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tv   Power Lunch  CNBC  September 30, 2016 1:00pm-3:01pm EDT

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you're going to be less likely to do that going forward and i think stocks will head higher. >> good having you here as well. thank you. he's with ubs. market picture looks good today. we are green and well there across the board. "power lunch" picks up that story with the deutsche bank latest now. ♪ indeed we do. thank you very much. good afternoon. i'm tyler mathisen. here is what's on the "power lunch" menu for friday. what a difference a day makes. 24 hours ago fears that germany's biggest bank was in trouble. today, the stock having its best day in five years. we're going to go inside the twists and turns of all things deutsche bank straight ahead. and battleground showdown. our andrew ross sorkin live in iowa on his squawk the vote tour, trade, manufacturing, immigration, all in play, big time, in the hawkeye state. i believe there are six electoral votes at stake there. and here's a total kicker.
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one stock getting a big upgrade today thanks to, get this, brown shoes. lace up, ladies and gentlemen. "power lunch" starts right now. ♪ i can't get enough yeah, yeah ♪ >> and welcome to "power lunch." i'm melissa lee. three hours left in the quarter and stocks are firmly in the green. we're just about two points off the session highs in the s&p 500, which is higher by about .9%. financials really helping the lead, to lead the day, thanks to deutsche bank. good news there potentially. semiconductors a big standout. they're on pace to close out their best quarter in 13 years. >> i am brian sullivan. here is what else is happening at this hour. hurricane matthew strengthening. it is now a category 3 storm in the caribbean. it is expected to make landfall in jamaica by monday. consumers getting a little swagger back last month. consumer sentiment topping expectations. and your sweet tooth can celebrate. the peeps who make those
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marshmallow peeps going back to work. what is that sound? dentists everywhere celebrating. >> welcome, everyone. i'm michelle caruso-cabrera. big two hours ahead. we're going to kick it off with the massive rebound in the shares of deutsche bank that tyler mentioned. shares extended their gains. they're now up about 14% after an afp report saying the bank is close to a $5.4 billion settlement with the department of justice over mortgage bonds. cnbc has not independently confirmed the report. if that report is accurate, however, that settlement number would be well below the reported $14 billion opening bid by the doj in its talks with deutsche bank. meaningful in its difference. let's get to cnbc's bob pisani live on the floor of the new york stock exchange. >> true or not, that report, that afp report did move the markets prior to the european close at 11:00, 11:30. look at bank of america. u.s. bank stocks had a tough time yesterday, they had been rallying through the morning,
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but rallied even more after that report. you see bank of america recovering all the losses from yesterday and a little bit more, now up nearly 3%. look at the sector, strong day overall, 3 to 1 advancing to declining stocks. banks leading, energy also leading as oil is on the upside. consumer staples and industrials broad swaths of the market on the upside. the end of the quarter and it has been a good one. take a look here. primarily it is tech driven here. nasdaq 100, great quarter on semiconductors like invidia and micron. small cap, russell 2000, had a good month. s&p 500 that is a very respectable gain at 3.4%. maybe one reason we're rallying is because traders like the fourth quarter. it is a good one traditionally. look at our friends at kenshow. since 1990, s&p 500 up 81% of the time. s&p 500 average gain, see the bottom, up 4.5%. health care, industrials, consumer discretionary, big swaths of the market traditionally do well. >> ipo moon shot nutanix, priced
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at $16. that is not a typo. trading at $34.37, up 114%. they make computer storage technology that makes it easier to run corporate servers, but the bottom line, really important thing, guys, this is a flashing green light to all those tech unicorns out there, 100 or so of them valued over a billion dollars, telling them that it is safer to consider going back into the u.s. public markets. big day for the ipo market. >> bob, thank you. we'll get more on that in a bit. right now, it is friday, around 1:00, that means the weekly rig count numbers are out and they're up again, compared to a week ago, we added 7 oil drilling rigs out there. for a total of 425, you remember the euphoria about opec and how they might cut production? america continues to ramp up production as the price continues to climb just a bit. rig counts up 7. >> as bob pisani mentioned, wall
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street suffering from whiplash as investors closely watch the twists and turns from the deutsche bank scandal. annette vicebach is live. >> if that number, 5.4 billion u.s. dollars were right, i think we would have heard from the bank already by now. very stringent capital market rules here in germany, the rules say you have to act immediately as a company if the number is reported, which is actually close to the real number you are facing as a company. so at first place that was why deutsch why bank reported the 40 billion u.s. dollar number. they didn't do that voluntarily. they did it because the number was out, they had to do it. if it was the case now, that number was correct, they would have to come out with that statement already by now. i guess that number is not correct, and perhaps we'll
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probably see the number, which might be a little bit lower than that number, than the 4.5 billion euro, 4.5 billion u.s. dollar at least according to sources we are talking here on the ground. with that, back to you. >> annette, thank you. now let's bring in steve liesman. by the way, steve, the banks regulated in europe different than they are regulated here in the united states. that may play a role. just to repeat what annette was talking about, under german corporate law, if you have a number that gets leaked, you're required to put that number out officially. >> we're almost into more of a journalism story than a banking discussion here. the story is i have to think that every minute that goes by that somebody doesn't confirm the afp story makes it perhaps less likely. we have been unable to confirm it here at cnbc. i believe miss caruso-cabrera, crack reporter, has been working
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the phones. i've been working the phones. we can't confirm it. >> did i understand her correctly, if i said there was a number out there, and i said the number -- i pick it out of the sky. >> 7. >> 7. and that's not close. they don't have to say anything. but if it is close, they got to say something? >> i have also been working some things and german attorneys, by the way, and here's the -- what annette said may be completely accurate. however, german law requires you to basically put the number out there, confirm it if it is true. so -- or if it is done. so if they're still in negotiations -- >> probably still are. >> deutsche bank would likely have no legal -- >> let me seat othe the other s this. morgan stanley has put out a note to its clients talking about this number, unclear if morgan stanley has any -- but all of the movement in the stock today is 1109, the moment if you put up that intraday, it all
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came ex-post this afp story. my question as a journalist is if you want to leak the story that you have a deal, why would you put it out through the wire service of a french wire service? there are multiple ways you could put it out. >> if you're deutsche bank and have a deal, you have to say something. >> right. >> if the number may be -- may end up being correct, but as i understand it, in german law if they're just negotiating, if i'm buying your home and basically i say i offer you x, and you say, sounds good, but we haven't finalized anything, under german law, i don't believe they have a legal requirement to report that. but if we signed the papers, then they might have to confirm it as i understand it from an attorney who deals with german m&a transactions. >> they had to say something about the 14 and that's clearly not a done number, so maybe they're thinking the converse on this case. >> i want to switch roles here.
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what do you think about this number here? >> this number? i have no idea. i think -- i think $14 billion is not going to happen. i think that's not going to happen. i think it will be far lower. >> 5.3. putting you on the spot. >> that's a number tossed around as something that could be acceptable. >> exactly. they have that set aside. >> convenient for me. >> the number is almost the same. >> i hate to dis this number and have it be right. i don't have any independent confirmation either way. but -- >> i would also say the report was leaked after the shares closed in germany. want to have an impact on the stock, do it when the liquidity is out of the market and only talking about trading -- want it to hit the stock and in a big way. >> i had conversations with people where they say, if you're the doj, you don't want to be the thing that brings down deutsche bank. you calculate how far can i go without forcing a massive capital raise, and what number -- you get to around 5 --
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>> the doj comes in at the number they already reserved for it. >> they paid out $5 billion in euros dividends. >> you were exact -- i think your point was exactly right. what the stock is moving on is really a journalism story and for the viewers and listeners out there, think about how this might work. somebody has a relationship with somebody high up, deutsche bank, doj, pressing on the person who says i don't know, $5.5 billion, throws it out there, nothing is finalized. >> could be somebody high in the french government. this is all very political over there as well. >> and here too. can we go macro for one second. we have to go. i prepared this beautiful chart i want to talk about. >> excellent. >> what you see is a red line. the red line is the minimum amount of capital that a u.s. bank relative to its assets -- that it can have after you've been stressed. that number is 4%. you will notice that the yellow
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line is the same amount for european banks. so european bank currently meets the minimum stress amount required by the fed. one reason we have this entire conversation is because u.s. regulators did one thing early on, they forced u.s. banks to take a hit to equity, to their shareholders, and the european banks did not do so much. that's why we're here having this conversation. >> the reason europens did that, they thought that the european economy would grow, the banking earnings would grow, they could retain the earnings, wouldn't have to. they were wrong. >> a little bit of fun history for me this all grew out of the t.a.r.p., when they bought out the government stake that they took when they gave money in t.a.r.p., they raised equity, forced to do it so all of this early action, it goes back to the history of this thing, anybody who did something early and quickly and forcefully won and anybody who delayed is still in 2016, dealing with questions like this. >> good point. >> steve, thanks.
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>> thank you. >> it is a swing state showdown with just 38 days left before the election. our andrew ross sorkin is in one of the states that will play a pivotal role in the election. andrew? >> yes. we are at java joe's in des moines, iowa. six electoral votes, pivotal votes are up for grabs in this battleground state. and, of course, agriculture in this state is the big issue. we sat down with some farmers and we're going to show you a little bit of that in just a moment when "power lunch" returns. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests...
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welcome back to "power lunch." it is a swing state showdown with just 38 days before the election. hillary clinton stumping in florida. donald trump in michigan following yesterday's quick visit to iowa. and while the hawkeye state carries six electoral votes, it punches well above its weight when it comes to presidential politics. andrew ross sorkin has more. >> reporter: every four years iowa's corn fields become battlefields for presidential campaigns. 2016 is no different. early voting began thursday and the rest of the country is looking to the hawkeye state, voted democratic in five out of six past presidential races. iowa didn't gain its bellwether
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status because it is representative of the rest of the country. according to the census bureau, the pop ration is moulation is white. candidates shift their focus to agriculture while campaigning here. and especially on the trillion dollar farm bill. trade, another hot issue for iowa's farmers. many support the transpacific partnership, which the american farm bureau says would increase net farm income. both presidential hopefuls have called into question. immigration policy will likely have a huge impact on agriculture. iowa farmers also have their eyes on wind tax credits. the environmental protection agency, and estate taxes. >> andrew joins us now from des moines, iowa. mrs. clinton was there earlier in the week. said mr. trump was there. that state, as you point out, has gone democratic in most of the most recent elections. mrs. clinton was leading middle of the summer in the state, but
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the last things i've seen is that trump may have a slight edge. >> trump does look like he has a slight edge. 5 to 7 points depending what poll you look at. as you mentioned, they're all coming here. hillary clinton on my flight in, she was flying out, mike pence was here over the weekend, tim kaine was here prior. so they are trying to work this state over and swing it in their direction. we spent some time with some farmers, though, yesterday, to really try to get a pulse on what they're thinking about. as we mentioned earlier, trade was their big issue. listen to what they were talking about. >> one of the important issues for us is getting more trade. agriculture is one of the things that has the most to gain from tpp. and we're starting on a price of -- prices are all headed down now. we're in less than half. and that's kind of a scary thing when you think about the future. we need more export.
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>> they both said -- they said that, you know, both candidates are against the tpp, but that donald trump is more against the tpp. one of the other issues that came up was taxes and in this town, estate taxes matter. listen to this. >> being taxed to death is no way to grow an economy. it is like if i wore stiletto heels to the corn field, doesn't make any sense. we need to have serious conversations about what are we going to do about this tax policy run amok. >> we should note, big difference between the way some people in the rural areas feel relative to the cities in des moines. no doubt this may be hillary clinton territory. that may be donald trump territory. the one thing i want to note, despite the talk of policy and issues, it is an issue where it may come down to personal ty. so many of them talked about that. and so many other -- what i
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might describe as closet trump people. you go up to them with a camera, they'll talk about the issues, they don't want to talk about who they're voting for. camera goes off, they say trump. so kind of interesting just to be -- >> that's a phenomenon that is at play in lots of places around the country. i think that's a phenomenon that's in play in lots of places, that people, when the camera is on them, they don't want to say -- >> maybe what the pollster calls. >> and when the pollster calls, they won't anser. >> this happened in the united kingdom. people didn't want to admit they were a tory or favor the party of margaret thatcher. you wonder how accurate the polls could be now. >> i did find one person who was a closet hillary clinton person, but it is interesting how this is so polarizing that certain people don't want to say either way. >> there is early voting that is already started. are there actually polling places. >> just started yesterday. we may have -- this is it. this is it right here.
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this is the sample. started yesterday. this is the ballot. hillary clinton at the top. got to go further down to find gary johnson and then some names we never even talked about on the air before. >> who are running for president. who are running for president. >> who are running for president. >> interesting. >> yeah. ready for this. gloria riva. >> oh, galore . >> i was going after andrew in the commercial break. i said get out and see the world. there is a lot more between new york and l.a. and there he is. >> there he is in iowa. >> you have this big tour going. where are you going next? >> so next week we're going to be in jacksonville, florida. the week after we're going to be in arizona. then we're still up for grabs. we have a couple of weeks before
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the election. we're going to pick them depending how close we can find a battleground state. >> one comment, one suggestion. jacksonville, florida, shockingly, largest city in the united states geographically. who knew. >> yes. >> number two, dayton, ohio. >> i was born in dayton, ohio. >> were you really? >> yes. >> did not know that. my wife was homecoming queen in oak wood high school, but also a city that has a military base that has been hurt, right, patterson, ncr national cash register, how about dayton, ohio, battleground state, salt of the earth. >> dorothy lane grocery best brownries. >> our producer is giving you the thumbs up. >> you were born in dayton, ohio. i feel pretty cognitive right now. half of all credit cards
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have a chip. so why aren't they more prepared to accept them? we have that story straight ahead. the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voiceedge mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. get the future of phone and the phones are free. comcast business. built for business.
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it is hard to believe it already has been a year, not since brangelina, a year since the mass migration to credit card chips has rolled out. that rollout has far from gone perfectly, though, half of all credit cards now contain a chip, only one third of retailers are prepared to accept them. cnbc contributor contessa brewer
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joining us now with more on the transition. >> it is pretty amazing that roughly 2 million retailers upgraded their credit card terminals and are accepting the cards. that's short for euro pay mastercard, visa. those cards have a tiny microprocessor that communicates with the card terminal. that creates a security code for each transaction. and the credit card industry says already it is seeing a dramatic drop in fraud. >> for those merchants that have upgraded, we have seen a 54% reduction in attempts to use counterfeit cards. at merchants that have not yet upgraded, we have seen an increase in the use of counterfeit cards. >> thieves are targeting the remaining swipe cards, pushing fraud toward a record $4 billion this year. the national retail federation insists the chips are not enough security, pushing for pin codes for each transaction rather than
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signatures. we're nowhere near the chip card use they would like to say. some say they have the new terminals, they paid for them, but they're waiting for six months or longer for certification by the credit card industry. and despite all the public griping over how slow they are, it really only takes 14 seconds to dip that card. consumers are not the problem. 78% of americans feel really positively about using the chip cards. half say it is their preferred form of payment. >> i get impatient waiting for it. who bears the cost for the new terminals? the merchant or -- >> the retailers. if you're looking at regional retailers, $2200 per terminal, it can add up to a lot. and while they're waiting for certification, they can be on the hook for any fraud that occurs just because they're waiting for mastercard or visa or discover to come in and certify them. >> to your point about the pin
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codes, doesn't help with online fraud. if someone has your number, they have your number. but the way they do it in europe, you put card in, then your four digit code in. anybody can scribble the signature. doesn't seem to be reducing fraud. >> retailers say that was just a misstep. and also many more retailers were set up for pin code punches, only a third of those would have had to upgrade as opposed to the chip cards, everybody had to adopt a new terminal. >> it generated an entirely new industry of manufacturer of the cardboard thing that says please swipe. warren buffett's warning to john stumpf. what he told him next. [child speaking indistinctly] announcer: are your children in the right car seat for their age and size? is the seat supposed to be forward-facing or rear-facing? did they move to a booster seat too soon?
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it may be too late to check when you're on the road. [blaring car horn and skidding] fortunately, you're on the couch.
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hi, everybody. i'm sue herera. here is your cnbc news update for this hour. palestinian president mahmoud abbas and israeli president met in jerusalem today ahead of the funeral for shimon peres. abbas was one of the few arab voices to express sadness over
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his death and his aides say he wanted to recognize peres for his years of trying to promote peace. a rescue worker breaks down as a baby girl is pulled from the rubble of a bombed building in syria. the 1-month-old girl who was bloodied and covered in dust was taken to a local hospital. bmw is recalling 4,000 suvs in the u.s. and canada to fix a new and potentially deadly problem with takata air bag inflat inflaters. the company says the driver's front inflater can separate from the plate shooting out medal and other debris. the recall covers 2015 x 3 and x 4 suvs and 2014 and '5 x 5 suvs. check out this little guy. not so little. a panda, trying to get into shape. all caught on camera, doing sit-ups. the panda comes from the research base in southwest china. i hear planks are in now. not sit-ups. what the heck.
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couldn't resist that. >> so cute. >> is it just me or is sue herera obsessed with pandas. >> i am obsessed with pandas. >> that's pretty good. >> i love pandas. >> i'm obsessed with pandas and my daughters come from southwest china, so there you go. >> i heard of prancersize, this is pandersize. >> pandering to the pandas. >> that was unbearable. >> oh, stop. >> let's get a check on the market -- >> take a pause. ron insana, you evil genius. stock markets now. dow industrials recovering with deutsche bank. maybe an oil/deutsche bank recovery. the dow jones industrial average up 168 points right now. tyler, rescue america. >> i'm going to send it out to rick santelli, tracking the bond action at the cme. >> well, tyler, we all thought rates were going to continue to test the lower 150s, but actually settling at 162 last
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week, ten years getting close. look at a two-day chart, big reversal. two-day chart of bund yields, pretty big reversal. one of the bigger reversals is the guilds, the uk. is this significant or deutsche bank passing through the cross hairs and not becoming as big a story. well, i can't tell you that. what i can tell you is the month to day chart of our ten-year minus bunds is breaking out, which means our sell-off is pushing rates much more aggressively than bunds. that's very significant. has all types of trading implications, so traders are monitoring, is it just an end of the quarter event, indeed it could be. we truly want to watch, this trade is getting close, getting close to a spread that we haven't seen since the '80s, trade ares watching it quite closely. >> to wells fargo. berkshire's warren buffett spoke with john stumpf about the fallout from the fake account scandal telling stumpf he needed to take the public outrage more
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seriously. berkshire hathaway has a stake worth around $21 billion. he told becky quick the conversation took place around two weeks ago after stumpf was interviewed on mad money. we spoke for five minutes. i said i diabete think the interview wiinte -- didn't think the interview with cramer went well. buffett denied a report he had contacted the entire wells board to express his anger over the matter telling becky, it is dead wrong to imply i went to the board directly. i've talked to nun one else on the board. wells fargo shares down more than 12% in a month. >> we didn't think the interview had gone well. he kept saying using these weird legal phrases to the degree that it is a consideration. >> it is a consideration, the board will -- >> would you like some coffee?
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>> let me defer to the board. >> stocks rebounding today as deutsche bank, that sell-off that started yesterday, subsided. concerns about european banks not going away, though. let's bring in ron insana and peter bookbart. this highlights how once again, the european banks haven't raised enough capital, compared to the u.s. banks. this problem keeps coming back. even as we recover today, due to relief about whether or not they have to pay that fine. >> it is that, combined with the damage profitability of the entire region because of negative interest rates and basically flat yield curves, the fla lack of demand for loans. they're bleeding every day from that perspective, my opinion, negative interest rates is essential essentially attacks on their capital. they went into this with mediocre balance sheets to begin with. >> what does it mean for the u.s. markets? >> you damage your banking system, you slow economic growth. same thing in japan. it is just a suppressant on
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global growth, regardless of the state of the u.s. banking system. >> i didn't hear him say systemic breakdown, anything like that, ron. we're talking bigger picture issues, not transmission effect to the bottom line of a u.s. bank. >> i don't think we know yet. if deutsche bank were to implode. >> we don't think that, right? >> we don't. for now they have over $250 billion in liquidity. if hedge funds were to pull all their money, three months worth of a lifeline. >> and the ecb. >> of course, they have the back stops. so did we. back stops are always in place when it comes to central banks and other ways to mitigate the impact of a systemic problem. but we don't know if deutsche bank is strong enough to withstand something stronger than what we have seen thus far. whether it is a punitive fine that is larger than $5 billion, whether it is a massive -- >> let's be clear, the difference now, peter, between now and 2008, let's talk about the liquidity and capital. deutsche bank doesn't have a lot of capital, but they got a ton
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of liquidity. lack of liquidity is what kills you. it is what killed lehman brothers, it is basically what put down the american banking system. is there anything analogous between this and '08? >> one more data point. remember, they didn't have central bank back stocks for lehman and bear, right? so deutsche bank does. >> there is money raining from the sky from the ecb to provide deutsche bank with any liquidity need they could get. the question is what is going to happen to the eke wid holders, to the bond holders what is going to happen to the cocoa owners. they're the ones that potentially are going to get punished. not necessarily the depositor at the local deutsche bank. >> what does that mean to the u.s. market? >> it could mean something if this were to become worse. by saying there is no current systemic risk, back to 2008, 2007, not saying there is, i'm saying that these things can cascade rather quickly and turn into large scale problems and we
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don't know fully what deutsche bank's counterparty risk is here in the united states. >> peter, you were mentioning it could be a depressant on economic growth. deutsche bank is not an island. you got commerce bank, a lot of the periphery banks also viewed to be in trouble. if you combine all these trouble banks together, what kind of depressant effect could that have on european growth in general? >> going into this, global growth slowing to 2.5%. that's on the cusp of the global recession. you throw in now a tightening of loan growth because of problems with global banks, well, this could tip us into a recession. >> as usual, melissa making an excellent point, because we're focused on deutsche bank. commerce bank, another big german bank, unicredit of italy, the royal bank of scotland, those stocks are down 50, 60 and 70% over the past 12 months.
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we talk about the message of the markets. you see bank stocks collapse, 50, 60 or nearly 90% from its all time high, sitting at a 33 year low, its bonds lost value, we're seeing all kinds of messages from the various instruments around deutsche bank that will not recover immediately, we haven't seen a full scale blowout of risk spreads, though, that would suggest this is at the moment a contagion risk. >> where are the bonds trading? 97? >> solid. >> trading well above 90. >> the cocoa is the one you measure a lot. you look at the most for how much risk april tide thepetite . they went to below 70. rebounded sharply on this report out of france that there is a much smaller number from the doj. >> you have done excellent reporting on this too, is germany -- i'll ask you a question. is germany in a tough spot because they said to italy, no -- we're not bailing out your banks, so how does then germany,
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if they need to, turn around and bail out their own bank had they told italy a compatriot in the eu, we're not doing it for you. >> you cannot bail out the small little banks, can't bail out the small bond holders in those banks because that violates the european rules. germany could let the european rules -- we're never getting to this with deutsche bank. if they started to punish the bond holders, once you get to 8%, then the german government is allowed to step in. >> an out -- >> absolutely. >> one of the biggest banks in the world. nobody lets a -- the biggest bank go. >> it is never going to be lehman. >> lehman is a different case altogether. >> we talk about counterparty risk, that was an issue with lehman, but not with bear. lehman was liquidated. deutsche bank's never going to be -- >> we also had wholesale funding issues in the u.s. banking
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system. >> in a funny way, italy would like it if -- >> for sure. >> if you're going to take a bailout your bank, we're going to bail out our bank. >> bonds this morning were above where they were in 2012 before draghi said whatever it takes. >> important point you made for the audience. not well defined in these types of matters. >> it is the credit default insurance on a level of bonds that deutsche bank has issued. >> betting whether they will fail or not. the line above that, more senior ones, that is below the 2012 level. there is a belief that well before the german government begins that money, they clip the bottom level of the capital structure up until the point where they can stabilize -- >> if i can speak for you, the risk was perceived as greater in 2012 than it is right now. >> on the subordinated level --
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>> but important level. >> so let's remember, though, they are heavily levered. they carry about $46 trillion in notional value of derivatives, 41 billion euros in value at risk. there are issues outstanding with deutsche bank that are serious. they may not be lean and light moments, but all the european banks have yet to account for the bad sovereign debt they hold and they haven't really taken care of -- there are issues to plow through here. doesn't have to be the end of the world. still a big deal. >> thanks, ron. thanks, peter. on deck, the four big stock ideas that you need to hear about. called street talk. we're going to bring you some investing ideas after this short break.
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today's a big day.
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monday say big day as well. we have a heck of a show for you. we're live in detroit for an update on the continued recovery. check this lineup out. dan gilbert, bill emerson, chris ilitch, mary barra, the ceo of gm, the mayor of detroit, surprise guests, locals that are coming in. part of the revival, detroit has a long way to go, it has come a long way. to motor city. it will be fantastic. >> a good one. it is time for street talk. >> these are the analyst recommendations on the stocks that we think you should hear about. first one is the brown shoe reference. tyler made earlier, sketchers. susquehanna research upgrading to positive. all about the brown shoe apparently. they say the analyst does that material improvement in the company is expected by the second quarter of next you -- year and shoe.
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next you. apparently new brown shoe lineup is coming out, it is important because sketchers hadn't had the right product mix. that problem is getting better. but the international wholesale business remains robust. $27 on the stock implies under 20%. >> i don't get brown shoes. that will be -- who wants a brown sneaker. >> everyone but you. >> do you want a brown sneaker? >> i just wanted to say you again. >> walmart, pacific crest coverage with an overweight rating. investment in the store experience and e-commerce helping to drive sustainable market share gains. they have posted positive comps for eight straight quarters. the analyst thinks earnings are poised to reflect positively. that's analyst speak for go higher because momentum is building. >> stock had a great run for a few months but stalled out. >> the third stock, small cap called the day,
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biopharmaceuticals, a washington state based biotech focusing on antibodies working on a chronic migraine solution, green capital beginning coverage with a buy rating and a $45 target like a lot of biotech stocks. you cover a ton on fast money. all about drug trial results. risk here, but green capital, positive on alder. even with a 4% upside, they're very bullish on the outlook. the ticker is aldr. >> market sentiment, yesterday was a terrible day for biotech. we saw the risk off grip the markets. today a much different day also for these stocks. qualcomm, buy rating with a $75 target on the semideal. it maybes significant strategic sense. qualcomm gets presence and powertrain security, automotive, $10 billion in free cash flow per year at a $30 billion
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valuation. let's bring in the man behind this call on the phone, vijay rakesh. great to have you with us. >> thanks for having me on. >> the reasons behind a potential deal are pretty clear as you lay out in your note. does this mean it could be in play and could be the target of another semiconductor company. >> everything right off the mark here, qualcomm, from the financial side, with 75% of cash off shore and nxpi, it makes sense to use offshore cash to buy nxpi. i think this transforms from a maturing hand set market to much more secular long-term automotive road map for the next 10, 15 years. so strategic and financially makes a lot more sense for qualcomm. so anybody coming in obviously
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does not have that kind of offshore cache to begin with. >> there has a lot of talk and chatter within the semiconductor space. in terms of other ones you mepged your note that on semiconductor cyprus could be attractive as well. >> i think what you're seeing is a lot of the companies are trying to move automotive space. qualcomm and what we're seeing is trying to move from hand sets to automotive because we think the next decade -- it will be the point of convergence. so we think on and cyprus both at 35% make for attractive assets here. >> who could buy them? >> don't want to speculate. i think obviously significant
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consolidation happening in the semiconductor space. so, you know, you are seeing just a lot of consolidation. i think you see a lot of interest in these names. >> we'll leave it there. thanks for your time. tyler? >> thank you. check out this video from this year's ryder cup. just happened yesterday. an american heckler tees off against a european golf pro. we'll show you what happens after the break. there is a hyundai riding on this. narrator: the best place to find adventure...
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this fan in red was heckling rory mcilroy and andy sullivan saying he could make a putt they were struggling with in practice. here it is. >> he did it. >> henrik stenson, the british open champion, challenged him. take the shot. they put a $100 bill next to the ball. david johnson, the fan sunk it and no one was as surprised as he was and you see how shocked he was when he spoke with reporters. watch the putt again. >> be quiet, everyone. it's in.
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>> what just happened? >> i blacked out a while ago. i was freaking out. thank you. that was -- that was a very cool experience. i can't believe it just happened. i closed my eyes, swallowed my puke and hit the putt and it happened to go. >> closed my eyes and swallowed my puke. >> that's -- >> that reaction, can we roll that video again. i love america, but that reaction was the most american thing. yeah! somebody give me an eagle to eat. >> i don't think venom would be all allowed. the u.s. for the first time since 1981 has won all four of the first day morning matches. they're up 4-0, but this is a very, let's just use the stock market term, volatile competition. it can swing more than a deutsche bank share. >> look bullish for the us us.
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>> looking bullish for the u.s. >> knowing the ryder cup, to quote you, i doubt the european team will have any liquidity issues in the 19th hole. >> that's right. plenty of liquidity on the course. >> we are less than two hours away from closing bell -- closing the books on the third quarter. really? wow. we're already there. been a strong quarter for the markets. what can we expect next quarter? the fourth quarter playbook coming up.
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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. [ that's a good thing, eligible for medicare? but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you.
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fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. welcome back. i'm michelle caruso-cabrera. what a wild ride for germany's biggest bank. tanked yesterday. today, shares having one of their best days in years on unconfirmed reports that a settlement with u.s. regulators may be close. it is the last trading day of the quarter, a bullish one.
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are the bulls going to be in charge in the fourth quarter? and technology bright spot, the best performer this quarter are the names you may want to like the second quarter as the second hour of "power lunch" begins right now. ♪ don't blame me for the music, america. i didn't pick it. i'm brian sullivan. two hours to go until the closing bell. a wild ride. a wild ride for the markets as well. the last trading day of the quarter, a big triple digit rally for the dow gaining back what we lost yesterday. three major averages on track for a third straight week of gains, financials and consumer staples, today, the best performing groups, yesterday, the financials were the worst. utilities and real estate are the biggest laggards once again. >> thank you very much, tyler mathisen. welcome. the headlines at this hour, tesla says auto pilot was not to blame for a crash with a bus in germany. recent survey of clinical trials in china revealing fraud on a
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massive scale. more than 80% of clinical data there is, quote, fabricated. and hurricane matthew picking up strength now, a category 3. it is expected to make landfall in jamaica by monday. melissa. >> tyler, to the big stock move this hour. deutsche bank stock surging more than 14%, this after an afp report says it is close to a $5.4 billion settlement with the justice department over mortgage bonds. cnbc has not independently confirmed that report. any eventual settlement would be well below the reported $14 billion opening bid by the doj in the talks with deutsche. there are fears here about deutsche, eu officials dismissing the concerns. let's bring in tara palmieri, a cnbc contributor. great to have you with us. how are you getting the sense that they're dismissing these concerns? what are you hearing?
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>> the commission is being confident and that's how they have to be. just the idea of them being in meetings or creating new resolution plans could just throw more panic into the market. so they're staying calm, they're referring to the stress test in the summer that deutsche bank passed very well. so they're really trying to exude a feeling of confidence. and their job is to basically try to pressure the u.s. to lower the fines. that's one of their tactics as well. so if thigese reports are confirmed, that would be part of the eu commission's goal. it has a pretty big say in whatever sort of contingency plans move forward for the bank, if it needs to, in fact, inject capital. so, you know, the commission is silently working behind the scenes trying to -- >> it is michelle here. in theory, they don't need a plan. there is already a plan if a bank gets into trouble, which is
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a whole process of what is supposed to happen, bail ins, et cetera. that may be part of the strategy, why they say nothing. >> right, exactly. and they say we created this beautiful infrastructure after the 2008 financial collapse and we have all of these plans in place in case large bank or any bank really does seem like it is near collapse and needs to be bailed in, bailed out, however you want to say it, but the truth is that they have never actually executed the plans before, which is quite daunting in a way. but they do have a single resolution board and the single resolution board has a series of safety nets that it created in case. and the thing is that it is actually forbidden to do a bailout, which is using taxpayer funds and angela merkel did push this. this was her idea. she used that line on banks in italy and portugal that would love to inject a little state aid into their banks. so instead it would be a
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bail-in, in which the onus is on the creditors to deal with that. but if because it is one of europe's largest banks and basically, you know, its balance sheet is half of germany's economy if that was the case where it really did need to be bailed out, they could do some wiggle room, there is a caveat, a large caveat that if financial instability breaks out because of the bank collapsing, you know, they can did a small amount of state aid. but has to be approved by, you know, the commission. >> this becomes a huge headache. if it ever got to that point, that's a huge headache for angela merkel, correct. politically the party is absolutely dead set against any sort of bail-in, package for deutsche bank and yet if that didn't happen, that would be an enormous headache for her, enormous impact on the economy of germany just before she herself faces an election. >> right, she's -- in 2017 she will be running for her fourth
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term. it is known, but in recent elections, in germany, her party, the christian democrats have taken a huge beating with this more far right party, even more austere, really starting to gain some momentum and it is because of her migration policy, so if she ends up having to use taxpayer money to bail out a bank, that could be political suicide for her. so they're really walking a fine line in germany and publicly she said no taxpayer money will be used if there is any sort of bail-in, bail-out. but at the end of the day, there is wiggle room because it is a huge bank it -- >> there is a systemic risk clause. >> it would hurt the rest of europe. >> thank you, tara, good to see you. >> exactly. >> tara palmieri. now wilfred frost. try to balance out some of of the reasons for the stock price rally we're seeing today, this report come out of france that they may be close to a settlement with the doj for a much smaller number. >> if we come to the morning, first of all, i think the
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initial move was a bounceback from yesterday's decline. a decline focused as we discussed a lot today, michelle, on liquidity concerns. they can hurt a bank very much, very quickly. i think this morning people realize it was more of a capital concern that affects deutsche bank. still a very, very big concern. but they have a little bit more time to do it. there was a couple of quirky other points we heard in the letter that the sale of the stake in a chinese bank was in fact still on the table earlier in the week. we thought that had disappeared. that could boost the capital by 3 billion or 4 billion if it is confirmed. this big move, based on talk that the doj is close to settling with deutsche bank and at a number of 5.4 billion. i would say that is just the rumor. it is a matter of weeks away, not a matter of days away. >> steve liesman was on last hour and he showed this graphic which shows how much capital european banks have versus a
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line for u.s. banks. so u.s. banks would be the orange line and all those yellow fwha bars that don't meet the line -- why don't they raise capital? >> it is a fair point. it seems obvious. but i wouldn't say it is through lack of trying to raise capital by the european banks or the regulators. they have done so quite a few times. they have continued to be hit by various crises over the last few years, 2010 to 12, the eurozone cris crisis, that continued to whack the share prices of the banks, making it at the -- more expensive than they need to raise again. >> that's -- 100% right, but at the same time, look at deutsche bank, they paid more than 5 billion euros in dividends between 2009 and 2015. they may be trying to raise dividends, but no problem returning capital to shareholders instead of keeping that capital on their books.
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>> yeah. i think that is a fair criticism as well. but they have raised significant amount of capital throughout. the criticism for the regulator overall is inaccurate marking to market. and not pressuring the banks enough so that they raised capital, the banks and the regulators feel like the banks are a bit safer, then it turns out down the line that the capital they have isn't quite as sturdy as they thought. overall issues. but the other one to raise up again is not so much the regulat regulator. it is a huge bit of pressure on all of the banks because it is depressing share prices so severely. >> thank you. right now to seema mody, a market flash for you on a friday. >> on the last day of the quarter, financials in fact, energy and consumer staples are today's best performing s&p 500 groups. the comeback in banks largely due to lessening worries over the health of deutsche bank. there are three financial sector
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components that are still in bear market territory like mason, affiliated managers and wells fargo all down more than 20% from their recent highs and financials are currently the only negative sector year to date. >> we'll talk more about those financials just now. we're less than two hours away from closing the books on the third quarter. a decent quarter for the markets. all three of the big major indexes with gains. what can we expect in q 4? david leibowitz is global market strategist with jpmorgan market asset management. if i bought deutsche bank yesterday, i would feel pretty good today. should i be buying financials here? >> i think that when i look at the markets globally, the one pocket of value that is left is financials. financials have been beaten up because of negative interest rates, they look very cheap, especially in europe, trading below book value. i think there is some risk, sometimes things are cheap for a reason if you use valuation as a
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guide for looking for opportunities, i think there is -- >> u.s. banks are a better place to go than european banks? >> u.s. banks are looking healthier. i would say in general today relative to during 2008 banks globally are looking far healthier. core equity, capital ratios have doubled in the u.s. and europe. there is headline risk now and i think the biggest thing that investors need to be cognizant of is the ability for contagion, sentiment to deteriorate around the names and push the market lower. >> if you add that to the negative interest rates, those aren't going to go away anytime soon. what sort of time horizon are you thinking of when you say buy financials? we heard this buy financials because they're bargain s for how long, a year, two years? and what has that done for anybody? nothing. >> the u.s. looks for attractive than europe. the fed has given some banks clearance to start raising the div diiden dividends.
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>> a rotation into financials as the dividend play. >> central banks around the world steep ing yield curves trying to keep banks profitable and banks that are able to pay out more capital to their shareholders, that's a powerful combination. sometimes things are cheap for a reason. a lot of risk in financials, but i think there is a lot of opportunity. more opportunity than say in telecom or utilities. >> very nice run for the u.s. market broadly since the middle of february. this quarter will end positive. what are you looking forward to in the fourth quarter and how do we finish the year? >> there is a lot that will happen between now and the end of the year. you got the u.s. election, you got the referendum in italy, a couple of fed meetings, there is room for things to deteriorate. we look at the state of the u.s. economy in particular, the consumer looks healthy, the insured unemployment rate, the number of people claiming unemployment as a percentage of the labor force is at its lowest level ever. the labor market looks healthy. we're seeing confidence pick up, a good reading on consumer
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sentiment this morning. all of that supports consumption, there by supporting the broader u.s. >> we are fairly reactionary. things happen, and we react to them. we don't have long lead times. what should we be talking about that is not in the headlines but worries you? >> so the thing that keeps me up at night is i think there is more inflationary pressure in the system than a lot of people really appreciate. i think the labor market is tight. i think wages are going to start picking up into the end of the year and i think -- >> the fed is screwed up. >> there is a risk next year we could find ourselves in an inflation environment where it is not hyperinflation but the fed find itself behind the curve. >> interest rate hikes? >> succession is a relative term, more than one. the fed finds themselves behind the curve. you have rising wages. to me, that's a toxic -- >> not commodity inflation, it is wage, which is usually what -- >> if you loaded up on bonds.
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>> i think there is a little bit of a scare. i'm a believer the bull market and fixed income has ended, but the bear market has not yet begun. inflation is the missing link there. as we begin to see more inflationary pressure, i think that puts fixed income at risk. that being said, i mean, as we said, the next three months are going to be fraught with fed meetings, elections, et cetera. for the average investor you need to make sure your portfolio has some balance. i wouldn't be abandoning fixed income yet, just cognizant of the risks. >> does the fed raise in november? >> i don't think they raise in november. i would say the conversation for the past few years has been much more about what the fed should do as opposed to what the fed will do. i don't think the fed will go in november. i think december is in the cards. all this rhetoric was meant to prime the pump for a december hike so they don't find themselves in this feedback loop where conditions tighten and can't make a move. the fed goes once before the end of this year and then hopefully
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one to two hikes next year. >> david, you can come back. >> thank you for having me. >> appreciate it. david leibowitz of jpmorgan. is the election being targeted by hackers. what keeps the election safe. the washington post reporting 19 people registered to vote in virginia, which is fine, except all 19 are dead people. as we head to break, not just deutsche bank. look at the other headaches that angela merkel is dealing with. the refugee cris i emissions scandal, concerns about greece, the brexit. "power lunch" will be right back. (announcer) at boll and branch,
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and get $50 off your first set at bollandbranch.com, promo code: tv. a big rally to end the last trading day of the quarter. the dow, nasdaq and s&p 500 all trading in positive territory. home builders are up more than 1% this quarter. but are losing momentum here. the industry group is down more than 6% this month on pace for its worst month since january. the laggards this month include tempur seeley, lagat and whirlpool. >> a lot of talk about how the stock market might react after either candidate is elected in november. whatever happens, we could be in for a bumpy ride.
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matt maile. always doing good work. what did you look at and what did you find? >> it is very interesting to note, whenever two term presidency comes to an end, the last with times, it has been -- the market has fallen out of bed, went to look further back and found it doesn't matter if it is a two-term presidency or one-term presidency. whenever a new person is elected, i took out the times where president died or resigned, but new person was elected, came into office, the market had a significant move whether it be -- the average move to the upside was 25% and the average move at downside was 24%. so about the same. but either way, the smallest move was in the midteens. >> you can't say -- you're not here to say you're going to collapse or soar, more of hey, folks, it has been kind of steady out there, don't expect that to continue. >> exactly. i think one of the key things for this, for investors, especially individual investors, let me say, i'm not trying to do this in a self-serving way.
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we talk to institutional investors. but if you're an individual investor, you go into december and january, talk to your financial adviser about what you want to do in the year ahead, this should be a good year, do it early. do it in october. the move tends to happen after the election or shortly after the election. and you want to have a plan in place because if it looks like it is going to go down, don't panic and sell everything. you don't want to chase the hot group or hot stock at the time. you want a plan in place you have something to -- a good base to rely on when you make those investment decisions if you do want to make a change. >> because these are big moves, is the bottom line that you want to be long volatility going into the next couple of months? >> i think so. it is funny, you think it is only going to happen after the election. last october, sorry, october of 2008, the last time we had a new president come in, the market went down 27%. so we could still get another big move. that was in the middle of the crisis. but the point is i definitely
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agree, volatility will almost certainly pick up. want to be long that volatility. not only that, in recent years, last two years, we have seen a couple of big moves, only about two months long. in each case, seven years, the moves have been elongated, at least six to nine months and in many cases a year or a year and a half. we could be in for something that will take us out of the range we have been in for almost two years now. >> one thing we could invest in sounds like would be the vix, the volatility index, right? >> that could be a good idea. you have to make sure you're on the right product on the vix because it can be a very, very volatile asset class. but, you know, again, talk to investment -- >> i should have said options. melissa asked the same thing. i meant how to invest on the option side of the vix. >> right. >> it is friday. been a long week. especially when you started in germany. thank you very much. >> a great week then. >> a fantastic --
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>> i was born the same place that michelle was, i know -- >> also from dayton? are you from dayton? did you grow up there? >> no, we moved to the east coast before i was a year old. >> to where? >> matt caruso-cabrera, thank you for coming on the show. >> do you have a long lost brother? >> dayton. from dayton. >> hackers targeting the u.s. election that is according to homeland security secretary jeh johnson on morning joe this morning. he said one or two of the attacks on state and local election systems was successful. but thinks the decentralized nature of the system, 9,000 different jurisdictions, will keep the election safe. first time i've really -- that -- it is a whole new world of threats to the election. used to be just the people in virginia registered but were dead, like the people in cook
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county. now it is -- >> i cover latin america for so long and they were -- a lot of companies were very aggressive and very -- we say progressive about having big programs nationally, everybody has to take the day off and go vote, et cetera. and yet now you're very worried that a lot of the elections in latin america because they're national and on the internet. >> and computerized. >> and computerized, all computerized. that they were hacked. it is very troublesome. so maybe you -- maybe going back to -- >> i wasn't paying as close attention as i should have. i got an e-mail saying hey, by the way, do you know which president going back to 1950 had certain performance. clinton, bill, had the best -- the best s&p 500 performance when he entered and left office. >> obama number two. >> coming off the low base, okay. don't cheat, michelle. don't cheat here.
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what did you answer for 12? >> hillary never followed the honor code either. >> equatorial guinea or yellow? >> only two presidents who had a negative total return during the time in office. who were they? presidential stock market history. >> ford. >> no, close. bush, two. >> bush, two. >> bush, two. and nixon. >> he got -- all that happened at the very end. negative 40% return. nixon down 20. every other president up. nobody asked for this, but i deliver. >> cybersecurity in focus at our upcoming cambridge cybersecurity summit in partnership with m.i.t. and aspen institute. cnbc.com/cybersummit, you can attend. it is next week in beautiful cambridge, mass.
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shopping, big bets and bribery, accusations. the good, the bad and the ugly next.
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welcome back to "power lunch." time for the good, the bad and the ugly. first, to the good, costco beating estimates. profits of $1.77 per share. revenue slightly lower than expected. but same store sales higher. good enough for the gain of 4%. the bad, wynn resorts, the president resigning, replaced by the wynn resorts president, lower 3%. ugly day for cognizant technology solutions, plummeting by 11.5% after revealing an internal inquiry, foreign payments may have violated u.s. foreign corrupt practices act. company's president resigning. melissa? >> huge pop today for nutanix. more on this company. can technology keep lifting stocks higher. "power lunch" will be right back.
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narrator: it wasn't that long ago. years of devastating cutbacks to our schools. 30,000 teachers laid off. class sizes increased. art and music programs cut. we can't ever go back. ryan ruelas: so vote yes on proposition 55. reagan duncan: prop 55 prevents 4 billion in new cuts to our schools. letty muñoz-gonzalez: simply by maintaining the current tax rate on the wealthiest californians. ryan ruelas: no new education cuts, and no new taxes. reagan duncan: vote yes on 55. sarah morgan: to help our children thrive. could be looking to close out the session and the quarter on a high note. up by a full percentage point, being helped by the gains we're seeing in financials and energy up by 1.7%. to sue herera with your cnbc news update. >> we begin with the 14-year-old boy held in connection with the
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shooting at a south carolina elementary school. and the murder of his father. he appeared in court today, charged with murder and attempted murder. cameras were allowed in the courtroom, but they are not able to show the suspect because he is a juvenile. the tulsa, oklahoma, police officer who fatally shot an unarmed motorist was arraigned in court today. betty shelby entering a not guilty plea. the judge set a preliminary hearing for november 29th. subaru recalling nearly 593,000 vehicles, some for the second time, because the windshield wiper motor can overheat and cause the risk of a fire. the recall affects certain legacy and outback cars from the 2012 to 2014 model years. pampers is now making its smallest diaper ever for the smallest of babies. the premature babies, specifically. the first diaper from a major diaper brand specifically designed for babies weighing as little as one pound. more than half a million premature babies are born in the u.s. each year.
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that is the cnbc news update this hour. brian, back to you. >> sue, thank you very much. the oil market is closing for the day. also, for the week. let's find out what it is doing. jackie deangelis at the nymex. >> we're higher today, it is the after effect of those opec announcements that we got earlier this week. i like it call it opec euphoria, over $48 a barrel. rig count numbers were out this afternoon too, we saw seven oil rigz added here in the united states. this is what happens when oil prices are higher. we drill more and this is exactly the kind of threat that the cartel faces after making the kind of move they did. the other producers may not follow suit. the dollar index was relatively stable, around 95. that is supportive of higher prices. the big question is if the euphoria continues into next week. some think we could make a run for 50. we also could lose some steam from here. for the week, oil prices up more than 8%, though. back to you. >> jackie, thank you very much. hot ipo on wall street
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today. nutanix soaring in the market debut, up 115%. josh lipton, if it was nutella. >> yeah. well, a possibility for the ceo. mix it up. data centers and nutella. soaring is right. investors betting here that nutanix technology can up end a lot of traditional i.t. players. the typical data center has a lot of different hardware, storage, servers, different software. it is a lot of moving parts for i.t. teams to manage. so nutanix aims to change that. combines storage and computing power into a single product. company does boast revenue growth of some 85%. and also has strong gross margins and nearly 4,000 customers now rely on this company's technology. investors clearly like what they see. nutanix on track to be the best
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ipo debut of the year. so in order to compete with big tech players, cisco, ibm, dell, they have to spend a lot of money on sales and marketing, operating expenses are nearly as high as total sales. question for investors, can they keep enjoying the hypergrowth and manage to bring down costs. clearly a lot of investors seem to think it can. >> josh, thank you. big rebound happening right now. stocks session highs, technology one of the few savings accounters trying to hold up the market yesterday. one of the top performing sectors this month. joining us, jason ware. good to see you. >> thank you for having me. >> i want to kick off with nxpi, you held it, sold it yesterday. why would you say -- why would you walk away now? >> we're looking at valuation and what a potential premium might be if qualcomm were interested in taking the stock out.
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as we look at it, at a $41 billion market cap here, the premium that qualcomm would have to pay would be half of the market cap. for a company doing 6.5 billion in revenues, that seems steep for us. we had a great run on the stock and decided that looking at upside, downside, probably a good time to take it off the table. >> the valuation compared to the broader text sector is much richer. trades above 32 forward multiple. where are you finding value in a space that it is trading at a premium to technology. >> semiconductors, it is interesting. there are certain secular growth trends within semiconductors, but also semiconductor companies leveraged to things that slow down like intel with pcs and qualcomm had issues and that's part of the reason they're look for growth. within the semiconductor group there are places like silicone motion, and what they're doing is providing the microcontrollers for flash
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storage and ssd. there are spots an investor can look at for the ability to find that growth that they're look for. but it is a tougher group to be in. >> i say this with love, but you are a twitter lover. you always come on to defend twitter. twitter had a nice run. up 36% this quarter. as much as you love it, are you selling any twitter? >> we haven't. we're still holding. one of the things we're looking at is going back to a preem jump what would someone pay for twitter. we have a lot of potential suitors out there looking at the stock. we think it could be worth $20 billion or more. we look at the multiple on facebook in terms of the market cap and market share within social media. if you kind of back that out and look at twitter, within 45 billion and half that given the revenue growth of 20 billion. >> twitter is no facebook. >> we discounted that. so 22 times on the market cap for facebook, but if you look at
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twitter, they're only about -- i think facebook is 8.3 times the market share in social media ad spend. half that for revenue growth. we arrive at a to $21 billion price tag. >> you don't want to pocket when you got? >> we think it is a valuable asset and someone will take it out. we talked about earlier this year, i didn't want to speculate who, but it was part of our investment nice is. >> what is valuable? if user growth is slowing, what is valuable about it? >> you all use it quite a bit. >> we're a subsector -- we're a subgroup of the population. we don't represent broader america. people in the media tend to use twitter more, celebrities use twitter more. their problem is that people in general don't know how to use twitter or what to use it for and then the high profile people who are more like us, a mark
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andreissen, who said he's given up twitter and feels 12 pounds lighter. >> over 300 million people enjoit service. we think there is a huge opportunity for them to grow that. won't grow as rapidly as it has. but continue to grow it in a relationship with google furthers that. thursday night football went off without a hitch and was impressive. i think depending on the suitor you can make the case for valuable property. >> what is the last new position you've taken. not the last new stock you bought. the last new -- the most recent new stock position you've taken? >> we took a position on amazon. haven't owned it. >> after everybody raised their price record to a thousand bucks, now you -- >> don't say that in front of her. >> we're looking longer term. the reality is there is some challenges with regards to the stock at amazon the last couple
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of years, people talking about overvaluation. >> not to belabor the point. why now? what has changed that made it so attractive? >> what took you so long. >> we are all geniuses here. >> you're ahead of the curve. >> 99 i was in. >> they have a great beachhead in e-commerce. cloud has begun to pick up. >> cloud play. not a retail -- >> both. it is both. it is both. and cloud is what began to interest us looking out over the next five and ten years at the pace that they're growing their aws, we think if that continues, not only is that a fantastic asset atop the growth trend, but we think that earnings are understated. and we're starting to now see that earnings growth. just a couple of years ago, people are talking about basically negative earnings at amazon. now talking about -- >> have you played with the amazon echo?
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>> i love it. >> it is amazing. >> i couldn't just hinge -- >> i love it as well. >> it is going to listen. >> it probably is. >> jason, thank you. >> thank you. >> great to see you. >> a lot better in person. >> wonderful here. >> a lot better in person. >> great setup. >> despite all the sound and fury in the headlines, stocks have done pretty well this quarter. the s&p 500 down about 3% over the last 90 days. not bad. but you probably don't care what has happened. you care about what's going to happen. we're going to ask the trading nation team just that coming up.
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look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪ it is time for trading nation. because traders do trade better together. as the third quarter comes to an end, let us ask what will be the best performing etfs in the quarter, that's numbered four. aaron gibbs, ari wald. we'll give people a way to make money. what is your etf way to make
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money? >> we generally like cyclicals here. we think the market is setting up for a -- a strong fourth quarter, a sentiment induced rally. we think like areas like technology, transports and energy, if there is one etf for diversity, that include all these areas, that we recommend buying, it is the s&p high beta etf. this etf has traced out a head and shoulders bottoming pattern over the court course of the last year, completed with the breakout above its $31 neck line. now, note, this etf is still below the prior cycle high. the s&p is coming off a new all time high. relative catch-up potential here. just to get back to that prior peak, around $36 would be a 10% rise from current levels. plus breakout potential above that prior resistance, we like this etf a lot.
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>> okay, there you go. erin gibbs, which are you buying to help our viewers make some money? >> so i want to focus -- i agree with ari on high beta. i want to be more focused and go in just for the technology. i like the s&p technologies, technology has been the leader for q 3. but we see it continuing in q 4 and for quite a few reasons. one, we're still seeing very good earnings growth of about 3.5% for this quarter. but it is still -- even after this run-up, it is still trading at lower valuations than the s&p 500. and you're getting better expected growth. so i see opportunity not only for the beta play, but also just for higher earnings growth with that value going into q 4. >> all right. we like it. the xlk and high beta etf, two interesting ideas.
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thank you very much. for more trading nation, more ideas and segments like this, go to trading nation.cnbc.com. deutsche bank stock bouncing back. up 15%. the markets overall responding. they're higher as well. we're wrapping up the third quarter with what looks to be a pretty good one. more market coverage on "power lunch" right after this. and now, the latest from trading nation.cnbc.com and a word from our sponsor. >> a strong dollar is often viewed as a net negative to the economy. that's not always true. while export driven companies will often struggle under a strong dollar because their products are less competitively priced abroad, consumers will benefit because imported products will be cheaper. and because the u.s. imports more than it exports, from an economic perspective, a strong dollar is an overall positive.
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welcome back. check out this -- this is a man, attempting to take a -- he's trying to take a selfie with a python. gets the -- look at that. that's nice. >> play that again. this is a man -- >> look to the right -- >> they remove the python. >> to quote forest gump, i'm not
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a smart man. >> on the premises on the school of northwestern india. he tries to take it -- >> it wasn't a selfie with a cobra. they have teeth, but just enough to grab and pull. he did some damage there. >> oh, god. >> lady gaga is heading to the super bowl. the singer announcing she's headlining the halftime show for the super bowl in february. she posted this tweet. it is not an illusion, the ru r rumors are true. this year the super bowl goes gaga. >> nice. >> great. >> great show. >> she is an entertainer. >> upper east side of new york. >> i didn't know that. >> look out for her. stocks closing up third quarter strong. what can we expect as we head to q 4? a fearful event like deutsche bank earnings, the election or is there a wild card out there? let's bring in cnbc contributor tim seymour, managing partner of
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triagem asset management. >> i hope it is better than a snake bite. i think the elections, european referendums, good and the bad about u.s. earnings is that the bar is low, but low but low for. i think volatility is still, you know, there to be bought. i think the fed is going to be very noisy even if they can only go once, maybe, who knows into december. when i think about the fourth quarter what we want is continuation of some of this slightly higher interest rate progression. if we get the long end moving up 40rks 60 basis points gradually it's good for cyclicals and tells the stories of industrials, shippers. if you look at u.s. banks and look at the balance sheets and look where valuations are relative to their earnings power i think the banks can be a place to make money. i think it's a place people
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should be looking. >> you think all those sectors do well with a steepening yield curve. >> especially airlines. we talk about capacity and efficient isis. pricing power is very important. i think the worst is priced in to their discipline on new capacity, et cetera. i think they are priced at recessionary levels. airlines are the most interesting trade in the fourth quarter. >> what's the biggest wild card. elections or what's going on in europe given the referendum you mentioned as well as what's going on with deutsche bank. >> it's very clear that merkel and germany have a lot of political fors not only within their own country but, obviously, the extension of the euro that brexit ushered in. the italian referendum is a bigger headline but i don't know it will be a big event. merkel's loss of at least consensus power in germany is a big deal. it's a big deal for the euro and it's a big deal for europe.
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>> tim, what many people don't realize the eem is up 10% far outpacing our markets have done. do you believe this is the beginning of a longer term run or is this kind of a short term phenomenon with the emerging markets? >> the floss have been impressive. in the last two, two and a half years you had more outflows. people loved everything about em. to the extent that fund flows are telling you a story of some rerating, yes, absolutely. when i think about the fed and the dollar, the dollar rallied ahead of a fed move. currencies have priced that in. i think earnings growth and potential. em central banks are cutting rates for the first time in a couple of years. 38.25 is an important level. technically a big break is something you're buying not
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selling. and i think if you wanted the markets to perform the best here it's probably korea, probably russia opinion oil price physician they have a floor will close as well. >> let's say you had $10,000 to invest on the start of the quarter or the next six months how would you allocate it? >> you know, i think the u.s. continues to be the best place in the world to invest even if the valuations here are the least attractive. >> how much of the 10 grand would you put in? >> if it's a global portfolio i would have 60 cents or $6,000 of my 10,000 and have 2,000 in europe. i would have the other 2,000 in emerging south being heavy china. >> there's your 10,000. 6,000 in u.s. 2,000 in emerging and 2,000 europe. >> if you think about where both you have stability, i think fourth quarter will be a place where you're actually not going
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to misogyny trades that are the most interesting for 2017. again southeast global cyclicality, you have time to catch that. you don't have to jump in heavily. em has macro forces that are positive. >> thanks. "fast money" trade for us. we should note stocks are sitting close to session highs. s&p 500 is at 2172. just a point off the session high, up by 1%. take a look at some of the names new highs. international flavors and fragrances, intuitive surgical, electronic arts and nvidia posting gains. >> check please is next and we'll get more on monday's big show from detroit. that's coming up. there we go. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement
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with new cabinets this wfrom this shop,house, with handles designed here, made here,
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shipped from here, on this plane flown by this pilot, who owns stock in this company, that builds big things and provides benefits to this woman, with new cabinets. they all have insurance crafted personally for them. not just coverage, craftsmanship. not just insured. chubb insured. >> check please. before we get the check please, this is my monday check it out please. we'll be in detroit. we have a heck of a lineup for you. we have head of quicken loans. chris ilitch. the ceo of general motors. we got the mayor of detroit. we got sunshine on a cloudy day. we have everything. it's going to be spectacular. we'll be in the motor city. i love detroit. see threw. >> dan gill sbaert cleveland
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guy. >> he's building a huge amount of stuff in down detroit. long way to go but they've come a long way. >> i'll be tuesday and wednesday up in boston, cam bring at the m.i.t.. great panelists there including people from homeland security, fbi and others talking about among other things a story we reported today the concern about hacking into the election in the united states. >> it's very worrisome all over the world in general. >> you think about the idea, oh, well we all ought to vote on computers. but maybe not. >> how often do you fight with the one have now. >> do people get hacked by conducting business on the internet. how about the big yahoo! hacks. there were questions when they should have disclosed to people who were hacked instead of waiting two years. >> i do believe we taught have voting over a weekend. >> or should be a holiday. >> begin 6:00 friday night.
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>> if the tigers rally -- red sox and tigers playoff. maybe i'll see you at the game. >> 6:00 friday to 6:00 sunday. >> two debates next week. vp debate on tuesday night and second presidential one a week from sunday. donald trump first half of donald trump of hat last debate or latter half? >> you mean the strong donald trump for the first part of the debate. >> wandering unfocused donald trump in the second half. >> you saw that happen along with the move in the peso interestingly. >> he's got the tweet story going. something almost mexican. >> chipotle mexican grill. fidelity disclosed the contra fund has slashed its stake in chipotle in august. they reduced their holdings by 19%. it is, those still, meeting the contra fund the largest mutual
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fund investor. great check. great to have you with us. thank you for watching "power lunch". >> closing bell starts right now. hi, everybody welcome to the closing bell. i'm kelly evans at the new york stock exchange. >> i'll bill griffith. we'll look at whether the momentum can continue into fourth quarter which performs typically pretty well historically speaking and then it has the move october included in it. >> what's different today versus yesterday. those concerns about deutsche bank. the stock rebounding on hopes and rumors the department of justice won't push for a $14 billion settlement. we'll give the facts on w

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