Skip to main content

tv   Power Lunch  CNBC  September 20, 2016 1:00pm-3:01pm EDT

1:00 pm
-- >> i think once people step back, the fed's language isn't changing. they're on a very defined course. very slow and gradual and as long as we don't see inflation really ramping up, i think it is a nonevent over the long term. >> great having you here. thanks so much. erin browne. that does it for us. thanks for watching. "power lunch" starts now. >> scott, thank you very much. thank you. welcome to "power lunch." i'm tyler mathisen. here is what is on the menu. boy, did we just see fireworks on capitol hill? senator elizabeth warren calling wells fargo ceo john stumpf gutless and said he should be criminally investigated for the bank's fake account scandal. more on her words. plus you'll hear from the chair of the senate banking committee as soon as he comes free from the hearings, richard shelby of alabama. slamming the brakes on driverless cars, why the head of audi america is raising serious concerns today and you think you have what it takes to be the next fed chair?
1:01 pm
prove it. got an insanely addictive gain for econ nerds everywhere. "power lunch" starts right now. welcome to "power lunch." econ nerd brian sullivan with three hours left in the trading session. stocks, as you can see, at session lows, mildly in the green. but if this recent trend continues, it may not be for long. trying to lead the dow higher at this hour, you got merck and other names out there. as you can see, the dow is up just 19 points. goldman sachs doing okay. and we're pleased to have seema mody riding shotgun with us today. >> hi, everyone. i'm seema mody. here's what else is up on "power lunch" at this hour. housing starts falling more than expected last month after two straight months of gains. u.s. attorney general loretta lynch says this weekend's explosions in new york and new jersey are being investigated as an act of terror. and the national hurricane center says tropical storm lisa
1:02 pm
has formed in the atlantic. it is not expected to make landfall in the u.s. lots to get to this hour. first, we begin with the big fireworks on capitol hill. massachusetts senator elizabeth warren going after wells fargo ceo john stumpf in a big way. >> when it all blew up, you kept your job, you kept your multimillion dollar bonuses, and you went on television to blame thousands of $12 an hour employees who were just trying to meet cross sell quotas that made you rich. this is about accountability. you should resign. you should give back the money that you took while this scam was going on. and you should be criminally investigated. >> some strong rhetoric being used by the senator. let's get straight to cnbc's wilfred frost live on capitol hill with the latest. >> yes, indeed, strong rhetoric as you rightly say from senator
1:03 pm
warren. it really summed up the tone of the q&a part of the hearing with ceo john stumpf of wells fargo. that's despite in his opening statement him using terms like deeply sorry and taking full responsibility. once the q&a started, it didn't feel like that was the case. too many moments where he appeared to be dodging questions and not taking full accountability, most notably on the issue of clawback of executive pay, both his own and those of the head of community bank, kerry tulstead. one wonders why they'll be considering -- wishing they got out ahead of the issue and doing things of that ilk before that hearing because it was a massive question of the focus of the senators. here is another example of where people felt he was dodging certain questions and not taking full responsibility. >> do you acknowledge that the employees who engaged in this activity were committing fraud? >> you know, i'm not a criminal,
1:04 pm
you know, officer, and i don't know the -- i'm not a lawyer. i know the legal term. i know this, they broke our code of ethics, they were dishonest, and we did everything we can to support law enforcement on these issues. >> i'm not a lawyer either. neither are most adults in america, but i think most people understand the meaning of the word fraud. >> now, that sort of response led senator tester to say that what mr. stumpf had done was unprecedented in uniting this committee, the first time he had seen that in his tenure on the banking committee. the only other big headline i'll bring out quickly now was the fact that mr. stumpf said, quote, i can't guarantee actions only begun in 2011. they extended the investigation back to 2009. a further development we didn't know about this morning. the stock price which was up over 2% is at its lows of the
1:05 pm
day, which it were hit earlier when senator warren started that very pointed set of questions. guys? >> how would you characterize mr. stumpf as he left the hearing room? you were in hot pursuit. he took no questions that i could see. what would you -- how would you describe his body language, his manner? >> well, he was trying to stand up tall and walk out i suppose as proudly as possible after a grilling that he just had sceee. and i imagihe managed that pret smoothly. but his tone was calm, collected, also it seemed genuine as he delivered the opening remarks, but there would be a sense of disingenuousness as he went on because of the content of what he was saying regardless of the tone. and it didn't feel like he was really meaning it. as he walked, of course, a somber departure because a tough time in there. >> he did not seem to get ruffled or lose his cool. i did not hear, how did he
1:06 pm
injure his hand? was it shaking hands with elizabeth warren? >> well, yeah, no, added some attention in terms of when he was being sworn in at the start of the hearing. i have asked about that. it was with his grandchildren over the weekend. >> oh, the old grandchildren over the weekend story. i guess you're going to stick around as we bring in jon najarian and larry kudlow. jon, you were here watching all of it. i've not seen quite as ferocious an interrogation by u.s. senator of a sitting ceo in my recollection. >> right. and it wasn't just miss warren, but she did a great job. it was also looking around at mr. brown, at sherrod brown. i thought he was going after stumpf like crazy as well. and everybody virtually said the same sorts of things in regard to the clawback issue. because there is so much money paid out to top executives of
1:07 pm
banks like this. some of it is deserved. they're at the very top of the food chain, the top of the pyramid. but when they make mistakes, there should be some issue, if it is not just a mistake, if it is fraud, which clearly this was, then i think somebody has to take responsibility. he says the buck stops there. >> jon, the buck stops there. two questions. does john stumpf need to be fired right now? and why doesn't the market seem to care? >> i don't think elizabeth warren or anybody else in congress can fire mr. stumpf. i think that would be a bad precedent. not that you made the statement that that should happen, i'm just saying that should not happen. if the board is not willing -- the board has to listen to the shareholders and they are the voice of the shareholders. if they don't do the right thing here, and i'm not saying the right thing is to fire him, i think the right thing is to clawback and to discipline the
1:08 pm
folks. >> one other thing that seems important here, as they ask the old question from the watergate hearings, what did you know and when did you know it, mr. stumpf, what did the federal regulators know and when did they know it and why weren't they on the case quicker? we spoke last week with the l.a. times reporter who was one of the first people on the story. it drew the attention of the los angeles county city prosecutor, but it took a long time before federal regulators, the occ, the cfpb got on to this. >> that's really important point for everything. not just the wells fargo, but for the entire banking, regulatory, federal reserve, that's a really important point. regulators are always so far behind the curve. point number one. point number two, you need to have your own 11:00 p.m. show on nbc or some place because of your incredible humor. number three, this remiis, remie
1:09 pm
if i'm wrong on this, an election year. there is nothing better to have a pinata like a wall street bank -- >> or pharmacy ceo tomorrow. >> yes, going there too. so we can get at wall street, kill wall street, we can shoot them, we can kick them, we can put them on the ground. if that doesn't work, we can string them all up, because they're all evil, you know that, all wall street people, all bankers, all financial people, in fact, almost anybody in america who is engaged in business during an election year like this is bad. bad, bad, bad. >> there was consumer fraud evidently here. >> i get that. i think one of stumpf's problems today was he was very poorly prepared for this, and he didn't have -- he didn't have fallback positions like i'm going to look at this hard, and i'm going to look at that hard and i agree. in a political year particularly, you have to be willing to go up there, and just kind of cow tail unless you got a much better case.
1:10 pm
>> to your point, do you think the candidates, trump and clinton, have addressed this misconduct at wells fargo enough? >> no. i don't think they should. i really don't think it is that -- i don't -- what is at stake here is the broader regulatory questions. now, this action happened when, in 2011? is that correct? quite a while ago. 2016. so it is kind of yesterday's news. now if you want to have banking policy, with respect to dodd frank and the reform of dodd frank, perhaps they should. i haven't seen anything -- hillary hates banks, period. trump tries to hate banks and sometimes he doesn't hate banks, not quite clear. >> one question, whether the candidates have addressed it or not, wilfred frost, one person conspicuously silent from where i sit is one of the largest shareholders in wells fargo warren buffett. where is warren? >> well, that's a fair point. we haven't heard much from him over the last 10 or 12 days since this story broke.
1:11 pm
i suppose leading up to this hearing we heard from certain shareholders that they weren't that concerned with this and from certain analysts that this wasn't so much an earnings issue, much more a pr issue. that might be why we haven't heard. back to larry's point saying the ceo, mr. stumpf, didn't feel that well prepared, didn't come across as that well prepared, that came across on certain points that came up, in particular the question of when he became aware of this whole scandal saying in 2013, at some point, but he couldn't remember exactly where -- when you would think like a hearing like this you would do all sorts of research to make sure the exact dates were stuck in your mind. in terms of when the regulators knew about it, that is in fact also part of the hearing that the share senator shelby outlined on the agenda, of course, the first person being mr. stumpf. but the regulators were being quizzed as we speak. so we might get a furtherancer on that. the final thing, with the other banks watching and thinking
1:12 pm
because mr. stumpf was asked, you know, does this highlight the banks are too big and need to be broken up. his response was, this was a thing of focus, not of size. but other banks may be worried about what the fallout of this might be. >> i know we're out of time. i want to come back to john's point, very important point. the u.s. government does not set pay scales, hiring and firing, that's a private sector issue for the board. unless you can prove fraud and illegality in which case i do think there are provisions where they can get involved. but i want to make that distinction because i think that's a key point, too many people nowadays believe the government -- they can say who to hire, how much to pay them, how long their vacations are, et cetera, and that ain't right. that just is not -- >> goes back in part, i think, to the financial crisis when the u.s. took stakes in major companies, where they did have the ability to control who
1:13 pm
earned what and -- >> unless you want to turn banking into a complete public utility. >> will, thank you, jon, thank you. larry, you're going to stick around, i'm told. we have much more to talk about with you. a little politics, little fed and more. >> including this election. they were leaning heavily in one direction, but that is changing. the surprising results of the latest cnbc fed survey coming up. and why these eight iphone 7s have literally gone to the dog. they went to this dog. one dog, who just apparently is just texting like mad. we're back right after this.
1:14 pm
1:15 pm
1:16 pm
welcome back to "power lunch." wall street just changed its tune on who may be the next president. steve liesman has the results of the new cnbc fed survey and, steve, the results are significant. >> they are, seema. the reason we asked this, this campaign has a big influence on the economy. in fact, 60% say the whole campaign is negative for the economic outlook. we want to show you the big changes in the betting on who is going to be the next president. before in the august survey, 84% of our 41 respondents had said that hillary clinton would win the white house. that is now down to 51%. not necessarily true, only half of clinton's losses are trump's gains. 15 points to those who say -- 26 saying trump will win and 23%
1:17 pm
saying they're not sure. more than half of that went into the don't know, unsure. but it had been a very easy and comfortable bet on clinton, now down to 51%. let's look at the next screen here. what you see here is the idea of who is -- what is best for the economy on the election outcome. we had a big story here that there were more comfortable with the democrat winning, that's not true anymore. more comfortable now with a republican winning. which, by the way, historically is where you expect this group to be. big story here they moved away from trump and now they're back more where they had been previously. interesting split. who has the best policy for the stock market versus the economy. take a look at this. in september, 49% now say it is trump on the economy. that is up, so the policies that trump has been talking about, he's been sitting there, essentially talking to our audience where as i have to say, the democratic nominee has not been -- there has been no pivot to the center from clinton where as trump responded to the
1:18 pm
criticism, look, still a lot of criticism about his policies and how his numbers add up or don't. but he's talking about tax cuts, talking about regulatory reform. those are registering with our audience here, 49% saying that trump would be better for the economy. and still clinton wins on the stock market 26%. however, 53%. the reason is because when we ask people why do you make this split between the economy and the stock market, clinton is a known quantity, her ability to relate to foreign leaders is also comforting through the stock market. overall, the ideas of regulatory reform and tax cuts are thing s registering with our audience. >> interesting. >> and i have to say, we look for the corporate tax numbers for hillary clinton, does she even glom on to the ones proposed by president obama? we cannot find it. we don't know what her middle class tax cut would be. she's not talking about the issue. therefore you get guys like jack
1:19 pm
welsh who come on our air this morning and make a cogent case and i want to just -- larry kudlow said this to me, and advised my thinking about the political side. he's on set there. he said to me, the election is not going to be an omb debate. it is not going to be that. what you're going to do is get -- the public will get a general sense, this guy wants to cut taxes and reduce size of the government, and that person wants to do other things. raise taxes and increase the size of the government. and that's the choice people are going to make. i think trump is talking to that, clinton is not. >> steve, stick around. let's bring in larry kudlow. some political strategists say the rise of trump in the polls is due to the speech last week outlining his economic policy. what part of the economic policy do you think is resonating with americans? is it cutting the corporate tax rate or renegotiating nafta? >> i think it is the whole picture. i think steve hit the nail on the head. trump gave very good speech to new york economics club. by the way, hate to tout my own
1:20 pm
book, but john kennedy gave his speech at the new york economics club in december 1962. >> do you have a book? >> i don't have a book. i should. >> you have a book. >> the book is out there, folks, please buy it. enough of that. detroit and new york, very strong thematic message speech. tax cuts, particularly by the way, middle class tax cuts, rolling back regulations, which really helps small businesses. and growth. basic message is growth and jobs and wages. and it is starting to hit. he's done a good sober job on this. he's put out a lot of -- >> can i add a third choice. >> hang on. mrs. clinton to steve's point, does not have an economic growth message and when she does talk about it, it is all about raising taxes on rich people and rich corporations, not what people want to hear. and i will just say this, editorially, you know my bias
1:21 pm
here, you can't tax your way into prosperity, we had a 15-year slump, republicans and democrats, you can't tax and spend your way. >> there are a lot of problems with this. does it affect small business, the trump plan, and that's unclear and murky according to -- there are other issues about whether or not you make 3.5% growth. >> let me say, let me say, as somebody who put some time on this, as you know, for a bunch of months, he's cutting taxes for small business. all right. virtually all small business iterations will be eligible and available for the tax cuts. now, i understand the details and the tax rules and the -- all the various laws. i'm not a tax attorney. that complicates matters somewhat, this will all be -- >> this is a matter of pass through income and -- >> yes, this can all be worked out to the betterment of small business across the board.
1:22 pm
>> i got a comment on this, but we have to get to sue herera with breaking news now. >> it concerns exxon, brian. thank you very much. the s.e.c. is investigating exxon on climate change and accounting practices. specifically the investigation will explore how the company valued its assets given the massive drop in oil prices earlier this year and late last year. so they want to see how the company valued its assets in the price crash in oil. and it is also going to exam how the company values its projects due to climate risk. exxon right now is down just about 58 cents on the trading session, but once again, the s.e.c. is going to investigate exxon on several fronts here. back to you guys. >> sue, thank you very much. guys, i can add a little color to this as well. i've been following the oil and gas industry closely. there is two issues here. number one, the climate change thing, did exxon appropriately make shareholders aware of the possibility of risk to the value of projects because of the
1:23 pm
change in climate? number two, to sue's first point, which is when you value your portfolio, some company, if liesman oil corporation says we have 3 billion in proven reserves, you're valuing that on the aggregate price of a monthly average in a barrel of oil. as the price of oil goes down, you are supposed to revalue the value of your assets because the aggregate price has come down. it looks like the s.e.c. here is saying that maybe exxon and perhaps others have not appropriately written down the value of those assets as the price of oil has gone down. a lot of things get -- a lot of things are based on that proven reserves number. what is tyler mathisen really worth. if the value of the house drops by half overnight, then you're worth less and that's probably what the s.e.c. is going for here. >> you already took that hit a couple years ago like the rest of us. it may surprise lots of people, i've been helping mr. trump on
1:24 pm
taxes, but our book about jfk and the reagan revolution, the biggest point in our book is that what we need now like we had then is a bipartisan tax cut. okay. the republicans historically have not had a lock on tax cuts. the parties have switched gears since the 1930s. there is no reason in this election as steve reported that hillary clinton has no tax reform plan for corporates, which is probably the biggest -- >> we have been talking about, where has she been? >> that's right. we talked about that -- >> sitting on the ball. >> that's right. there is no reason why she couldn't have a good corporate tax reform, obama has it. what i'm saying is i -- this country needs so much help on these issues, i would like to see bipartisan discussions. i'd like to see bipartisan competition on the issues. there is no reason why the republicans have a lock on tax cuts. it could be the democrats. >> in '86, it was -- >> thank you.
1:25 pm
you're so right. furthermore, in 1981, reagan won with 71 democrats in the house. and, by the way, in 1963, '64, kennedy had tremendous bipartisan support from -- the plan was put up in 1962. it passed in the house in '63 with -- before his assassination, with democratic support and republican support. all i'm saying. >> playing us off here. just like at the emmys. just like at the emmys. jimmy kimmel, he was funny, by the way. larry, steve, thanks. >> appreciate it. >> appreciate your time. >> steve, you're going to be back with more later on. >> a lot to talk about the fed. >> a lot to talk about. it is a party on the lido deck and a killer day for shampoo. the good, the bad and the ugly in today's trade when "power lunch" returns.
1:26 pm
it's not just a car... it's your daily retreat. go ahead, spoil yourself. the es and es hybrid. this is the pursuit of perfection.
1:27 pm
when you cook with incredible thingredients...ato. you make incredible meals. fresh ingredients, step-by-step recipies, delivered to your door for less than $9 a meal. get $30 off your first delivery blueapron.com/cook. ♪ ♪ ♪
1:28 pm
hello, everyone. i'm sue herera. here is your cnbc news update at this hour. the new york times citing law enforcement officials reporting that the father of ahmad khan rahami, the suspect in saturday's bombings, told police his son was a terrorist two years ago. this prompted a review by federal agents. but an official says the father later recanted the statement. donald trump jr. coming under fire this morning for a twitter post comparing syrian
1:29 pm
refugees to poisoned skittles. the tweet asks, quote, if i had a bowl of skittles and told you just three would kill you, would you take a handful? that's the syrian problem, end quote. but that tweet was not original. a right wing former illinois congressman has voiced similar ideas. california's big sur wildfire has become the costliest ever in the united states. burning in the los padres national forest, it caused more than $261 million to fight. it has consumed more than 185 square miles and it is only 67% contained. and pope francis greeting religious leaders to pray for peace at the sacred convent in assisi. pope john paul ii started the gathering back in 1986. that's the cnbc news update for this hour. brian, back to you. >> sue, thank you very much. time for the good, the bad and the ugly in today's trade. first to the good. royal caribbean, one of the best performers in the s&p 500, this
1:30 pm
after the cruise operator raised its quarterly dividend by a dime to 48 cents per share. the home builders are under pressure after housing starts came in weaker than expected. the xhb is down about 1%. and it is an ugly day for seaworld. this after that company cut its quarterly dividend, saying it would suspend its future dividend payments. the news -- the new iphone 7 has apparently gone to the dogs. this is kiki, dubbed china's richest dog, his owner, the son of one of china's richest men, bought the pup eight brand-new iphone 7s. because, guys, one just isn't enough. and just in case you're wondering, the social media geeks out there, kiki has 1 million followers on twitter. this isn't just any dog. it is a dog with a very rich man, but also one with a strong social media following. >> what does it do on twitter? >> probably its owner is tweeting for him but looks cute
1:31 pm
and post photos of -- >> makes the impossible pawssible. >> i like it. >> i liked it. new safety rules for autonomous vehicles, is the government supporting or stifling the industry? find out ahead. and it is over. brangelina breaking up. can you believe it? angelina jolie filing for divorce from brad pitt. the money at stake and the impact on hollywood still ahead.
1:32 pm
narrator: the best place to find adventure... kubo: come on, this way. narrator: ...is in the forest. kubo: wow. narrator: so grab your loved ones monkey: don't even. narrator: and explore a world of possibilities. kubo: it's beautiful. narrator: visit discovertheforest.org to find the closest forest or park to you.
1:33 pm
1:34 pm
welcome back. let's check the markets ahead of tomorrow's interest rate decision. the dow industrials up .14%, 25 points at 18146. the s&p up about .1% at 2141. nasdaq basically flat, two points higher at 5,237. now, to the bond market. rick santelli is, as we say, tracking the action at the cme. >> you know, it is really fascinating, today it seems as though all the agita on the long end seems to be calm as we start the first of the two-day fed meeting.
1:35 pm
march start first to 10s. the left side is all about 170s. on top. the right side all about 160s below the market. pretty much that is the closing tradable range in traders eyes. but we see the long end loses it, what is happening to these yield curve spreads? starting to flatten again. tens minus two or 30s minus five. the steepening because of the sponsorship issues regarding long maturities. seems to be gone. when it comes to the dollar index, the fed never had more room, should they actually want to normalize, though nobody thinks they will. this november 2015 start to dollar index clearly shows we're so much closer to the lower price structure, 100 that we saw in november, december of 2015, and a briefly in the beginning of this year, those days are long gone. should the fed tighten? there is plenty of room, even though the overseas issuance of dollar denominate securities and the demand for dollars may cause
1:36 pm
a little agita, think emerging markets. seema, back to you. >> thank you. the countdown to super wednesday with the fed and the boj in focus, but it is the bank of japan that is likely to be the bigger talker. expectations are really all over the place. some economists forecasting the central bank to cut rates deeper into negative territory. others say japan could change a number of bonds it buys in an effort to help banks by steepening the yield curve ahead of tonight's announcement. the prime minister shinzo abe strongly defending the aggressive policies. also talked about the importance of tpp. >> japan and the u.s. must each obtain domestic approval of the tpp as soon as possible for its early entry into forest. success or failure will sway the direction of the global free trade system. >> all right, later that night, i had a brief exchange with the prime minister where he said i'd like to underscore to the u.s. investor that japan has an
1:37 pm
attractive and profitable investment landscape, which tyler and brian, as you know, pretty much not the case at all given the chronic deflation. >> nice selfie of you guys. >> i'm still working on my selfie game. >> the biggest negative rate that japan has is the negative birth rate. >> that's true. >> aging population. >> everything come backs to the demographic cliff. i worked for the japanese 20 years ago and things were bad then. and it is not gotten any better. >> hasn't. >> long life, low birth rate, a lot of expenses. >> a lot of challenges japan is dealing with. with the with the boj and the fed in focus, let's check on the numbers again. kenny, great to see you this afternoon. what do you think will be the bigger market mover? >> the bank of japan meeting.
1:38 pm
i think although six possible outcomes, i think two of the ones you have to consider, the fed does nothing and the bank of japan eases, and then you see the markets rally and take off. or the fed does nothing and the bank of japan does nothing other than job -- the markets will be disappointed and the markets will sell off. one way or the other, i was in the camp that the bank was going to ease and the fed was going to do nothing. i was more of a bull. lately with all this talk and speculation, it might make sense because we're seeing central banks having difficulty with the continued stimulus and what the sense is around the world. there is a real possibility that they do nothing in job -- and the market will disappoint. >> if the bank of japan re-adjusts their formula that they use in buying bonds in japan, could that reignite the global bond sell-off we saw in late summer? >> i think if they do anything, right, anything that is perceived as helpful and stimulative, i think the markets
1:39 pm
are okay. and so i'm not sure if that's what -- there is talk that that's what they're going to do. i think that's out there on the edge. i'm not sure that's what the mainstream is considering. one way or the other, i think the bond market already told you they're not taking really any chances, i think stocks have come up der a little bit of pressure and don't really know what the answer is going to be and we'll find out really overnight tonight, right? because tomorrow morning it is going to be wednesday night in japan and the news will have come out. >> makes sense. what are the wider implications of the boj meeting. would you trade the yen ahead of tonight's announcement? >> listen, i'm not a currency trader. i'm not the one to ask that. i would be very careful. i certainly would be -- in terms of stocks, i would be much more defensive because i think that there is a real chance -- the market will take a hit. >> all right, we'll leave it there. kenny, thank you for joining us today. >> thanks. the government just releasing new safety rules for autonomous cars. we're going to tell you what they are and why the president
1:40 pm
of audi north america is not so sure autonomous cars are the way to go. "power lunch" returns right after this. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. ♪ yet a lot of people still build portfolios with strategies that just track the benchmarks. ♪ but investing isn't about achieving average. it's about achieving goals. ♪ and invesco believes doing that today requires the art and expertise of high-conviction investing. ♪ translation? why invest in average? mary buys a little lamb.
1:41 pm
one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t. announcer: when they test you, stand firm and move only when you hear the seatbelt click that says they're buckled in for the drive. never give up till they buckle up. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
1:42 pm
♪jake reese, "day to feel alive"♪ welcome back. the department of transportation just announced the safety policy for deploying autonomous vehicles on u.s. roads. let's get to phil lebeau in chicago with the details. >> until now, as we have done so many stories over the last couple of years about self-driving cars in development, it really has been like the old west. the federal government is saying, it is time to put some parameters wharn parameters around what is going on with the development of these vehicles. these are guidelines. but a couple of things that stand out here is the federal government is asking companies working on these types of vehicles to certify that they're safe before they go out on the road and in some cases they may even seek preapproval for certain types of technology that are implemented. here is the secretary of
1:43 pm
transportation talking about why this is so important. >> there has never been a moment like this. a moment where we can build a culture of safety as a new transportation technology emergence that harnesses the potential to save even more lives. >> a couple of key questions that have come up since they first announced this policy late yesterday. will drivers be required -- here is the google car. i had a chance to go in this. there is no steering wheel in that car. is it possible we'll see this type of a car out on the road some day? the feds are saying, yeah, that is a possibility. these are guidelines, which means the feds are not saying, look, it is written in stone what has to be in a self-driven car, it is more along the lines of you've got to show us where the technology is headed, and if it is safe and therefore we could approve it. by the way, we wanted to show you, shares of mobileye so act whiff it comes to driver assist systems and self-driving cars,
1:44 pm
but it is the beginning of perhaps a new day when it comes to developing the vehicles. >> phil, stay with us here. scott keogh, audi of america president, joining us now. penned an op-ed in the wall street journal titled the dangers of self-driving car hype. he writes, regulators often disagree, but this is one instance when both sides have every incentive to work together. he joins us now. to your point if a software company a beta version of an e-mail or app, it may be annoying but nobody gets killed do you think the technology and the people pushing it out west and now in d.c. are moving too quickly? >> you know, i think the key word there is hype. and, look, we have been doing this for ten years. self-driving cars. we completely applaud what the government just announced. one, it tries to give us some consistency, which as phil pointed out that's what we need.
1:45 pm
and, two, it points out innovation. that's what we want to do. but we do dial into our op-ed, very clear, there has been too much hype out there. people are losing this term autonomous, using the term piloted, using the term self-driving and we're not quite there yet. so we believe in the technology. we have to understate the hype. serious business with people's lives. >> is this a case where 90% of it is fairly easy. we can get a car to stay in lanes, you offer traffic jam assist, but it is that last mile, that last 10%, the what do we do if it snows what do we do if the lanes aren't clearly painted on the road, what do we do if there is unexpected construction not in the gps system. is that the biggest and longest hurdle or are we close to those things too? >> we are close to those things too. but let's not make any mistake. the system will tell you, if the system cannot read the lines, if the system has an issue with construction, it will immediately blink and say, we
1:46 pm
are no longer in self-driving mode, grab the wheel. and, again, this is where we get into the semantics. right now -- >> doesn't have a steering wheel. scott what if the car doesn't have a steering wheel? >> that will be a while before that happens. >> scott, this is phil. i'm curious from your perspective, i get this question more than any other, what will happen with the insurance companies? how will they write policies for somebody who has a self-driving car, let's say in 2022 or 2023, how is that worked out, especially because state by state those insurance regulat n regulations are different. >> yeah, agreed. and, phil, this is a classic example of just as we have been looking at with the government, where we need some uniformity and some conformity. but the basic truth is this, we believe honestly it is going to make driving safer. 94% of accidents are caused by human error. this has the potential to remove that, and that is something obviously insurance companies believe in.
1:47 pm
so it should reduce costs, should make driving safer and this is a very positive thing from our point of view. >> the issue then, to me, then, scott, the issue then becomes if 94% of accidents are caused by human error, and you fundamentally take the humiditien humidity the humans out of it, who is responsible for the accident? it has to be the autonomous car. is it your legal liability and vulnerable going to escalate because on any accident that happens in an autonomous car, i, the driver, am going to say, wasn't my fault, had to be audi's fault. >> and, gentlemen, look, i'm with you. you guys are jumping to the endgame when we're on the 4 yard line and trying to get there. we got a long way to go. these are the types of issues that need to be worked out. you're all zeroing in on what is not going to happen what is not going to work, what can't be. i think we need to get higher ground. higher ground, we are going to make cars safer.
1:48 pm
consumers will embrace this technology. the government is pushing. we will invest in infrastructure to make our roads safer and better. that's the higher ground. yes, we have a lot of things to overcome and we'll get there. but we in the automotive business are very used to dealing with all of the things you raised. we have legislation all over the place. we have all sorts of issues with attorneys and class actions and everything else th. this is not new news. >> barclays wrote once autonomous vehicles become widely used, auto sales will fall 40%. is that an exaggeration? >> i don't know if it is an exaggeration. >> i think there is a couple of things to look here. i think the business model will potentially change. you will not have as much straight retail business on that front. you have a whole bunch of new business models. the other thing you're going to have is you're going to open up a world of people who don't have access to the automobile today. handicaps, elderly people, younger people. it is going to open up a newer
1:49 pm
market. the way i like to look on it, there will be a business model reset and clearly we at audi want to position ourselves to win that reset. it is not doom and gloom. the other thing that doesn't get mentioned is yes there may be fewer cars, but these cars are going to be driving more miles. if you look at the mckenzie study, what they're saying, it will be the same amount of net cars on the road, just replacement cycles will be better. so i'm more optimistic than that. >> your thoughts? >> i agree with him. i think it is a little premature to say everybody will give up their car. there are still going to be a lot of people who want to have a car. they may have two cars instead of three or one car instead of two, but a little early to say everybody will give up their own car. >> let me get your reaction. i'm sure not everybody will give up their own car. the other thing i'm not sure of is people really want to give up driving their cars. i'm thinking of the case where i'm driving down my beautiful street in my new jersey suburb called park street.
1:50 pm
and the speed limit is 25 miles an hour. i know i can go 40 miles an hour on that -- but my car, my autonomous car will say, no, you'll drive 25 miles an hour. when i use my autonomous car and i know i can get in there, i'm a new yorker, i can cut that guy off and that gives me satisfaction, baby. but my car goes, no, that's too risky. you can't do that. i'll get frustrated with all of this. i have a very -- >> look, i know it well. and i can assure you, again, you're all jumping to every car on the road is going to have no steering wheel and be fully autonomous. there is going to be a massive phase of piloted driving. still a drive, still someone behind the wheel and what the car is doing is getting rid of the tedious stuff. garden state bloody parkway,
1:51 pm
lincoln tunnel, holland tunnel, no one needs to be grabbing the wheel. >> people are already writing articles about what they're going to do with the unused parking buildings in manhattan. i remember 20 years ago, e-mail got proliferated, everyone is, like, the paper industry is doomed. we sell more paper now than we ever have before. with all due respect to the analysts at barclays that seema quoted, i see an environment where there will be more cars sold because you'll have the tyler mathisen scofflaw car because he wants to speed through the city streets and then the autonomous car. is everybody predicting the doom of the -- >> the race car driver is calling me a scofflaw. >> i'm a safe driver. >> sure. >> my jeep only goes 55 miles an hour downhill with a tailwind. >> i actually have an audi as
1:52 pm
well. >> we rendered him speechless. >> i think the truth be told, the market is probably plateauing in the u.s. luxury cars will sell about 1.8 million this year. i think the market has the potential to work its way up to 1.9 over the next few years. i think the key thing is there is going to be a lot of business model opportunities no one has identified of what you can do with this type of technology. and we haven't even tapped into it. that's what's going to be powerful. technology from my point of view leads to good things. doesn't lead to doom and gloom. >> let's do a whole show on autonomous cars sometime, guys i'm ready. >> let's do it. >> as long as we got to go, as long as the owner of a 2002 audi all road never bring back the air springs, ever. phil lebeau and -- >> that is an sclabsolute class car and every owner hangs on to it. >> thank you. do you want to be chair of
1:53 pm
the federal reserve? do you think you could do a better job than janet yellen. of course you do. because you're smart. but now a new game from the fed wants you to prove it. we play it coming up. ♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade. when a moment turns romantic, why pause to take a pill?
1:54 pm
or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.
1:55 pm
1:56 pm
a new game online for the san francisco fed where you adjust interest rates and then the unemployment rate and inflation and fed funds rate shows up on the screen. i've been playing in the commercial break and i've been -- >> 10% on -- uncontrolled economic, 1.5% unemployment. >> 10% inflation, but 1.5% unemployment and 6% fed funds rate. >> well, you know, i think you should play to the end, see if you're reappointed at the end there. >> i keep raising rates. >> two more quarters to go. >> inflation out of control. where is paul volcker? >> looks like uncontrolled economic boom still 16.5%. go. >> last quarter. here we go. >> still 1.5% unemployment rate. and let's see what happens now. because of disappointing economic results, you have not been reappointed. >> good, i'll go join the private sector and make $4 million a year.
1:57 pm
>> you did good. >> you think you can do better? >> i don't know. we'll see. i hope -- >> we'll find out next hour. we're going to play. tyler, we're going to play next hour. steve is going to boom the economy. >> i love it. i love it. 10% inflation and 1.5% -- we'll be back with that after -- in the next hour. still ahead, the stunning deal in the pharma industry. allergan spending $1.7 billion on a company nobody ever heard of. more on the company and what the deal means for the industry next.
1:58 pm
narrator: the best place to find adventure... kubo: come on, this way. narrator: ...is in the forest. kubo: wow. narrator: so grab your loved ones monkey: don't even. narrator: and explore a world of possibilities. kubo: it's beautiful. narrator: visit discovertheforest.org to find the closest forest or park to you.
1:59 pm
images, videos, social updates. we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud, we can help an energy company predict pipeline corrosion. and help a start-up to use social data to predict market trends. now businesses can get more out of their data. that's what the ibm cloud is built for.
2:00 pm
here's what's on the "power lunch" menu. a tale of two stocks. one soaring more than 700%. the other losing a quarter of its value. meantime, speaking of, the fed kicking off a two-day meeting, are policymakers keeping rates low for political reasons? we're going to find out what wall street thinks. say it ain't so. mr. and mrs. smith are done. hollywood's power couple, angelina jolie and brad pitt calling it quits. what their divorce means for hollywood and the big bucks at
2:01 pm
stake as the second hour of "power lunch" begins right now. a quick check on the markets with two hours until the closing bell. stocks in the green so far, but well off their highs. dow was up more than 100 points earlier in the session. oil is also moving higher as well. the final trade is less than 30 minutes away. >> and susan, thank you. i'm tyler mathisen. welcome. the headlines at this hour, the s.e.c. investigating exxonmobil's accounting practices. the probe focuses on how the oil giant values its assets in light of climate change. and falling prices for oil. fedex plans to raise rates next year. and pier 1 import stocks are higher. the hedge fund taking in 9.5% stake in the retail. transitioning now, senate
2:02 pm
hearing today, wells fargo ceo john stumpf says he takes full responsibility for all unethical sales practices in the retail banking business. joining us from capitol hill is the senate banking committee chairman richard shelby. welcome, always nice to have you with us. >> thank you. >> did you get the answers you sought from both mr. stumpf and the other panels which involved government regulators where you were concerned about why the government regulators didn't know what was going on at wells fargo, not just what mr. stumpf knew and when he knew it. >> we got some of the answers, but from both sides, but there was some unanswered questions. but this investigation, i'm sure, is going to go on in different aspects. but the main thing that i try to put forth today that banking's based on trust, integrity. wells fargo has been a good bank. i'm sure still great bank.
2:03 pm
but people want some answers to these things, want to know what's wrong with the culture. why would you let this go on so long. the timeline and stuff like that is very important to us. >> from what you know, based on your research so far, do you believe that wells fargo violated the standards of integrity and trust that you think the banking business is built on, number one. and number two, do you agree with senator warren that mr. stumpf needs to resign? >> i don't think mr. -- that's up to the board. he works for the board. not me. not senator warren. and others. mr. stumpf has been recognized as a good banker a long time. when things happen on your watch, you do have to have responsibility for it. and there has got to be an accounting for it. i'm not sure that just happened yet. >> do you think, back to my previous question, that wells fargo lived up to the standards
2:04 pm
of trust and integrity that you would hold banks to? >> no, i don't. i do not. when they were -- you have employees and up to 5,000 that they terminated for bringing forth fraudulent accounts. there is something wrong with the culture and something wrong with the bank. >> is there something wrong as senator warren pointed out with the idea that many of the people who were fired were lower level individuals and that -- to her discovery, none of the senior executives involved, not mr. stumpf, not anyone, has been fired as a result of this. does that concern you? >> i think it begs the question of what is really going on and as anyone in responsibility accepting accountability and responsibility. we haven't seen it yet. >> senator shelby, i had some people on social media reach out and say that other banks, nonwells fargo banks, have basically done the same to them. i haven't retweeted them because
2:05 pm
i can't confirm. but they have come out. do you believe we will find there are other major national banks who did the same thing as wells fargo? >> i think it is probably similar. i don't know that myself yet. i asked that question today and others asked it too. this could be systemic through the banking system, but the banking system has got to go back to trust and integrity. when they get away from that, they get in trouble. >> do you know of or are aware of any current investigations into other banks? >> i do not. >> do you believe that you got sufficient answers from the government -- we were on the air during the second half of your panel. i apologize for not knowing the answer, but you can tell me. did you get sufficient answers from the regulators as to why things took seeming -- federal regulators, why things took seemingly as long as they did. for example, you cited the fact which we reported last week as
2:06 pm
well that this whole matter at wells fargo came about largely because of some smart reporting by some journalists at the l.a. times and then it led to some charges in the city attorney's office in l.a. but the federal regulators didn't seem to get on to the case for quite some time. what did they tell you about why that happened? >> well, they tried to -- obvious to anyone watching hearings today that it was the city of los angeles attorney that initiated this after the report by the los angeles times reporter. not the comptroller of the currency, not the consumer agency. they were late to the party. that was obvious. i think they're trying to claim a lot of credit. >> why did federal regulators seem to be late to the party as often as it seems? or have i got it completely wrong? >> i think you're on to something.
2:07 pm
i believe they were late to the problems. they did not react to it i think in a timely way and now they're trying to claim credit for everything. >> i think people who are trying to conceal fraud are sometimes very hard to find. we think of bernie madoff. >> it is. but once you got it, you better dig deep. >> senator, thank you very much. congratulations to the crimson tide last week. >> thank you. >> i know you're happy -- >> we're glad the game was over. >> thank you. >> senator shelby of alabama. >> thank you. >> our next guest is sticking with his buy ratings on wells fargo despite the latest scandal. paul miller joins us. you said that a strong performance by stumpf could mark a positive turning point for the stock. >> but i think today was not a good day for banks in general. i think the attacks that it came out, i don't think wells fargo did a really good job in prepping for it or a good job in defending themselves at all. i think that this story is going
2:08 pm
to have a lot more legs after today and i think it is also going to have -- going to hit some other institutions out there. we have been saying that most likely this is an institutional problem. that's our biggest concern that it is more of an institutional banking problem than it is a wells problem. but i think after today, this story is going to have more legs to it. and you're probably going to continue to see volatility in the stock and how they trade. >> the stock was down 8% last eight trading sessions and we have seen it up during the testimony. what does that say? >> the stock has gotten relatively cheap. the scheme of things, you put this in context, they make almost $20 billion a year in profits, $5 billion a quarter. so this is still, you know, on a relatively speaking matter a nonmaterial financial hit. what it is, though, a reputational hit. i don't see a lot of customers yet leaving the bank. but i do think the stagecoach is going to get some mud on it. so how that plays out repetitional, we have to wait
2:09 pm
and see. >> other brokerages said eps may be hurt by 3% or so. do you agree with that? pretty minimal? >> it -- listen, right now, they have a 13% -- you could probably see a half a basis -- half a basis point being shaved off there. probably three to four cents a number in that target. but, yeah, we have to wait and see if there is any mass leaving of customers on how it plays out. >> do you have a buy rating on the stock and what would make you change it? >> i do have a buy rating on the stock. i have a buy rating on most of the banks out there, given where we are on the economy. if i start to see the reputational really take a hit where people are leaving en masse, where it is not just a three cent hit or five cent hit, the reputation itself just takes -- is going to have a meaningful material impact on earnings, that will make me change my opinion. we have to wait and see. what i'm really concerned about, not just wells, but for the industry as a whole, is now another leg of regulatory concern, another level of
2:10 pm
regulatory cost that is going to float through the system, just for wells, they're going to have to spend $50 million on a compliance program. probably most of these other banks will have to do the same thing. >> 50 million is about five minutes of their profit, probably. if you go into it, i understand what you're saying, in no way am i defending wells fargo, but if our viewers know, if they tried to change a checking account or tried to refinance a mortgage, it is not that easy. somehow wells fargo ends up owning your mortgage anyway. do you expect people will not take mortgages with wells fargo even if the rate is the best or, b, switch checking accounts? i simply can't see it personally. maybe you see it a different way. >> i don't see it. but saying that, this does take on a lot of senior management activity. so instead of guys trying to grow the bank, they have to dig themselves out of the hole with the regulators and prove they're doing everything on the up and up and to fix the culture. it is going to take a while to
2:11 pm
fix the culture. that's what's going to hurt, i think, the growth metarikz of we wells fargo as the management team focus turns to something else besides growing the bank. >> and final question, does stumpf keep his job? >> i'm not going to answer that question. >> doesn't that -- doesn't that matter? in terms of the leadership? >> it is not my job -- it is not our job as an analyst to decide if the ceo should come and go. the board has to decide that. i think mr. stumpf needs to decide that for himself. >> would it help the stock if if he left? >> at this point i think it would, yes. >> okay. all right. paul, thank you so much for sharing your time today. paul miller. >> yep. >> well, the fed kicking off a two-day meeting, their decision on interest rates comes out tomorrow. 2:00 p.m. eastern time, right on this fine show. are policymakers keeping rates low for political reasons? what wall street thinks and big fed discussion coming up after the break.
2:12 pm
♪ ♪ ♪ the highly advanced audi a4. ♪
2:13 pm
2:14 pm
pg&i help customerss, how with their bills.day? there's different rates to fit different needs, so listening is a huge part of my job. because customers want to know that you hear them. they have kids, they have families, they have priorities. i definitely understand that. i have three children, i was a stay at home mom, i didn't have money to pay the bills, and so i put myself in their shoes. and i'm going to do all that i can to lower their bills and to help their situation. to choose the rate plan that works best for your family, visit pge.com/rates. together, we're building a better california. welcome back. this time tomorrow we will know if the fed decided to raise rates or hold pat. two banks, barclays and bnp paribas are betting against their peers and predicting a rate increase tomorrow. here to make the case for september hike is laura rossner and cnbc contributor ron insana. you're on.
2:15 pm
>> great. the case, we think, is quite simple, actually. we think it is about the data. the data have been supportive. the data have been proved from july and from june. also from the date of lift off, it is about risks, risks diminished and as of the july meeting and they have remained muted. so in this environment, with lift off already having occurred, normalization still under way, and the fed not having deviated really or abandoning its gradual rate hiking path, we think it is quite prudent and appropriate for the fed -- >> why do so many others on the street see it differently? what are they missing or seeing that you're not seeing? >> okay. >> just smarter than they are. >> that's why i'm giving you -- >> i think what is happening is we had a nine month pause. and that's confusing. we started the process nine months ago. and that's a long time. and investors, i think, they're
2:16 pm
looking at that pause and just saying, the fed doesn't want to go. the fed won't go, even if there is an opportunity, and i think that is wrong because there were specific shocks that delayed the fed. there was -- >> they don't have china as an excuse anymore, right? they don't have the oil price collapse anymore. we have learned to live with that. >> brexit is behind -- >> brexit is behind them. if they don't do it, what would be their grand reason for not giving birth to that fed rate? >> i think it is hard. i think it is hard to explain why given the economic outlook, given recent data, why right now it is not justified given the reaction function. now, you know, i think it will be a close call and there will be some, you know, give or take on the inflation front, but -- >> ron? >> i think there is some risk of a surprise tomorrow, but the data that i see that would prevent the fed from raising rates at this juncture would be on the ism, both manufacturing and services data weakening. retail sales last month fell.
2:17 pm
there are some real time economic numbers that would suggest this is not the most opportune moment in this part of the economic cycle to raise rates. i'm still thinking they might delay it. if they were going to justify it, the big spike in median incomes that we saw in 2015 up 5.2%, biggest on record, slight uptick on some inflationary measures might give them leeway. that's what i -- how i think they justify it. i don't think it is justifiable. >> profit margins are falling. and capex growth negative. that hasn't really changed. capex contributed to growth, early in the expansion and has basically been doing nothing. it is now contracting mildly, but the key piece of news, the key positive development has been consumption growth this year, which expanded at 4.4% in the second quarter, and still looks on track. >> i would say there are still some global considerations. the bank of japan will make an announcement on wednesday as well. they may be unwinding what we
2:18 pm
call operation twist, which is their attempt to keep down long-term interest rates, which are in negative territory. i don't know how many central banks can unwind these processes simultaneously without disrupting emerging markets, some developed markets and the like. >> ron, lauren, susan, everybody stay put. we're going to come back. donald trump, you might have heard about him, he's been an outspoken critic of the federal reserve and janet yellen saying they are keeping rates low in part for political reasons. let's go back to steve to see what cnbc's fed survey has to say about that claim. steve? >> he used the republican nominee, so when he makes claims whether they're baseless or not, we take them seriously. so we asked our 41 respondents in our survey, does -- is the fed keeping rates low for political reasons? they rather strongly disagree with the republican nominee. even while they support his economic policies, they think he's wrong on this. 84% saying the fed is not keeping rates low for economic reasons.
2:19 pm
is the fed -- is the election playing a role in the decision not to hike rates? 64% say no. 31% say yes. but let's dig into that number a little deeper and what you find here is are they going to keep rates unchanged to help trump, no, help clinton, no. the fed wants to play absolutely no role in this election. there is some criticism of the fed, though. let me show you where it comes from. we asked did the fed pay too much attention to the latest economic data in a national economic information and markets? and the answer is they think they spend too much time focusing on the latest economic data. 58% say that. they think the fed is correctly focused. they want a better framework, seems to me, for making policy, not this back and forth over how it happens. >> steve, thank you very much. so what do you think? is the fed reactive to markets? >> it always has been.
2:20 pm
it is not necessarily part of the mandated, it is included in all of the variables that the fed assesses when it is making policy. markets send messages. it is important as for the political aspect of it -- i can never pronounce that word, but to quote colonel potter from mash, that's horse. remember george h.w. bush blamed alan greenspan for raising rates during the election cycle in 1991 and '92 as the reason for him having lost the presidency. i don't believe in any way, shape or form that enters into the fed's conversation. >> i agree. i think the fed is a-political. i don't think that's a serious consideration at this point because we're not seeing evidence that election uncertainty is really creating turmoil and asset markets or in any of the real economic data. that's one. on -- in terms of the fed and the market, i can understand some of that criticism. but market variables do impact
2:21 pm
the economy, so that is part of the economic data the fed has to -- >> whether you think the fed would do something or not do something to help a candidate or another candidate, do you -- do you concede the possibility that what steve just said, the possibility that the fed would -- all things being equal rather do nothing so that no one can accuse them of doing something to help one side or the other. but doing nothing is doing something. >> and i don't think it is that precise, not the question of doing nothing so as too not influence things. it is doing nothing as to whether or not it is appropriate, even at this juncture in time. i think if the fed wanted to go and if inflation were ripping and the economy were overheating, they would pull the trigger. >> i think an important point is that the fed's framework is for gradual hiking. and that is a slow pace, before they meet both of their objectives an they decided on that process.
2:22 pm
now, there are some dubs on the committee that prefer to wait until we see clear evidence that -- >> hawkish statement with the delay to december? >> whatever happens, we will know in less than 24 hours. >> we will. >> 24 hours, 38 minutes. >> i think the market is underestimating how close it is. >> all right, folks, thank you. ron, laura, appreciate it. >> i think you're right. >> it was the best of times. it was the worst of times. one stock up 700%. that would be the best. the other, down 28%. you may not know the names, but we'll tell you why they are both important coming up on "power lunch." [click]
2:23 pm
man: ♪ you're beautiful [click] ♪ i'm coming back to you [click]
2:24 pm
yeah. well, we gotta hand it thto fedex. glasses. they've helped make our e-commerce so easy, and now we're getting all kinds of new customers. i know. can you believe we're getting orders from canada, ireland... this one's going to new zealand. new zealand? psst. ah, false alarm. hey! you guys are gonna scare away the deer!
2:25 pm
idiots... providing global access for small business. fedex. allergan agrees to buy tobira for $1.7 billion and the stock shoots up. from just under $5 a share to $38 a share, 700% premium. mail allergan is bad at negotiating. meg terrell with some explanation. >> a lot of people are having their eyebrows raised at this premium being paid today. robert w. baird -- >> not if you take allergan's botox, then you can't raise your eyebrows. >> you're on fire today. >> robert w. baird calling this
2:26 pm
the highest premium he's ever seen. an analyst. for any deal, not just biotech. biotech known for big premiums. if you look at where tobira was trading, back in july, they had a phase two clinical trial readout and the results were mixed. it was trading down 63% for the last couple of months. then off of that, a giant premium today. let's go over some of the terms of the deal. allergan paying $28.35 per share in cash. it does represent the 500% premium to yesterday's close. then they're also on top of that offering potential contingent value rights up to $49.84 per share. that's based on milestones if tobira hits them, they get that payout. what allergan is doing is investing in a disease called nash, nonalcoholic stiato hepatitis. one of the growing potential diseases in the united states and around the world,
2:27 pm
progressive liver disease and linked to obesity, affecting 5% of americans so big opportunity here. >> is this fatty liver disease? >> it is fatty liver disease, the more severe kind, when you see liver inflammation but not related to alcoholism. >> any idea if there was any other bidder? >> there was speculation there may have been others. >> why pay so much? >> i would like to sell my house for $500,000, mathisen builds $1 million. >> there is speculation about that. gilead is in the space. analysts speculating -- >> i want to get the price up above 40 grand. >> sold to you. >> sold to me. >> cnbc, where you go for financial advise. >> thank you. oracle holding its annual tech conference in san francisco. we're going to go there live and speak with oracle's ceo, saf safra catz and to nymex for the final trades. what if a company that didn't make cars made plastics that make them lighter?
2:28 pm
the lubricants that improved fuel economy. even technology to make engines more efficient. what company does all this? exxonmobil, that's who. we're working on all these things to make cars better and use less fuel. helping you save money and reduce emissions. and you thought we just made the gas. energy lives here. you know what, guys? there's a lot of tree branches and dry brush over here. we should probably move the bonfire over there. [smokey whistling a tune] i'm guessing smokey liked that idea.
2:29 pm
2:30 pm
hello, everybody. i'm sue herera. here is your cnbc news update at this hour. president obama addressing the united nations general assembly this morning saying the world must do better when it comes to housing refugees.
2:31 pm
>> together, now, we have to open our hearts and do more to help refugees who are desperate for who a home. we have to follow through, even when the politics are hard. >> green peace activist demonstrating in front of the u.s. mission in geneva, demanding an end to talks over the european trade and services agreement and the much debated transatlantic trade and investment partnership group. the group claims that they could pose a threat to environmental protection. a volcano in costa rica spewing large plumes of smoke and gas prompting authorities to temporarily close that country's international airport in san jose. no word on when normal operations might resume. and new research conducted by aaa says consumers are wasting money to the tune of $2.1 billion in the past year on premium gas if their vehicle is designed to run on regular. it said premium gas does not increase horsepower or fuel economy or clean engines any
2:32 pm
better than regular gas did. that's the news update this hour. i'll send it back to you, brian. >> thank you very much, sue. appreciate it. the oil bulls kept in the pin for another day. crude oil softens. premium gas worthless as it is. i guess we'll get cheaper. jackie deangelis at the nymex. >> good afternoon, brian. a little bit of a seesaw session. we did see prices end a little higher. remember, october rolling to november today. and november finishing just around $44 a barrel. under that critical $45 mark. the blip higher we saw today, some job owning, some headlines about opec, got the meeting in algeria, speculation surrounding that, possible some of the shorts are being squeezed out here. possible also that the role today created some volatility. we did see a big move in the dollar index. when i see a move like that, i look for crude to go lower and it didn't. gives you a sense there is some support here and some momentum to the upside. just around 4, still stuck 4, s
2:33 pm
the trading range. day two of oracle's open where clouds are in the spotlight. john joins us from san francisco. >> safra catz, ceo of oracle, joins me here. i've got to ask you, you were just on stage with the chief minister from india. important market for you, both in terms of product and employees. 44,000 employees, second only to the u.s. a lot of talk these days about the u.s. worker, whether it is building eye phones in china or ford, building cars in mexico. some argue it is a zero sum game that if other countries gain workers, the u.s. loses. what is your perspective? >> what we were talking about was actually going to ultimately lead to more jobs in the united states because this is about opening markets in india. there are over a billion people, in fact, i was on stage with the
2:34 pm
chief minister, they have 110 million in the state alone and so many of them do not have access to technology. imagine bringing technology, bringing the power of the consumer to a state as large as that and throughout the country. this will increase demand for our technologies, our partner's technologies here, and all products actually by unleashing the power of the individual in india. >> want to ask you about education too. because oracle supported a charter school in silicon valley, d-tech high school, building a building for it on your campus. not everybody can do that. what have you learned that maybe america as a whole could apply to improve education, fill the pipeline for tech workers?
2:35 pm
>> well, a couple of things. first of all, when you see a need, it is not good enough to talk about it and say, gee, i wish we had better education. many of our corporate cousins and companies know that they actually have the resources to do something and for us, d-tech high school, which is on our corporate campus, is a perfect opportunity. larry ellison's 17 years ago said let's build a high school. sorry it took this long. but now we're doing it. but what we're unleashing and if you go see over at our -- we have an actual presentation with the students, and they keep coming up with brilliant ideas. and unleashing, especially, the girls, in technology. doubles the potential workforce, doubles the potential ideas, and solutions to difficult problems. and i'll tell you, those kids are so innovative, they're going
2:36 pm
to solve problems we don't even realize we have yet. >> all right. i want to ask you about culture. john stumpf, ceo of wells fargo, just got grilled by a senate committee about this fraud, 5300 wells fargo employees creating more than 2 million fraudulent accounts. he told senator elizabeth warren he does not see that, he said i disagree with the fact that this is a massive fraud. a lot of people feel like ceos get paid a lot of money to make sure things of that scale do not happen. how do you impact culture as a ceo to try to prevent that sort of thing? >> i'll tell you, you have to do it in multiple layers. you have to lead by example. you have to do training, constantly, in case people don't know the difference, you need to show them that at oracle and for us, i actually do the entire introduction for our ethics training around the world. and we do it every year. to make sure that our employees
2:37 pm
understand that we will not tolerate ethics breaches and we react to when every once in a while, we are, like every company, we are at the risk of the weakest link. our employees represent us around the world and if something, someone does something wrong, we need to make sure that we deal with it, we deal with it fast and frankly we deal with it publicly, to make sure everyone knows the difference between right and wrong. >> well, we have talked cloud here at open world. we have talked leadership and the future with you as well. safra catz, ceo of oracle, thank you for joining us on cnbc. >> thank you. >> back to you guys. >> john, miss catz, thank you very much. as john mentioned, wells fargo ceo getting taken apart on capitol hill about the bank's aggressive sales practices. elizabeth warren of massachusetts really laid into him. >> i'm not asking about regional managers. i'm not asking about branch managers. i'm asking if you have fired
2:38 pm
senior management? the people who actually led community banking division who oversaw this fraud or the compliance division that was in charge of making sure that the bank complied with the law? >> kerry -- >> did you fire any of those people? >> no. >> no. okay. you haven't resigned. you haven't returned a single nickel of your personal earnings, you haven't fired a single senior executive, instead, evidently, your div in addition of accountable is to push the blame to your low level employees who don't have the money of a fancy pr firm to defend themselves. it is gutless leadership. >> it was an extraordinary session. that was just really just one part of it. she really went after him. in a kind of aggressive manner that i haven't even on capitol hill in many, many years. i don't even remember it being that aggressive at the peak of the financial crisis. >> right. i like the menendez exchange,
2:39 pm
when senator menendez was asking john stumpf, he goes, john stumpf basically said the people who are perpetrated this crime, whatever you want to call it, the fraudulent account openings, they're paid good money, $30,000, $40,000 a year and senator menendez asked stumpf how much do you make? >> anyhow, thoughts? >> i think wells fargo is donating a lost money -- a lot money to both parties and both candidates. >> the company behind fashion names you know plummeting today. what is going on? and what went wrong for brad and angelina, one of hollywood's most glamorous couples headed for divorce. more on that when "power lunch" returns. what's the value of capital? what's critical thinking like? a basketball costs $14.
2:40 pm
what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley everyone thought i was crazy to open a hotel here. everyone said it's so hard to be a musician, but i can't imagine doing anything else. now that the train makes it easier to get here,
2:41 pm
the neighborhood is really changing. i'm always hopping on the train, running all over portland. i have to go wherever the work is. trains with innovative siemens technology help keep cities moving, so neighborhoods and businesses can prosper. i can book 3 or 4 gigs on a good weekend. i'm booked solid for weeks. it takes ingenuity to make it in the big city. i'm booked solid for weeks. tell me, how do you like to learn? songs are my favorite! ooh! elmo likes songs! puzzles! me love puzzles. well..puzzles are a great memorization too- dinosaurs! yess!!!! puppies! ooh! i love puppies! so do, i. actually...pets can teach important lessons abou- dancing! elmo loves to dance. okay then, let's dance. (everybody cheers) yeah baby! there's no one road out there. no one surface... no one speed... no one way of driving on each and every road.
2:42 pm
but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in... and the road you're on. the 2016 c-class. lease the c300 for $369 a month at your local mercedes-benz dealer. shares of ascena losing a quarter of their value today. what is ascena? the company behind dress barn, ann taylor and more. does the stock's big drop signal a change in fashion tastes? courtney reagan joins us now with the details. >> one of those names we may not think we care about but we do
2:43 pm
because it owns -- the parent company to all these brands. most mall based. women's specialty clothing and accessory brands. all different but struggling. for the most recent quarter, profit disappointed, revenue did beat, guidance below expectations and the ceo said that off peak demand or sales outside of events like memorial day has been inconsistent. but one positive note is that margins have improved, but shoppers aren't embracing buying at full price. the acquisition of ann taylor and loft added debt and complication to the company. more so than at least was initially thought. only lane bryant saw positive comp sales in the most recent quarter. loft is by far the largest business by revenue, represents about 23% of total sales. sales at loft were lower, not nearly as bad as at ann taylor, comps fell 12%. dress barn ceo left recently. it posted negative comparable
2:44 pm
store sales for the past four years with the exception of three quarters. t problems have been going on for some time. it ruled out a large store closure program, even though the seven brands total 5,000 stores. ascena hired accenture for a company wide transformation and analysts are hoping for more answers and a company turn around strategy on the investor day at the end of october. their expectations, price targets, they know they need a plan, the plan seems to be under way, we just don't no he whknow is yet. >> thanks, courtney. time for street talk, our daily dive into the wall street recommendations. >> double call on home builders. bush says that dr horn is worth a look because it is based on
2:45 pm
its consistent performance they say. analyst thinks that kb home might been fit from loosening of lending standards. august housing starts came in lower than july. >> that's trumping the calls. both stocks are down today. market voting with the dollars. the second stock, related to what susan just talked about. ply gym. starting coverage with a buy into $16 target. the analyst said the company has solid growth prospects and improving balance sheet and robust free cash flow. says the business has secular tailwinds because the company sells to distributors and retailers serving the single family home market. a lot of building supplies likes the fact that the housing stock is aging, work needs to be done. that $16 target implies about 18% total return. >> not bad. third stock, advance microdevices, upgraded to market perform with a price target of 5 bucks. this comes after a previous
2:46 pm
downgrade which bernstein says was premature. the analyst said that new developments in amd have derisked, that's right, the balance sheet and offered support to support valuation. >> i hope the analyst is right. investors lost a lot of money in the name. 30 bucks in today's dollars, from 30 to 6 in a decade, including one of the best five year runs we had a long time. hopefully the analyst is right. finally, smaller cap call of the day is rpc. oil and gas firm hikenen research. they got a different system there. rpc is a holding company for a bunch of oil field service companies and they note the company is regaining market share at better prices, calls the balance sheet pristine and valuation reasonable noting 8.1 times earnings, 2018 expected. rpc, up .2%. but hikenen research making the call today, putting them on their focus list. >> all right.
2:47 pm
social media is calling this a day love died. angelina jolie filing for divorce from brad pitt. can steve liesman run the federal reserve? last hour brian tried and we put our fed reporter to the test. that's coming your way on "power lunch."
2:48 pm
2:49 pm
2:50 pm
. angelina jolie files for divorce from brad pitt. lots of money at stake. robert frank joins us now. this is a biggy. >> it is big money wise because they are one of the richest couples in hollywood. this divorce is likely to be more about reputation than money. the combined net worth around 400 million roughly equal. in her filing jojolie is asking for custody of their six kids. if this does turn into a money battle very little of that could be considered marital property since they have been married only about two years and the
2:51 pm
money and property before the divorce would not be considered communal. they will have to divide a lot of property because they love to buy real estate. they have a chateau in southern france they bought for $60 million. it is 1,200 acres. it is where pink floyd recorded a lot of the wall. they also have a place in l.a. brad bought that in 1994, 1.7 million. worth a lot more today because they expanded that. they have a big home in new orleans. they listed that for over 5.5 million. they recently cut the price by $850,000. >> are these properties available jointly? >> unclear whose name was on the original deed of these properties so that is something. obviously, they are not going to live in all of them together. >> if they bought it since marriage it is community property in california. >> unless they bought it in one
2:52 pm
of their names only. >> might be over for brad and angelina but the media frenzy is just getting married. joining us now from los angeles is -- hi -- president of the hollywood reporter. this is a marriage dissolving. it is a sad day and there are children involved. this is going to be a big deal for hollywood. maybe a cottage industry will be created. >> this is a huge story. they think you can't under estimate this in the media conversation we woke up and suddenly there was a news story that we could escape into. it's not syrian refugee. it's not trump. it is something that is sort of something hollywood hasn't done lately which is have an old fashioned big huge a-list story.
2:53 pm
a lot has been said in the last few years about the reality styles of hollywood. if you look at brad and angelina they are probably the last great couple that embodies something about hollywood that is very important to hollywood which is selling the idea of glamour and talent. >> this is liz and burton. >> because this is not going to be about money but a question by her whether he is fit to be a parent therefore there is going to be a lot of leaks about his lifestyle, his fitness as a parent. do you think this will get ugly for both of them from a reputational point of view? >> they did this -- anyone who knows about the p.r. business knows they could have done the nice thing. maybe they could have done the joint statement. instead, it was sledgehammer down on one side, lots of allegations and i'm just going to assume that lawyers from both
2:54 pm
sides are whispering agendas around now. i think that is something that the media that has definitely wet the appetite of the media. people leak out allegations as a way to get what they want. sometimes they think it is revenge. >> whose career do you think will be hurt more by this? >> i think there is obviously an inherent bias towards men in hollywood and brad pitt will play a leading man well into his paul newman age. angelina jolie seems to care less about hollywood these days anyway. she is lecturing on syria. she is teaching courses. she is writing op-eds. brad pitt is still a huge movie star. he has a movie coming out for oscar season. i think what we will be watching with anticipation is you have
2:55 pm
toope an movie, how do you put brad pitt out to talk about the movie without talking about the hugest elephant in the room? >> it will be on the cover of all magazines, people, us, magazines, entertainment weekly. great cover with jimmy kimmel last week. will they be on the next cover? you cover business. >> i think you look to our website the stories about how they will market the movie i just mentioned. we are planning a story about the rose athat -- the mirror ball, it did quite well, critically acclaimed. i think we will look at it from a career angle. i think we also probably look at their box office and see who had the most successful financial career. other than that i think we will sit back and wait for the drip
2:56 pm
and drab from the attorneys like everyone else. >> janice, thank you very much. it's just the beginning. it's your fed day. thank you. in the last hour we played the san francisco fed game. i was completely incompetent. i destroyed the economy and inflation was out of control. steve liesman mocked me. >> 2% inflation rate. i'm going to be a pretempive hike. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
2:57 pm
when a moment turns romantic, why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.
2:58 pm
announcer: are your children in the right car seat for their age and size? it may be too late to check when you're on the road. [blaring car horn and skidding] fortunately, you're on the couch. hey, jesse. who are you? i'm vern, the orange money retirement rabbit from voya. orange money represents the money you put away for retirement. over time, your money could multiply. hello, all of you. get organized at voya.com. but they demand the best shopping experiences. they may want the latest products and services, they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail.
2:59 pm
let's talk about how digital works for your business. steve liesman. >> i got 5% funds rate. 5% right near the target and 2.27. let's see if i can keep it going. slower growth. wait for new data. i'm going to stay on hold. >> but you are doing great. >> i'm doing okay. >> you have a 5% fed funds rate. >> i don't think you are going to cut it. >> i'm going to let it go. >> it's not my problem. >> waiting for new data and the answer is -- >> we are in 2024 now. >> my inflation target is pretty good. i'm going to just cut it down to four. >> the feds says 5% is the place
3:00 pm
to be. i brought it down a little bit. one quarter to go. do i get reappointed? yes. >> wow. >> the lesson from this game is the impact of rate hikes are long and variable. you have to act strong early when you see stuff. >> they will be playing that game tomorrow. i'll be there with you. thanks for watching. "closing bell" starts now. hi welcome to "closing bell." i'm kelly evans have the new york stock exchange. >> exxon is under investigation now. we told you friday about the new york attorney general's probe. now the sec is looking at the oil giant. we have details coming up. and the man once known as dr. boom will join us here at the stock exchange to give us his outlook for the economy and hid

59 Views

info Stream Only

Uploaded by TV Archive on