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tv   Power Lunch  CNBC  August 18, 2015 1:00pm-3:01pm EDT

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you'll get out of earnings and you'll be looking for any catalyst. >> unless the federal reserve has a mandate we don't know about, their job is to focus on the u.s. consumer. that's telling them to go in september. >> good stuff. we'll see you soon. have a great rest of the day. "power" starts right now. >> "power lunch" and the second half of the trading day start right now. >> scott, layne any, gentlemen, thank you so much. thanks for joining us, i'm tyler mathisen. sarah eisen is with us today from the new york stock excha e exchange. home depot raising its outlook, walmart cutting its forecast. the chart pretty much says it all. up almost 20% year to date, walmart down about the same amount. we'll tell you where the street stands on these two retail titans. get ready for el nino, folks. why this year's could be one of the strongest on record. wall street's weather man will tell us what this worrying
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weather pattern could mean for commodity prices. and the end of the dreaded annual performance review. why it is now falling out of favor at so many more u.s. companies. first, though, let's check in and welcome sarah eisen. hi, sarah? >> hi, tailer. we'll begin the show with the housing market, home building rising to the highest level since 2007, a key measure of future construction plunged. diana joinings us live from washington with all the numbers and back numbers. >> this is stocked full of contradictions. single housing starts took a nice move up, nearly 13% for the month. multifamily down 17%. look at the big picture from whens we came. single family construction is 25% below the 30-year average. multifamily is trying to make up for a decade of underbuilding. the single family construction
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surge in july much needed, yes. and it plays into the home depot numbers that were so stellar. even when people buy new, they fix it up to their own liking. some say the retailer needs to play to professionals more. let's go to the permits, down for both single and multifamily. for single, that may be on fears of rising interest rates thus far. multifamily had been surging ahead at warp speed. still seeing strong demand on the construction side for apartments. the multifamily drop was likely due to the expiration of a tax break in new york that had permits running at the highest level in 50 years. then it dropped off in july when that tax break ended. there has been some bubble talk recently, though, on the multifamily rental side. we are going to talk about that in the next hour of "power lunch." tyler? >> all right, diandiana, thank very much. it is now a question of two retailers, earnings, that is. let's begin with the biggest of
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them all, walmart. the company reporting a bit of a mixed bag. walmart missing profit estimates, revenue did manage to top expectations. walmart attracting more shoppers to its stores for the third straight quarter after a long period of declines. but walmart is now splashing its earnings guidance for the year and giving a softer outlook for the current quarter because of wage increases, investments and its struggling u.s. business. walmart the worst performer of all the dow 30 stocks today, sara. >> a different story, tyler for home depot. shares are surging. it's the best performer in the dow. the world's biggest hom improvement chain meeting estimates, beating expectations and raising the outlook for the year thanks to the housing recovery. home depot shares currently up 2.25%, a double digit gain so far this year. >> let's take a closer look at these two retail giants. home depot shares up about 18% this year.
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quite a contrast for walmart. its stock down almost 20%. where do analysts stand? we asked dominic chu to take a look. >> you and sarah pointed out the worst and best performing aspect of those stocks today. if you look at the chart you just saw, very much about the same picture year to date. they've gone in opposite directions. walmart down by 19%. meanwhile, home depot rising the housing wave that diana olick has been talking about. let's take a look at home depot first of all. there is a decent consensus view here. it is at least a whole, not a sell it all. analysts say are a buy, 12 rated a hold. the interesting part about the current average target price for these analysts sits right about where home depot is right now. no more implied ginns. we'll see if analysts upped their target or take down targets now that their targets have been met.
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that's home depot, the positive side. on the walmart side, walmart have nine buy ratings, 18 holds, zero sells. again, hold or better, but much more on the hold side right now. the interesting part about this, tyler, the average target price for at least walmart shares implies a possible 14% to 15% upside from current levels. the question now becomes whether or not walmart becomes a value for some traders. maybe not. maybe it is. home depot fully valued according to target's. we'll see if the analysts change their views in the coming weeks. >> let's take a more macro view of walmart and home depot. walmart widely seen as a barometer of the consumer economy. so what does its downbeat forecast say about the months ahead. or, steve leisman, does it just say more about where we are right now as consumers and whether we're just not liking what walmart is serving.
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>> can the answer be yes? >> yes. >> it is. i was fascinated by dom's report and the previous reports about is it a home depot or walmart economy. when i look at walmart -- this is where you want to be careful. one company is not enough evidence on the economy except for when that one company does half a trillion in sales, about 70% in the u.s. i did a little math this morning, which is my favorite thing to development take a look at this chart and tell me what you think. is it a walmart economy? that is u.s. retail sales year over year versus walmart sales. >> pretty close correlation. >> not too shabby. >> look at the left side of q1 '09. what happens at you move to the right? >> they converge. >> what is happening right now if you look at the very, very far right? >> they're almost the same. >> the u.s. economy is higher.
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so walmart is a little less representative. it does include autos and food services. i decided to use everything. i want to show you one other thing which is the overall measure of consumer spending in the economy. >> what is the narrative of that? >> my narrative on that chart is, as goes walmart so goes the u.s. economy, but a little less so now than we were previously that there are other things going on. >> let's go back to the other one, the bar graph. >> what we see here is the two on the right, by the way, are action economics estimates for the third and fourth quarter. pretty strong consumer spending, bouncing off that dip in the first quarter. that's more of your home depot economy. stronger home sales. diana reporting about stronger housing starts. you mentioned stronger auto sales out there. i'm a little tending towards the second explanation you gave which is maybe that walmart may not have the mix right in terms of what people are wanting throughout. >> what's pce, personal
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consumption. >> what's sar? >> not a disease. seasonally adjusted at an annual rate. >> if you were a geek like me, you would know that. >> i'm educated. steve, great, thank you. sara? >> a number of other retailers out with earnings. tjx, parent of tj maxx is showing a weak outlook, the stock is surging. right now the shares are up more than 6%. they're up 10% so far this year. dick's sporting goods also getting a nice pop in today's action, beating profit estimates. revenue also coming in in line. dick's boosting its outlook for the year. shares of dick's sporting goods are up almost 2%. tyler, sports has certainly been a bright spot in terms of apparel spending. >> sara, thank you. tleerly 100 wildfires burning out of control this morning across six western states. some of the most dangerous ones are burning in washington state, and that's where we find nbc's leanne gregg. she's live with the very latest
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on the fight to contain the blaze. l leanne? >> reporter: the air support will continue as soon as the inversion lifts. six helicopters and two fixed wing aircraft will continue to drop retardant. they'll do that yesterday. they'll also continue to build containment lines. they'll do back burning to try to add additional buffer. so far this fire is 30% contained. they did make some progress yesterday, in part because of higher humidity and a little bit less wind than they had been having over the weekend. still, 2600 people remain under evacuation orders, and the fire has grown to about 64,000 acres. one of the biggest concerns right now is the northwest edge of the fire. it's moving within six to eight miles of the town of manson. in this area 40 homes have been destroyed and they're concerned that perhaps that count will go as high as 75 homes and
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businesses. of course, washington is one of six states facing dangerous fire conditions. today the temperatures are a little hotter than yesterday. the wind may pick up this afternoon, not a good combination. back to you. >> leanne, thank you very much. the climate pattern meteorologists have named el nino is shaping up to be one of the biggest in nearly 20 years with one climatologists comparing this year's weather pattern to godzilla. what is el nino and what influence will it have on west coast weather? let's talk to wall street's weather man, dan leonard, senior meteorologist with weather services international. we don't have him yet, but we'll check in with him tyler because this is set to be a very big deal. we haven't talked about it since the late '90s, it's having an impact on some soft commodities like wheat, rice and the price of corn. >> we'll get that link-up fixed we hope. meanwhile, the game of drones. the growing war they're playing
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in the multibillion dollar business of public safety. think first responders. plus a new battle in the space race. jane wells live in los angeles for us. we'll have that when we return. ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks,
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everyone is looking for ways while to cut expenses.s unique, and that's where pg&e's online business energy checkup tool can really help. you can use it to track your actual energy use. find rebates that make equipment upgrades more affordable. even develop a customized energy plan for your company. think of it as a way to take more control over your operating costs. and yet another energy saving opportunity from pg&e. find new ways to save energy and money with pg&e's business energy check-up. abercrombie and fitch is tumbling to a 6.5-year low. a major management
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restructuring, six new positions which will report to the president of the abercrombie brand. unit shares are at the worst levels, down by 6%, down 37%, sara over the past year to daet period and 57% over the last 12 months. >> ouch. that has been brutal. the climate pattern meteorologists have named el nino is shaping up to one comparing it to godzilla. we'll talk about what it is and what kind of influence it will have on the weather and your portfolio. with us now, we do have wall street's weather man, dan leonard with weather services international. good to see you. >> hi, sara. >> give us a refresher. it's been since the late '90s since we talked about el nino. what is it and how predictable is it. >> it's essentially a cyclical pattern in the pacific. we look at sea surface temperatures between the dateline and coast of south america. when the temps are hot, especially like this year, you
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tend to get el nino conditions. that has impacts on a global level, not just across the pacific, but the entire earth has weather impacts that derive from the el nino pattern. as you mentioned, 1997 was the last time we had a big one. we also had another big one in 1982 and 1983. this is as impressive if not more so than those two. definitely into the fall and winter significant el nino impacts. >> impressive is one way to characterize it. how about destructive? what can we be looking at in terms of the cost and which economies, markets, commodities get hit? >> if you think a basic principle of meteorology. when you have heat energy, you more nrj to work with. the warmer the waters are in the pacific, that's more energy to distribute back into the atmosphere. now, as long as we have that atmospheric connection with el nino, then we will see more significant storminess, especially across the pacific.
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this has been big implications for the west coast of the u.s. california in particular has a big potential this winter to have a lot more storminess. obviously that's good news because they've been drought-stricken for so long. the entire southern u.s. should have relatively cool and stormy weather if this plays out like a typical el nino winter like we had in 1997. and the north gets a little bit of a break, so cold and storm any last year, but if it holds, it will be warmer and drier than norm nl the northeast. >> tell us about the implications for the commodity market. we've already seen some wheat and corn moving on anticipation of this. >> right. the traders i talk to say this is generally a bearish signal for the winter going forward. you have warm and dry weather across some of your prime consuming regions from the midwest through the northeast. that's not exactly a bullish signal for commodities, especially energy.
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as we head into the fall, there are other important factors to look at. it's not just el nino, so we're not ready to lock in a warm dry winter from the midwest to the northeast just yet. >> we're certainly having a warm summer now. thank you, dan leonard from weather services international. tiler? >> sara, two of the world's richest man battling for the stars. jane wells live in l.a. with the details. >> elon musk wants to go to mars. richard branson wants to go to space. both involved in a new space race, both getting a little ugly. both want to launch a constellation of low earth satellites which will provide fast internet speeds globally. branson is an investor in one web which was formed by greg whiler who used to work at google and is reportedly friends with musk or was. one web partnered with intel sat. airbus will build 648 satellites which it hopes to start launching in two years. with half the world off-line,
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whiler hopes to sell this service to traditional telecoms to resell to customers. here is why he thinks one web will succeed where others have failed? >> we're really very boring about our approach. a lot of people would like to do lots of other things. we've tried to say, no, we're not doing intersatellite links, all these cool things. they sound great but they add years of time of development and tremendous amounts of risk. >> is the bandwidth big enough for two players? elon musk has started hiring and hopes to launch 4,000 low earth internet satellites. he may sell the services directly to customers. google and fidelity has invested a billion dollars in his venture. here is the crux of the matter. who has rights to the spectrum? greg wyler says one web does. but filing first may not mean you have first priority. it may be whoever gets the
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satellites up first. and spacex has filed with the sec for an ex-peermtal license for the exact same spectrum. that decision could come downey day. sara watch this space, literally. >> the race for space comes back to spectrum. jane wells, thank you very much. the end of the treaded annual performance review. why more and more u.s. companies are falling out of love with it. but what's taking its place? plus -- >> i'm rudy and i work here at method in san francisco. coming up on "power lunch," stick around and you'll find out what we do here when we're not playing pong.
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but it is not the device that is mobile, it is you. real madrid have about 450 million fans. we're trying to give them all the feeling of being at the stadium. the microsoft cloud gives us the scalability to communicate exactly the content that people want to see. it will help people connect to their passion of living real madrid.
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welcome back to "power lunch" home builders rising on strong housing data. lennar and d.r. horton are hitting multiyear heights, toll brothers and pulte group. a run of an 8.5-year high. a big day for those home building stocks. mcdonald's is trading at levels not seen since june. the fast food chain ranked in as the first choice for breakfastarians, offering breakfast all day starting this fall. this fall, starbucks and panera spicing up the formulas of pumpkin spice lattes. starbucks saying this year's
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version will include real pumpkin. panera also promising a version without artificial colors, flavors or high fructose korn syrup. brazil's petrobras could phase one of the largest penalties in a corporate corruption investigation, fines as large as $1.6 billion. that stock has plummeted 65% in the past year. >> sara, it is not just tech companies thinking their work spaces anymore, method emerged as a startup taking on big companies to sell soap, dish washing detergent and other cleaning product. cnbc got inside its san francisco headquarters to meet the, quote, people against dirty. >> high name is rudy becker, head of the packaging department. today we'll take a tour of the office. come on back. here at method we make cleaning products for the home that are environmentally friendly. we are people against dirty.
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even though these folks are up at the front desk, we rotate through every single person. we give people the chance to work the front desk. we use this space to get through the monday morning huddle. nobody has an office, we're at these open desks. this is our business managers, we have our accounting team, finance, hr group. our kitchen bar, we have lots of toppings for our frozen yogurt. that's tuesdays and fridays. this is my home, where i spend the bulk of the day. i have a picture of my family. i'm in charge of all the packaging. i spend a lot of time pumping foam. we have our interpretation of a light bright board. we made with our ownerspa bottles. i think i broke the top off this one. let's get out of here. welcome to the lab. this is where the brains are behind the bubble. this is where all the products are developed, gel hand wash, cleaning products for the home
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or laundry detergent. it's all started right here. this is our ping-pong room. we decked out this whole room floor to ceiling with astroturf. people typically use this room to clil out. which have a tiki bar here at method, a chance to tone it down a little bit, relax with your friends. if you've had a hard day, this is where you'll find most of the peel at method having a drink at the end of the day. >> rethinking the way people work. interesting. the company just opened a $30 million factory in chicago. it will produce at least 70% of the company's 200 products by the end of this yeermt for more on method, its success and our office envy series, head over to powerlunch.cnbc.com. gold prices are closing right now. let's take a look at how they faired today. gold under pressure down about $20.40, less than a quarter of a%.
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reigniting talk the fed will be raising interest rates, helping boost the dollar. taking a look at how the rest of the other precious metals fared, silver, copper, palladium and platinum, silver trading at a iks six-year low on the back of more equity losses in china. rick santelli is tracking the action as always. rick? >> maybe the best way to know what's going on today is to look at a chart of s&p 500 futures over 30-year bond deals. you see the failure to hold above settlement in the s&ps dragging down on this last move, flattening out any move in rates where it looked like we were going to see some selling pushing rates up to the higher end of the range. let's stick with that 30-year. if you look at the two-day, what's interesting here is a couple of issues. first of all, how it's toying with yesterday's highs and indeed how it's been in a narrow range. open the chart up before christmas of last year. you can see why we're spending
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so much time here. keep in mind, 2.83, 2.84 friday. we're splitting the difference. not only are we holding settlement at 2.75 in the 30s, also settlement for 2014. ideaing stocks under pressure today. check out the dow over the past one month. it is down about 3%. should you buy at these levels on these little dips we've been having? we've got some four star large cat growth picks for you. the end of the dreaded annual performance review. why it's now falling out of favor in many companies across the country and what's replacing it? you're watching cnbc, first in business worldwide.
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i'm sue herera, here is your cnbc news update. bank of new york melon will pay
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to settle charges it violated bribery laws by providing student internships of government officials. the bank did not admit or deny the charges. indonesia destroying 37-owned fishing boats as a warning against other countries poaching in its waters. indonesia has some of the world's richest fishing grounds. russian president vladimir putin taking a small submersible craft down to the bottom of the black sea off the coast of crimea. he went down 272 feet to see a sunken merchant ship he said dated back to the ninth or tenth century. heidi klum striking back at donald trump who recently said she's no longer a ten. the supermodel released a video for her twitter followers in which, there you go, photographed for a fashion shoot wearing a white t-shirt that says, an there you see the trump
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mask. rip it off and it's a 9.99. ty, i think she's prettier now than she was when she first started her career. >> she's just fine. she's just fine. donald should just leave it all alone. >> yes. >> come on, man. leave it alone with the women. i mean, please. >> especially one with a good sense of humor. >> thank goodness she does. the same, by the way, for megyn kelly who stood her ground. dominic chu. >> i would say heidi is still a ten in my book. disney, cvs and 20th century fox being downgraded from an out performed rating to a more neutral or market performed rating, citing what it sees as value from content providers to the distribution of that content. wells also downgrading diversified media sector to a market weight while maintaining a more overweight or buy rating
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on pay tv. interesting move by wells analysts, sara. following the broader market lower. let's look at where we are right now. we're near session on the s&p 500, down six points. the dow is down 40 points with walmart as "the biggest loser." kate rogers is live at the nasdaq. bob pass sin aisani is with me. >> we're on the 200-day moving average, actually 20.97. we're in this maddening trading range through the middle of the entire year oochlts 2097 is the moving average. we had good news on the retailers. tjx was very good news for ross stores. they'll be reporting soon. home depot's good numbers were very good news for lowe's overall. there's only one stock in the s&p, new 52-week low. you know what that is? it's walmart.
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that was a bit of a disappointment overall. you can't grow much when you're as big as walmart. those retailers, the revenue top line numbers have been flat for several years for them. great housing starts in july, the highest level since 2007 for housing starts. builders are at new highs. some of these home builders are up double digits today. commodities are the opposite direction. we noted earlier at the open we've got six-year lows in all the big commodities like copper, aluminum, nickel, zinc. every day you think these stocks can't go any lower in the commodity space. you see century aluminum. you see clf, cliffs, aluminum corp of china, vale even down. >> 10%. >> how much more can they go down? it's only a $3.00 stock at this point. a lot of activity in emerging market etfs today.
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anything related to overseas, thailand -- malaysia is now on the upside. was down through most of the morning. indonesia also weak as well. these country etfs have been in free fall, down since june. but since we had the devaluation in china, they've really gone straight down for days. >> currencies have plunged and the stocks are following. >> let's go over to the nasdaq, kate rogers with some of the movers nasdaq is down. micron, nxp, skyworks are down 2.5%. out performed by web bush securities setting foreign exchange headwinds among other things. another big loser today is viacom. lower by about 2%. this comes as cable ratings are taking a major hit across the board according to nielsen and wells fargo downgrading along with disney, cnbc and fox.
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bob mentioned ross stores, the biggest gainer in the nasdaq, up by more than 3.5%. it comes as retailers are in focus today with walmart cutting full year guidance and reporting the earnings that missed expectations and tjx which owns tj maxx on the top and bottom lines. tesla higher by nearly 1% following the monster upgrade from morgan stanley on monday with a price target of $465, sara, back over to you. >> thank you very much, kate rogers. how do you invest with the market focused on china and the federal reserve? big question marks. james lu and liz ann saunders from charles schwab. james, i'll start with you. do you look at the media selloff we've been talking about. they've been such a pillar of strength over the past few years during this bull market. >> they really have. second quarter earnings season
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was a bad one for the s&p. it wasn't just oil and the u.s. dollar. those are problems that have been around for two quarters. what we're seeing is a more general slowdown. the key is there's light at the end of the tunnel. we expect earnings will bounce back by the fourth quarter and in to 2016. for most investors, the reason the market is still hovering in the range that it's in, is because they are expecting significant bounceback last year. >> range is the word of the day, liz ann. what breaks us out of this very tight range and which direction does it go? >> if you look back at history at tight ranges, and this is the tightest we've had around, when you look at the top ten of narrow ranges in the past, not including this one of course, the break tends to be the upside for the rest of the year. the rub this time is within our sights we've got the possibility of an initial rating increase. i don't think that's necessarily going to usher in a tremendous amount of volatility or market weakness. history doesn't suggest that. but the reason why the fed will
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move this time has less to do with strong growth and inflation and more to do with just simply their desire to get off zero bound. as dangerous as it is to say, it's different this time. i wouldn't be naive in assuming we're all clear until that point. >> history may not repeat itself. james, you're telling clients to buy financials and technology? >> that's right. we generally favor cyclical sectors. i wouldn't be caught wrong footed. we think the probability of rate hike in september is more likely than not. the market right now seems to think about 40% to 50%. financials, technology, consumer discretionary, these are areas that benefit when rates are rising. what i would be wary of are utility stocks, up about 10% over the last month orr so. because rates have fallen. we think the path of least resistance -- >> liz, you also like financials and technology. my question would be do you need to see a rate hike to see these industries, especially financials, outperform?
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what if the fed decides to wait? >> i think that's the case. certain subsets of financials. i don't know that that means the entire story dies if the fed decides to wait. if the fed does decide to wait and it fly ms. the face of the data, that changes the landscape a bit in that it suggests when they do have to move, they'll have to move more quickly which would be somewhat market negative but probably benefit the financials. it's partly due to where we are in the rate cycle. you've got evaluations in financials, too. >> guy, thanks very much for the tips and for the general commentary. james and liz ann, good to see you both. go to powerlunch.cnbc.com to see what liz ann says. breakfastarians have voted. mcdonald's set to introduce all
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day breakfasts. a great idea that will begin this fall. will it help turn slumping u.s. sales around at mickie d's. plus marshmallow alphabet, sioux lilly. what do the names say about us? are we regressing? that's all ahead. t the td amerie trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.
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solar company sun edison forming a billion dollar investment fund with goldman sachs. they'll use the money for construction and asset purchases. good news for esperion therapeutics, the drugmaker's lead drug designed to reduce cholesterol remaining on track to begin phase three studies, following the removal of a partial clinical hold on the drug by the fda last month. shares, though are down sharply, tyler. >> time for the power run down. sarah will join me and jane
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wells is, too. jane is always good for a few words here. first topic, united postal service taking on ups and fedex, competing in the new e-commerce landscape. i think they've got to do it jane. what took them so long? >> they really have been doing it. 40%, i think, of their business -- they're doing 40% of amazon's business. for all the heat jeff bezos has taken over working conditions at amazon, every mail carrier should be sending that guy flowers. i've seen them on sundays, christmas day. if it weren't for amazon and election years there would be no business for the postal service. >> i got a package on sunday delivered by the postal service. it came in amazon. >> certainly they need it. the postal service is almost broke. yes, they're having increased packages, but that's only 20% of their total business.
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they've seen first class male tea tear ate, still shrinking, down 20% over the last decade. they've been burning through cash, their labor costs are rising. they have to upgrade to new technology and equipment. i think it's good. >> this will be a high margin business for them. >> yes. they've got a new ceo trying to shake things up and good for her, i believe. sandy well's wife offering $20 million to rename paul smith college, the wife of billionaire sanford weill. she didn't go to paul smith college but is taking a liking to it t. gift comes with a string attach and that is that the college change its name to jane weill college. >> i thought long and hard about this. the question is, is it controversial that someone demands to put the name on the school for philanthropic efforts. i don't think it's controversial. i think it will inspire others and inspire a culture of giving.
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you see it all around new york. you see buildings named, the new york public library is named for schwartzman. when people have money, they give it away. sometimes they want their name on the building or college. from what i've read, the college needs the money. >> sometimes they do want their name on it. sometimes they don't. stephen ross has been a big benefactor at michigan and its business school. there are other examples of this, jane. >> i think, it just seems a little unseemly. the other way around, if you give us the money, i'll maim the school after her. what's also interesting is in the court we'll find out what forever means. it was supposed to be paul smith college forever. instead forever may only be 69 years. i'm working on having them change the brokaw news center to the wells-brokaw center. i'm buying coffee every day for these people. >> let's talk about breakfast.
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breakfastarians, those who eat breakfast twice a day say mcdonald's is their go-too choice. the golden arches rolling out breakfast all day long beginning this saturday. sometimes on saturday or sunday, i just don't get there before 11:00 in the morning and they've shut down breakfast, jane. >> i'm telling you, this is what took so long. people always want their egg mcmuffin's. they don't always want a big mac. mcdonald's is very smart rolling this out. i have to admit, i used to eat pancakes for dinner. of course, i was young. the key demo is mostly young, mostly male, perhaps hung over. if you can have bacon any time of the day, go for it. >> sara? >> i'm a breakfast-for-dinner type of gal as well. breakfast is the only part seeing increased traffic in u.s. restaurants. the npd group which crunches this consumer date a said for
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lunch the war will come down to burgers. that's how these fast casual restaurants are going up against some of the traditional fast food, by introducing burgers. now the key is going to come down to whether they can do it as cheaply as fast food. forget breakfast. it may be about burgers. >> and also -- also the real estate in the kitchen, if you're doing breakfast and lunch at the same time, you have to reconfigure your traditional cook line. >> also egg prices are going up. >> when i started dating my wife, i was surprised to learn that cereal was a dinner-time main course. it was really something. >> m stands for marshmallow. google reviewing the name of the latest android operating system. it's going to be called marshmallow, staying true to the sweet tooth naming trend which included lollipop, jelly bean, alphabet and etzy. which are we obsessed with
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childish sounding names? have we run out of other ones? >> look how much fun the employees are having with all the names. obviously google is getting creative. they know their alphabet and they're continuing, and the long line of android releases and upgrades. it may be a playful name. but it's actually a very serious strategy. android is the dominant operating system. google shares have been on a roll since they announced the new alphabet formation and announced their last quarter earnings and their ceo. wall street does haven't a problem with it. >> jane? >> i think it's stupid. let's rename general motors butterflies and unicorn. >> we'll have a silly naming contest for "power lunch" next. body cameras have become more widespread in the wake of ferguson and baltimore. but it's not the only technology that first responders use to keep the public safe. ahead, a closer look at the latest in police gear including
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drones. don't go anywhere. you're watching cnbc, first in business worldwide. ♪ ♪ if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end august 31st. share your summer moments in your mercedes-benz with us.
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let's go over this hour's power points.
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avon seeking approval of a $62 million settlement of a lawsuit accusing the company of defrauding shareholders by concealing the failure to stop workers from bribing officials in china to win business. target reaching an agreement with visa to reimburse card issuers for $67 million for costs incurred by the massive data breach during the 2013 holiday shopping season. stocks under a little pressure today, nothing too terrible. telecom and consumer discretionary are this day's leaders. if you missed any of the big stories in the past hour, visit our website at powerlunch.cnbc.com. sara? >> no more annual reviews. ge is the latest company saying good-bye to traditional management practices. why do it and what's going to replace it? that's ahead in just two minutes on "power lunch." [ male announcer ] eligible for medicare?
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look for the experience and commitment to go the distance with you. call now to request your free decision guide. ♪ o0 but your stellar notebook gives hanyou the gumptionlc. to reach for the sky. that's that new gear feeling. this week, these office depot brand notebooks just one cent. office depot officemax. gear up for school. gear up for great. coming up in the next hour, the most global eyes are on china. we have three other countries which need to be on your investing radar. could we be heading for a big country default that does not involve greece? plus some stocks of companies that many might consider dull, but all they've done is make
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long-term shareholders really rich. those names ahead. the story about government waste and the tsa that may make you angry for about 160 million reasons. right now back to tyler. general electric quietly moving away from annual performance reviews in favor of more frequent and less formal conversations between managers and employees. far cry from the old rank and yank days of ge when it would regularly boot underperformers based on where they stacked on a bell curve. is ge's shift a move to a kind her gentler corporate america? let's hear from professor sydney finkelstein from dartmouth. welcome. if performance rankings are out, what's in? >> i think key thing that happens is you don't want to wait until the end of the year to do performance rankings. think about feedback that you
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hear, is it useful to hear it six months later. i think regular discussion and interaction is the name of the game. the word is coaching more than standard performance evaluation. >> why is this happening? >> i think there's a couple reasons. there's been a lot of research on this. most of the rank and yank system, they don't actually work that well. performance evaluations at the end of the year have a lot of flaws. for example, a very famous study a couple of decades old that show one of the biggest predictors of how well an employee be rated would be whether or not his or her boss actually hired her or whether he inherited the employee. that's kind of crazy. there's a lot of data about bias that's in there. i think other factor that's maybe a bit more recent is the rise of the millennials. millennials want interaction, feedback, discussion. they want to be part of something. if you want to hire the best
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trained most impressive class of young people that we've ever seen come in the workforce, i think you've got to make some adjustments. >> so there was this article that everyone was talking about over the weekend from the new york times, professor, on amazon. it was somewhat of a browsing article by "the new york times" about the bruising culture at amazon, described a rank and yank system which amazon denies it uses. is there any efficiency toward that? could it actually be a good thing? how popular is it? >> well, the core idea is, if you have lower performers, you want to remove them, make room for somebody who can do a better job. if you want to drive a culture of excellence, and that should be in quotes, then this is a logical thing to do. the problem is it comes with some side effects. maybe the top of the list you end up losing a lot of good people who actually may be performing pretty well but don't want to be in this cut-throat environment.
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while millennials like a lot of feedback, they also want to feel like they're partners with you. coming into a system where you're put to the bottom of the list very quickly is maybe not something they like. >> has technology and big data caught up with the ability to track employees? what always bothered me about employment reviews is that the manager could have bias or could be unfair as you suggested. where are we on the technology to correct that? >> there are so many startups involved with workplace productivity methods or software that allow you to track all kinds of things. we live in a 24-7 world. that's not news. but, in fact, because we're always on on cell phones, other mechanisms, we are always in a position where somebody can see what's going on. with these tracking devices, there's so much people know about what we're doing. at one hand, i get that it's good because you can remove inefficient time. guess what? there's actually research about
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creativity that letting people kind of get there -- styles, not always, but sometimes at their own pace can benefit. >> professor, thank you so much. very enlightening. professor sydney finkelstein from dart momoutdartmouth. >> sara, thanks for joining me. >> thanks for having me. i'll be back tomorrow. now 2:00 on wall street, 3:00 at rio de janeiro brazil as that country starts to get very unwanted attention. melissa with us as always. the dow down about 30 points. we'll have more on the three countries that need to be on your investment radar. analysts overseas are saying the pain may finally be done for some of the biggest oil companies in the world. they are now recommending buying shares of big old companies like fran's total, conoco phillips
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and statoil. let's bring in john, founding partner of capital. conoco phillips a unit states company, tote tall, they're saying these companies have been hit hard. the valuations look attractive. do you agree? >> no. i think they have a ways to go yet. it's way too early to pile into any of these names. just starting to see the impairments in my view. these are all questions that when the dividends are sustainable despite to what the guys are saying, the ceos. >> jonathan, we've showed our viewers last week that $400 billion in market cap has been wiped out of the nine biggest western oil companies in the world over just the last 12 months. we're not suggesting exxon mobil is going to go out of business. at what point do these names become long-term value plays? >> i think we're getting there. but i don't think it occurs until early next year, 2016,
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when you'll see u.s. oil production go to below 9 billion a day. i think the bottom will be during that time period, but there could be a lot more pain, brian, until we get to there. >> john, should we look at european oil companies differently than how we look at u.s. integrated companies, in that european may be exposed more to international projects. we're looking at a brand price near six-month lows versus wti which is at 6.5-year lows. >> they will be the ones getting into iran. our u.s. companies won't. they'll be getting into iraq even more and around the world for that matter. what they are facing, however, is still a horrific refining environment in terms of oversupply and over capacity. so they have their own personal struggles in that regard. but the u.s. is still i think the place to be. once the rebound does start to occur -- citi is right about
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this, it is going to be the big multinational majors, the names you know are the ones to get into when you feel the bottom is in, which i don't feel it's even close. >> their analysis a $50 to $70 a barrel oil world. do you think we're there? right now we're at $42.41. >> i've been on record saying we may even break 30 before this is all said and done. >> you think we would get into the high $29 a barrel range? >> i do. i think the oversupply is that great. i thought when iran was going to be looking down the road to getting back online post sanctions, that opec would mang arrangements. right now iran is saying they'll pump as much as they can like everybody else until this whole thing sorts itself out. commodities, as you know, has to overshoot. do i think down the road, the 2016 time period, you've done a lot of work on this. 50 is the average number. i do think we'd get back to that then. >> i've done enough work to know
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that if you're right, we go to the low 30s or high 20s for any amount of period of time, we'll see some bankruptcy attorneys very busy. >> it will be as bad as it was in 1998, very damaging to the u.s. oil production. we never came back from that. it's what kept us in a box throughout the early 2000s. we were hooked on foreign oil as a result of the 1998 price implosion when we got down to $10.86. >> citi disagrees on the macro perspective. john, thank you very much. >> thank you, brian. oil's pain also starting to hit the economies of countries not named china. here are three nations you need to be watching very closely right now. brazil, the economy sinking, primary stock index down 16% in just 90 days. venezuela is next. the cost of ensuring that country's sovereign debt rising the a record high leading some thinking a major default may be coming. russia, their index down by 11% in one month and their currency
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to ruble is sinking fast. kathy rooney vara and tim seymour. katherine, of those three nations, which do you think might be in the most trouble? >> vin swale la. vin swale la is in dire straits at the moment with oil where it's add. if we see lower, vin swale la is a default candidate for 2016. i think 2015 is off the table because we have elections december 6th. the big payments come in october and november. venezuela have very unlikely to default before the elections with the president and his party running so low in the polls. >> nearby, tim, is brazil, the brazilian economy shrinking, inflation running rampant. president has a single digit approval rating. >> 8%. >> protests in the street. where do you see brazil playing
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out? >> different than venezuela. there's a real domestic economy, but the problem with brazil is the fiscal constraints are things they can't change the budget quickly. the entitlements are so deep and run so far and wide, there's obviously been a political corruption scandal. then there's always persistent inflation. they've tried tightening monetary policy. that hasn't worked. the fiscal adjustment hasn't worked. yu near a case where gdp will contract probably 2% in 2015. fresh downgrades and probably contract a bit in 2016. the problem is there's a heavy china correlation. it's less about oils than metals and mining, iron ore especially. this is a case where china has indicated they're not only pulling back dramatically, but the rest of the world is, too. this compound by the currency effect. break-even costs in the base commodities are going lower and lower as these currencies are going lower and lower in lockal
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terms. >> at the same time, kathryn we've seen many instances in which the equity market and the actual economy of a country are divergent. we're seeing portfolio managers turning away. relative positioning in emerging mashts is down 55% to the lowest on record since april '01. could there still be an opportunity despite what's going on with the economies here? >> there's always opportunities in an up or down market. when there's so much pessimism and we're talking about panic mode, certainly opportunities to rise. the question is, is now the time to get in or is there further downside to come? in the case of brazil, there's a lot of value, just in the oil market. it stunts additional investment in the oil market. that's huge opportunities going forward. consumer staples very interesting. brazil is going to have a contraction of 2% this year,
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probably in 2016 as well. that's an interesting place to be. brazilian risk across the board is a lot lower, and i think you can see opportunity for upside. the question is when. one thing i will add with brazil is the prospect for rating down grades. my contention is we will see all three rating agencies at the lowest level of investment grade with a negative outlook likely by year end. that means moody's is forced to move to that negative outlook. the trend is not your friend in brazil for the near term. >> in 1998 john kill dof mentioned it. we know you're a russia guy. do you think russia gets locked out of the capital markets because of what's happened to oil? >> no, not in the near term. the other thing that's happened in russia's economy, they've devalued the currency so significantly, that in local terms the construct of the economy is somewhat sustainable. the budget has changed. the flexibility is more than people think. russian oil companies, this terms of talking about stocks to pick, they've outperformed
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because the tax structure in russia is that the up stream is heavily taxed. it doesn't hurt them at these levels. they're interesting with lower cap ex-levels. i agree with kathryn. em unloved for a long time. >> kathryn and tim, thank you very much. aging infrastructure. you know it. it's one of our biggest problems facing america, especially when it comes to power lines. but what are companies doing to try to transform our grids? jackie deangelis has that story. >> reporter: good afternoon, brian. you remember when those epa regulations came out saying we need cleaner emissions? that means coal plants will come off-line and natural gas plants like the one behind me are going to start to become more prevalent in this country t. problem is you need massive power grids to fuel those projects. the power grids need transmission lines. here is why it's so important to
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upgrade them. >> aep is the largest transmission company in the country operating more than 45 miles of transmission lines. carrying electricity from power plants to substations where it's delivered to your home. the lines are big. building them is difficult, dangerous an epen sive. the lines are more than 40 years old and some built more than a century ago. aep is spending $4 billion over the next five years replacing transmission lines and substations in the northeast and midwest. >> you basically want to make sure the system is as efficient as possible. sometimes that's a new line. sometimes it's rebuilding existing lines. so it's not a one size fits all approach. >> magnifying the need for grid upgrades, the new emissions standards set by the epa. all across the country coal-fired power plants are being shuttered. aep is retiring six gigawatts of energy production, enough to power millions of homes. that generation needs to be replaced with new plants which also means new transmission
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lines. the new systems don't look like they did a hundred years ago. they're meant to have higher capacity so they can work for another 60 to 80 years. in ft. wayne, indiana, the company is upgrading its sorenson station using a new line designed to bring extra high voltage power to the region. >> projects like this do a lot to improve reliability. they do a lot to ensure that we can withstand the loss of any component in the transmission system. that's important to large customers. >> when it comes to turning the lights on, reliability is the name of the game. so, of course, it matters to you and me, brian, when we turn the lights on that we're going to get power. it also is really important to big business. where we shot that story in indiana, there's a nearby gm plant, for example, looking for more reliability. as we see more companies branch out, power grids are going to be very important when it comes to business and infrastructure as well. >> jackie deangelis, an important story. and for all the residents of new
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jersey i personally also say thank you. melissa? >> u.s. stocks off the lows of the session. three major averages in the red. the dow down just about 20 points at this point. let's bring in michael sans taro lead portfolio manager with sylvan capital management and advisor to ridge worth large cap growth fund. you've identified what seems to be a theme here in some of your topics and that is housing. we've got the great housing start data numbers. this morning it jump-started the sector here. how do you identify what's over values at this point. what will still have legs. >> the housing trade is interesting because people think it's overvalued every time i starts to move. what we found is when demand got destroyed in the recession, the recovery of those home starts has taken a lot longer than people thought. even now if we're at seven-year highs at 1.2 million units,
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you're talking about a good 200,000 units lower than the last 50-year average. as long as demand is still there and still growing, albeit slowly, the stocks eval you asi valuations aren't quite right. >> i want to start with vmc, a new high in today's session. yet it trades at a 47 times forward pe. that's higher than starbucks, michael. how do you walk through and say this is worth it at a 47 forward pe? >> sure. first off, the number is wrong. i guess the most important thing at sylvan capital and the ridgeworth cap growth funds is find where growth is a condition that's happening and the expectations aren't right. the reality is vulcan has done a great job in consolidating the industry of aggregates, buying small players which has allowed them to not only get a little better pricing, 5% to 6%, but
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also better volumes, call it 6% to 8%. they're getting closer to their customers when they buy these small mom and pop quarries which is great because it lowers the fuel costs. we've got a nice diesel tail wind. what you find is tonnage can grow at vulcan probably double or come close to doubling in the next couple years. therefore, the incremental margins are north of 60%. this company can have over double its earnings to go back to its previous peak. the 40 times number you throw around is not really accurate. we think the earnings expectations for a double here in the next few years are very reasonable. >> you also like d.r. horton, but i want to switch gears and go to cognizant technology. you say they're giaining in ters of sail. who are they gaining from? >> it's interesting. they've been compete being the indian outsourcers. but it's become less important for growth over time for these
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players. outsourcing has been on a -- it's been growing but at a much smaller rate. down to low single digits. what cognizant has done is a very good job in the intermediate term of growing the digital presence which is taking their corporate customers and allowing them to expand into the cloud, into mobile computing, engage in social media plays. that business has been not properly modeled in our opinion by the street. so there's expectation tas are not quite there. cognizant has done a great job of taking market share in those businesses and allowed them to beat their revenue and earnings expectations. >> michael, thank you for your time. brian? >> melissa, thank you. on deck, clash of the home improvement titans. who is really winning the diy wars? home depot or lowe's. speaking of homes, many home builders hitting multiyear highs. did you miss your chance to rise this run or are they still worth your hard-earned money. later on, alarming news on just
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how unsafe america's roads may really be. plus the outrage of the day, 160 million reasons to think the government continues to waste a lot of your money. we're back right after this. ♪ ♪ if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end august 31st. share your summer moments in your mercedes-benz with us. more and more, data is visual. in fact, the number of mris has increased by ten percent a year. and a radiologist might view a thousand images to find one tiny abnormality in shape, contrast or movement. because it's so challenging, a research project is teaching ibm watson to see.
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in the future, it could help clinicians spot key patterns quickly and precisely. ibm watson is working to make healthcare smarter every day.
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time for home improvement cage match. o lowe's set to report their earnings tomorrow morning. both stocks have been good investments, up about the same over the past 12 months.
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what is the better bet going forward. scott, i'll begin with you. you raised your price target on home depot to 137, about 12% more upside from what it's already gained. what is driving home depot right now? >> i think both companies are benefiting from very reasonable home inventory levels. that's helping drive home price appreciation. that is driving more investment in the home. heme dough poe specifically, they continue to execute at an extremely high level and performed on a very consistent basis over the last several years. >> scott, why do you think lowe's a better investment than home depot? >> well, we do like lowe's. for roughly a similar valuation, maybe one-point turn difference on a pe basis, we would prefer to put fresh money into heme dough poe given its level of consistency as well as greater leverage to the pro customer
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which is growing faster than the diy segment. >> i meant that question for peter. i totally chunked it. peter, why do you think lowe's a better investment than home depot? >> our hats are off to home depot. we'll give the edge to lowe's here. scot pointed out a valuation gap. we remain intrigued that lowe's has a lower operating margin at 8.5% versus home depot at 12% a. very good home model backdrop. we want to play the smaller boat because we think there's more leverage on that model. >> higher operating margins are better, peter. why would you prefer the lower operating margin. that tells me either their cost structure is too high or they don't have enough pricing power or some combo of the two. >> it comes down to earnings growth opportunity. the organic top line growth at both companies will be fairly
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similar. but lowe's should see greater leverage in a model from an expense standpoint because it's coming off that lower operating margin base. think about 50 to 100 basis points of operating margin expansion is a lot more powerful than it is for home depot's earnings growth. >> nobody hates the other name. a bull case for hd and lowe's. gentlemen, i appreciate it. thank you. up next. a vacation property throw-down. million dollar listings, ryan ser hant is in the house with some serious waterfront eye candy.
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a real estate face-off. multimillion dollar homes. which is the better tore your buck? bravo's brian serhant makes the call. million dollar homes, all day today on cnbc. all right. welcome back. cnbc's popular "million dollar homes" series is back. we're escaping the hot and hazy dog days of summer and going to the we. well, midwest, visiting some million dollar waterfront homes. two houses in the same kind of market battle it out to see which is the best bang for your buck. so for round three, we are going waterfront, on lake michigan. we have the custom cliffside going up against the private palace. here are the homes. >> a mid century wisconsin home built cliffside on lake
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michigan. this custom six-sided green home sits on 3.4 acres and offers endless lake views from every room. 2,100 square feet span two floors and both levels include large wrap-around decks. there are four bedrooms, 2.5 baths and the modern kitchen is equipped with high end appliances. outside, 400 feet of shoreline extend to a private pier. high-end lake living for $2,450,000. >> a modern michigan home right on the lake, se collude on 30 acres of forest. this property allows for maximum privacy, 4,000 square feet of living space that boasts four bedrooms and three bathrooms, all flooded with natural light and lake views thanks to wall to wall windows and open beam architecture, all steps from the private sandy beach. tranquility on the water for $2,199,000. >> joining us, ryan serhant, the
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star of "million dollar listing." i don't think new yorkers realize how hot the real estate market is there. >> it's true. my grandmother and a lot of my family live in wisconsin. i spent a lot of my summer vay igss when i was a little boy. >> don't you know. >> you betcha. >> yep, yep, yep. >> it's a hot market. >> these houses, too, of everything we're going through with the million dollar home challenge, these are my favorite. i love these houses. they're beautiful. lake michigan is beautiful. the arc sec tour is very contempora contemporary. this battle and seeing which one is going to win is the toughest for me. before we go through them, is there one you like the most? i saw your eyes adjusting. >> i love michigan but am partial to wisconsin. i also love boating and i don't think the one in free soil,
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michigan, has a dock. it had a beach. >> it has a beach but doesn't have a dock. >> unless you want to drive the boat onto said beach, i would go with wisconsin, plus i like the beer there better. >> so that works for you. if i have buyers trying to choose between one property and the other and they're saying which one should i choose, what i tell them we say which is the better deal? i break it down as an acronym, d.e.a.l. >> neither is chip. >> that's a lot of house. $2.5 million gets you that corner. >> what do you think is the better deal. >> d is decor, they both have beautiful decors, wisconsin, custom cliffside, might need a little touchup. that's okay because you're making it your own. e for exposure, both looking out over their own property, their own privacy, both looking at the water. a is amenities. i think that's where you have the deal breakers here. the big amenities for these
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properties is the lot size. in michigan you have 30 acres of space. in wisconsin you have 3.4 acres. in wisconsin you get one parcel to build on. but for only $2.2 versus $2.45 million, in michigan, three buildable parcels. >> you could build. >> a lot of people think about the now, the now, the now. >> chop it up and maybe have a neighbor somewhat close and bank some coin. >> in new york, i can't buy a three-bedroom apartment and say i want to sell off one bedroom. here you have 30 acres, the taxes are higher in michigan on this property because the taxes are -- if you break it out -- >> who is your winner, ryan? >> who is your winner? >> i told you, wisconsin. i have to go with the semi home down crew. >> you're partial and a little biased. >> i'm completely biased, but not the host of your show.
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>> i think the winner of the million dollar home challenge and the one will battle it all out is the one the most future appreciation which is michigan which is private palace. down the line it's a beautiful house, it's a bigger house at the end of the day, almost 4,200 square feet, compared to 2,100 square feet. 30 acres of land on lake michigan. >> you go for michigan. you'll get the nasty grams from your family in wisconsin. you know that, right. >> i have to stick to my guts. >> ryan will be back on "the closing bell." the final round of competition. thank you very much, ryan. still ahead, 160 million reasons to be an outraged taxpayer. those details when "power lunch" returns.
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hello everyone. i'm sue herera. here is your cnbc news update this hour. south korean tv reporting tensions between north and south korea are escalating, the north using harsh rhetoric about upcoming military exercises by the south and the u.s., resuming
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loud speaker announcements as the demilitarized zone. new developments in the case against pennsylvania attorney general kathleen cain, a citizen activist has filed a complaint accusing her of using taxpayer money for her defense. she claims a conspiracy led to her being charged with leak aging a case. scott walker's plans will allow patients to buy insurance across state lines and increase the contribution limits to tax-free health savings account. people blasted congressional republicans for not doing enough. the tooth fairy must be having a lean year. children are receiving 24 cent less per lost tooth than a year ago $3.19 versus $3.43. that's down from $3.70 in 2013. you're up to date.
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i don't know who would leave -- why would the tooth fairy leave pennies? just give the poor kid $4.00. but that's me. by the way, i voted with you on wisconsin. >> that's because we got the connection. >> oh, yeah, you betcha. the people up there, eight-month winters. >> they are. all right. oil moving higher in today's session, close to $42.50 a barrel, about a 1.7% gain in oil. still no respite. still very low for oil, but up 75 cents a barrel at the close. time for "trading nation." walmart beating revenue estimates but missing on earnings as the retailer's wage hikes weigh on margins. will it cause bigger problems for corporate profess. anita markowska and chad morganlander. are you seeing fresh evidence of rising wages and what does that mean for corporations overall?
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>> i would say at this point the evidence is not convincing or is not consistent, but i do see early signals of which pressures. one thing we watch is the atlanta fed tracker. as opposed to to other wage metrics tracks individuals. those are rising at 3.25% a year, about one percentage point higher than where we were roughly a year ago. >> all right. so chad, listen, a lot of people look at wages as part of overall costs and they say the costs are going up, that's a bad thing. higher wages can also be a good thing for corporations, could they not? >> i believe that to be the case. when it comes to walmart, for example, it was less than .10% drag on their earnings. so we don't believe that wage pressure is in full cycle right now at this point. we would, though, be somewhat more concerned about it, perhaps about nine months out to 12
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months out because you have operating income for s&p 500 companies at an all-time high. we believe that will start to kick in. nonetheless, we're not seeing walmart's earnings, nor do we think it's happening right now within the cycle. >> .10% is not a large number. >> no. walmart, for example, a majority of the pressure on operating income came from gross margins. it was based off of pharmacy benefit issues from their pharmacy as well as shrink issues. not a great deal. >> all right. chad and annika, we'll leave it there. thank you very much. for more trading nation, the online stuff i just referenced go to tradingnation.cnbc.com. if you think there are more car accidents on the roads, it's not just your imagination, sadly. an important discussion on auto safety ahead. i'll be back with the latest
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in high-tech policing from body cams to drones, solutions for problems that people care about when "power lunch" continues. >> some people say trading in the after hours session is like trading in the wild, wild west. while there's nothing wrong with trading in the post market, it's important to realize that the spreads are probably going to be wider. the liquidity is probably going to be lower and the risk is definitely going to be higher. you totalled your brand new car.
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this next story may gave you 160 million reasons to be frustrated as a taxpayer. according to new figures turned over to congress by the tsa the agency spent about $150 million on body scanners that missed threats. eamon jaf verse joining us with more on that. >> the 90% tail your rates, the so-called red teams penetrated security checkpoints with apparent bombs and explosives, 95% failure was good enough to get the tsa interim director sacked from his job earlier this summer. politico obtained numbers to
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show just how much taxpayers have spent on some of those body scammers, politico reporting it's $160 million on body scanners at the center of the controversy, manufactured by l-3 communications. i called l-3 communications to ask them about this. they said they'll have no comment. melissa, the tsa told politico it's taking steps to improve security at its checkpoints. one of the big questions here is whether or not the failure is related to the machines themselves, the technology in them or the operators at the tsa who are operating those machines. all of that still to be determined guys. >> you would think they would have determined that before spending all that money eamon. it's insane. thank you. police body cameras are in the spotlight, but that's not the only technology being used by first responders. hampton pearson is live in d.c. with more on this. ham? zblp believe it or not, first responder technology is a $6
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billion a year business. the recent up rise innings in baltimore and ferguson, missouri, are putting a premium on crime fighting solutions that also offer transparency. a couple of examples down below from motorola of just what's out there. imagine if you will a state-of-the-art 911-type command center that can take calls from a robbery in progress, match up with surveillance cameras in the area and send snapshots responding to the crime scene all within a matter of minutes. the next generation cop on the beat, if you will, cannot only have a wearable camera, but special glasses, perhaps reminiscent of the terminator, that transfers images from the scene, return relevant info to that officer in the field and even sensor technology available that would monitor what happens when the officer actually draws his weapon. it's all recorded in realtime back at the command center.
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>> i think this technology provides a lot more information than ever before, but provides the capability if you turn that information into actionable intelligence. it enables the ability to have transparency. >> among the major players here, motorola, harris communications, general dynamics and digital alley. they make those body cameras if you will. you can't go anywhere these days without at least a conversation about drones. very early on in the game for these folks. there's budget constraints, technology constraints and too much of a notion that it's the wild, wild west right now as far as rules of the game. >> hampton per son, a cool story. thank you for joining us. housing related stocks have been hot. 13 home builders or home materials companies are hitting 52-week or all-time highs. i have a little hometown pride. the single best performing home related stock is cabinet maker
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american woodmark up 63% based in winchester, virginia. more on the home builders when we come back. stickers. what's up with these things, victor? we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. who reads all those? he does. for all the confidence you need. td ameritrade. you got this.
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everywhere you look,
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apartment buildings keep going up and keep filling up. but how much will be too much? some cities are seeing as much as four times the normal apartment construction. where the hottest markets for the home builders. diana olick joins us and she knows. >> reporter: i do know, brian. you look in any major metro across the nation, you see cranes all over the place building apartments, especially true here in d.c. when you hone in on the numbers, they seem staggering, in over a quarter of the 100 metro markers, construction activity is higher than local historical averages. in the new york area, four times higher. in boston and newark, three times higher. apartment construction is higher than normal in philly, houston, seattle, san fran, l.a., dallas, all this according to trulia. this as single family home construction is well below average. texas, of course, is the construction. construction is cooking on all burners out there. you ask are we overbuilding? i say no.
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take a look at multifamily apartment construction going back in time. it dropped off in the 90s and didn't move. as single family home building soared, multi sat. we have increased rental demand and we're making up for lost productivity. vacancies and rents are still at record high. that demand is coming not just for millennials, but more from downsizing baby boomers who don't want to own anymore. the only concern seems to be in the luxury section. that's where a lot of construction has been in big cities like new york and boston and again here in d.c. we are starting to see the high-end soften a bit. not crash. more concessions on the rent. as far affordable rental units, this nation still needs thousands more. melissa? >> diana olick, thank you. the home builders index hitting high. jack, diana had just gone through all the many ways in which multifamily homes are seeing a boom right now. are they impacting your
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universe? you focus more on the single banner builders? >> we are still building well below the historical trajectory. you're starting to see households reform. you have to fill those units with -- serve that household creation. you're seeing it both on the a presidentment side and seeing single family construction pick up case. >> do you need to see a tipping point where you see a cooling off in the construction of multifamily in or dore believe that a single family will be more robust and return to historical norms? >> right now the rental rates in multi should be signaling more purchase activity, but they're not. we all know what those issues are. it's student debt. it's wage stagnation. rents keep going up. homes are more affordable on a purchase side than rents in many markets. you're starting to see the tipping point, where it's cheaper to own than rent. but some people can't buy, whether it's the down payment. mortgage credit has loosened
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some. in our markets it's taking new homeowners ten years longer to buy a home. >> what's your topic? you cover not only the builders and the reeves, but banks as well as super robust but they are one of the few serving it. we like the mortgage insurers. this is a way to play the first time buyer. we like those two a lot. >> great to speaking with you. still ahead, will the third time be a charm for the drug many are calling the female viagra? we've got that story next on "power lunch."
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be able to access information, wherever we are. information for an athlete's medical care, or information to track their personal best. with microsoft cloud, we save millions of man hours, and that's time that we can invest in our athletes and changing the world. if you think car accidents are on the rise, not your ima imagination. texting and driving not the only problem, but a big part of it. former chairwoman of the national transportation safety board. we talked about this a number of times on the air. this is a big problem and only getting worse. i look at car commercials and i see they are promoting in-car connectivity and wi-fi. doesn't look like we are closer to solving the problem. >> unfortunately, we see a tremendous amount of risk on our roadways. statistics are showing us that
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number is born out. the first six months of this year we've seen a 14% increase in highway fatalities. distraction is certainly a part of that. >> there are more cars on the road because the economy has gotten better. but upwards of 20% of wrecks are caused by texting or other distracted driving. how do we solve that problem. when a fine is like a speeding ticket versus a dui where you could lose your license which texting and driving is just as dangerous. >> that's right. i think one of our challenges, it's so widespread and so accepted. when we see people walking down the street being distracted, sitting at a restaurant with another person looking at their device, then expecting them to behave in the car differently, that's one of the areas where we have a big challenge. society has really accepted this behavior. unfortunately, we've accepted it behind the wheel to a great degree. >> you are a d.c. insider.
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is anybody talking about this? are there real proposed solutions? >> there are proposals for providing incentive grants for states to provide texting and driving campaigns to educate people. >> does that work? s. >> it does work. you are going to collect some of the people will change their behavior if you educate them. this is true for seat belts. we've seen seat belt use rates increase when you educate people. the large majority of the people who will come onboard is when a good law is enacted. you are still not going to get everybody. some people need the threat of an enforcement. >> should we up the penalties? >> we have advocated for stronger penalties. when we talk about it, it's about human life and the value of human life. no call, no text, no update is worth a human life. >> deborah hersman, a good lesson. thank you very much. the fda will likely decide today on approval for the drug many are calling the female v g
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viag viagra. things look different now. back in june we had the advisory panel recommend approval. >> right. that's why it looks different. it was surprising after getting rejected twice this got a positive recommendation from the outside panel of advisors. 18-6 recommending this be approved to make sure safety is in check here. it was rejected because of the efficacy, safety weight was considered to be worse on the safety side. maybe efficacy wasn't strong enough to merit approval. the drug can cause low blood pressure, can cause fainting. these can be exacerbated by drinking alcohol. this is a chronically-taken drug. that's why it's different than viag rachr viagra. it's different when we are talking about viagra and this drug. some people are saying maybe it doesn't bring enough to offset
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safety concerns. that positive panel may have turned things around. we may get a positive vote. >> say approval happens, how long till the drug could be on the market? >> presumably quickly. it's made by a private company. stock play may not be there. if this drug sells, it could be a potential takeover target for speciality drug company like a valeant. >> thanks, meg terrell our biotech reporter. >> queer trying to squeeze in street talk here. advanced auto parts upgrading from buy to hold. they think general parts is integrated nicely. about a 17% total return. >> since its april low up massively. credit suisse throwing cold water after the second quarter earnings came in inline saying the stock's reaction was overdone. some skeptics on the street.
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sandisk, bank of america downgrading to underperform from buy. target got cut from $40 to $75 cutting the target $2019. sandisk is down around 40%. >> many analysts in the $60s or $70s. stifle with a buy. about 25% upside. should drive earnings higher. fuel economy standards mean lighter parts which means may sell more lighter parts. >> they just made a deal yesterday. wells fargo downgrading three big media stocks. all go to market perform. citing this season's earnings report claiming they see value shifting from content to
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distribution. >> the last stock the under the radar name is spectranetics. needham upgrading to a strong buy. likes the new hiring of the cfo. and excited for a angioplasty balloon. >> that chart over the long term not too pretty. >> there you go. >> the s&p 500 doing something it hasn't done or has only done five times in the past 20 years. we'll explain why it might spell trouble for stocks tonight at 5:00 eastern on "fast money." >> five times? >> five times in 20 years. >> what? >> you have to tune in and find out. >> they changed their logo? >> why we call it a tease, mister. >> the fourth alternative away
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jersey? >> keep guessing. >> now i'm intrigued. we look forward to it. thank you very much. oil closed up just a bit. dow down 53. losing steam. thank you very much for watching, everybody. welcome to the "closing bell." i'm kelly evans at the new york stock exchange. bill? >> later. i'm bill griffeth, a consumer tug of war now between dow components walmart and home depot, he said, moving right along. walmart shares down 3% today on the back of that earnings report. a strong number from home depot has sent those shares about 2% higher. we'll break down what both reports say about the u.s. economy. >>

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