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tv   Power Lunch  CNBC  December 30, 2015 1:00pm-3:01pm EST

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i think you have today and tomorrow to get into the stocks. we haven't borrowed from neck ye next year. single digit multiples. >> wonderful, guys. that does it for us. you can go to "power lunch" with breaking news and kate kelly has details. hi there. it's kate kelly from headquarters starting out "power lunch" with breaking news on puerto rico. the governor just about to make remarks about on a crucial set of bond payments due monday they are likely to default on a relatively small portion. let me walk you through it briefly. the first missed payment is expected to be about $36 million due on some public financing bonds otherwise known as the rum tax bonds. there's also a small payment, a little over $1 million due from the public financing corporation which already defaulted earlier
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in 2015 on a separate payment that will not be paid. however, the vast majority of the more than $700 million that the island owes on monday by midnight on the 4th will be paid, including importantly the general obligation bonds that amount to about 330-odd million dollars. widely held by many mutual funds, something like 45% of mutual funds that invest in munis around the u.s., melissa and brian, are exposed to some of that paper. >> and that's why we're following the story. kate, thanks so much. we'll keep you posted on what's going on in puerto rico. this is "power lunch." i'm melissa lee along with brian sullivan. oil is getting knocked around today, no surprise. in the last six months, crude is down almost 40%. what a tumble. >> also, natural gas, did the nat gas trade just run out of energy? it's had a huge week but it is down again today. what is going on, melissa? >> and a year ago brian made some pretty brave and bold predictions about 2015. today we will show you what he
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got right, what he got wrong, and why he should really pay attention to brian in 2016. >> no, no. as i write, put on your gloat coat because i blew it. >> i didn't make any predictions. >> next year you will. >> next year maybe. >> next year you will be on the hook. tyler is out. you just saw mandy on "fast money" so here we are and here is where we are in the news. crude oil prices plunging again, now back below $37 a barrel, and once again global crude prices, brent crude, have fallen back below the u.s. traded price. it is hard to believe that just a year and a half ago oil was above $100 a barrel. we are down nearly 70% from those highs. also on your radar, natural gas. those prices have been on fire over the past week, but not today. natural gas down about 6% at this hour, and they are also now down nearly 70% from their highs
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in 2014, and this should not only low iryoer your heating bit also give companies a break on their power bill. but here is your question heading into next year, will oil prices stabilize anytime soon? joining us, tim evans, energy futures specialist. i guess, tim, coy si could say have stabilized in a way. they tumbled last year, started january in the 40s, we're a little lower than where we started the year. do you see any reversal higher for wti traded crude prices in 2016 or a continued move down? >> well, i think there's vulnerability on the downside particularly for the first half of 2016. we're looking at a surplus that could be 1.5 million barrels a day or so depending on how much
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iranian crude oil comes back onto the market, and even under that scenario there's some additional downside risk if we see some fairly low probability events like a unity government taking hold in libya, a recovery in libyan production could add to the oversupply in the year ahead. >> i tell people all the time that the oil story literally may be the simplest story in the world, which is that there's too much of the stuff versus demand. nobody we've talked to suggests demand is going to pick up anytime soon meaningfully. when you look out, do you see any meaningful, call it a million barrels a day, drop in production anytime in the next six months because if you don't, it is likely that that supply/demand imbalance is going to continue. >> well, that's right. we've been talking for some time about a general theme of lower for longer, and that continues to be the dominant theme in the
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market. in the next six months, no, i don't see anything other than a geopolitical surprise that would quickly rebalance this market. and i think even beyond that horizon, what we're really looking for is some kind of change in opec policy, some kind of change in saudi arabia's aggressive competition for market share that would restrain output, rebalance the market, and help the market turn significantly higher. failing that, we're looking at a much longer-term process where it's going to take a long time to draw down our surplus inventories. inventory data for last week showed u.s. commercial crude oil inventories 36% above the five-year average. >> i'm sorry to break in, but the bottom line, it sounds like you think it's going to be a
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long, drawn out bottoming process. the saudis showed no evidence of retreating from their policies. they made numerous comments they think the market should rebalance on their own and they should continue with their policy of unlimited output. >> absolutely. they're doing a fine job of selling their policy, which is they're going to beat the competition into submission through lower oil prices, and we always want to take into account where the saudis want the price to be when we consider that outlook. >> so the bottom line here is a long, drawn out bottoming process for crude oil in the next, what, you said 12 to 18 months? >> well, i mean, i'm focused more on the shorter term on these next six months that definitely look like they're going to be weak. depending on what the opec reaction is to these lower prices though, i do see some potential for them to, you know,
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look at the decline in their own reserves, look at the deficit that they're running, and rethink whether this strategy is really working for them. so far they're only getting a larger share of a weaker market, and their total revenues are down. >> tim evans, citi futures. we appreciate that. the saudis have said recently they are not going to slow down their production. tim evans, thank you. we'll see new the new year. appreciate it. >> thanks, brooiian. >> seven-year notes up for auction. rick santelli is tracking all the action at the cme. >> hi, melissa lee. it's the last coupon auction of the year. $29 billion 7 year notes. the yield at auction, 2.161. the highest yield in an auction since september of 2014 and it looked to me like around 2.15 was trading in the one issue market. so higher yield at the dutch auction. they had to move it to get it to
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move, and definitely not a good sign, so it tailed a bit. but it gets a little worse from there. 2.34 bid to cover. $2.34 of investor money chasing every dollar's worth of securities at the dutch auction. that's the weakest since march of '15. not that long ago. 47.1 on indirects. weakest since october of '14 and directs at 14.1, the only bright spot. the best since january of '15, so almost a year. the grade, d plus, d as in dog plus. we had a rotten set of auctions. maybe it's the holiday week but something to pay attention to in next year as the lights went on and the supply is done. melissa, sully, back to you. >> d pluses all this week. rick, thank you. not a good year for the hedge funds or individual investors or warren buffett. the oracle of omaha headed for his worst year since 2009.
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shares of berkshire hathaway are down 11% in 2015 versus a slight gain for the s&p 500. what's behind the underperformance? blame the commodities slump. berkshire's railroad business transport oil, coal, and agricultural products and it's manufacturing business sells to the battered oil industry. a lot of the same bets a lot of other traders are making this year. we're going to go to seema mody for a market flash. >> stocks are mostly lower but check out shares of tesla. shares are up over 1%. a bullish analyst note from global equity research says tesla will deliver more than 18,000 cars in the fourth quarter. that means tesla is on track to meet the higher end of its quarterly guidance and latest annual forecast. shares up 8% this year. back to you. >> all right. despite low oil prices, it's been a bumpy ride for the airlines this year. some up double digits, others dropping double digits. the xal is down 15% in 2015.
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the sector facing a major challenge in 2016 that may impact revenue growth. we'll tell what you that is. you're watching cnbc, first in business worldwide. we'll tell what you that is. announcer: it's time to make room
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bond insurance companies fall. the big ones are mbi and ambac, ambc, those shares are down. you also pointed out there is a third one, a smaller one but a third one. >> assured guarantee. all worth watching here today. meantime, here are the headlines we're watching for you. shares of weight watchers soaring 20%. oprah winfrey making her debut as the company's spokeswoman. pep boys is trading lower. icon eyicahn enterprises agreei buy the company for $1 billion. icahn enterprises hitting a new 52-week low. celgene named a top biotech pick. look at three of the largest u.s. airlines. delta and united are down by double digits. the airline that's soaring in the stock market, jetblue up
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45%. southwest and spirit airlines are getting whacked. they're down about 45%. the three major carriers have usually shrugged off low-cost carrier competition but after rapid expansion, they are responding aggressively. one study showing that overall airfares for december are down as much as 24% this year. that's some pretty good news. seth kaplan is managing partner of airline weekly. seth, listen, our viewers and listeners know what they're paying for gasoline for their cars. i've got to imagine that the airlines are just as happy about their prices at their pump, so to speak. are we going to see ticket prices continue to fall because of low air fuel costs? >> yeah. now, the declines will probably slow down somewhat, brian. this year we've seen them really tumble, and the airlines are trying to get their hands around that because they realize at some point, you know, that's going to flatten up, and so if the fuel prices stop falling, they can't go below zero, and if the fares keep falling that can
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only mean one thing, lower profits in 2016 than 2015. they're trying to get their hands around the supply growth. but it's an a race to the bottom between falling fuel prices and falling airfares. so far happily for the airlines the falling fuel prices have won the race. >> you know, seth, when i read this story and when we talked about it in the morning meeting, my first thought was where the heck are they falling? i fly a lot and they seem still very high to me and the airlines all seem completely full. load factors, those are up, aren't they? the airlines are still filling up their planes. >> they are. and they're filling them on average though, brian, with people paying less. absolutely. it depends on the market. if you're sitting in seattle or the dallas-ft. worth metroplex, you have intense battles.
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airfares have dropped, other places less so. a year ago, you tried flying on a different date or making some inconvenient connection, you were going to pay a lot whereas now it's kind of creeping back in there where maybe not the exact seat that you want, but you can get a good deal again and that wasn't necessarily the case a few years ago and i'm talking, brian, not just about if you're flying spirit but even flying delta, united, and american. some very low fares out there right now. >> let's talk about what is the root cause of this and that's capacity expansion. this is exactly what a lot of analysts were concerned about when fuel prices hit rock bottom. we had southwest, spirit airlines expand capacity tremendously. that caused them to start discounting prices. that caused the bigger carriers to then respond aggressively with discounted prices. that capacity expansion won't go away overnight. the root cause will be there? who is in the toughest spot? will we continue to see low airfares because that capacity is simply not going to evaporate
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overnight. >> yeah. and ironically, melissa, it's the airlines that, you know, the legacy airlines, delta, united, and american sort of blamed for what they see as excess capacity. airlines like spirit and others, those airlines are feeling some pressure quite simply because when fuel is have cheap, the legacy airlines can profit with lower airfare. everybody is growing and you're right, melissa, in the end this is supply and demand economics. you put more supply into the marketplace, prices fall. that's what happens with airfares. you've gotten to a point where american airlines is out there with fares in some markets, not all, brian, but some markets of like $40. well, where can spirit come in under $40 to get somebody to fly spirit which they might not prefer in terms of an airline. to be clear, spirit is one of the most profitable airlines in the world, they're doing fine, about you it does put pressure on them. a year or two ago they were making money coming in at price points that were much lower than prevailing airfares and getting people to fly them who might not
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otherwise have done so and now it's becoming harder to do. >> seth kaplan, it was a pleasure. we'll see you in the new year. take care. >> likewise. happy new year, brian and melissa. check this out, these are the latest pictures out of missouri. massive flooding throughout parts of the state. jay nixon has called in the national guard to assist with flood fighting effort. roads are closed in 500 locations. thousands of homes in missouri are reportedly threatened by this flood. wow. a rough year for the emerging markets. look at the etf that tracks them, the eem, down almost 20% in 2015. what about next year? we will the commodities crush bring more pain. we have your 2016 playbook. plus -- >> coming up, a startup delivering wine by the glass. >> fine box allows members to discover new wines and explore their own taste preferences. >> will the panel chink it dru ?
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time now for our regular series power pitch. that's where entrepreneurs get just one minute to make their pitch and then a panel of experts weighs in, asks questions, and decides if they have got what it takes to become the next big thing. >> hi. i'm rachel. >> and i'm matt dukes.
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>> we're two former lawyers with a shared love of wine and travel and we're bringing both to you with fine box. we're the first wine by the glass club. every month members receive one of those delivered directly to their door. inside are three individual glasses of wine curated from all over the world. we bring the tasting room to you, exceptional wines, simple tasting notes and the stories behind the wind. >> both the novice and wine connoisseur in mind, you can explore your taste preference before committing to a full-size bottle. when you find something you love, it's easy to order more by the bottle or glass. the u.s. is the world's largest wine consuming country with over 100 million wine drinkers and this industry is ripe. >> you just saw matt and rachel's pitch. let's meet the panel.
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joining us on set is alicia syrett. she advises and invests in over two dozen startups. also on set is nikhil kalghatgi with vast ventures. he invests in 50 consumer and mobile startups. and also nir liberboim with investment in online subscription businesses. hello to everybody. great to have you with us. would you like to throw the first question out? >> let's say a consumer comes to your site to discover. how do you keep them as a customer paying $35 a month for a few glasses of wine after they've already discovered their tastes? >> that's something that's great about wine is you are constantly discovering new tastes, discovering new regions. so maybe you know you like a right bank bordeaux, but then we're going to introduce you to italy. so even if you know you like your taste preferences, it's always changing and there's
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always room to grow. >>. >> i love wine. i like wine with dinner. wine with lunch sometimes, maybe even a little breakfast wine. but the problem i have is that it's always one directional. it's always me buying it. i never get to indicate to the seller what i like. how do you engage with consumers after the purchase? >> so this is going to be the first platform that can really learn from your own tastes. so after you have three glasses of wine each month, we're able to learn about your taste preferences and you can make indications on what you liked, what you didn't like through your online account and then we can cater more towards your taste. >> you mentioned in your pitch you have both the wine novice and the wine connoisseur in mind. how are you selling the same product to two different seg snments. >> with the wine novice it's more of an educational aspect. it gives you the opportunity to learn about wines and discover your own taste preferences. with the connoisseur, we're giving them access to wines they
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wouldn't otherwise have access to. so these are wines you can't traditionally find in the u.s. and they can explore smaller, more niche vineyards. >> alicia. >> talk to me about distribution. right now you're selling direct to consumer on your website, but when can people get your product through retail distribution? >> so we are direct to consumer product and the core model revolves around delivering three individual glasses directly to their door. we envision retail applications in mid to late 2016 so you will see them in stores as well. >> so the wine category is strong and growing but it has historically had very little brand loyalty. how do you ensure consumer convert from sampling to loyally buying full bottles. >> creating a memory experience is important to creating brand loyalty. you don't just get a glass of wind. we'll tell the stories, transport them to a little town in france or italy and explore not just those external regions but also help them learn about
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wine and their own preferences. >> we all heard what matt and rachel had to say. now we need to know if the panel is in or out. >> i was initially concerned whether this was going to be a big enough business opportunity given the droirect to consumer model but the fact they're eventually going into retail i think is a really big deal. there's a big opportunity around single serve premium wines and it's a really smart team and a huge market. so i'm going to go in. >> we've got one in. what about you? >> i tried chateau and i actually thought it was delicious breakfast wine, but the most important thing for me is about discovery and really understanding if these are exactly what you want to try, and i'd like to try it, so i'm in. >> okay. >> nir. >> i tried a vine box and i discovered a couple wines i really liked and i like the packaging and branding. i'm concerned it's a highly
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regulated category but i think you're onto something big. i think this is destructive so i'm in. >> three ins. these actually quite rare. >> we're focused on growing vine box and stay tuned for more in the future. >> thank you to matt and rachel of vine box and to our panelists. and that, folks, is today's "power pitch." >> all right. einstein was wrong. mandy was in two places at the same time and had longer hair and a different outfit. are you in or out on vine box? melissa and i were just talking, we were both way out. not even close. >> said no way. >> three glasses of wine is a night, not a month. >> for you. you're a big person. you can consume that much. >> it seems expensive. >> it seems expensive. >> we're out. what do you think, america? tweet us using #powerpitch in or out of vine box. and for more "power pitch" visit powerlunch.cnbc.com. we are full of power.
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>> braff zil down, russia down, india down, china up. despite a big sell-off. with oil and other commodities in a slump, how do you play or invest in because it's not -- you don't play with money, you invest it. the commodity dependent regions in 2016. we're going to find out. stick around. it's hard to find time to keep up on my shows.
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hi, everyone. i'm sue herera, here is your cnbc news update. turkish police say two men suspected of planning a new year's day proper attack are in custody. authorities seizing a suicide vest and an explosive device containing ball bearings. california's four-year drought may be coming to an end or at least easing a bit. os are expecting good news later today when they get the first official snow pack reading of the year. the sierra nevada snow pack makes up 30% of california's water supply. electronic cigarettes may not be as safe as you think. scientists with the va in san diego treating human cells with the vapor of two brands of e cigarettes and they found those
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cells were more likely to show dna damage and die. bill cosby faces up to ten years in prison if found guilty of aggravated indecent assault charges filed today in a case from 12 years ago. cosby is expected to be arraigned within the next hour. and that is the cnbc news update at this hour. brian, back to you. >> sue, just quickly here, i don't know if you know this, are we going to see bill cosby in court anywhere later today? >> we do not know that. i don't know if there's a requirement that he be present or not, so we're not sure, but we will be covering the story. we'll be all over it for you right here. >> sue herera, thank you very much. >> thank you. gold prices are doing what they have done for much of the year, falling. here is your metals close right now. you can see comex gold. aside from copper, silver, palladium are down.
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let's get some investment advi advice. rob morgan, chief investment officer, and jim key, president and chief economist at south texas money management. rob, first to you. what, if any, major changes to your strategy and recommendations to your clients are you making heading into january 1? >> yeah, brian. i was prior to the fed's rate hike campaign initiation is few weeks ago, i was very aggressive recommending an overweight on stocks and the sectors i was recommends were cyclically oriented but prior to that all happening, i pulled some of my equity chips off the table. i went to a market weight on stocks and rotated into some more defensive sectors. we can get into the details of that, but from a broad standpoint, that is what i'm recommending going into 2016. >> jim, you are at south texas money management. oil has been the driver for the stock market this year.
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so what do you see happening with oil and what do you see happening with relationships between oil and stocks next year? more of the same? >> well, i'm afraid so. we've been underweight energy for about two years. we have an energy symposium with a lot of speakers. the underlying economics still point to lower oil. unfortunately, about 80% of the world's oil supplies are owned by state directed economies, so the lower oil prices and the volatile oil prices kind of can destabilize those regions. i think that's why markets are reacting in a negative way. anytime you see oil fre fae falg below $40. >> another year of the same? >> well, the underlying economics would say yes. there's just a supply glut out there that would probably take at least 6 to 12 months to work off regardless of what global demand might do. >> all right. >> i might point out that we're
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not really commodity forecasters, so the gist of that is i would expect that the oil market anytime you see it plummeting or falling below $40 a barrel, just expect more volatility in stocks, but our advice to clients is always to lift your gaze and think longer term in a market that's a little more short-term focused. >> yeah, and so, rob, obviously oil has been a big theme for "power lunch." we've talked about it for really a year now. what's going to be a surprise in or around oil or anything else, a surprise maybe that you're hoping for, not looking for, but hoping for next year? >> well, i think, you know, people this whole year have been hoping the financials would do well in a rising rate environment. and now we finally have that, and so i think that that outlook is going to be rewarded next year. i think financials should do well, but i share jim's views on the commodities from the standpoint of the dollar is going to continue nudging up.
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have an underweight on materials. i don't actually have an underweight on oil because i think cuts in production are going to catch up here soon with cuts in rig counts, so i'm a little more neutral there. financials is -- i think that will be a nice surprise for 2016. >> i know a lot of investors hope you are right. rob morgan and jim key, guys, thank you. have a happy new year. see you in 2016. >> thank you. so go to powerlunch.cnbc.com to see what else jim likes next year. melissa? >> brian, it's been a tough year for the emerging markets in part due to plunging oil and commodities prices. check out russia. the ruble in today's session hitting a new low for the year against the u.s. dollar. with all these new lows in the emerging markets, is there opportunity in 2016 or is it really all about oil and commodities? seema mody joins us with that story. >> and it's clear that investors will have to be selective on where they find opportunity given the number of macroeconomic and political factors at play. take a look at brazil. not only being hurt by the drop in commodity prices and slowing
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growth but high political uncertainty as its president deals with rising backlash from citizens and heightened concerns regarding her involvement with the petrobras scandal. two key collectielections in th will determine modi's effectiveness. ve investors are becoming more bullish on russia barring political surprises and if relations improve the west and putin, sanctions could be lifted sooner than expected so that may be one market to focus on next year. >> seema, stay right here. we're joined by ron insana. we have the ruble hitting 1 1/2 year lows. what's the outlook? >> unless you're a crazy pro,
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you don't go into russia. this is not a widows and orphans type place to invest. even emerging markets broadly speaking are still going to be dependent on how many times or if the federal reserve continues to raise interest rates, strength of the dollar, strength of commodity prices, and the strength of china. until those four variables become clear, maybe a little before they become clear, i'm not sure that it's easy to get excited about this part of the investing spectrum at the moment. >> which do you think will have a larger impact on global markets? this is a piece i'm working on for next year, fed or china? >> well, i think they're equally weighted. if the fed raises rates three times and the dollar strengthens, you have capital outflows from emerging markets that come into higher yielding u.s. securities and if china weakens substantially, you have the same problem repeating itself because the yuan will ultimately get devalued. you have a double edged sward barbelling the emerging markets. >> the last time we were in a raise rising environment emerging markets did fine and it's different this time because
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we are in a cycle where commodities are absolutely crushed and that is a key differentiating factor. >> and that includes australia and new zealand and brazil. >> exactly. >> and to the extent that it's different, you still have some currencies, and this is the same, that are pegged to the value of the dollar. you start blowing the grids apart like we did in the late 1990s and you have all kinds of turmoil that has begun this year. the question is whether or not it's going to resolve itself favorably going into 2016. >> okay. seema, ron, thank you. good to see you. happy new year. brian, back to you. >> let's get a check on the bond market on the back of that seven-year note auction that professor santelli apparently generously gave a d plus. rick? >> yeah, who let the dogs out. it was a doggy week if you were looking at the dutch auctions tuesday, wednesday, and thursday. but 90 billion of supply is out the door. new owners. let's look at the intraday of seven year. you can see the volatility right straight up at 1:00 eastern.
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normally you see rates come down after the supply. there's still time. they are moderating a little bit actually. if you look at the long end just to compare it, volatility as well, and we do see it coming off the 304, 305 area. lqd and hyg they were really popular to talk about a while ago. it's the investment great lqd that yesterday made a new low going back to 2013. the hyg made it's lee on december 14th but it's in the neighborhood we haven't seen since 2009. >> thank you very much. they say that the wheels of time stop for no one, but a famous indoor ferris wheel in times square unfortunately does. courtney reagan live in times square with that story. courtney? >> well, brian, the toys "r" us in times square is closing its doors for the last time at 6:00 today. i'll tell you why. you have to stick around. it's coming up on "power lunch."
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welcome back to "power lunch." i'm melissa lee. seaworld filing a lawsuit against the state of california to challenge a ruling by a state commission that bans breeding of captive orcas. fairchild acknowledging it received an offer by an unnamed bidder to buy all shares for $21.70 per share. and big energy names getting hit again today as u.s. crude fell more than 2.5% in trading. let's get to seema mody for a market flash. shares of universal display are up about 7% on this down day. korea's electronic times is reporting samsung and lg display are close to final deals with apple to supply displays for iphones. it follows a report stating apple will launch iphones featuring oleds. shares are near the highest levels of the day. toys "r" us is closing its
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iconic store in times square tonight. it says the rent is just too high. courtney reagan is there getting in one final ride on the ferris wheel. >> i want to try to get in there before the doors close for good at 6:00 tonight. t-rex is going to roar for the last time. toys "r" us is closing its iconic times square store five months after it closed the fao store it owned on fifth avenue. they are looking for a new location but haven't found one yet. it's among a number of retailers that are closing manhattan stores due to record high rents. average asking ground floor retail rent is up 42% in the flat iron area, 28% on just one part of east 57th street. however, the real estate board of new york says not every area of manhattan is seeing a high averaging asking rents than a year ago. rent is down as much as 6% in some areas. the average asking rent for ground floor retail space in
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times square is up 3% and it's the second highest area in manhattan at $2,390 per square foot per month. many retailers justify the higher occupancy costs in part as marketing expenses. frank lao says the big apple is really hard to beat when it comes to consumer exposure, especially for tourists even if tourism is down due to the strong dollar. now, we know that online sales have begun to steal some sales and traffic for sure from many stores across the country, and david basic at alex partners says new york city stores that cater to tourists especially could be even harder hit from this e-commerce hit. basically because if you're a tourist and you want to explore the city, you don't want to carry around a big bag, especially if you can order it online and get it delivered right to your home. back to you guys. >> courtney reagan. try to have a little fun out there today. thank you.
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airbnb is now valued around $25 billion, but landlords and governments are still trying to figure out if it is a friend or a foe. while some tenants are getting slapped with thousands of bucks worth of fines, the three biggest residential landlords are actually in talks with airbnb to work out some kind of potential revenue-sharing model. if there's a lot of money, you have to get yourself some. with rents near records, some are asking the questions, is being able to rent your place on airbnb raise everybody else's rent? you have brought in legos. >> oh, i have. >> to sort of accentuate your point. please educate us with legos. >> yellow lego. this is how much a landlord -- the landlord's bottom line. colored legos. this is how much a landlord is willing to take from someone who
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is considering airbnb but not to the landlord's knowledge. >> okay. an illegal airbnber. >> exactly. and this is the cost that the landlord incurs if someone finds out about the airbnb that they didn't even know about in the first place and the cost they incur to mitigate future airbnbers and that outweighs the profit. >> so there's a gap. here is the bottom line. if it's illegal, matt, then the landlord is taking a risk even if he or she does not know that somebody is renting out their apartment, right? because landlords can't be on top of what everybody is doing. >> absolutely. >> what is the airbnb effect on everybody else? >> if you're taking apartments off the market to turn into short-term rentals, the rents will go up because your limiting the inventory going on the market. >> i get that sort because you're not really because there
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is a tenant in place. when the tenant is away, you're airbnb'ing so you're not depriving another potential tenant of an apartment. >> correct. we're not sure on the legality on whether that's the case. >> then that's a different story. so how does that push up rents because it's not impacting the inventory. it's supply and demand, right? what you charge in rent. so if you're not affecting the supply mault thely because a tenant is in the apartment and that tenant is airbnb'ing, how does it impact the rent? >> i think what's happening is landlords are seeing that tenant is getting $1,000 per night in that apartment. they're thinking, this apartment is now going to be able to get charged $30,000, which is not the case. so then when the tenant moves out, they're going to up the rent to exorbitant amounts that are not affordable. >> right. and what's happening, i have actually spoken to landlords who we work with regularly, and for example a $3,000 apartment has commanded $5,500 for a
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short-term lease from that landlord. now, the landlord actually believes that the value of that apartment is $5,500 because he doesn't realize that there are people that are taking that $5,500 apartment and airbnb'ing it for a profit to make it affordable. it's in that gap of how much that person is paying and how much that landlord is willing to take, it's pushing it up. >> there are people who could not afford to live in a place but for some benefit they get from airbnb. >> agreed. but landlords are vetting tenants before they let them in, so there's a qualification level. >> there's a limit. the tenant has to still be able to pay his or her rent on their own because you're doing credit checks and employment checks and income checks. >> but as we learned in 2006, everybody always tells the truth when they fill out a form, right? >> it's a risk all landlords face. >> some people are fibbing, i think. >> it's a risk all landlords
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face. the hardest part is that in addition to that risk, now they're facing the risk that people are hoteling their properties, not to their knowledge, and they're getting taxed and hit with $20,000 to $40,000 fines when they're caught about the government. >> nita and matt, we have verbs. airbnb'ing and hoteling. >> right here. >> if matt comes back, he needs to bring lincoln logs or something. >> i know. >> jenga. >> that might be applicable to new york city real estate. here is what is ahead. oil down big today. materials, what a dismal sector for most investors but there's one bright spot that might have big implications for the american economy. and last year right around this time, i made some big predictions for this year and for all of you looking for an opportunity to tell you i'm wrong, i can promise you it's coming up. so get your gloat coat up.
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and this year, look at whate he put in our driveway. the lexus december to remember sales event is here. lease the 2016 es350 for $349 a month for 36 months and we'll make your first month's payment. see your lexus dealer.
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welcome back to "power lunch." i'm melissa lee. here are this hour's power points. stocks are lower but holding steady. the dow is down 45 points. oil plunging once again today. crude down more than 3% at this
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hour, and health care and utilities the leading s&p 500 sectors. brian? >> well, more bad news for the city of wilmington, delaware. dupont announcing it will cut 1,700 jobs from the company's headquarters in wilmington, and on deck we'll speak with the mayor of that city to get his perspective on the seemingly major blow to his city's economy. "power lunch" is back in two.
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dupont will cut 1,700 jobs in delaware early next year ahead of the planned merger with dow chemical. we retached to delaware's governor for an interview but he declined. he issued this statement. dupont's announcement is deeply disappointing especially to the thousands of delawareans who helped the economy grow and succeed for generations. the mayor of wilmington is joining us now. there's no city in america more closely aligned with one company than dupont and wilmington. bad news. what does this mean for your city? >> well, brian, there will be a trickle down effect from the 1,700 layoffs. most of the lawoffs layoffs will be in wilmington.
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i had several family members that retired from dupont almost about 20 to be exact. anybody that's been in wilmington, delaware, for a long period of time, we've called them uncle dupie because dupont has done a lot for our state and city. i'm saddened 1,700 people are going to lose their jobs. >> mayor, a spoke with a prominent resident of the area a month ago right when the dow chemical news was announced, and his word was tragedy with what's going on at dupont. the company has been there for 200 years. would you describe what's happening with dupont and the investors and the breakup and the mergers and everything as a tragedy? >> absolutely it's a tragedy, brian, but when the bottom line comes and the shareholders get together and they want to make changes for companies to survive, that's what they do, they merge and go after the smallest person. my concern for the future now is that these folks' pensions will hold up and their benefits will hold up. i do know personally i know some
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people that are very terrified. they're making six figures at dupont. i go to church with these folks and they're very scared. and it's -- you have to understand that when you are being told you're laid off, the job you have had for the last 15, 16 years and you're making great money with a solid company and somebody walks into your office and tells you you're out and you're not prepared for it, what do you do? you see fear on these folks' faces and it's very unfortunate, but i knew when the breakup went, i knew there was going to be a problem because what they're doing now is looking for the bottom line and, you know, when you have a board of adjusters and people start looking at ways to save money and compete with worldwide businesses, this is what happens. people at the bottom get hurt. >> at the same time, there could be an upside and that is that the ceo of dupont has said that one of those companies spinoffs, one of the three spinoffs will be headquartered in delaware. what sort of upside are you getting -- are you getting any indication as to how many jobs
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those might mean. maybe those are better paying jobs at the end of the day. >> right now they're not committing on anything. they're saying it might happen but at this point in time i'm worried about the spinoff. that's the solid problem i'm having. having to look at tax adjustments because i have to keep them in the city of wilmington. that's 1,000 jobs and that's a spinoff from dupont and that's the one i'm working with and anything i can do to help folks being laid off with dupont, the city of wilmington can't do much, but the state and the county should be reaching out to those folks. >> wilmington mayor dennis williams, thank you for taking time for cnbc. we appreciate it, sir, and have a happy new year. >> thank you so much. off happy new year, too. >> tough times in wilmington. we're with you, delaware. it is now 2:00 p.m. on wall street. same time in wimenlmington. welcome to the second hour of "power lunch" here. melissa and i are doing double duty all week. >> fun, fun. >> let's begin, you might have heard something on this program this year about the drop in oil
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prices today. in fact, the story is so big jackie deangelis was forced to leave the nymex and to visit us in studio. >> got a visa, across the border. >> welcome in new jersey. >> my morning started out with a 5:00 a.m. e-mail that said the volatility continues. this will be wild today. and it has been. when you see these kinds of moves in either direction, this is what we have to expect. so yesterday all commodities to the upside and today all commodities now to the downside. looking at ail today, the pressure we're seeing coming out of that doe inventory. a build of 2.6 million barrels certainly bearish for crude oil prices. u.s. production up three weeks in a row. i'm not sure if we have this chart for you. but if you look at u.s. production on a weekly basis you can see we started around the levels we are now, 9.2 million barrels a year. we peaked in june at 9.6 and now we've come back down. so this shows you next year it's really anybody's game. the producers, the shale
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producers, they're much more flexible in controlling their volumes, controlling their output and they can play along here depending on what opec and the saudis decide to do. but right now as you said, prices under that $37 mark and expected to potentially go lower early next year if the fundamental story doesn't change. >> why does everybody say depending on what the saudis intend to do? is there a thinking that the saudis are sort of talking up this tough rigid oil policy as a political gain? they're jaw boning at this point? because the saudi energy minister said unrestrained output is a reliable policy for saudi arabia. >> and everyone was reading that today with a very critical eye. you have to look at their budget numbers that came out just a couple days ago and know they are choking from low oil prices. how could the oil minister actually be out and say that today? now, they may be willing to draw the line in the sand even deeper than they have or they may sort of be positioning themselves to bring a big surprise to the market, and that is something people are starting to consider.
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>> remember that whole production keep up things. we were just kidding, world. >> wei let's bring in kyle cooper. kyle, here is the thing. here is the problem -- you know, you lay there and you think, okay, saudi arabia is making some money on oil but a lot of people are losing money. at some point they will make the economically rational decision to cut production. but is that where the great mistake can be made in oil right now is thinking that the saudis will act rationally? >> well, yeah, and what's rational? if they cut, does the price go up enough to offset the volume? and i think they got sick and tired of earlier in the decade losing market share, and ipg the li line in the sand they have drawn is we're tired of losing market share. we're going to maintain our customers. we're one of the lowest cost producers on earth. our margins are still better than others and we're not going to give up customers anymore. >> kyle, in your mind it's not
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about what the saudis are going to do because in your mind the saudis are going to keep going what they're doing, pumping oil. >> it certainly seems like that. this has been their mantra for quite a while. i honestly think they vastly underestimated the significance of the oil shale here in the u.s. i think they thought it was kind of a lot of bluff and wouldn't really fulfill those levels that we've seen. and now they're saying, you know what? this is via 1986. we're not giving up any more market share. >> what i think is interesting is the view right now looking at the budget and seeing some of these reforms the saudis want to put into place. basically effectively taxing the inhabitants of the kingdom that are not used to this. the concern here is we could potentially see a little bit of a mutiny internally once the effects start to pak place. that's what people are thinking might cause the shift in tone. >> absolutely. like you said, the saudis have been very, very lavish with doling out goodies to their populace.
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people get used to that, and it's going to be very interesting. i still think the royal family has a pretty good grip on the government there and is not under any duress or, you know, immediate threat of overthrow, but you know what? that's always a possibility. that's obviously one of the most volatile areas on the planet. if we come in one morning and the saudi royal family is no longer in control, things are going to get really crazy. >> kyle, what's the price of a gallon of gas in houston right now? >> unleaded is $1.57, $1.60 if you go to one of the discount sam's. >> i'll be to the airport. i'm flying into houston on sunday. we'll see each other, i assure you. kyle cooper. >> give me a call. i'm in. >> kyle, thank you very much. let's get to breaking news with sue herera. >> thank you very much, brian. we are awaiting the arraignment of entertainer bill cosby. he is going to appear in court at that arraignment nbc news is
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reporting. we expect that to happen at 2:30 p.m. eastern time as you look at the live picture. obviously that's a lot of the live trucks. this is a very big media event, and we should let you know cnbc's and nbc's cameras are there as well so we will bring that to you when it does happen. we have discovered, as i said, mr. cosby is going to appear in court. earlier this morning prosecutors outside philadelphia charged the comedian with aggravated indecent assault more than a decade after allegations surfaced that he drugged and molested a former temple university employee, and that occurred in his home. it's a felony charge. mr. cosby is 78 years old. if he is convicted, he faces five to ten years in prison. it's a second-degree felony charge. nearly 50 women have come forward saying that they were victimized by mr. cosby, but in many cases the statute of limitations have expired. in this particular case because of a civil proceeding, the prosecutor said this morning
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that some new evidence was discovered which then allowed them and basically encouraged them to bring this case against mr. cosby. so they have charged him with aggravated indecent assault more than a decade after those allegations occurred. you're looking at the live picture. elkins park, pennsylvania, is just about 20 minutes or so outside philadelphia we're learning, and he will appear in the courthouse. we expect it to happen about 2:30 p.m. sources have told nbc news that mr. cosby will probably go in the front door of the courtroom. we have cameras all over that situation in case he comes in a different door, but, again, brian, we expect it to happen at about 2:30 p.m. we will keep you posted, melissa and brian. >> sue herera, thank you very much for that. we were just talking about oil before. after energy, we should point out materials come in at number two for worst performing sector in the s&p 500 down 9%.
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freeport-mcmoran is down 70% in 2015. alcoa down 40% so far this year but there has been a bright spot. morgan brennan has found it. >> there is one bright spot. it's been a tough year for materials. they have marketly underp underperformed the broader s&p 500. but metals and mining companies have plunged. take a look at construction materials. this is an industry group up about 38% for 2015. so the two names that are fueling that, vulcan materials which has gained more than 46% this year. also martin marietta materials up 26%. morningstar says it's been a recovery story as nonresidential constriction has begun to take off. both of these company produce rocks for concrete and that business tends to be almost entirely u.s.-based. unlike other more valuable commodities that rely on demand from china and other countries. he doesn't expect to see the same kind of rally in 2016 but
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that demand for construction should continue including for roads with legislation that was recently passed here stateside and that should benefit these names to some extent next year. another group to watch, chemicals. while down about 5% -- 5.5% this year, this is an industry group that has actually soared about 15% in the fourth quarter. that's thanks to the proposed dow chemical/dupont merger. analysts expect to see more consolidation especially among agricultural chemical companies and frank mitch at wells fargo adds that despite a rising rate environment a strengthening u.s. economy should be a positive for chemicals as well. for that reason, melissa, he likes names like ppg industries which made an acquisition in mexico and is seeing its input costs come down. >> it's an interesting point about the concrete leverage plays. they're also not dependent on the dollar. >> it's so true.
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rocks are not valuable enough to move and export out to other parts of the world. >> exactly. >> but they make a lot of sense locally. >> morgan, thank you. brian? >> the top of the last hour we learned puerto rico is set to default on part of their debt payments that are due on monday. the default will total just $37 million but they will pay the $329 million in general obligation bonds. still, a big story out of puerto rico. let's bring in a man who called this morning a year ago, larry mcdonald from societe generale. there's two ways to look at the story which is, number one, puerto rico is expected to default. number two, they will still pay the majority of what is due on those g.o., general obligation, bonds. is this a good or bad outcomes? >> for investors watching us at home, there are 72 billion of these bonds. 16 different parts of the capital structure, but those general obligation bonds, those g.o.s, are about $13 billion of
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the $72 billion, so at the end of the day what we're witnessing is a public bankruptcy where politicians are picking winners and losers and that's what's going to -- that's what we're going to see over the next year as the government of puerto rico picks those winners and losers. >> yeah. they pick the winner and loser and they can decide what creditors are going to get paid. let's take the story out bigger for an investor in oregon or whatever sitting there right now thinking what does puerto rico matter to me? explain the connection to puerto rico and the bigger markets. >> all across the united states of america what we saw in detroit with that bankruptcy is some of the pension people were given better protection than the bondholders, and now people are going to look at other bonds across america, cities and towns, and they're going to start to think could government officials pick winners and losers, and i think what could transpire is the cost of financing across america,
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particularly in the cities and lower parts of the capital structures of different bonds, those costs can go up relative to what's happening in puerto rico and what we saw happening in detroit. >> larry, i wanted to -- i'm sure you saw this, too, but we saw a sharp reaction in some of the insurers of these bonds, the nbiss. they're down 3% or so apiece at this hour. the fall mostly on this news out of puerto rico. it can't possibly be the small -- the amount that's being defaulted that's simply pushing the stocks down. is there some thinking when you're looking across different issues coming out of puerto rico, are yields going higher on some of the bonds that are due to be paid out later on, for instance? are we seeing a pricing in of risk in other bonds aside from the ones that are due on monday? >> yes. we've seen a massive pricing of risk across the capital structure, so some of the bonds are trading in the low 70s and you have some bonds trading down at 10 cents on the dollar. in the case of the mortgage
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insurers, they have wrapped some of the bonds. the bonds defaulting are wrapped, 1.9 billion, so people are saying, oh, geez, how much will the mortgage insurers be on the hook for. across the capital structure you're seeing the different bonds pricing in risk and i think that it will continue over the next two to three months and through the year. >> given the amount that is going to be defaulted on on monday, larry s there any way to sort of do a back of the envelope calculation on what puerto rico may not pay in the future? is there any way of getting your head around that? >> the most simple way is if you have $72 billion of debt, $13 billion in g.o.s and after the g.o.s, you have the cofinas with better protections in terms of the language written into the bonds. besides the g.o.s and the cofinas, other bonds across the capital structure are considered weaker and there's no way to
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really quantify that right now, especially on the air, but i would just say $1 billion of g.o.s is at the top and then you have another $10 billion of cofinas and everything after that falls into different buckets. >> larry mcdonald, head of u.s. strategy at societe generale. have a happy new year. >> thank you. >> here is what's on the menu for "power lunch." humble pie and maybe a little crow on the side. >> sounds delicious. >> it does. yummy, yummy. brian is going to have to eat a lot of it. my chance to grill brian on his 2015 predictions coming up. >> but there's still time. one trading day. a small market rally, please, might help me out. we're back right after this.
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plug in some simple info and get up to 50 free quotes. choose the lowest and hit purchase. now...if you'll excuse me, i'm late for an important function. compare.com. saving humanity from high insurance rates. at the end of every year many of us on cnbc make predictions about the next year and then you try to be honest about them and say, okay, here are the predictions i made, here is what i got right, and maybe here is what i did not -- it's hard for me to say the "w" word. >> get wrong? >> what i did not get right. here is our chance to talk about it. just because you didn't make predictions because we prrnt doing the show together at that point. >> i'll make some predictions -- >> next year. >> for now i will be delivering the humble pie. i'm ready. >> first up, your prediction was that the ten-year yield would be
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above 3% and that prediction was -- >> it wasn't just wrong, it was horribly wrong. >> it was r-o-n-g wrong. >> of all the predictions i made, i knew it was the least likely to come to pass because we were so low when i made it. that would have been a monumental shift in the bond market. i thought the fed would raise rates, they did. i thought they would raise them earlier than they did. >> most people did that also. and the thing is that the wall street strategist who thought the economist who thought that they could amend their predictions and you're stuck with yours. you had to stick by this one. >> everybody you know that -- you know -- >> nobody has gotten it right. >> they're like, sullivan, you're a moron. i threw it out there anyway. >> next up, that gold will end the year trading below $1,000 an ounce and survey says -- wrong again. gold is trading at $1,060.
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the lowest trading price for the year was $1,046 in december. on the flip side gold as trading as high as $1,300 an ounce on the 21st of january. so almost a year ago. >> so this one i got wrong, yes, however, i got a piece going up where i recap it, it should be on the website soon if it's not already, which is i think i will be right soon on this one. >> i agree. you're a little early. >> early is wrong as they say in trading. i have been negative even before i joined cnbc on gold, i have been negative for five years since it was at 1800 bucks an ounce. the only prediction i can make about gold next year is i'm making no predictions about gold. i have hated it for five years. i called it a tired old mule. you get all the gold people worked up. i was wrong on gold but i think i will be right sooner than later. >> because a lot of the gold call because you thought the u.s. dollar would be stronger? >> has nothing to do with the dollar. there's a great book that says gold is simply people buy when
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currencies are unstable, when people are scared. and sta bill has returned to much of the world and gold is just a thing. >> it's been a safe haven for a long time. >> try to sell your gold if there's anarchy. you will get ten cents on the dollar for it. >> you can't eat gold. next prediction here, you believe that 2015 would hold a major sovereign default. >> i was wrong. but the puerto rico stuff, they just defaulted. >> they're not a sovereign. >> i'm not saying i was right. i'm saying puerto rico may default on part of their debt on monday. i mean, i'm not hoping for a sovereign default. i thought venezuela would because of oil, russia could. russia less likely because the weak ruble is boosting exports. venezuela, if oil stays down it's just a matter of time. >> you're thinking maybe venezuela in the next couple days could be your ticket in the next couple days? >> not next couple days. >> next prediction, ibm would
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see some sort of split. >> it would break up. >> >> a lot of other spinoffs. >> i was wrong. they have to do something. if those go well, this prediction could turn out to be right because they are going to have to take steps if the current strategy does not work. ibm was a $200 stock a couple years ago. one of the worst performers in the dow again. multiple straight declining sales. ibm will have to do something. warren buffett has even given it a boost and it's not helped ibm. wrong this year but ibm, something has to turn. >> a final prediction and you might be right on this still. that the dow would close higher for the year by -- either be flat or up -- >> my prediction was the dew wou -- dow would have a meh year. what do you mean? that's right. >> it's down for the year. >> there's a 2.8% dividend yield
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which makes it -- reverse that buzzer. >> are you going to play it backwards? >> if i am off on the dow by a half a percent. >> we'll let you have that one. you're right. >> by the way, every other strategist wif we have on this network was wildly optimistic. they've all been wrong. >> all of them. >> all of them. >> all of them. >> so i'm -- we'll call it a half for 4 1/2. >> fine. half right. >> there you go. that's over. we do have some serious breaking news with sueherera. >> it concerns news out of belgium. brussels is canceling the new year's festivities which included fireworks over a terror threat. it comes in the wake of two separate raids over two days where they detained four people, two suspects were arrested and they are accused of plotting attacks in brussels, so as a result of that, brussels has
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canceled its new year's festivities because of a legitimate and significant terror threat. we are also following a developing story right now, and that is that bill cosby is due in court within the next 15 minutes. he faces charges that were lodged against him this morning of aggravated indecent assault more than a decade after allegations surfaced he drugged and molested a former temple university employee in his home. it's a felony charge. he would face five to ten years in prison if convicted of that second degree felony charge. once again, he is expected in court in just a few moments. we will continue to follow this live developing story right here on cnbc. we'll take a quick break and then "power" is back in just a moment.
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welcome back to "power lunch." just a reminder on the developing story we're very closely following which is that bill cosby is set to be arraigned in a courthouse in cheltanham, pennsylvania, which is effectively a very close-in suburb, inside the beltway that goes around philadelphia. it's one of the most close in suburbs to deep south philadelphia. that's a copter shot and you can see there's not only a number of authorities but there's also a number of media that is there. bill cosby set to be arraigned on a felony charge of sexual
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assault. we are watching an suv right now. again, we don't know if bill cosby is in the suv, if he will be attending the arraignment in person. it would be likely he would be. >> sources at nbc -- or nbc is reporting sources are telling them bill cosby will appear in person. >> generally you do. >> he will walk through the front door of that courthouse, so we are expecting him. he should be arraigned at any moment now. sue herrera is joining us from the breaking news desk. this is a story you've been following here. this is a stunning develop. >> it is a stunning development. and earlier this morning as we watched that black suv to see whether or not mr. cosby is inside, the montgomery county first assistant district attorney kevin steele, who was in front of the media this morning, said, quote, reopening this case was not a question. he says, quote, rather, reopening this case was our duty. there was a civil suit filed by the plaintiff in this particular
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case, and it was part of the testimony that was given in evidence of that civil case that triggered the reopening or the reexamination of that particular allegation by this woman, which was, of course, that he conducted aggravated indecent assault on her. that's what led, that new testimony is what led prosecutors to reopen this case and ultimately bring those charges against mr. cosby which were announced this morning. nearly 50 women though in the past have come -- in the past year have come forward saying they were victimized by mr. cosby, but, unfortunately, the statute of limitations in many of those cases have expired. there is a separate case in los angeles that is pending right now where the limitations have not expired and prosecutors have said that they are actively pursuing whether or not to file charges in that particular case. in that case there are allegations that he molested a woman after he gave her a drink and caused her to black out at a
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party. mr. cosby is expected in court in just the next few minutes. we know the prosecutor is in the court already and has told nbc news, specifically our philadelphia affiliate, that he is expected in court in just a few moments. so, guys, we are waiting to see whether or not that is, indeed, mr. cosby in the black suv. it certainly seems like it might be given the focus of that helicopter shot on that particular suv. back to you guys. >> yeah, sue. thank you very much. generally, you do show up for an arraignment. there are cases if you filed a waiver or notice of appearance, you would not have to. in this case mr. cosby is, according to our sources, likely to show up for the arraignment. the arraignment is where they will likely set bail. if they believe there is enough to go forward with a preliminary hearing, bail will be set at which case mr. cosby, if bail is set, will be forced to put up the bond. one would assume he would have no problem in doing that as well. he lives nearby, in the next town over. there we go. the doors are opening on the
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suv. and we are waiting to see if mr. cosby will be stepping out. . >> there he is. >> there he is. bill cosby being led for arraignment at the courthouse in pennsylvania in the town next door to the one in which he liv lives. >> no comment to reporters obviously. they wanted a comment from him but he's not making a comment at all. i'm sure under the advice of his attorneys. >> he is being charged with felony sexual assault like we said. >> actually, brian, nbc is using the words aggravated indecent assault because that's the formal charge, just to step back from that just a second. that's what nbc standards is using. >> okay. thank you, sue, for that. again, the magistrate in this sense will likely go ahead and if they believe they have enough to go forward with a preliminary hearing will indeed set bail for
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mr. cosby, and then if the preliminary hearing goes forward and they believe they have enough evidence to go forward with trial, then a trial date would be set, so the process here, bail set, preliminary hearing, go forward with the trial if, indeed -- >> and, brian, you have the legal degree, not me, but a lot of legal experts are saying that there will be a lot of challenges in proving this case partly in conjunction with other sexual assault cases, that they're difficult to prosecute, but one would think that they must be -- there must be pretty compelling evidence at least in the prosecutor's view to bring charges against someone with the profile of mr. cosby. they must feel, i would think, that they have a pretty solid case. would you not agree? to bring these kinds of charges? >> it's hard to know what they've got, sue, but just generally legally, if you're going -- again, i'm not an attorney. i do have a law degree, but if you're going to go forward with an arraignment of somebody with the profile and the legal resources of mr. cosby, as a
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prosecutor, as a district, i would imagine you are going to feel like you have extremely strong evidence because this is a high-profile case, not one you would wish to lose as a prosecutor. >> absolutely. >> keep in mind that under oath about a decade ago he acknowledged having a relationship with this woman but said it was consensual. >> right. and she actually settled a suit. we do not know the terms that she filed against mr. cosby, and there are some defense attorneys out there who say that basically one of the issues will be whether or not she is pursuing these allegations against him for financial gain. however, she already settled a civil suit with mr. cosby, which removes the potential defense claim that she has a financial incentive to aid the prosecution. so it's going to be very interesting. we don't have many of the details of that civil suit that was settled, but there was some sort of monetary compensation we understand which would remove
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that particular motive in this case according to legal experts anyway. >> if you're just tuning in, we just witnessed bill cosby, the entertainer probably known at one point as america's dad walk into this courthouse in elkins park, pennsylvania. so he just arrived. you're seeing the leftover media scrum. when we saw him step out of the black suv, you saw a lot of cell phones. this will be one of the biggest celebrity trials in the era of twitter and social media that we have seen to date probably. >> absolutely. >> if it does go to trial. it's likely that it will. you have the arraignment, bail will be set, you will have a preliminary hearing. they will decide then if it will go to trial. it likely will because like i said the prosecutor is not going to go this far without having what they believe to be a strong case in which case a trial date will be set. just looking -- again, all laws are different. as you said, sue, it's aggravated indecent assault. states will often use different terminology for similar
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offenses. punishable by up to ten years behind bars in the state of pennsylvania. looking through some of the pennsylvania legal records as we speak, but that is elkins park, illinois, very close to philadelphia. and mr. cosby resides in the next town over of cheltanham. let's go back again. this is the video of bill cosby moments ago getting out of an suv to arrive at the arraignment. and a magistrate in elkins park, pennsylvania, just outside of philadelphia. >> mr. cosby, how do you feel, sir? >> as you see, craig, he almost tripped over the curb. >> obviously questions being shouted at him. refusing to answer, shaking his head. stumbled a bit on the way in. >> it will be interesting to see, as i mentioned earlier, prosecutors in los angeles are looking into more recent allegations against mr. cosby. those allegations were lodged by a 24-year-old woman who has
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alleged he molested her after he gave her a drink and caused her to black out at a party in the playboy mansion in 2008. they have not filed charges yet but they're quoted as saying they're watching these particular proceedings very closely to decide whether or not they should file separate charges in a separate incident back in 2008 involving a separate woman. so it's going to be interesting to see whether or not they do decide to reopen that and do that. >> especially because that -- she would have been a minor at that time. >> uh-huh. well, she was 24-year-old -- she's now 24. i think that's what that means, melissa, you're right. she was -- in 2008 it says according to reuters she was 18 but then other news sources have her at 17. so, you know, i'm not sure whether -- she might have been a minor, she might have been an adult at that point. i think the math on that is according to different news sources, you're getting different ages but serious
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allegations nonetheless, no matter what age. >> we're going to take a short break. what i'm reading in the pennsylvania code, the preliminary hearing by pennsylvania law is required to occur relatively quickly after the arraignment unless there's an extenuating circumstance within a matter of days. so we may know more about a potential trial date here in the next phase of this. bill cosby arriving for arraignment in elkins park, pennsylvania. you are watching cnbc, we are first in business worldwide. we're going to take a short break and then back with more right after this. it's hard to find time to keep up on my shows.
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can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. all right. let's get back to business now and those final oil trades crossing just moments ago, and it was another tough day for cried oil down 3.4%. $1.28 a barrel to $36.59. natural gas falling today as well g 6.5% to $2.21. well, it just has not been a great year for investors among many of the major asset classes. in fact, the best return in any kind of a major market you could find was in stocks. the s&p returned just 2%, including dividends. put it this way, 2015 has been one of the hardest years to make
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money anywhere since 1937. what will the next year bring? let's ask the "trading nation" team. that's larry mcdonald joining us bike from societe generale and dennis davit from harvest volatility advisers. >> t the fact that a 2% gain with dividend is the best performing asset class of any major asset classes at least in the united states is pretty fricking terrible. >> if you talk to traders, it's an absolute meat grinder of a year. hall of fame legends, buffett had a terrible year, david einhorn, carlos slim. those are my three most favorite investors of all time and they all had bad years. but the investor listening to us right now, i want you to understand, 2008 was a terrible year in the stock market but bonds were still up 22%. but this year not one major asset class had a good year, and
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that's what's made it so difficult across the board. >> dennis, what -- so we know -- let's just put this year behind us. i know we have a day and a half. it's over in our minds. >> happy to. >> what of the asset classes you track and follow is likely to be the best performing asset class one year from today? >> oh, yeah, nothing like getting put right on the line. >> just throwing it right on the line. >> what we trade at harvest is primarily u.s. indexes and u.s. equities and that's where we feel the opportunity is going to be. we feel the u.s. is growing at a slower rate. we feel that's where the opportunity is going to be. commodities, i don't know. commodities are crops i always tell people. oil is a crop, gold is a crop. i know it sounds crazy but when i used to trade beans back in the day and when beans are high, people planted a lot of beans. when oil is expensive, they drill for a lot of oil. i view them as a crop. the one area that concerns me is the private equity area, the
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unicorns is a popular term out there. like what are they worth? they had some of the greatest returns if you look at where they're marked on a lot of people's books. >> if you can get in, but we're going to have to leave it there. we're a little tight on time. the bottom line stocks, even if they're not great, will be the best performing class in your mind. thank you very much. >> thank you. >> for more "trading nation" go to tradingnation.cnbc.com. another short break. we're back right after this.
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we have some breaking news. bill cosby leaving the courthouse after his arraignment. nbc news reporting that bail was set at $1 million and mr. cosby's passport has been turned
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over. nbc reporting that a preliminary hearing scheduled for january 14th. bail is set at $1 billion, guys. his passport has been confiscated. he turned it over while he was in court. it was a short arraignment, brian, as you really predicted. sometimes they take a longer period of time. this one was pretty perfunctory and only lasted a few moments. so 1 million bail, the passport has been turned over. january 14th will be the next hearing date for the preliminary hearing, guys. back to you. >> all right. sue, thank you very much. again, that charge aggravated indecent assault. generally what an arraignment purpose is simply to make sure you are exactly aware of what all the charges are against you and to set bail if they feel that is the case. in this case they obviously did, $1 million. one would imagine mr. cosby would be able to raise that based on the value of his home alone. but also unsurprisingly taking his passport so he could not leave the country as well. january 14th is the date of the
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preliminary hearing where they will decide -- and that will take longer, melissa. that's where they say we are going to go to trial and here is going to be the trial date. >> right. and as sue pointed out before, this would be the first trial even after a string of allegations, similar allegations. this would be the first trial if it does come to trial. >> that is absolutely correct, melissa. there have been 50 women who have come forward saying they were victimized by mr. cosby but the statute of limitations has expired in many of those cases but not all of them. i think this trial is going to be watched very closely. just a little background on the allegations by the woman involved in this particular case, andrea constand. said she met mr. cosby back in 2002. at that time she was working as a director of operations for the women's basketball team at temple university. mr. cosby was on temple university's board of trustees. he was considered by this woman a mentor and a friend.
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the incident occurred allegedly in january of 2004 when she was invited to mr. cosby's home which is quite near where we're seeing this live shot now to discuss her career plans. she says that he gave her three pills and saying that they were an herbal medication. she said she then felt dizzy and had to be helped to a couch and then passed out. so that's a background on the alleged incident and when it took place and the woman who is filing these charges who now incidentally lives in canada. she's not given any comment so far on this morning's proceedings. >> the black suv you see in the middle of the screen, that's the vehicle transporting bill cosby away from the courthouse where he was just arraigned. $1 million in bail set, passport taken away. the next hearing date to watch is january 14th. we're going to take a quick break. "power lunch" will be right back.
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this year has been somewhat of a bumpy ride for the markets. we are joined with a look into year end. michael, you brought some stock picks. i want to go straight into them. the sector you like are health care, consumer discretionary,
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health care. unite ed health not long ago indicated the viability of aca ? >> well, it may not be great, and it may be better than that. so there could be some upside with the aca for united health. in this space, united health has been less volatile than the space as a whole for the second half of the year. and they're better diversified than the typical hmo company. so we still like the company. they're still growing sales. they're still growing profitability. it's a good management team. we think that shareholders will be rewarded over the long-term with united health. >> in terms of consumer discretionary, you like t.j. max. >> yep. >> have you seen any benefits from low oil prices, low energy prices? is that yet to be seen in 2016? >> yeah, i mean, it could still kind of flow through through 2016. tjx is in the sweet spot.
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if you're in the mall, most of the stores in the mall aren't doing that well. tjx offers kind of premium product at discount prices and consumers like that. particularly thrifty consumers. and we see a path where the company can grow sales at a nice double digit clip in an environment where most companies are happen to be in the mid single digits. and yes, any kind of savings that hasn't blown through from oil prices, tjx could be a benefactor of that. >> and you do like industrials. does that mean you believe in the strength of the u.s. recovery, or that global growth is still intact? >> more the strength of the u.s. recovery. so, you know, talking to the producer. dana versus the caterpillar. something that has a diversified portfolio of products that isn't based on big industrial one-time purchases overseas for infrastructure spending. so two different types of companies, and we certainly prefer danaher there.
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>> trading to a premium to the s&p 500. is it worth paying that for danaher? >> yeah, you've got two different businesses, you've got a catalyst late in 2016 where the company is going to split into two different companies. kind of the slower industrial base and the health sciences bit. so it does have a rich p.e. to the sector in the market a little bit. but you've got kind of two different types of -- straddling two different type of sectors. >> happy new year. thanks for your time. >> same to you. >> the portfolio manager at fbe capital. though it may not be animal house, in my opinion, "revenge of the nerds" is one of the great classics of all time that doesn't get the credit it deserves. david katz says that could be the theme, revenge of the nerds, not the movie, of investing next year. david is cio of matrix asset advisers. what do you mean revenge of the nerds, david? >> if you look at technology this year, the hot stocks are on fire. they're up 40 to 120%. the flip side of that is some
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very good companies like cisco or qualcomm or semantech are down. they've got no respect. they're considered the nerds of technology. we think that's going to be the place to be next year. we're a little bit wary about the valuations. whenever you're paying more than 100 times earnings, it's been trouble. even if the prospects continue to be very good. the flip side is you've got a lot of very good businesses with great balance sheets and under ten times earnings that are paying a 3% or 4% yield. we think that's going to be a much better place to make money. >> okay. so of the big-time tech companies, and you're a value guy, david, who looks the most valuable? who's the cheapest relative to how you would value the company? >> well, in terms of the cheapest, hewlett-packard, the printing business is one of the cheapest stocks in the market right now. their outlook is a little less certain. so we would buy a basket of them. hewlett-packard, dirt cheap with a great yield. qualcomm has had a lot of
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problems in the last year, we think is well on their way to fixing the problems. an activist got involved, they changed a lot of things about the company's structure. that pays a 3.5 to 4% yield that's growing. and we think that's much better situated for good things in the upcoming year. so both of those should do quite well. cisco has done quite well as a business. stock hasn't moved yet. so we buy a basket of those under 13 or 14. >> who looks the least cheap? >> a company like netflix has done absolutely great. i love the product. we have it in our house. my kids have it. but the valuation is excessive. and we think it's too richly priced relative to a lot of things in technology and relative to a lot of entertainment companies. >> so listen, costs are going to go up. everybody's talked about that. did you own it and do you no longer? >> we did not own it. we generally are trying to buy
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companies under 12 times earnings. so when we're involved with netflix, people are going to think it's gone the way of the dinosaur. basically about 15 years ago, when you have this great run on the internet stocks, companies like cisco and microsoft were nosebleed territory. we had lots of meetings and said don't expect to buy them for a long time. now that we've bought them when they're down 70%, people are pretty disgusted with that. same thing will be the case with netflix. >> all right. david katz with matrix asset advisers, now a new honorary member of lamda lamda lamda. if you saw the movie, you'll understand. power lunch is back right after this. ing 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey?
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for all the confidence you need. td ameritrade. you got this.
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take a look at that chart. something is going on in that chart this year that may be a buy signal for stocks. we'll explain what that is tonight on "fast money" at 5:00. meantime, let's get back to sue herera. she's got the latest on bill cosby. >> thank you so much, melissa. moments ago, bill cosby arrived at the police station where he is being processed, formally booked. he would be fingerprinted. they will take a mug shot of him, which the police have told wcau, which is our nbc affiliate in philadelphia, will be released to the media shortly. so he arrived just moments ago. he came directly from the courthouse where he was arraigned and bail was set at $1 million. that bail was paid by wire
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transfer, according to nbc news. mr. cosby surrendered his passport. this is in relationship to charges that were lodged by prosecutors this morning against mr. cosby. they charged him with aggravated indecent assault on a case that took place allegedly more than a decade ago after allegations surfaced that he drugged and molested a former temple university employee. at the time, mr. cosby was also sitting on temple university's board of trustees. he faces between five and ten years in prison, if convicted of this second-degree felony charge. and there you see mr. cosby moments ago being led into the local police station. now, it's going to be interesting to see how this proceeds. we will have the next preliminary hearing held on january 14th. guys, back to you. >> all right, sue herera. january 14th is now a date on the u.s. calendar for mr. cosby. in the meantime, a couple interesting things happening in the markets, as we are
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continuing to watch them. energy socks are close to session-lows, so we have seen a deterioration on the equity side of the oil trade going into the final hour of trading today. >> one more day left in the year. one more day and an hour left. thanks for watching "power lunch." "closing bell" starts right now. welcome to "the closing bell." i'm syrara eisen in for kelly. >> and i'm bill griffeth. we're going to talk about the selloff's impact on the middle east, the global economy, state economies, the ruble. >> oh, yes. ruble coming up. >> meantime, this is a fascinating part of this story. alaska now considering an income tax for the first time in 35 years to make up for lost oil revenue. the governor will join us coming up to explain t

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