tv Fast Money Halftime Report CNBC August 28, 2017 12:00pm-1:00pm EDT
some of the stocks we've been tracking this hour, higher fitbit still up 6.5% vmware as pat gossner gets ready to take the stage, up about almost 2%, as well and snap up 3. >> i would just note, also, with the dow, just some of the movers are related to the impact of the storm. travelers is the biggest loser home depot is the biggest gainer >> indeed. well, mike, sarah, thanks. let's welcome over to the half polic melissa lea back at headquarters >> south texas underwater. the rescue and recovery operation still underway, three days after harvey makes landfall this is video of houston from a drone, shot just a few hours ago. parts of texas getting even more rain today, as this history-making storm keeps lashing out at the lone star state. welcome to the "halftime report." i'm melissa lee in today for scott wapner we'll get the forecast and the virtue latest on what could be another major storm in just a few minutes. but first, contessa brewer is live in houston covering the
business impact. jackie deangelis is in corpus christi watching the refineries, and brian sullivan is focusing on the port side of the story. we begin with brian. hey, brian >> reporter: hey, melissa. thank you very much. i can confirm that it is once again raining here the rain will just not stop. and there is nowhere for the water to go. we're south of houston, by far we're in texas city, which is where a lot of these major refiners are based let's focus on the ports because the galveston ship channel, which is the doorway to the port of houston. you literally, all the ships in houston have got to go through the galveston ship channel it is completely shut down it is not that far that way to us there is no, at least, word that we've gotten lately of when that will open. and there are many, many supertankers that are off the coast. the reason we care about the port of houston is not only because it's going to bring in needed supplies, but it's a national story, as well. according to the port bureau, about 1.2 million jobs are directly or indirectly related to the port. it does about $256 billion in
annual economic activity and it is the largest export port in the united states, by dollar volume. of course, a lot of that has to do with refined products remember, we export gasoline there is no ship traffic at all, if you are in the port, you're stuck in the port, you can't get into the port. there's no word, guys, on when it's going to open we're talking about tens of billions of lost economic activity every single day. of course, we'll have a lot more on the top of power lum"power , well but the rain will just not stop. go away. >> all right, brri, we'll see yu on "power lunch. let's move to corpus christi where jackie deangelis is about to bring us up to speed. >> good afternoon to you, melissa. that's right, when you think about the gulf coast, you think about the refineries here. some of these refineries have been hit hard. here in corpus christi, we know
that three of the five have definitely been shut down. sitco, valero, and flint hills also, two other big ones in the area the exxon refinery in bayview and shell in deer park pant totaling all of them in the aggregate, we're talking about 2 million barrels a day comie ini offline, at least temporarily. you can see as we drove into corpus christi, the refineries are almost picturesque part of the landscape here, part of the scenery but when you have flooding and power outages, certainly the operations there can be compromised. part of the story is the refineries themselves. the other part is how you move product around the port of corpus christi is also closed. and we're watching very closely the pipelines, as well because those will be how we transport storage -- fuel that's in storage, out of here, to keep sort of all the wheels moving. the colonial pipeline, which is what takes fuel up to the east coast is the one that everybody's watching at this point. >> jackie, thank you
we now move to texas's biggest city, the fourth biggest that would be houston. many parts of the metropolis are underwater contessa brewer is reporting now on the toll that harvey is taking on business and accusations of price gouging contessa >> reporter: melissa, we're at the convention center where thousands of people have arrived to take shelter. in fact, bus loads are arriving right now. the adjoining restaurant for the convention center, which normally would be open and bustling, is closed down like so much of downtown houston in part, these businesses are closed because roads everywhere are flooded. it's very difficult to find a clear path in and out of the downtown area, because of the overflowing bayous but the road closures are part of that. the other part is that some of these people who work in downtown have flooded homes. and they have other things, more important things to take care of those who aren't flooded desperately are trying to get into the office, like the petroleum geologist i met
earlier. >> most people i work with are either on the west side or over in the medical center and they're all stuck right now at their houses and unable to get out. downtown always survives these kind of things not a problem. >> texas's attorney general said today that they're investigating complaints of price gouging. for instance, he said, bottles of water up for sale now for $8.50 or gas prices that have been jacked up some 30%. in texas, that is against the law to raise prices in a crisis like this. he says he'll investigate fully and prosecute fully. melissa, back to you >> against the law and morally re reprehensible. t.j. lassman is here with more on this storm that is battering the south and another storm that may be developing off the east coast. >> lots to talk about. continuing to keep an eye on harvey i want to take you through the track. where it is right now. you can see just off the coast of southeast texas, it is going to meander just in portions of the gulf as we go through the next 24 hours. by the time we make it to
wednesday afternoon, we continue to see it make landfall again. not increasing in intensity a whole lot, maybe slightly, but not going to be a hurricane. we are going to watch it stay pretty consistent as far as those winds go at 45 miles per hour now, it continues to move northeast, still dumping heavy amounts of rain on portions of texas and louisiana. take a look at what we're looking at as far as our radar goes right now you can see, it's just off the coast. we do see heavy bands of rain moving into houston. that's what's been changing over the past hour or so. we went through most of the overnight hours with not a whole lot of action in houston of course, still, those bayous very high. we saw the dams let out. so still plenty of flooding going on around the city but most of the heavy rain pushed east, into poorrtions of lake charles we saw heavy amounts of rain and that is the story as we continue through the next couple of days. you'll notice the additional rainfall we'll be watching, over 20 inches in some spots. i don't want you to focus so much on exactly where we're seeing those 20 inches, but more
of the fact that more rain is on the way for areas that have already been hit harder. and another spot that we're keeping an eye on, potential tropical cyclone number ten. you can see it's off the coast right now of florida, georgia. it continues to move northeast, the warm waters of the atlantic going to continue to intensify it slightly. this is going to be a rainmaker as we go through the next couple of days. we'll watch it potentially become a tropical depression or a tropical storm we already have those watches and warnings issued for portions of the south carolina coast. melissa, back over to you. >> angie lassman, thank you. time for the trades now. with us for the hour, joe terranova, steve weiss, josh brown, and john spellengani. joe, i've got to turn to you first. in terms of what we're seeing, we're seeing the energy sector, the worst-performing sector in albeit a quiet session ahead of labor day. what do you make of it are we trading too soon on this in terms of the damage
>> i think the importance is that the colonial pipeline will be okay. and given where we are right now at noon on monday, it looks like that is the case i think it's also important to understand that this is a very bearish event for crude oil, which is already in a bear trend. the department of energy is actively selling millions of barrels of oil out of the spr. in fact, 14 million, i believe, by the end of august so very bearish for crude oil. the refiners themselves have been in a downtrend. it's very clear that production will be down for a while there i'll reiterate what i said, though, last week. i think this is an opportunity over the next couple of weeks that if you've got yourself in the refiners, that you'd want to use any strength to get out of them >> as we hear, though, reports of more and more rain, i mean, as we talk to a lot of the refining analysts out there, they say, it's not wind, it's the flooding, the longer the flooding, the more the refiners could be offline and the more damage could be done to their plants >> yeah, it's the refiners, that's why you see the stocks
doing well these things typically overshoot, though. it's always worse when you're in the heart of the disaster. and the first thing you've got to be conscious of is that there are people, there are families, and there's personal property. and it's going to take them so much longer to recover you always have mixed emotions about trading on this stuff. and i don't generally get involved in it but i'm not running portfolio. i have a fiduciary responsibility to all of these investors to protect the portfolio. that's just not what i'm doing with my investor's capital putting that aside, i think you've got to be patient and look at it more of a trade and sit back and think, okay, what is the real-term impact on it take a look at the insurers, for example, get away from commodity for a second for them, it typically means price increases going forward. and the market is more efficient these days than it used to be. where the insurers would get hit because of all they're going to pay out and then we get the price increases. now the market gets the joke a little bit and right away stocks get flattened out pretty
quickly. and expectations of prices going up, and not so much panning out. >> i want to bring in jeff kilburg to this conversation what are you seeing in terms of the actions positioning. we are seeing gas at a 2 1/2-year highs, futures? >> yeah, melissa, we are seeing gas futures up and crude oil futures down 3%. a binary outcome and why is that it's due to the demand component. like joe terranova, we're see crude oil almost going under $46 because of refineries. ten refineries are now shut down do to harve. and we're seeing this rain in this 48-hour period. it's unprecedented more capacity could be shut down but on top of that, houston is the fourth largest city in the country. and it's paralyzed right now so the demand from that could push crude oil lower, but right now we are seeing rent go down along with it, but the crude brent spread has been in almost two years. about a k$5 spread.
>> and you're pointing out utilities and how they perform typically shortly after or during a hurricane >> the weakness in utilities and that historically is the reaction but there's a lot of emotion in the market even some of the agricultures, cotton, 50% of cotton in texas has been harvested but the sprproblem is this downpour all those large, round bales of cotton they've already harvested and put in storage, that is susceptible to flooding. right now you're seeing about a 2.5% pop in cotton but we're seeing across the way of all texas, we're still trying to understand. and steven weiss was saying, maybe people are overreacting, but i don't think we have all the data yet this is a storm like no over and if it comes back, if it persists, more rain, we get up to 50 inches, that flooding will hit houston and the whole state of texas and now we're going into louisiana we're talking about a state of disaster in louisiana. this is not over, unfortunately, for these poor people down at the gulf coast >> just to clarify, i'm not saying we're overreacting.
i'm saying you typically overreact in the middle of these things i don't know >> fair enough fair enough. >> josh? >> fair enough zplf ye >> yeah, i agree, actually, with everything steve weiss said. and i want to add a little more meat to those bones in terms of the impacts on the stocks. because we are more efficient, number one and number two, even if it's like a worst-case scenario in terms of what they're estimatin right now, let's say $20 billion in losses, $30 billion in losses, which usually it's not, but let's say it is. you would have to do like $100 billion worth of losses, to really have a monster impact on the property and casualty insurers they have huge capital bases you've got nontraditional investors come into insurance like hedge funds, private investors, at a rate that you've never had before >> the risk is spread out on top of the fact they've got a lot of reserves >> yeah, let's pop travelers up. >> so it's a buy today >> in my opinion, it might not be a buy right this second, but
this would be the one that i would buy, because they're hitting it the hardest of all the insurers and the reality is, it's like when you hear about these settlements on wall street, after these s.e.c. takes action on a bank, let's say and the london whale, it could be $30 billion and then it's like stoplighted and it's usually nothing even close. and it's like the last page of the newspaper when the final number comes out so not that we're looking forworkefor oh, a tragedy, how can we profit but when you think about the insurance companies, they've gotten very good at this investors have gotten very efficient. and oftentimes, the end result will not be as bad, plus you get the benefit of premiums going up real quick, on houston, and just in general it's national flood insurance that's covering the homes. it is not private insurers >> the u.s. government >> yeah. >> the private insurers do self-fund to businesses and they will be raising those prices next year. >> john? >> i think the big unknown right now is if the hurricane goes back into the gulf
and last night, oil was only down 15 cents, 20 cents. and as the forecast started to change saying harvey is going to move back into the gulf and swing back around and hit louisiana, that's when we saw the biggest move in oil and gasoline so that crack spread really blew out. i think that's the biggest fear. and that's why the refineries really came off as hard as they did since the open >> our thanks to jeff kilburg who's still out there. still ahead, how the insurers, automakers and airlines could be impacted by harvey and gilead buy iing kite "halftime report" back in two minutes. or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide.
welcome back to the "halftime report." gilead agrees to buy kite pharma for $11.98 billion pete, you own gilead and have been lamenting for so long on how gilead is just not doing a deal and here we have it what do you make of it >> you and i have talked about this it seems like forever they have all this cash and everybody says, where they going to get the growth from we know it's gotten more and more stagnant as we've watched in terms of the hiv and start moving over to the hep-c and it slowed down. but we talked about where they needed to get growth they have all of this cash, it trades at a low multiple it was a complete setup. when were they going to do it? they finally did melissa, i think this is the perfect buy for gilead and i think today's stock reaction says it all you look at a stock that's
actually making this size of a purchase and you see the stock actually trading to the upside that says a lot about what this was and what the interpretation is in terms of revenue, in terms of earnings, and a new growth spot because that is exactly what gilead needed. they needed to find a new way for growth and they needed to add to their pipeline. this does exactly that so i love what they've done. i think the management gets kudos for that it took a long time, but they finally pulled the trigger >> kite obviously a car t player we have others jumping on the back of this deal. do you think this replaces the declining revenues that gilead has been seeing in hcv and its franchise there? was this a good deal >> there are al of parallels being drawn to this and pharmasat, and pharmasat was a lot further along and a lot further ahead of their competition than this is so the truth is, we're not going to know whether or not this was a good deal for a long time, but it was a $17 stock about a year ago when it became public.
they took way too long the stock's up, but i think it's up not dramatically 2.5%, so the market's telling you, basically, i think, this is relief that we bought this thing. it's not saying this is the best deal in the world, because it would be up a lot more i disagree with that in a little bit. i'm glad they bought something they did the financing, $10 billion in debt over a year ago. great, they did it i would have liked them to see -- to buy something that was more of a sure thing >> more of a sure thing and more -- >> not up for fda approval not even first to approval pete najarian, i'll go back. novartis is first in line to the fda with its car t drug. and we've seen a lot of the other players with other drugs that have caused some very serious or potentially deadly side effects so we don't know if this is going to pay off isn't that a concern of yours? >> well, i -- i would disagree with that. and by the way, i actually think when you look long-term, that's exactly what they're doing here from gilead's perspective. they're looking long-term. they need a pipeline in the
long-term. this does add to that. i mean, the immunotherapy, that is the sweet spot right now for folks. are they behind. when i talk to professionals in the field and i talk to a lot of different folks today, they all said, this is a great deal this is exactly what was expected and their drugs, they feel, they're going to be able to compete, the immunotherapy area, cancer, oncology this is exactly what they needed to attack and they've got a great pipeline that's going to be absolutely a monster. >> and you hold on to gilead on the back of this on this pop, you still hold on to gilead? >> absolutely. absolutely and by the way, when you pay $12 billion, melissa, and you're up 2.5%, i totally disagree with what steve's saying. usually, you would see at least a little bit of a pullback i think this says a lot about exactly what this will be as a combination. >> i don't think you would see a pullback, pete, if you're buying something that you're going out there and you're saying it's tremendously accretive if you've been sitting with cash cash is a depleting asset by
definition because even though inflation is low, it's inflation. you're losing the value of your asset in cash. so, that alone, if you're saying out there, the point is, you've added a risk to that cash now. because what if it doesn't get approval what if it gets a label that restricts it now you've added that risk here and you may not have any accretion whatsoever >> guys, agree to disagree pete, we'll see you a little bit later on with some unusual activity hurricane harvey likely to have a significant impact on the airlines and auto. we'll get a status on both when the "halftime report" returns in two minutes. helping keep shoppers safe. this is a financial transaction secure from hacks and threats others can't see. this is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. this is not the cloud you know. this is the ibm cloud. the ibm cloud is the cloud for enterprise.
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only at td ameritrade. the massive storm that's ripped through texas is having a major impact on the airlines and will have a big impact on the auto sector. phil lebeau tracks both. he's live in chicago with the latest hi, phil >> let's talk about the auto industry and how the impact is going to be felt, not only in the houston area, but in texas and for the broader industry, overall, we've already seen citi bring down its estimate in terms of the sales rate for the month of august. and remember, we get those numbers on friday. citi bringing it down to the low 16 million range look at some of these pictures we've received from the texas auto dealers, who are saying, boy, it's bad. and depending on what dealership, look at this
that is an auto lot, some of these cars are completely underwater now it's going to be a complete loss for some of these dealers whether they're in the used lots, as these pictures show, or in some cases, the new lots. we do know that some of the dealers tried to move their vehicles to higher water, but as somebody told me, when i talked to them earlier today with the texas auto dealer's association, he said, look, some of these dealers, they thought they were going to higher ground and now they're finding out, they are not on higher ground and so the impact remains to be seen don't be surprised if we see perhaps more than a million vehicles just completely salvaged and that's the way it's going to be and they're going to be washed out of the system, both new and used there's sort of a boomerang effect here. while it may affect new car sales in the near-term, there are 18 stores in the houston area that are shut down, they are making sure their employees are safe and at the same time making sure they can reopen perhaps later this week, the boomerang effect is that you'll see the new sales impacted over
the next couple of weeks you're not going to see many people going in and buying new vehicles in that houston area. however, at some point, because so many vehicles will be salvaged, they're going to be washed out of the system and then you will have people going into the dealerships, buying new, as well as buying used. so, that's what we've seen in the past, wherever a hurricane rolls through. a couple of auto stocks to watch, auto nation, an it has 18 stores the in the houston area group one gets about 37% of its sales in texas and a large percentage of those are in the houston area by the way, group one is based in houston so those are a couple -- and also, kansas city southern that is the main rail transporter for mexican-made vehicles that are made in mexico and then brought up here to the united states. most of those can go -- they go through laredo and they can to a certain extent skirt around houston, but that's obviously going to slow down the system a little bit >> is there a silver lining effect, phil, in that a lot of these car inventory could be simply just garbage at this
point, and that could actually help prop up prices in the long run, both on the used side as well as the new side >> yes, that is the silver lining here. and i've talked with a few people with automakers, you know, in the manufacturing side of the business, who have looked at this and said, look, you never want to wish for people to lose their vehicles, but there's enough inventory out there that it's okay to a certain extent, because we can say, okay, this is going to sop up some of that inventory, certainly on the new side and in the used market, it's already, eh, a relatively tight market it's not a loose market out there, but this will certainly tighten it even more down in that region of the country >> thank you, phil lebeau, in chicago. group one down about a percent the prophet's marks lemonis is joining us right now >> what we're seeing is going to
see unfortunately without homes. we are doing our best as an rv industry to make sure that we can ramp up supply in an effort to really smooth that problem. we saw that during the fema disaster with katrina. but in addition though that, we're trying to really collect clothes and collect products around our stores, across the country and more important than just getting shoes and clothes is collecting cash so we are launching a cash donation program, to make a donation at the register of my store across the country we're matching that and putting up 2 million of our company's money as well. i think the big concern that we have is, when does this subside? where the supplies going to com from where are they going to stay how are they going to eat and clothe themselves? that's usually the biggest concern in a time like this when the water subsides >> can rvs help these people at this point, marcus what we're seeing in the stock market, the shares of a stock
market, a winnebago are soaring. is there a thought that there will be decreased demand, for instance, for rvs, to help shelter people while their homes are being renovated. >> typically, what yul see in this environment is fema will come up and set up as many as 5,000 units in one field and those rvs will be deployed and really marshaled in a way where people can get temporary housing until their apartment, their homes are rebuilt. and so you'll see that the houston market will turn into a bit of an rv city for a while. they're great because they have kitchens and clothes and things of that nature >> marcus, how many camping world locations do you have in the texas area, and especially in the storm-impacted area and what are your local employees doing? how are they faring? >> so we have 11 stores in texas. we have one in houston the store is underwater right now. we've been in contact with a number of our employees, and
unfortunately, not only are they in rough shape, but it's impossible for us to actually get them out of there. they're in markets or in neighborhoods where they can't even get out we'll obviously provide the housing for them when they get out, but that's our biggest fear, is how do these people actually get out from the water? >> marcus, we'll leave it there. thanks to you for phoning in thanks to camping world for your good work in this time of need for the people of texas. marcus lemonis, host of "the profit," as well as camping world ceo. i know it's difficult to trade, but in terms of the used aut dealers, the auto dealers. >> you say say these stocks are going to get hit, auto nation, inventory's down, they're losing their inventory. then you talk about other stores that are getting hurt. but the reality is the replacement cycle is going to be so much stronger because for every store that's affected, everybody will have to go out and replenish their goods. the entire area. and then the next thing they'll
be coming out is this is going to impact gdp. but then gdp will have the replenishment cycle that will drive it, as well. you've got to look at coming out of this and be optimistic about that and people can also be optimistic about them. will drive the community, also, as they rebuild and everything more jobs, et cetera zpr do you thi >> do you think there could be a boomerang effect for the likes of gm or ford, which hasn't really been doing -- there wasn't an upside effect when interest rates were low. it was a great time to buy a car. >> i don't know necessarily if i would agree with that for a ford or a gm. i think there are certain industries that maybe have been clearly on the defensive, as the rv industry has been on the defensive. now something like this occurs and you go back to what happened with katrina, fema, i think at that point, somewhere around 140 to 150,000 towable rvs were brought into that region at that point. maybe that does something to turn the sector. you look at hertz rent-a-car or
avis something that clearly is having troubles right now in a little bit of a secular downtrend something like this stabilizes the downtrend. >> trb >> i think generally speaking, there are people who are set up to trade these types of events, and i think most people aren't so like when you see something like this strike and you see volatility in certain names or sectors in the market, just like, generally speaking, don't think that that's your cue to wade in with a wallet open and try to figure out, do i short this, do i buy -- it's a really, really tough game to play, especially because of what steve brought up, which is the fact that for every action is a reaction for every tragedy, there's a rebuilding it's really tough to know where we are in the sentiment cycle around these names so you say, all right, this company, a lot of damage maybe they'll have, you know, a terrible quarter because of a lot of projects got put on hold. but then, wait, all of a sudden, there's all this backlog work for something that are going to happen six months from now and what's being discounted into the share price today. and i don't think that's a game
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let's get to sue herrera at the storm desk with the latest on harvey. sue? >> thanks very much, melissa here's what's happening, everyone texas governor abbott has activated the entire texas national guard in response to harvey's devastation first lady melania trump will join president trump on his trip to storm-battered texas. the white house now says president trump will travel to texas on tuesday rescue teams have rescued 2,000 people from the flooding in houston houston's mayor, sylvester taylor says the army corps of engineers is releasing pressure on dams in the area and that will add to water around the already-flooded city he added that rescue is the major focus of the day >> that's my directive, is that we want to focus on getting people where they are and getting them out of their homes or whatever the stressful situation may be and in that regard, we have more assets that we're working with today, than we had yesterday,
and there are more assets that are on the way >> residents of a texas nursing home between houston and austin were evacuated by rescue workers earlier today. carrying many of the residents on gurneys and many were covered in sheets to protect them from the rain that is the very latest on harvey i'll send it back to you, melissa. >> sue herrera, thank you very much we've all seen by now all the videos and pictures of all the devastation that harvey has caused, and that likely means an impact on gdp. we're joined by ylan mui live in washington we've certainly seen this with past devastating storms. >> melissa, i don't want to underestimate or diminish the impact to the local and state economy there in texas that is going to be real and that is going to be painful. but when you go up 30,000 feet and look at the macro economy, what you see is that economic shocks of this nature tend not to have a lasting impact i went back and looked at some of the gdp numbers around
hurricane katrina, for example that storm hit around august 29th you really saw that impact hit in the fourth quarter. gdp went down from 3.4% in third quarter to 2.3% growth in the fourth quarter but it rebounded back in the first quarter, to 4.9% you saw some impact there in durable goods. those orders were down 3.10% in the third quarter of 2005, but rebounded in the quarter following. you see the same thing happening with superstorm sandy back in 2012 gdp during the first quarter was hit. that went down to about 1. -- 0.1% gdp growth. but in the next quarter, again, you saw that rebound, a 2.8% growth in gdp, quarter versus quarter. so you do see some rebounding happening, because of that rebuilding that you guys have been talking about, to some degree, happening both on the ground and from a federal level, as well. >> you know, ylan, the timing of this, though, is very
interesting in that we could see that dip in gdp, albeit, it looks like it would be a blip in terms of the dip if gdp. we'll get that around the same time as the debt ceiling, possibly a debt ceiling fight and all. a time when the fed is expected to start winding down its balance sheet. do you think this could actually throw a wrench into the fed's plans? >> it remains to be seen what the fed will do. and we have some time to make that decision. i think the more important factor would be, what is the size of the government's response that is really the key here. what you've seen in previous storms is that the federal response and the government response to the disaster actually made up for all of the economic loss, sometimes even more than made up for the economic loss that was suffered during those storms so the real question here is, what role is the federal government going to play, how much aid will it deliver to texas. and will that be enough over the long-term to sort of smooth out any damage that was done to the economy from those storms. >> all right, ylan, thank.
ylan mui in d.c. our next guest has been bracing for harvey's impacts for weeks. joining us now, captain richard russell. i imagine you've moved a lot of the tankers out of harm's way long ago what's your expectation now seeing the path of the storm and how it has developed >> good morning, melissa thanks for having me on. yes whereby we've been watching this storm store 10, 12 days now, since it started in the atlantic, came across the caribbean into the gulf. so we make plans ahead of time on with we're going to do. and as the storm gets closer and we have more of an idea of its impact, we work with stakeholders and the coast guard and our customers to get the tank [ inaudible ] -- we know
that [ inaudible ] -- it's a lot of our business, so we also know that we're going to be some of the [ inaudible ] -- >> captain russell, i'm sorry to interrupt. the connection is very spotty, so we're going to have to let you go but good luck to you, captain richard russell of aet we'll try to get him back on some time later on cnbc. meantime, commodity chemicals getting impacted here. we're joined now by kevin mcarty, vertical research partners analyst kevin, great to have you with us what is really the impacts to the refiners is it a shortage of the raw materials for which they need to make the chemicals is it damage to the plants? what's the biggest concern >> it can be all of the above. thanks for having me on. our hearts go out to everyone in the region affected. in terms of the financial side, i would say you have chemical plants here that are generally designed to withstand high winds, but not high water. and so, as we monitor the supply side of the equation, we see mounting outages rising by the
day. just to frame it a little bit for you, melissa, texas is the second largest state in terms of u.s. gdp at 8.8% the supply of ethylene, which is the most important building block chemical is about eight times that figure. texas accounts for 70% of the u.s. ethylene production, neighboring louisiana is north of 20% so, tremendous concentration on the supply side. and that's what we'll be watching in the days and weeks to come. how quickly can these assets come back online will it be measured in days, weeks, or months >> you say, westlake is your preferred play it seems to be slightly geographically advantaged in terms of where its plants are, more so in louisiana than some of the other players out there we're seeing bands now, though, of rain, of up to 15 inches or close to where westlake has plants are you watching the forecast very carefully in terms of your willingness to say that westlake is a top player to be insulated,
so to speak, from the storm? >> that's a good point, melissa. so for context, our top picks overall in the chemical space are dow chemical, eastman, and wr graves. with regard to the hurricane angle specifically, our preliminary analysis suggests that many of westlake's competitors in markets like polyethylene, chlorine and caustic soda have already suffered pretty significant outages. as you pointed out, westlake does have production assets in lake charles, louisiana, which is now suffering some of the heavier rainfall so we'll need to continue to monitor west lake's ability to keep their plants up and r running, but we do like the stock overall with the 12-month view >> and it's already had a stellar 12-month performance kevin, thanks so much. who's going to trade on chemicals, whether it be because of the storm or not. outside of the storm, we looked at west lake it's up 30 plus percent over the past 12 months anyone no one in the space? >> well, i think the only concern you would have would be on the rails, because a lot of
the movement on the rails in this country over the last 18 months has been chemicals. so in absence of the production of chemicals, obviously -- >> chemicals, cars >> right, right. >> they might get hit on volumes. >> right -- >> but back to what jobs -- sorry, steve back to what josh was saying before, yes, that's probably a transitory occurrence. the longer term overall trend for the rails is still in place. so probably, it's an opportunity for you. >> but feed stock costs go down, of course, with the petroleum costs, is what you're saying so, look, again, there's going to have to be rebuilding so you're going to see commodity being in need. so i think -- but it's all temporary. you take the long-term view and it plays out and you're in the ninth year of an economic cycle. how much longer can it go on >> i think that's okay we all want to make the point you don't jump in on a trade because of this. but as you pointed out at the top of the show, travelers could be that opportunity.
the longer term view was there, right, prior to the hurricane. it may even get more favorable after the hurricane, because of the ability to increase -- >> travelers has been in an up trend all year and actually pulled right back to the 200-day, which is rising. that's where the buyers should have come in and so far today, they did if they can stabilize at this level, yeah, that's the type of a situation where you're not looking for when's the hurricane so i can buy it, but it happened and if you like the stock and it holds its up trend and you still feel confident in owning it, it does present an opportunity, mel, you're absolutely right >> john? >> i think i agree with what the gentlemen said i think the biggest thing, is this really going to cause any democrats and republicans to start coming together and do some infrastructure spending to kick start that? obviously, we'll need a lot of -- >> do you think that rebuilding texas should supersede building a wall i do >> i think that -- >> i think that should jump the queue. >> i think the mexicans should pay for the wall i'm joking >> what's the priority now
$20 billion in federal aid for texas? >> the priority is obviously texas now and the loss of life i think trump is going to go there. but still, what we need the veil bipartisanship to get something through congress that is -- whether it's tax cuts, tax reform, infrastructure, something needs to happen. >> so this sounds like it's actually a very sort of crystallizing moment i mean, in your view >> for someone, yeah >> if there is any -- >> it's not happening. >> so they can't even get together on agreeing to help the people of texas. >> no, it was texas that voted against hurricane relief for sandy. >> yes, but -- >> hold on, hold on. we've got to get to contessa brewer who's in houston with a special guest. contessa >> reporter: -- at the convention center in houston, where there are some 3,000 people taking shelter here i know you've been out give me a sense of what you're learning about the magnitude of the devastation.
>> well, the devastation is historic and it exceeds anything we have ever seen before we had initially a category 4 hurricane make landfall several days ago pounded coastal communities, pounded corpus christi and victoria and rockport, with significant wind damage and flooding damage. but then the storm has become a tropical storm and just parked on the gulf coast, has moved over towards the houston region and has just been dumping in the neighborhood of 50 inches of rain and we haven't seen a storm just sit and vain and rain and rain and that flooding has been widespread we've had over 2,000 high-water rescues. we've got people who are seeing their homes destroyed. and this facility here, the george r. brown convention center has the capacity for about 5,000 who have lost their homes. we're at about 3,000 right now, but it's expected to be full by the end of the day >> i know that the estimates are starting to come in about damage and devastation. what do you think this is going to cost the federal government
>> i think the damage is going to be very extensive it's premature we don't have a specific cost estimate and part of the reason is the focus right now, quite rightly, is on saving lives there are still people in very real jeopardy. and, and, so, for folks who are at home, if you see water rising, try to get to a safe place. don't go to your attic the attic is a very dangerous place to be, unless you have an ax or something to get through the roof if it's rising fast, get on the roof the roof is safer than the attic. and don't get into your car and try to drive into water. unless it is an emergency, the most dangerous thing you can do is go in a car driving in fast-moving water. the focus right now of state officials, of local officials, of federal officials is on search and rescue. >> i know that as you're talking about that and that's your focus, that some of your colleagues on capitol hill are talking about, how do we fund the response and the recovery, but, peter king of new york
specifically, he's tweeting at you, that he plans to vote for funding, even though you didn't vote for sandy funding can you give us a sense of what you expect from your new york, new jersey, connecticut -- >> there will be plenty of time for politics and i'm not going to worry about political sniping. my focus here is on the tragedy unfolding and the people whose lives are in jeopardy and the people who need help and i have been spending day and night working, trying to coordinate with local officials, county judges, mayors, speaking with the governor. repeatedly speaking with the president, the vice president, can cabinet agencies and trying to marshal federal assets to save lives that needs to be the priority. the silliness of washington, we can worry about another time >> has this given you a different perspective? do you think you would have voted differently about the sandy bill given what you're seeing in texas? >> no, of course not as i said at the time, hurricane funding is a very important federal responsibility and i would have eagerly supported funding for that, but i didn't think it was appropriate to engage in pork barrel spending where two-thirds of that bill
was unrelated spending that had nothing to dowith sandy and wa simply politicians wasting money. that shouldn't happen. the focus of emergency relief shouldn't be cynical politicians trying to fund their pet projects it should be providing relief to people who are in crisis and in sandy there were people in crisis and here with harvey there are people in crisis and we need to focus on solving the problem and meeting people's needs and not engaging in political gains. >> what is your message for political leaders who are in houston proper, the downtown area is shut down. it's a ghost town. how do we get back to the business of texas with all the water still coming in? >> texas will rebuild, houston will rebuild we are a strong and resilient city and i would say one of the most amazing things is watching texans come together it's in the face of disaster and adversity. texans come together and are stronger hundreds of individual citizens who have just gotten on their boats and are rescuing their neighbors. thecity put out a call, if you
have a flat bottom boat and you can do it, do it we are seeing people at the convention center driving in with armfuls of blankets and diapers. i visited with a woman in the shelter who was an older woman on oxygen and using a walker she described having to walk down her street in waist high water using a walker i can't imagine how difficult that was she was picked up by a big furniture truck from gallery furniture. the furniture store truck gave her a ride here. we're seeing that kind of spontaneous generosity one message i would give particularly to big companies is there a real need for relief hear if you have the ability to donate, whether it is food or clothing or medicine or other emergency supplies or, as we shift into the coming weeks, rebuilding, that's going to take an enormous investment, as well.
i'm hopeful we will have a lot of good citizens in the business community stepping up to meet those needs. >> one more thing. do you think it's appropriate for the president to visit texas now? >> sure. you know, when i spoke with the president, we talked about his coming to texas and he expressed a concern. he said, he didn't want to come too soon and distract resources that need to be in search and rescue i think that's the right instinct as i understand it right now, his current plan is to go to central texas, perhaps visit corpus i don't believe he's coming to houston. i believe there's a balance. what i can tell you is that the president told me directly he said, ted, whatever texas needs, the answer is, yes we're leaning in when he conducted a cabinet meeting, he told the cabinet members, lean in aggressively. everything we can provide, do it as quickly as possible the vice president called me immediately after that meeting and conveyed that personally and i got to tell you, that's the experience i had with every cabinet member i have spoken to
in the last 72 hours what resources does the state need how can we mobilize? how can we be there? it's been impressive the cooperation we're seeing. >> thank you for your time today. we appreciate that as i said, some 3,000 evacuees now taking shelter and more coming in all the time the rain is relentless at this point. we're still looking at a real active flooding situation in houston, guys. >> contessa, thank you now, let's get to morgan brenner who is focusing on the insurers morgan. >> hey, melissa, that's right. we're in windsor and it also has three of these mobile claims units. three of these that are on standby. quite literally winnebagos waiting to get into the gulf region once some of these flood waters subside but it isn't just homes or businesses that adjusters will be assessing several analysts expect autolosses to be much greater
than we typically see for a hurricane like this given how extensive that flooding has been now, it's still very early but the mayor thinks these could climb. they could climb into the billions of dollars. keep an eye on progressive because progressive puts out monthly numbers and that provides an early look at how big the auto losses are. the public insurers allstate, berkshire hathaway and travelers has some business insurance, as well it's going to be commercial. while all residential flood insurance is backed by the federal government, many commercial entities be it stores, refineries, hospitals, they pay market rates and you're talking about insurers like travelers, ieg and hub and also some wind damage, business interrupti interruption all of this is going to contribute to insured losses as we just heard contessa say, this storm is under way and
expected to be under way for another couple of days and really anyone's guess as to how high these insured losses will be that said, the early estimates are really running the gamut right now. everything from a couple billion dollars up to tens of billions of dollars in insured losses but there is a bright spot in all of this. and that is the fact that the insurance industry should be able to handle this, even if this ends up being one of the costliest hurricanes in u.s. history. very well capitalized. $709 billion in surplus for the industry at the end of the first quarter. so, that means that even if this gets very expensive, this industry should be able to absorb those costs what that means for earnings, that could be a different story. that is the reason you're seeing the s&p property and casualty stocks trade lower today having their worst trading day for 2017 so far. >> thank you, morgan we'll take a quick break
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john, what do you think? >> for me the weaker dollar. didn't push back against the weak euro. right now testing 120. i think that has helped copper gold is up $15 today that's also a real positive. so, i think going forward we'll watch the weak dollar and how it trends into our earnings as well as copper, frepont and i expect that to continue really the trump administration part of their mantra has been the weak dollar. >> we talk about insurers. i wanted to mention berkshire hathaway a week and a half ago and retesting at a big volume. but the b shares in my view could trend up towards 200 bucks. i don't see any resistance here. coal volume on the rails is exploded >> i'm going with western digital. continues to be a theme. apparently, they are going to get, at least be part of consortium it's very tight, very few players. i think it's a great story here.
>> joe >> market still has not seem to stabilize. we can't get the banks to fully participate. i think the right sector to kind of hide out in right now is health care. and, clearly, if you did what pete and jerry have been doing, you got rewarded for that this morning. >> our thanks to john. that does it for us on "halftime report." "power lunch" begins right now >> and welcome to a special edeition of "power lunch." live in galveston, texas we have melissa lee and joe kernen back at global hq a new and unneeded round of rain hitting the flood zone, this after the deadly hurricane harvey pounded houston and the texas coast all weekend long the next three days, very critical for houston and the surrounding areas. some reports suggest another 20 inches of rain could fall, but more than 11 million