do you see oil going? >> i think right now we're sort of range bound in the mid 40s where we try to burn off inventory. but i could easily see a case into the 50s and 60s next year. >> give us the biggest bull case right now. >> the big bull case is associated with the fact that all of these 200 billion projects are not getting done bodes extremely bullish from the period of 2018-'59. oil price haves do go up we have to replace 5 million barrels of production every day, that's not happening. >> scott, you have said and correct me if i'm wrong, that you can make money at $30 a barrel, is that true? >> yes, we have a slide that actually shows break even price, pv10 below $30 a barrel in the heart of our acreage. >> where is it? >> high 20s, 25 to $28.
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>> so $29 a barrel you'd prefer not to see that i'm sure, but pioneer can still make money? >> exactly. >> how many of your competitors could say that today? >> very little. maybe a handful. you can count them on our hand. >> tim, how many could say that at 45? >> a vast number of them can make money, the question is can they make the same returns we can make because of the fact we've got the best rock and best efficiencies going on in the permian basin. a lot of the major queries basin still work -- >> companies have held on longer -- some obviously have gone away but companies have hung on longer than anticipated. let's say oil stays between 40 and 50 for the next two or three years, what will the industry look like? >> i think you'd have continuing issues pertaining to balance sheets and price determinations -- >> will it shrink? will companies go out of business? >> yes. >> we've seen a few of the very weakest balance sheets. >> right. you'll start chipping away at the companies who are marginal today, but i think would be heavily negatively effected if
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we had two more years of $40. just to standpoint linkage to reserve base lending being tied to future oil prices. >> scott, we're headed to oklahoma. and i don't believe pioneer -- you guys are not in oklahoma, correct? >> no. >> okay. not at all. they've obviously had some earthquakes. scooping the stack regions of oklahoma have gotten a lot of publicity lately and they're going to get more in a couple of days as we go there, would the earthquakes, tim or scott, would they scare you from investing in that region? >> no. >> if someone said, scott, i got cheap land for you. >> it's simply repositioning the salt water injection wells. occasionally some operators will drill into close to a fault, it will move down that fault and cause some slippage. and so all the commissions, the oklahoma commission, the texas commission, they've hired geologists, geophysicists on staff now. they want all producers to reposition and do some work before they drill their disposal
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wells. >> last -- okay, tim, to get you on the record if one year from today you come back on this fine program will oil be above $60 a barrel? >> no. it will be between $ 55 and $60 a year from now. >> little bullish but not wildly optimistic. >> no, we have to burn off inventory and that takes a long time. >> you keep that view we might call you lonesome dove. everybody else is still bullish in the business. >> i still try to be friendly but that's the fact. >> it's all right. we want facts, not friendly. tim dove, incoming ceo. scott sheffield outgoing ceo, thanks guys, congrats on -- i know you're not going out of the business and your boy's in it, but congrats on a big career. >> thanks, brian. by the way as we just noted on friday look at that says brian sullivan, the oil economy. we're going to be in oklahoma, which i'm learning is not an easy place to get to but a wonderful place. we're going to be there for a special "power lunch" on friday highlighting this scoop stack region, some of the plays, the costs where can they break even and maybe some of the impacts of these quakes and what the industry is going to do. coming up, what is behind
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china's latest big investment in american company and where could we see the next big deal? plus, we'll tell you what world record is being set here in what you're seeing when "power lunch" returns. we y's ocki, wherrocld ncl superstars tch investme y's oprtunitie ot aths loofy to be made.t t k thqutis ussmtcckllen to mght desis. u' nvereer;oofy to be made.t t i'doi can.can...
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chinese investment in u.s. companies is not slowing down any time soon. our su san li spoke to the deal maker in yum's china business last week. >> he's one of the most influential deal makers, deal brokers in china. he also managed to buy shares in alibaba pre-ipo. and you may remember prim ver ra, his company, his fund as a partner in bid to five starwood hotels, so they did succeed in buying minority stake in yum china, also take another 4% stake when yum spins off china unit on november 1st. i spoke to him this morning in his only interview on this deal and i asked him why he didn't buy any more. >> our purpose is not to control this company. this is a very big company. we position ourselves to be a trusted partner in an engaged
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shareholder, value shareholder. >> so when it comes to chinese investment, hu says china still punches below its weight relative to the economy's size and thinks there's a lot of irrational fear and anxiety about china buying up the world's. he does see a lot of opportunity still in the united states and the u.s. market, especially in the consumer services and technology sectors. but he thinks that chinese companies also need to do business in a world class way and follow the rules of the countries that they are buying into. and of note, you know, people are looking at this yum, this primavera deal as maybe a precursor so what mcdonald's might do trying to sell off their china, korea, hong kong units for possibly $3 billion. >> back to primavera, you said a stake in alibaba and alibaba owns ant financial, ant financial buys a stake in yum as well it's interesting primavera seems to be burnishing the share prices of the investments it
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already has. >> shocking. >> and timing because it happened just before the ipo. >> right. >> it happens before the ipo not only of yum china but also ant financial in 2017. >> which is worth $60 billion. >> right. >> so i guess everyone gets to win and share all around. >> it's a win-win for everybody involved. >> that's why he's an influential deal maker. >> interesting. susan, thank you. susan li. i think we're going to go to jackie deangelis at the nymex for the closing prices in oil. >> good afternoon to you, melissa. an interesting session for crude today. we came off at first, but getting a little rebound here still under $45 a barrel. you know, those headlines over the weekend really seen by traders as job owning with the russians and the saudi arabians that they're cooperating in some way to try to stabilize prices. well, they've been saying that for some time now, but what action is actually being taken, that's what the market wants to know. now, i spoke to dennis gartman earlier today. he thinks we're going to be stuck in this range $35 to $55 for the next two years or so, that it's going to be a cyclical pattern.
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producers will pump when prices get higher, they'll push the price back down and pattern will repeat itself. there's less optimism now about a freeze deal in september as well at the sidelines of that energy conference in algeria, though it would be in the saudis best interest. remember key player that won't be there is the united states. you're not going to have the russians or saudis freeze or cut production and let fraccers continue to pump at these levels. a lot of things moving the market right now, but critical that we're under $45. back to you. >> thank you very much, jackie deangel deangelis. will more apple employees vote for hillary clinton just because tim cook supports her? how big apple's ceo plays in the big election, that's next. evergrstupbens w side evergrstupbens w withh simes complexity. tha'y so manin are the i c
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hi everybody. i'm sue herera. here's your cnbc news update at this hour. gop vice presidential nominee mike pence holding a town hall in missouri. he told supporters donald trump has a better foreign policy than the democrats. >> they know. they know what the american people know. that donald trump will rebuild our military, he will standby our allies, he will stand up to our enemies. and america again will command
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the respect of the world for the safety of us all. >> bill cosby back in court hoping a judge throws out evidence stemming from a 2004 encounter between him and temple university employee andrea constand. an ohio county coroner fears the cincinnati area has been used as a test tube by heroin dealers for the use of a powerful animal tranquilizer. he says tests confirm the tranquilizer in the bodies of eight recent overdose casualties. and more cases are suspected. that drug can be thousands of times more powerful than morphine. and researchers in australia have recorded extraordinary video of a rare southern white whale calf. it's all the coast of western australia. recording tags were attached to seven white whales to monitor their movements. we'll keep you posted. that's the news update this hour. i'll send it back to you,
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melissa. thank you very much, sue herera. will more apple employees vote for hillary clinton because tim cook is one of her top supporters? john paulson staff get behind trump because the billionaire's on his economic team? here to talk about politics in the corner office is andrew ross sorkin and cnbc contributor ben white. andrew, start with you. fascinating column and essentially there are studies that show when ceos donate, employees fall in line. >> maybe this was obvious to everybody. you would think everyone has common interests, so if a ceo votes one way, the employee votes the same way. but what some of these studies have found is it's much more correlated than even that. there's a culture within these institutions. some might even call it coercion pressure in certain cases, oftentimes bosses whether they're the ceo or simply down the line of other people will solicit money and donations. when you start to look at the money piece of it, what some of the academic studies have really
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done, you start to see it is much more correlated than you might think. three times as much money is donated by employees to the choice of the ceo than otherwise. and by the way, most interestingly when a new ceo comes in, right, so it's not just this is their philosophy. when a new ceo comes in who has a different candidate in mind, they change their donations. and that to me was actually one of the most interesting pieces of it. >> that's fascinating. it seems there's something about it that seems wrong, ben. >> yes. >> that employees are under the gun to actually fall in line -- >> are they under the gun, or are they just scared? >> either way. >> i mean, the question in andrew's column addressed this to a degree, is there coercion going on here. you know, it's in rare cases is there actual direct coercion a ceo saying you should give this way and vote this way. but there's a more subtle coercion if a new ceo comes in and all of a sudden employees who were once staunch republicans are now democrats and giving to democrats because if you want to rise up, you're
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ambitious in your company, you don't want to buck the company line. >> i think the technical term is sucking up to the company. >> to the boss specifically. >> that's exactly right. and my question and andrew can speak to this too, what do we do about this? is this something that the s.e.c. should look into? is it simply a matter of this is what happens when a ceo goes one way the employees go one way. should the ceos not be active in politics? should they step back? i wonder what andrew thinks about that. >> there's a couple pieces to this. one, it's not illegal for companies or for ceos or other people to have political views. companies by the way have pacts. and they've long had pacts and they've long encouraged their employees to donate to those pacs. and of course those pacs then vote on behalf of the company's interest. this is not a new issue. the question does come down to coerci coercion. do they feel they're being coerced? is it a subtle form of peer pressure? there's one case this which certain employees told new
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republic magazine they felt coerced by murray energy. later after investigation the federal election commission said that they did not feel coerced or that they weren't coerced in part because the e-mails and videos they got encouraging them to donate at the bottom had disclaimers on them and said you don't have to do this. do disclaimers really work? there's some large questions about all this. to me the larger point though is just how influential the ceo or even the bosses down the line actually are. often i'm not sure we think necessarily within politics that they are. but it sounds like the more you get into sort of the culture of institutions it is meaningful. >> i would be curious to see if those employees actually fall in line and cast their vote for the same candidate that the ceo endorses. >> right. i think there was some data in the piece, in andrew's piece, that in congressional districts where the ceo of a company is in favor of a particular candidate that there's higher turnout, more people go vote in those congressional districts from those companies. so there is clearly some impact
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not just on contributions but on voting behavior, which is a fascinating thing. >> but if the boss, you know, andrew, doesn't take a lot of vacation, you probably won't take a lot of vacation. they come around asking to buy girl scout cookies, you're buying them all up. i wonder how much is parti ipar behavior, but to melissa's point, go to the voting booth and close the curtain, all bets are off. >> we will never know. and that's the thing. the other thing that's interesting to point out is oftentimes the interest of an executive or parts of management may not always be in line with employees, if you will. so the idea that everybody would have the same view is a bit surprising. it's also worth noting i talked to tony fratto quoted in the piece saying by the way this has been happening with unions forever. those are voluntary donations in most cases, in certain cases less voluntary. this is not just corporate america. there are lots of parts of the
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world where there's either peer pressure or coercion or whatever you want to call it clearly does take place. >> all right. well, it's a great piece, andrew. thank you so much for joining us. andrew ross sorkin and ben white. have you ever been to a home improvement store and had trouble finding something? like literally i need a small piece of rope but you have 60 aisles and you can't find anybody and the guy you find doesn't know where the small piece of rope is? don't worry. lowe's has an answer for this. robots. we're not kidding. plus, knocking over glasses and spilling alcohol all in the name of a world record. we're going to show it to you when "power lunch" aka plc returns. f mpy thatidmaars at com does th? exnmobil, ho gire efficie.y.evogy to me e workin a tse thgs tars better
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the rise of the robots is indeed upon us or at least at participating lowe's stores. lowe's will be introducing autonomous robots to the san francisco area. they will greet customers and help them find merchandise throughout the store. lowe's just the most recent example of companies integrating robotic technology into their workforce, or maybe supplanting it. joining us now is the executive director at lowe's innovation
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labs, kyle nell. kyle, welcome. it's kind of cool. but is it taking jobs? >> no, not at all. i think in the same way that your smartphone just augments you and gives you super powers, we're looking to do the same thing for our customer service associates and then also to provide our customers with the kinds of things they've been asking for for a very long time. >> and what are they asking for? robots that know how to find small pieces of rope? >> well, they're just looking for realtime information in the way that they want it. the best way to do that is by asking for it. the other thing too is the robots speak multiple languages. and so that acts as a translat translator. you can know as a customer speak the language you're most comfortable in and help be that translator between you and the customer service associate. >> like most people out there, kyle, i am skeptical of the powers of the this robot. so can you give me an example of how complicated a request this robot can actually handle? >> very, very easy. so there's lots of things,
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there's front facing features and back facing features. the ones the customers will see is you'll be able to when you're shopping the robot will roll up, ask you if there's something you can be helped with, looking for hammers, drywall, whatever it is, looking for paint, show you on a map on the screen where it is. if you want you can actually have it take you there. you will follow it to the location that you're looking for. >> does it have knowledge of the hammers that i'm asking about? i mean, if i said i need a large hammer, where can i find that and it can differentiate what i'm asking? >> it sure does. so if you're asking for something very broad like hammers, it will help you narrow down with that visual cue, specifically what you're looking for. and this is another thing too that our customers have been asking for too, the words and the gnome n clay chur we use a lowe's may not be -- it helps. >> you can scan something on your phone and the robot will take you there? >> so yeah, there are other features built-in and we've been experimenting with.
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so bring in the screw or hinge, hold it up to the robot, what it is and if we have it in stock. again, get to the thing i don't need to know what it's called but will help me get there. >> what was the hardest thing to program in the robot? the one thing it had trouble learning? >> there were a lot of things. the difference in the way that people talk is all over the place. the know man clay chur we use is in a wide variety, depends on the region and the area. also if you add in second language and third and fourth and fifth language component that adds to complexity and difficulty as well. really the hardest bit was getting our systems on the back end ready for these robots. and really building up those systems so they could be ready from a visual standpoint and a natural language processing. >> how are employees reacting to the robot, kyle? >> they really like it. i know it sounds like that might not be true but they truly like it. the thing that was most shocking to me about this entire thing was to see how fast it just
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became part of the day-to-day. much in the same way the first time someone had a smartphone everyone crowded around their cube looking at it and two weeks later everyone had one and couldn't imagine living without it. that's how the robots are too. >> okay. i did wonder because my first thought was you get an employee like take me to the robot crushing machine. >> no, no, we haven't had it. no, none of that. >> kyle, thank you so much. kyle nel. >> thank you so much. appreciate it. >> i thought of the scene from "the office" when the guy takes the computers to the back and sledge hammers. >> it does feel good to be a gangster. shares of michael's down 17% in the past three months. can the stock turn around? one analyst take is coming up in "street talk." amazon hitting all new highs seemingly every day. should you buy that stock? the trading nation team is covering it from all angles next on "power lunch." it's been over00 years since
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time now for "street talk," analyst recommendations on the stocks you need to know about. credit suisse upgrade price target remains $29. the analyst thinks the second half bar is lower with potential for comps and margins to improve after disappointing second quarter. also, seasonality should help along with lacking a slowdown
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last year in custom framing. >> been a slowdown in custom frames and pipe cleaning and stock has had a run. second stock, speaking of tire. upgraded to a buy. three reasons. one, the growth forecast is credible. two, a relatively defensive business model. 80% of revenue from tire replacement. the dividend yield just under 1% and they think it goes up. 23% upside. >> we were talking about used car sales going up. devon energy with a downgrade at raymond james. the driver is the oil price forecast is too high. they say it will be $20 to $30 higher costs. the stock run up recently. that's all played out for now. >> we'll see. raymond james says that. you heard the new ceo saying 10
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bucks, 15 bucks a barrel higher in a year than it is right now. 50 to 60. oil ceo is less bullish than the analyst. the devon ceo will be a guest on friday in oklahoma. >> fantastic. >> finasar with connections to speed up data. upgrading it to a buy from a hold. a few reasons for the upgrade including optimism on gross margins and the company might raise guidance and optimism of the rollover of 100g which is a new kind of transceiver that come were concerned about. the target is 28 bucks, about 25% upside and a hot stock up 50% so far this year and you wonder where was the upgrade? >> transceiver? i have to ask the lowe's robot about that. i'd like to buy a transceiver.
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amazon shares surging to a new high today. let's talk about it with the "trading nation" team. all right. you know, eddie, i won't ask you to judge the stock on a valuation basis because i think we have learned over a decade that's a futile task. when's the biggest risk to amazon? >> i think the competitors. people coming in from different areas, shutting out different markets. amazon is a -- it's a remarkable company. the stock is average 1% every 11 days for nearly 20 straight years and up to a new high today. >> what? repeat that. >> average gain 1% every 11 days for this may will be 20 years since the ipo. >> that's incredible. you think it will keep doing that? >> no. absolutely not. remember, earlier this year, it lost a third of its value in just six weeks. so traders looking at this stock have to remember the nature of
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the company that amazon is. it can move so quickly and things can change very rapidly with this company. >> all right. rich ross, incredible stats there. how do the charts look? more to come or topped out? >> more to come, brian. at this point, i think most portfolio managers, a matter of when to buy amazon, not if they buy it. i've brought charts that i think can help answer that question. i think we get to $900. tacks on another $200 on top of that range from the 685 to 885. 900. when's interesting, brian, just a testament to the strength of the stock. not broken below the 50-day moving average even with brexit and the s&p below the 200 day. amazon tests and holds that 50 day. that's a display of strength, brian. look at the weekly and focus on when. eddie with a great segue,
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talking about the stock losing a third of the value, that's not the column to make. you go back, that's 150-week moving average, defined the trend. look at the prior highs and run into trouble and we have had 30% pullbacks in the stock. you have been roughly 40% away from that 150-week moving average. with pullbacks, admittedly not pulled back every time we have done that but enough of a sample size to give you room for pause as the stock makes a never-ending string of all-time highs in here and interesting and once again buying the stock here. >> okay. buying on the technical side. eddie's a little concerned about the gains but some incredible statistics there on amazon. we appreciate both of your views. thank you. for more insights gorks to trading an explanation of what the heck is going on in this video after the break. this video.
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check this out. a new world record for the
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longest domino drop shot. basically, dominos with shot glasses. took place in a bar in dubai. successfully dropped 4,578 glasses and after verification of an official adjudicator for guiness, this was declared an official world record. >> how do the physics of that -- how does that work? i mean, the shots -- do they have little stems or something? >> probably stacked up. must be. there's a height issue. >> right. >> otherwise, they're too -- >> gravity. >> too squat i think is the term you're looking for. squatter box in the morning. >> plc in the afternoon. "check please." here we go. i'm watching the fang stocks. you were talking to the "trading nation" of amazon specifically.
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>> 1% every 11 days. >> they're all traded higher today and really shows you a y bifurcated market right now. there's a notion the fed stays lower for longer and also a desire for safety because two sectors of utilities and telecom, on the defensive side, and the fang stocks outperforming on the other side and really a tale of the market right now. >> mine is about the pipeline deal but not the one we're talking about. enbridge. huge deal. enbridge bought a stake in a company that controls a stake in the dakota access pipeline in north dakota. and if you look at enbridge, in canada, the brouhaha of the ke stone pipeline, with the deal made last week and spectra, there's an easier way to get
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crude from canada to the gulf coast of mexico and may have pulled off in deals what the keystone and transcanada could not not in a new pipeline very cool. >> could be completely wrong, also. >> "power lunch." >> "closing bell" starts right now. hi and welcome to the "closing bell," everybody. i'm kelly evans at the new york stock exchange. welcome back. >> we're back together. >> anything to report? >> what could be new today? nothing. >> nothing. >> just another day. i'm bill griffeth. vacation is over. the takeover talks are front and center today on wall street. we'll look at the big deal announcements and what they could mean for the broader market coming up here. apple is not the only company grabbing attention. twitter has a board meeting thursday. we'll have details c


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