tv Fast Money Halftime Report CNBC March 23, 2017 12:00pm-1:01pm EDT
popular safe haven trades. gold getting buying and the japanese yen, carl, its biggest run since april of 2011. signalling nervous nsz out there. >> and s.n.a.p. up nearly 35% today, well above 20 bucks. >> let's get to headquarters. scott wapner and "the half." yes, it is, the final countdown. welcome to "the halftime report, he" i'm scott wapner, down to the wire as the house is ready to vote on the health care bill today. does the trump rally hinge on the outcome? with us for the hour today, joe terranova, jim lebenthal. and head of macro investments. we begin with the markets. there is the dow up 71 points. s&p good for eight. that big vote on capitol hill today looming. the president making that 11th-hour push now to win support of some conservatives
within his own party. our kayla tausche on the hill with the very latest. >> scott, not just some conservatives, it is the single largest group of republican holdouts. they have been the opposition throughout this process and they have just arrived at the white house for a meeting with the president and the vice president following a meeting with top staff yesterday. chairman of ways and means, kevin brady, saying earlier this morning that they're going to have to wait and see how that meeting turns out. that is really what the vote and what the schedule here on the hill is hinging on. i just caught up with pete sessions, the chair of the rules committee convening today. and he said every part of the bill is being negotiated at the white house. they're the ones who know the art of the deal. i don't. people here on the hill are trying to do what they can behind the scenes to pull some strings and sell some members. but really the acknowledgment is that everything revolves around that meeting. if you take a look at the schedule for today, that 11:30 meeting is basically the only thing that has not been postponed, delayed or is up in the air.
speaker paul ryan's briefing, which was slated for 11:30 this morning, now moves to 3:30 p.m. a republican conference that was slated for earlier this morning is now postponed to the afternoon, as well. and then the final vote on the house floor, still tvd. i'm told it's a fluid situation. members don't know exactly when it's going to happen. i've tried to pin down a few of them walking the halls to see when they know or if they know when it's going to happen and they do not. they have been told to stay late and they're going to wait for word from house leadership. we'll see what happens. in the meantime, still no cbo score for even the most recent version of this bill, even though the bill is still changing, scott, people say they want to know how much it's going to cost. it's unclear whether they'll get that or any news about substantive changes in the near-term. back to you. >> and i'm going to see how if any way that the changes may be some of the votes a long day ahead for you, as well, kayla. thanks so much. pete. is the rally hanging in the balance because of this vote today? >> well, i think part of the
rally. i think we have all said that some of what's been going on. but has it been on influence on the markets. but i don't know that we absolutely implode, scott. i think we obviously would sell off. i don't think we absolutely implode. we had the big sell off the other day, that was part of it, 230 some on points. >> the big t.a.r.p. vote when it failed, and the dow fell. try to liken it to that situation. >> totally different. you're talking about liquidity condition, you're talking about the impact on the credit markets, completely different. listen, i don't believe pete is a macro trader. and that's probably to his benefit. but i think if you are a macro trader, this is your first macro event that you get to trade around. and i think that's where, when you look at the marketplace, the real consequences are going to be on this vote. the market itself, yesterday technology, i was incredibly surprised at how well technology held up yesterday. >> financials held up again, as
well. >> financials today are coming back again. so when you go bottoms up and look at the marketplace, you could find opportunities, top-down macro trader, you get skpited about an event like this, the first one of 2017 which has real meaning. >> i think you will have the market sell off if this assistadoesn't go through. today is an arbitrary day. tomorrow, saturday. if you think about it, we're a couple percentage points off the high, and the market -- while there's been a lot of rotation under the surface, i think a lot of guys are using this as a barometer to whether or not trump would get tax reform passed. if you look at the trades that have done well since the election, we have had a pretty big reversal in those trump trades. so tax reform measured by the retailers are trading at their lows of when -- entered into the u.s. election. you have also the industrial stocks, which have given back a lot of gains, financials have given back about 40% of their gains since the peak post the election. so the trump trades aren't working.
what are working are the defense sectors of the economy right now. >> let's go back down to washington. our chief washington correspondent, john harwood, is there. john, i'm looking at an article you just posted where you spoke with a veteran member who points to what you say could be a nightmare scenario for the market. >> exactly. they're looking back, even though as your colleagues on the panel state correctly, it's not comparable to the situation during the financial crisis in the fall of 2008, but members are thinking of it that way. members saying if this goes down we could lose 1,000 points off the dow. his point, it is a threshold question about the ability of the republican party to govern, the ability of donald trump to govern, and that's why members, they're not caring at this point about whether this has a prayer in the senate. they're simply scrambling to get it through the house as a way of putting a floor under confidence around the republican party. so a lot of the changes, you know, this white house meeting just ended between the freedom
caucus and the president and vice president. they're seeking to gut the insurance regulations. the essential health benefits part of obamacare. that's popular on the right. but that will lose you votes among moderate members, and probably doom product in the senate for sure. now, the question is, what is the effect if it does go down. whether or not there's a thousand-point drop in the market. the one thing that was interesting, this member told me, we're going to get -- we're going to cut taxes regardless of whether we get health care or not. god created republicans to cut taxes. we'll be able to reach an agreement on that. but obviously the health care and other priorities like infrastructure would be very much thrown into doubt if this goes down. >> interesting reporting, john. thanks, john harwood on the hill. so is this all hanging in the balance? a thousand-point drop potentially for the dow if this does not pass? do you believe that? >> no, i don't. in my view that was said solely to scare people into -- his
fellow members of the house, into voting for the bill. so they're not responsible for the thousand-point drop. i don't think there is any way you can always be wrong. but consensus is that the market will sell off if it doesn't pass. consensus is also if it only passes by the skin of its teeth that the market will sell off. so any time the consensus is that strong, maybe it doesn't happen. here's what i would say, though. if it does sell off, though, with significance, it's a major buying opportunity. because what's going to happen is that you'll see them double down to get taxes passed. because right now, this is a bump on the road. a controversial bump in the road. and the reason why the conservative caucus is against it are apparent to everybody. however, when you get to tax reform, and when you get to cutting tax rates, and i don't think that bill would be as big as everybody says, that that's where the rubber really meets the road. that's what goes into people's pockets. >> correct me if i am wrong, is whether the agenda from the president gets delayed, jim, or not. >> so i'm going to take what you
just said -- >> baked a lot of the cake already. you don't want to dismantle the whole thing before you get to eat it. >> the market cares about profit, scott. you know that and i know that. what's going to drive profits in the year term is a strong labor market. people buy cars, houses, everything. that gets the economy going. it's a virtuous cycle and that's what's happening now despite what's going on in the house of representatives. steve, i hate it when i do this, but i agree with you completely. if the market sells off -- >> just wear a tag. >> if the market sells off, it's going to be the mother of all buying opportunities. you want to know why? a lot of people have been selling over the last few months, waiting for exactly this moment. i get clients in all of the time saying the world is going to heck in a hand basket. they're ready to put it to work. give them the opportunity. >> absolutely right -- short-lived. >> i was looking at u.s. steel today, the stock down almost 20%, 15 and change. the bank is down 10%. so the trump train has unwound to a very large extent. >> john harwood, do you have a
thought? >> i do. and i just want to echo the comment that was just made about rates not going down as much as being talked about, down to 20% in that house proposal. you can write it in sharpie, rates -- business rates are not going down to 20%. and the reason i say that is based on conversations in the senate. they believe in the senate, republicans in the senate, that the board adjustment tax in the house is way to risky to take in the economy and the tradeoff between having a corporate rate a few points higher and avoiding the b.a.t., the senate will take that in a heartbeat. >> john, it's jim. i so hope you're right. the border adjustment tax would be disastrous in terms of unintended consequences. don't you think trump wants to push that through? this is a guy who regardless of the consequences, does push things through he wants. >> i think he wants to push something through. that's what we're seeing on health care. remember, he started out by saying we're going to take care of everybody, you're going to have insurance, even if you
can't afford it. this house bill is way, way far of that. it's going to dramatically increase the number of people without insurance. what he wants is a win. and at this moment, that's what house members share with him. they want a win, as well. they think it's vital. on tax reform, you can get a win without going down to 20%. we've got a 35% corporate rate now, highest in the world. you can take that down to 30% or 28%, and have either increase the deficit or figure out some other offset. but i believe that there is extremely strong resistance to the border adjustment tax in the senate and that that is going nowhere in that body. >> hey, john, it's joe. how should we think about the timing here, the longer the vote is delayed, should we expect this will actually pass? >> the house vote? >> yep. >> no. i think the longer it's delayed, the more you suspect it's not going to pass. i do think there is a determination -- i was told this
morning that speaker ryan is losing patience with the freedom caucus. he wants to dare them to take this down and say, yeah, you want to go home and tell your members that you took down the -- president trump's priority? you go right ahead. they're counting on the fact they won't do it. >> you know what, john? to your point, and i'm just looking right now at the results of a quinnipiac poll, which are just crossing the release from quinnipiac, which says "american voters disapprove 56-17 with the health plan with 26% undecided". so to your point, it all depends, perhaps, if you believe the polling that's out there, who do these members want to face more? an angry president or their angry constituents? >> well, that's a good point. and, of course, the characteristics of this american health care act are such that they would hit very hard. a lot of the core trump voters. so look, the safe vote for any member of congress on something
highly controversial, especially something that is being whipped together at the last minute, they don't have a score on, the safe vote is always to vote no. because then you're not going to be responsible for what happens. so i would guess that in the end they put it up for a vote and it goes down. they say they want to vote before members have to go home for the weekend. so if that's the case, i think the prospects are difficult. now, you know, we'll see. how -- what do they have to give away to get the votes and can they still get to 215? i think it is doubtful at this point. but, you know, we're just going to have to watch over the next few hours. >> yeah, down to the wire affair. long day ahead for you, as well. john, thanks. john harwood on the hill. >> here's one thing. just to correct jim. trump hasn't been able to push through everything he has wanted, because he's not pushed anything through. this is the first legislative action. >> he doesn't stop trump. >> there's no track record. i think what john brought up and
the question you asked is actually the paramount question here. is that trump has -- his approval ratings have sunk, right? dramatically. at this point, if you're on the fence, your constituency is on the fence, you're not really sure, do you go home to your constituency, which -- where the approval ratings have taken that hit, okay, and face them, or do you align with the president? and that's the issue that's going to keep happening throughout this presidency. >> he's trying to make the push. he's tweeting as we speak for folks to call their representatives and urge them to vote yes. >> but we have been through it down this path with obama on every piece of legislation. iranian legislation, that was never going to pass, last-minute. even obamacare. that was not going to pass and then brought it home in the last minute. >> i think the biggest overread of this whole thing is tax reform. suddenly, if he doesn't get this through, he's not going to get tax reform through, right? i mean, i don't agree with that premise. i actually think that this is a very difficult thing. he took on the most difficult
thing -- >> it's a delay though nonetheless. >> have we completely forgotten what the earning season told us so far and what moves this market to the up side? obviously the excitement over what trump is maybe able to do. but if have we forgotten about the earnings season and we're about to kick into another one and is that going to be good, bad or indifferent? are you saying that you're bullish no matter what happens today? >> i am bullish and on a selloff, a buyer. it's why you buy protection when it's cheap, gives you the opportunity to jump in if you missed -- >> with your analysis -- i want to agree with you -- >> when you're done, erin. >> the problem is, all of the companies that have bad results are going to point to all of this morass in washington and we had uncertainty. that's why consumers -- >> avoid those companies. avoid the ones that blame it on somebody else. you're not going to hear that from jpmorgan, the financials. >> so i don't think any of us disagree with the fact that -- the macro fundamentals haven't changed. they remain consistently -- continuing to improve. the question, though, is how
quickly then can the house republicans pivot to start focusing on tax reform? there's been a lot of political capital spent by both paul ryan as well as by trump over the last few weeks on this health care bill. if they can't get it done, there isn't an agenda right now laid out. >> the house republicans want to pivot towards the tax reform, i think. >> they have to. and during that time a nasty selloff in the market. >> i think the hold this vote -- the closer you get to friday, you're really putting yourself at risk from a market standpoint. does it go down 1,000? i have no clue. i agree with pete and i agree with everyone else on the desk. it's a buying opportunity. but you hold that vote on a friday and it's a no, wow. that's not exactly thinking clearly about the impact on the markets. you want to have this vote, if you think it's going to be a no, on a monday or tuesday. you don't want everybody selling on friday afternoon and going into a long weekend. that's a recipe for a disaster. >> i think it's a v-shape if it does sell off.
i don't think -- >> looks i can brexit? >> exactly. >> looks like the trump election? >> not that violent on the way. but, yeah, i think what comes into question, then is a strategy of the administration. i know asked myself and others, why didn't they do taxes first? that seems to be the path of least resistance and one you can get some democrats on. >> let me frame it this way, then. at what point would you be more cautious then, pete? at what point would your point of view change on where you thought the market could go? >> well, you know, we have catalysts constantly in front of us, right? this is the major catalyst we're talking about now and then it's earnings and then focus on oil and tax reform and repatriation. all of those. there is always a catalyst in front of us. >> can you put more cash to work? because you're sitting 35, 40% cash. >> i actually last week took off a huge number of positions. not because i'm negative. because they had worked and i wanted to be fresh to be able to look for other things. and i've added stuff since then.
>> right. and i've taken off positions also over the last week and a half for the same reason. like mentor, why hang off the last five cents. i kate off, and i haven't put it back to work. >> the key element is, you haven't put it back to work. all of us have sold. >> nervousness. >> i'm talking about something different here. i have sold boeing, time warner and i haven't put the money back to work. because the opportunities aren't there. you give me down 5%, i'll put it to work. kum ba yah, i agree. >> good stuff. here's what else is coming up on "the halftime report." >> coming up on "halftime." a bold call on american airlines. the stock down 12% in a month. one analyst says it will more than double. buy it now. plus, is ford's bad news and the stock drop a great opportunity to get a great deal on the stock? and all next week, the halftime quarterly report. how have our traders done so far this year? we're talking about wins and
losses. success and regret. all next week on "halftime report." the command performance sales event is here. experience exciting offers on our most elevated suvs ever. get up to $2,500 customer cash on select 2017 models for these terms. experience amazing at your lexus dealer. it'that can make a worldces, of difference. expedia, everything in one place,
huge. i think one stat that is interesting people don't know about disney. we know about the movies and things working well and espn may be not as bad as everybody said. how about the fact their free cash flow almost covers all of the stock they buy back, as well as dividends each year. that's impressive. >> pvh, joey. retail is terrible. yet pvh, they beat and they give better guidance for the whole year. >> gave great guidance, very upbeat. talked about growing the business over the next five years in china. nearly doubling it. talked about the opportunity there and the strength they're seeing. look at the stock. this is a stock that last year was 66. 114 in the fall. 98 here. as you rightly point out, fantastic commentary from the ceo. >> i was wondering -- the ceo is manny chore eco. is this like an execution story? managing the inventory and the business? >> no, i think it's -- >> they have the right product? global climb? van hoosen, nautica? >> it's the global footprint, i
believe. the expansion over the last couple of years, they have executed on that very well, and now they're able to come on a call and really highlight success internationally at $98. i think it's a buy. >> i mentioned how retail has been a complete cluster. you look at the amount that some of these stocks have fallen from their recent highs. look at that. that's in their recent highs. macy's at 37%, same as kohl's. target 32 and gap 25. that's a brick and mortar story. more than pvh is. okay? >> no, but i'm just saying, nike wasn't great. nike is -- retail is terrible. >> nike got the pullback that you're looking for. we talked about this on tuesday. many were looking for that opportunity. this has been a stock that has recovered, though, nike. it has recovered. >> so retail has been terrible, but i think that now with border adjustability going away, or at least becoming less of a probability, now is a great time to actually buy retail. for a trade.
optionality in the trade. it's cheap. >> you're right and the industry is shrinking. jcpenney is shrinking, everybody closing stores. that's what's needed to get to nicely profitable. >> fire eyes having its best day since november. goldman goes to buy -- >> from sell. >> it's very rare you see a sell call on the street. so this was a good sell call. i thought the sell call actually came late. he still made pretty good money. and the difference between the market and spread, what it did and this did, is about 20%. so great performance here. the upgrade, up 8%. he likes it -- they're making that transition to subscription model, which is much better model for the country. >> jimmy, give me something on alphabet. stock down more than 1%, below its 50-day for the first time this year. this advertising story, companies pulling out from youtube. >> it feels like this is going to be over in the blink of an eye. this is, is a., so easily fixable, and b., such a juggernaut in terms of ad sales. i don't see this disrupting
things. i don't own this stock, scott, and this is where i will put money to work in a down turn. >> let's talk some autos and that falls right into your territory, as well. after ford cut its guidance, lower than wall street estimates. so what's the deal, as all of the automakers today, jim, are getting hammered. >> scott, the rodney dangerfield of sectors. >> why should you give him respect? >> the reason why is, they trade at literally less -- in gms case, less than six times earnings and 4.5% dividend yield. i could go on and on. but how about this as the main point. the idea that these stocks should be cheap because we're past peak autos and are going to plummet, it just isn't there. the data shows for the two years we have been calling for peak auto, things have plateaued at 17 to 17.5 million. i'm going to look at gm for a second here. they have a book value at 1.17. that's a pure book value. that's a ridiculous price. >> gm down 7.5%, just in the
last week. the stock was higher on the year. looked like it had gained momentum. >> but in two years you've been calling for peak autos, the stock has done nothing but go down. >> no, actually, it's gone up. >> i'm looking at a chart right here. >> he's looking at ford. >> you guys talk amongst yourselves. >> i have a question for you. how is it they cut first quarter guidance by 31% but they left full year guidance unchanged? >> well, first off, i think this is new guidance. >> well, they didn't have guidance. versus street expectations. >> let me call it like it is. this to me like a ford-specific problem. you look at gm and ford, the stock stories are very different. gm up 10%. ford down 10%. i think ford is a great company but they hit some missteps today, showing up in today's news. >> gm has lagged the market. down versus two years ago. not as much as ford but it is down so if you listen to peak sales, which i think are here, you just can't keep buying cars and buying cars.
particularly with uber, less reason to own cars for the fleets. they signed fleet sales. >> earnings still growing. and by the way, the dividend -- >> they have always sold out. >> and i'm with jim on gm. >> when they were belly-up, they sold at an intimate multiple. >> totally different company ten years ago. >> that's the only time the multiple was high. >> scott, the best trade in the autos right now, i'm with jim. i actually own gm. they have a great dividend yield and continue to raise that up. the best trade of all, goodyear tire. look at the multiple there. look at the margins and what are they selling at ford and gm and everywhere else? suvs, pickup trucks. what has the best margin? the bigger the wheel, the better the margin, the more money they're making. >> absolutely. i talked about goodyear tire last week. my armenian giant over there, didn't agree with me. and as it relates to short interest. but that's one of the reasons why so many people -- >> that wasn't me. >> he did not agree with me when i said short interest was a trade you should go after. >> oh, i did disagree on that.
i hate that strategy. i hate it. i do not want a strategy -- >> has worked in the last week. >> has nothing to do with that strategy. i'm talking fundamentals. >> short interest was a buying opportunity. >> add on to the component that you take the fundamentals that pete is talking about, and cure rate that with the fact that no one believes the story and the stock price keeps going up. that kraetsds an environment where you want to stay in the name. >> the stock was going up and hitting 52-week highs before anything talked about all the short interest. >> why are people selling against it? >> part of the reason it's up today, the short interest. >> that's different, too. >> continue. i'm good. i rest my case. >> you're good? all right. okay. let's talk american airlines. down more than 10% in a month. stifel, though, thinks that shares -- i'm not going to tell you where. it's in our call of the day. we'll tell you, coming up. you won't believe their call. first, a check on the dow 30. take a look. we're in the green, waiting on health care. highs of the day, up 89.08.
see what a raymond james financial advisor can do for you. various: (shouting) heigh! ho! ( ♪ ) it's off to work we go! woman: on the gulf coast, new exxonmobil projects are expected to create over 45,000 jobs. and each job created by the energy industry supports two others in the community. altogether, the industry supports over 9 million jobs nationwide. these are jobs that natural gas is helping make happen, all while reducing america's emissions. energy lives here.
all right. welcome back to "halftime report." let's take a look at european markets are green across the board. taking a bit of a cue from here, over in france, up three quarters of 1% in germany and france. or excuse me, in germany and london, higher, as well. sue herera has the latest headlines. >> scott, indeed i do. here's what's happening at this hour, everyone. the man believed to be responsible for the terrorist attack in london yesterday has now formally been identified. as 52-year-old khalid masood. masood was born in kent and not the subject of any current investigation. there was no prior intelligence about his intent to mount an attack. house intelligence committee chairman, devin nunez says this morning it was a judgment call on his part to brief reporters and then president trump on
russian surveillance before members of his own committee. >> there was a lot going on yesterday. and it was a judgment call on my part. and that's the end of the day, sometimes you make the right decision, sometimes you make the wrong one. but you've got to stick by the decisions you make. >> americans are expected to spend more than ever on easter this year. according to the national retail federation's annual survey, easter spending is expected to hit $18.4 billion. that is a 6% increase over last year's record high. that's the news update this hour. now over to melissa lee with what's coming up on "power lunch." >> a big show coming up. we are handicapping the high stakes vote on the health care bill. we'll be speaking with a member of a key conservative group, the freedom caucus, that could decide the fate of the gop plan on which way he plans to vote. the boycott is spreading. more companies pulling their ads from google. will parent company alphabet be able to contain this problem? and one name that is cruising,
winnebago earnings in high gear. can the company keep riding the rv boom or did we see peak in 2016? top of the hour, "power lunch." "halftime report" back after this. miss the blitz? the call of the day or unusual activity with the najarian brothers? no problem. just go to cnbc.com/halftime to see the moves, the trades, who is winning and who is losing. plus, breaking news and analysis of all of the top stories. cnbc.com/halftimereport. e, where investors can investigate and invest in vests... or not in vests. 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.
we're back on "halftime report." american airlines taking off today. take a look at stock up 2.5%. the biggest bull on the street now names the airline its top pick and says shares are poised to double at least in the next year. our call of the day. joe denardy, research analyst, joins us on the phone. welcome. >> thanks for having me. >> this call turned a lot of heads today. $95 is the price target to a stock that's trading, what, just about 40-ish? >> yeah. i mean, we view the opportunity as the fact that american airlines has a -- essentially a marketing company within itself, and a business of selling miles
to credit card companies that is just fundamentally misunderstood by the market. as a result of american and other airlines not properly disclosing that business. and we think as a disclosure begins to improve over the next couple of quarters, and as airlines possibly look at monetizing those businesses, there's just tremendous upside across the industry. american airlines is the biggest opportunity. >> yeah. i mean, why, then, is the stock down 12.5%, year-to-date? now, today's gain may obviously change that just a bit. but it is the worst-performing bug airline out there. from a stock standpoint. >> i think american and the group in general is continuing to trade on monthly data points armed the pricing environment, and the market is overlooking the fact that within the -- within the company is a business that's growing revenues to 10% a year with a 65 to 70% margin. and as that becomes more well-known, i think the market will better value that.
that's the opportunity to look through some of the noise over the next few months from a capacity standpoint, and focus on the fact that airlines and particularly american, are intrinsically mispriced right now. >> joe, two days ago, morgan stanley downgraded the entire airline sector, specifically talking about american airlines having cyclical leverage based on falling margins and depressed cash flows. how do you defend against that and tell us why they're wrong. >> sure. well, morgan stanley probably isn't aware that american airlines is earning roughly $2.5 billion from selling miles to city in barclays. and the net stream of earnings will be incredibly durable during the next down cycle and provide american with a very high cushion. and i think they -- really, the rest of the market, are just -- don't appreciate that business exists. again, it's simply due to the fact there is an information disconnect between the business
that these airlines have and the market's awareness of them, because airlines don't properly disclose them. now, there are reasons for that. why they don't properly disclose. but i think that's going to start to change over the next couple of quarters. >> yeah. good talking to you today, joe. thanks so much. watching the stock trade right now up 3%, highs of the day. >> clearly, he's now my favorite analyst. because i own -- >> you have many, clearly, by virtue of your comments. >> a lot of them love him. >> we have heard on the show over the last many months, if not years. >> i think it's a good call. however, what i would say is, that is not entirely -- i don't want to say it's inaccurate, but i think it overstates it. those are miles they're selling that miles they wouldn't have otherwise sold, in some cases. in other cases, it is taking shares from the other airlines. the businesses aren't going to fly, because they have miles. they're still going to fly with the same amount, right? so the margins, i'm going to guess, are going to be a little lower than that. but it's a nice way to keep that business there and bring you
business in. >> stocks highs of the day, better than 3% on that big upgrate. leslie picker has a news alert for us, regarding a hedge fund and its, i guess, demise. >> that's right, scott. holding a letter here from eric mindich, saying he is returning capital to investors. his firm was founded 13 years ago, had assets under management of about $7 billion. now eric writes that he should be able to return 40% of investors' capital by the end of april and then make progress over the forthcoming months for the rest of that. now in 2016, his fund returned negative 9%. so posted negative returns of 9%. in the four years preceding that, though, posted positive returns, 13% in 2012, 22%. 2013, 6%. 2014 6%.
he said that given a difficult market environment and their own disappointing 2016 results, they have made the, quote, difficult decision to return your capital. this is according to the letter given to investors today. so now the latest sign of turmoil in the hedge fund world. we know that 2016 was the highest number of liquidations since 2008 in terms of hedge funds. so more pain, i'm expecting, to come on this front. but this is just the latest example, scott. >> yeah, leslie, thanks so much for that news. i love your comments. but erin first. >> they had been running $12 billion. so they had already seen fairly significant losses and outflows following last year's poor performance. i think there is just, you know, piggybacking on a trend we have seen over the last couple of years, where you have seen a couple of very high-profile managers suggesting that they can't run money again any more in this market environment. we have had over the last few years quantitative easing, which has taken a lot of duration out of the market. also had a flood of assets into
the hedge fund space. all of that has made it more difficult for alpha generation. and i think people were expecting that once the fed started raising rates, all of these problems would go away and you would start to see alpha returning to the market. and it's been just as challenging, because the political environment has gotten more challenging and has overtaken a lot of the more market fundamentals, which historically have driven the markets. so i don't think this is the last that we're going to see of big hedge fund closers. >> nor the last. >> >> also, a couple other things have happened. first of all, when he launched, it was the biggest launch in history by a large amount, $2 billion, $3 billion, funds didn't launch at that level. you don't invest in eaton park for a 9% drawdown. his lockup i also believe is prelaunched. when investors take a look, they say between the fees and the lockup, i want to get out. and then he is saying, i can't affirm my income overseas any more, which is what happened to every hedge fund manager, so i'm losing the tax benefit of that compounding, which has been
monstrous. all that money has to be repatriated this year, and last year. so these hedge fund managers have these monster, monster tax bills. he's no exception. so it's a good time to do it. because he would probably -- i'm guessing, have to take out a lot cash himself. that would be a bad message to investors. he paid so much money -- >> do either of you believe that the problems right now for the hedge fund industry are an inability to transition to quantitative models and maybe they're staying back to their knitting of just fundamental research and implementation? do you have to have that -- >> i think you're either a quantity or you're not a quantity. some are adding -- if you are a quant, you can survive? >> to me, i see so many quants that can't keep up with renaissance to sigma, because they literally reinvent their models every 12 months. to sigma, i think every six months. others don't have that. they come out with the kwabt model and the market catches up and then it's no good any more. but to use big idea and, you
know, big information and all of that kind of stuff, to scrape the web, that you need. right? because that's real-time stuff. >> all right. we just talked about american airlines. pete is seeing some unusual activity on the rails. we'll tell you what that is, next. first, though, the most actively traded stocks on the new york stock exchange trade today, led by mabank of america at the top of your list. an autonomous-thinking vehicle protecting those inside and out. and it's the mercedes-benz of today that will help us get there. the 2017 e-class, with innovations no car has offered before. and that will change driving forever after. lease the e300 for $549 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.
what's critical thinking like? a basketball costs $14. 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 we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.
look at the options market today. pete, what do you see? >> it's interesting, scott. you can see csx and how it kind of plateaued and was hanging out here. it's actually dipped a little bit for recently down to these levels where it is. and that little dip is actually from the 50 area, called towards 46. somebody today making a statement today, coming in and buying the april 46 calls. 5,000 purchased today. around $1.84 whether they made this purchase, scott. a nice bump in the calls. they also sold calls on the up side. right where the stock had been at that $50 level. they sold twice as many up there. what does all of that mean? the buyer of those calls is expecting the stock to move up towards 50, really not much through 50. the expectation is back up towards 50 by the end of april. if that occurs, that's a nice big trade. huge volume there. i put in a bid, i'm not in it yet. i might be in by the end of the day. i'll let you know. >> this has been a subject you have talked about before, because of the activism. >> right. >> involved in here. and hunter harrison, who is now
the ceo. >> yeah, no doubt about it. when you talk about the rails right now, and actually there was an upgrade earlier today, as well. so in the rail space. so a lot of activity, obviously this analyst talking about the airlines, talking about american airlines going to 100-plus dollars. and then all of a sudden you get an upgrade in the rail area. and we see this paper in csx, makes you scratch your head and say something is going on in the transport area. >> i have been bullish in the rails for quite some time. a lot of us on the desk have been. pete, are you concerned at all as we move towards building out the infrastructure in this company -- country, rather, to transit oil, that will negatively impact the rails which over the last couple years in the absence of an infrastructure has been transporting the oil? >> yeah. i understand what you're saying. and i do think that's something you have to think about. obviously, when we're talking about options, looking at csx and talking about april. that's not going ton to be an issue. if you're talking long-term, i agree with you. if you're going out a couple years, i think that's going to be an impact. >> pete come back this way.
good segue considering we were just mentioning oil, too. take a look at today's move in crude oil. in fact, let's bring in cnbc's jackie deangelis, and the futures now, to give us the scoop on what's happening in that market. >> good afternoon, scott. crude oil sliding again today on pace for its fourth straight negative session. jim, is this story all about oil supply right now? >> i think it is. if you look from a year ago, u.s. supplies are up 7%. in that same year's time, we have increased onshore drilling by a factor of 100%. the game has changed. opec can sit back and say, yeah, we're going to cut production. but when big major onopec players like the u.s. ramp up production, that makes us look at that agreement, even more suspect, and wonder when someone is going to cheat. so, yeah, i think this move lowers rail and i think it's all about supply. >> crude oil down 11% so far this year. do you think there is more pain ahead or is this sort of the bottom here? >> yeah, there could be, jackie. jim makes a great point.
it's the shale producers now that dictate where prices are going and how much outpit they have. i would say that crude oil could actually be lower from where we are right now if the gasoline market wasn't as strong. we're entering that season right now. season now, gasoline is up 13% on the year, and it's supporting crude oil, so if the demand doesn't materialize or continue in gasoline, yes, crude oil could go lower. >> okay. for more, check out 1:00 p.m. eastern time with jeffrey saut, telling you how to position yourself ahead of the health care vote and david lion of jp morgan at the top of the hour, and halftime back after this.
hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade so i thought it might be time to talk about a financial strategy. you mean pay him back? so let's start talking about your long-term goals. knowing your future is about more than just you. it's how edward jones makes sense of investing. it'that can make a worldces, of difference.
various: (shouting) heigh! ho! ( ♪ ) it's off to work we go! woman: on the gulf coast, new exxonmobil projects are expected to create over 45,000 jobs. and each job created by the energy industry supports two others in the community. altogether, the industry supports over 9 million jobs nationwide. these are jobs that natural gas is helping make happen, all while reducing america's emissions. energy lives here.
with carl icahn and whether or not they had conversations after jay clayton had been nominated to serve as sec chair. here's what she said. >> when carl icahn is influencing policy that will affect companies, and he's investing in the companies, buying and selling in those companies, that creates a conflict of interest just -- it's just beyond what we're even talking about everywhere else, and i just want to make the point that we're going to have to count on you. >> so, senator warren there calling on clayton to investigate potential conflicts of interests that carl icahn might have regarding investments and position as deregulatory czar within the trump administration. clayton's response to her was that he believes in talking to participants in the marketplace of all types as he gleans information for this potential role, but he did say that he
spoke to carl icahn after he was nominated to serve as sec chair. >> thank you. the latest from washington, d.c. we know that carl has rail against regulations regarding the epa, obviously, and he met with prewitt -- >> nothing wrong with that. >> head of the epa, and others, but this is not unexpected from senator warren. >> the question i have is -- >> fair to say, right? >> right. why do we continue to operate where we criticize -- has she ever met with carl icahn about concerns? before you publicly criticize carl icahn, set up a meeting with krarlhim, have a discussio about the epa regulations issue and determine you're going to go public and vilify the man. >> how about this? this is easier for you. >> go ahead. >> senator warren has done damage to our economy.
our economy would have grown faster without her specific regulations that hindered bank lending, period, but she's -- >> she's so much fun. [ laughter ] all right, that's a perfect way to thaend conversation. >> oh, man. >> let's do final trades. maybe we should have ended earlier. marriott is mine, that stock is trading at the all-time highs back from marriott group in 1993. >> i'm with you. that's mine. >> marriott? >> my final as well. on february 17th, incredibly large option activity in there, bought the calls, the stock, and how about the fact they just announced a $7 billion buyback. you got to like what he talked about as well today talking about caption. can you imagine? 300,000 room expansion. >> ceo? >> ceo, excuse me. >> that guy. >> that guy is expanding by 300,000 rooms. >> he was on "squawk" yesterday, did a great job. >> unreal.
>> i like the story too. i like the airlines. they've been sold off. americans led the selloff, but delta and united, buy the airlines. >> tiffany's rocketing after earnings and will continue. >> the highs from august 15. >> go to the ritz carlton, use your visa, a great company. >> i like xrt for border adjustment trade and at the bottom, it's a good short term. >> good stuff. good seeing you as well." power" starts now. welcome to "power lunch," i'm michelle caruso-cabrera. here's what's on the menu as the clock ticks on the big health care vote. you're going to hear from one house republican who thus far is promoting no on the bill. however, he just left the meeting with president trump. i mean, two minutes ago, did they hammer out a last minute deal? headed to the camera and find out straight ahead. also ahead, what the vote means to your money. the three market scenarios that could play out and how to position your portfolio as we aw