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tv   Power Lunch  CNBC  February 10, 2016 1:00pm-3:01pm EST

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things stand and what we should be aiming for. >> time of the gentleman has expired. the chair anticipates calling upon two more members, mr. bar and mr. delany and then excusing the witness. the chair now recognizes the gentleman from kentucky, mr. bar. >> thank you, mr. chairman. chair yellen, thanks for being back before us. the last time you were here we talked about a qualified clo concept and you were kind enough to respond to that question in writing. i want to thank you for that and particularly thank you for recognizing that the qualified clo concept could be considered a positive development in the market. and i'd like to continue our discussion about the role that regulation could very well play in terms of being a source of economic instability, particularly in our capital markets. the basal committee, one
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industry study suggests that trading in u.s. asset backed securities will become uneconomical if the rule is not tailored to fit the u.s. market place. if it is uneconomical to act as a marketmaker for commercial mortgage-backed securities or residential mortgage-backed securities, auto loans, credit cards, collateralized loan obligations, then banks will pull out of the abs market which represents a $1.6 billion source of consumer lending or 30% of all lending to u.s. consumers. so my question to you, chair yellen, is how will the fed ensure that the final rule will be tailored to fit the u.s. market which is the most liquid abs market in the entire world? >> so i will have a careful look at that.
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i'm not familiar with all of the details of the b asal proposal, but anything we implement in the united states, there is nothing automatic that is implemented in the united states. and we will have a careful look at what the impact would be. >> well, i appreciate you doing that. and i continue to urge the fed and you in particular as a member of fsoc to look at government regulation as a source of economic instability. to that end, we are told by many of the regulated bank holding companies that there is no updated organizational chart within the fed. and so my question would be can you share with us or can your staff share with us a detailed organizational chart with the names and titles of the bank supervision regulation divisions full professional staff? >> i think so. >> the organizational -- as i'm told, whatever organizational chart you have is very dated. and so we can't even get many of
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the folks can't even -- >> yeah. i don't see any reason we can't. >> i appreciate you doing that. switching gears really quickly to the consumer financial protection bureau and funding source, which as you know according to the budget overview, the bureau makes public transfers from the federal reserve system or capped at 618 million for fy '15 and the transfer cap is estimated to be 631 million for fy '16. given my time is scarce, if you could answer the following in yes or no responses that would be greatly appreciated. does the fed approve the bureau's budget? >> i'm not -- i mean we fund the bureaus. >> you fund it, but do you approve the budget? >> i don't think -- i think the answer is no, but -- >> can you veto specific allocations requested? no.
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>> i don't think so. >> and does the fed have protocols if the bureau seeks to transfer more than the cap on its transfers under the formula? do you have a protocol in place to prevent that? >> i mean, we abide by the law. i need to look at the details of what our obligations and limits are. i need to look at that more fully but certainly have protocols to abide by what congress set out. >> well, see, this is the problem that we have is that we don't have appropriations over -- we don't have appropriations control over the bureau. and so they get their funding from you, we would hope they would at least be accountable to you as the funding source. is there any direct oversight of the implementation of the bureau's budget by the fed? >> no. our inspector general has authority both for the fed and the bureau. but the fed does not have
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authority over the budget and spending of the -- >> thank you. thank you. >> and my last ten seconds, you've talked a little bit about the need for congress to address our long-term debt and deficit crisis. this seems to me a five alarm fire. why isn't the fed, given that mandatory spending is 70% of the federal budget, why isn't the fed more aggressively warning congress that it must reform mandatory entitlement spending? >> every fed chair that i can remember has come and told congress that this is a looming problem, with serious economic consequences. i know my predecessor has -- i have on many occasions, i certainly remember the chairman greenspan discussed with congress the importance of addressing this. >> thank you. >> time of tgentleman has
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expired. >> thank you for your leadership in general, but also your participation and patience at this hearing. also want to welcome our visitors and guests here today and thank you for bringing your important message. we do talk about how our unemployment rate has gone down substantially, which it has, below 5% now. but we all know when you get behind those numbers, there is really only two types of jobs being created right now in this country, high skilled, high paid jobs, we need very, very specific skills of advanced educations to get those things and low skill low paid jobs and we're not creating middle skill, middle class jobs, the kind of jobs that have been the backbone of the country for a long time and allowed wages to grow and allow families to raise their families with one job. infrastructure, there is nothing we can do as a country to help address that problem more than rebuilding our country. so if i could ever edit your t-shirts, i would say let our
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wages grow, comma rebuild our country. but my question for the chair and again, thank you for your patience, in december when the decision was made to raise the federal fund rates, in your testimony you said that was in part based on a view that economic activity would continue to expand at a moderate pace and labor market indicators would continue to strengthen. and certainly based on the top line data from 2015 and 2014 where we saw decent gdp growth, improvement in the residential market, business investments, at a decent level, not where we would like them, but at a decent level, increases in r & d investments. but you take into consideration the negatives from the oil and gas sector, the outlook for economic growth was reasonably solid and the labor market data that you were looking at the time must have been good because the january numbers were encouraging, not only in terms
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of unemployment, but wage data as you talked about. my question is, a lot has happened since that decision in the markets. and that tends to change behavior. when you look at the same kind of -- the same data you looked at when you made that decision in december, if you look at that data now, does it change your view as to your perspective on economic activity, economic growth, and general labor market trends. >> so i think the answer is maybe, but the jury is out. we have continued to see progress in the labor market over the last three months. there have been 230,000 jobs per month, averaging through. gdp growth clearly slowed a lot in the fourth quarter. my expectation is that it will pick up this quarter. but on the other hand, financial
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conditions have tightened considerably and that can have implications for the outlook. and with the committee set in january, we had previously said that we regarded the risks to the outlook for economic activity and the labor market is balanced. what we said in january is that we're evaluating and assessing the impact of these developments on the outlook for both labor market and activity for inflation and the balance of risks. and that's what we're doing at this point. >> when you look, chair yellen, at recent data that you get better than anyone about credit formation and borrowing activities in the markets, are you concerned that there has been a significant contraction in credit availability based on recent market activities? and how much does that factor in
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to your -- >> that is an important factor. >> and have you seen it? >> well, not really at this stage, but what we do see is that spreads, especially on lower graded bonds have widened considerably, borrowing rates have widened. >> what about bank lending? >> and it is not just energy. in our most recent survey of banks on their lending standards, we have seen a tightening that is reported in cni loans, in cre loans, and that certainly those loans continue to grow, but that is something that bears watching. and those -- it is really those kinds of trends that we need to evaluate. >> very quickly, as you weigh your decisions, inflation and labor market participation are critical, overall view of
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economic activity is critical. this subcomponent, what is happening with credit availability, how important is that in your decision-making process? >> well, what we're trying to do is forecast spending in the economy. investment spending and housing are two important forms of spending. and credit availability factors in to our forecast for both of those portions of the economy. they're not the only factors that matter, but they are a factor that is important and so we will be considering those and, you know, there is a number of weeks before we meet again in march. there is quite a bit of additional data we'll want to look at. but you've pinpointed exactly the kinds of considerations that will bear in our thinking. >> thank you, again. >> time of the gentleman has empired. the ranking member is recognized for unanimous consent request. >> unanimous consent to insert
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into the record a statement from financial innovation now, that would like to highlight the very important work that fed reserve board is doing through the faster payments task force which ben is a member. >> without objection, i thank chair yellen, thank you for your testimony today. without objection, all members have five legislative days with which to submit additional written questions for the witness to the chair, which will be forwarded to the witness for her response. i ask chair yellen you please respond promptly. without objection, all members will have five legislative days to submit extraneous materials to the chair for inclusion in the record. this hearing stands adjourned. >> welcome to "power lunch." i'm brian sullivan. today in washington, d.c., tyler, melissa and michelle are at cnbc hq and we're here in part because of what you just saw, fed chair janet yellen wrapping up her testimony on the economy, not far from where we're sitting right now. hello, everybody. your money is a little bit higher today, dow up 80 points, even as oil moves down and
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concern about the possibility of negative interest rates in america, tyler, moves up. >> all right, brian, thank you very much. we'll be back with you shortly. that is where we pick it up with our steve liesman. sum up chair yellen's testimony and its effect on the market. >> i thought she was down the middle. she told them that, you know, the fed sees the risk from china, the risk from market volatility, to the hawks she said, you know what, she did not remove rate hikes from the table. remember, this market is priced in no rate hikes this year. i could see the fed if the data were to turn, you know, even after yellen's speech coming back and hiking rates if you were to get further improvement in the unemployment rate, a further sign the weakness we saw in the fourth quarter is not continuing into this year. there was one thing she was asked about this, i think the best way to put it, in her own words. >> well, there is always some risk of a recession, and i
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recognize and just stated that global financial developments could produce a slowing in the economy. i think we want to be careful not to jump to a premature conclusion about what is in store for the u.s. economy. so i don't think it is going to be necessary to cut rates, but that said, monetary policy, as i said, is not on a preset course. >> just one more thing she talked about, negative interest rates. and she said the fed wouldn't rule them out. but -- and also a question to the legality of it, said the fed hadn't fully studied it but did not strike me as any nearer to being a reality in the united states now. >> let's bring in ellen zentner. you agree with steve's assessment? what if anything stood out to you from chairman yellen today in. >> she threaded the needle.
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they don't speak the same language. the fed is never going to be willing to say anything further than we're unlikely to hike rates at the next meeting. and they haven't pushed back against market expectations that are assuming they're not going to go in march. but markets that want them to say something more definitive like rate hikes are off the table for this year, or say anything about the path of policy after march, markets are just not going to get that, not from a data dependent fed that does no forward guidance. >> maybe it is my impression of it, but i got the impression compare ed to the last time, sh was more cognizant because she was cognizant then but admitted more up front that the dollar appreciation is a head wind and global hot spots, turmoil, is more of a head wind here. >> absolutely. the tilt was dovish in the same vein as the january fomc statement and bill dudley's
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comments on february 3rd. she was more explicit about what part of financial conditions is it that you're tracking. we're trying to send that message to markets, i hear you, we see this, it does pose a risk, but it is too premature to say it is a downside risk. >> what i worry about is the gap remains wide. i worry that the gap will be filled at least from the market standpoint, if the market ends up being wrong in a violent way and you can imagine the march employment report coming in with a 4.8% unemployment rate, another tickdown. and high wage growth. and the market is going to be -- i know it is only a five-yard penalty offsides in the nfl, but this will be a 15-yard personal foul if the market is offsides on the fed here. i think they have gone way too far. in pricing out the possibility. >> i think the fed is never going to see eye to eye with the markets. the market is pricing in recession. that's why they're expecting a rate hike.
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here is how yellen and crew can bridge that gap. at the march meeting, we know just based through data, on data through today, financial conditions through today, they're going to have to revise lower the forecast for growth and inflation. i bet those dots come down from 4 to 2 rate hikes for this year. that's not that far from market perception. >> let's take a pause here. we have a news alert in the bond market. ten year notes up for auction. rick santelli. >> demand is the great -- it was a bit above average. i gave the grade a b minus, b as in boy minus, yield in auction of 23 billion 10-year notes. looks like 1.73, 1.75, 1.74 is traded priced right with one issued market. if i look at bid to cover, white fly in the ointment, 2.56, versus 2.65 ten auction average. lowest since august of 2015. everything else, 62.3 on
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indirect. a little better than ten auction average. 15.3 on direct, best since may of 2015. primary dealers get 22.4 in the auction. so b minus, makes sense. when there is all these issues regarding the fed, tomorrow is the longest end. we finish off with 15, 1.5 billion of 30 year bonds. melissa lee, back to you. >> rick santelli, thank you so much. let's continue discussion. would the markets -- >> i want to point out with the u.s. government can sell bonds, 2.5 times bid to cover at 173, that is an a in my book. >> you're selling 173 on the yield and you can sell at 2 1/2 times bid to cover, that's an a in my book. what were you going to ask? i'm sorry. before i interrupted myself. >> are the markets offside with the fed? if they go down to two hikes, for the year, would that mean the markets lost that?
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>> not that much. she's right. if the fed comes down, i think that's a good possibility that the fed does come back, at least to 3, maybe to 2. >> the risk to 3, that won't tell the markets anything. you're at the march meeting. march is taking off the table. just bringing the dots down to three won't do it. you're having to herd cats here. you have 17 policymakers turning in their individual forecasts for where they think the path of policy will be. you can't say somebody has to take one for the team and lower the dot. it has to happen organically. there is the risk that the median comes down to 3, maybe the mean at 2 and we split hairs. >> i don't trust the stock market because i think prices are down for a lot of reasons that may or may not have anything to do with recession. but is the bond market telling you that the u.s. economy is going into recession? >> well, the bond market, that's the bear market, right? and so what the bond market, what bond market pricing tells you is that it is an average way
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across a whole host of scenarios, which is going to include very terrible scenarios, recession, they back out the one rate hike they did, they possibly go negative. that's always going to keep much fewer rate hikes priced into the path than what the fed is going to show. and that's when i say they're never going to see eye to eye, the fed and markets, but they can meet closer to the middle so when -- >> i agree, but i will say this, numerous times over the past five years when the economy has been in recovery, we have had yields either at this level or even below this level. we hit 1.75 on the way up and everybody is like, that's good news. why is 1.75 now bad news? >> it is not necessarily bad news. it is just that i feel like market sentiment has gotten disconnected from the fundamentals of the economy. what i'm worried about -- >> i want to interrupt real quick. the bad news is in the high yield spreads. what happened to the cost of funding for corporations, it is
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where interest rates hit the real economy and that's where there is some problems that are out there. what you have in this 173, in my opinion, is a flight to safety. you have that in the gold price and everywhere. >> things were getting better. what was it then? >> usually when the market feels better about the economy, the yield tends to rise. and when it feels really scared it goes scurrying for the cover of the u.s. government and it buys u.s. treasuries. that is the general pattern. >> you also had the 2011 crisis. there were reasons why the yields went where they went. again, for reasons that either had to do with the u.s. economy or exogenous factors is what drove those lower. >> i'm being my normal nagyse sf
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and i hear what he's saying. but i will say is anything normal these days? we have central banks throwing trillions of liquidity around the world. my point is, i wonder if the bond or stock market doesn't give us a false read on anything now, because there are so many of those, as you say, exogenous factors. >> the world is a scary place where do you want to be when the world is a scary place? we learned the cycle of global central bank easing is not anywhere as near complete as we thought it was. we have got japan negative going further negative probably, the ecb providing more and the fed on a tightening bias. >> i want to add to that answer, people have said the fed is involved in financial repression. and keeping interest rates down. i believe there is a message from the markets here that the fed is way too tight. and that given its own place of
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where it would set the interest rate it would set it quite a bit lower than where it has been and the idea that somehow the fed is keeping rates artificially down, i don't think that's right. the world is a scary place. and the ability of the market to actually price where it wants to go, despite where the fed is, is what is interesting to me. >> i don't think that lead monetary policymakers feel too differently than you. >> i'm pretty sure they don't. >> they believe and their own studies have shown if they could have gone deeply negative, they would have. and the real equilibrium weight is perhaps flat and those are in janet yellen's own words. >> what do you think? what is the state of the u.s. economy? what is the growth going to be this year? >> the fed keeps concentrating on real private domestic demand. the domestic economy is still growing. we had some slowing in the domestic economy. yellen admitted that today. look, i don't want to say it is late cycle. who knows what that means.
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it is a mature cycle. and the domestic economy has slowed a bit. you can't withstand this kind of volatility without some hit to job growth without some hit to the personal -- >> let me point out, guys, the final word -- >> the fed is at 2.4 and that's important. >> morgan is one of the low guys on the street on our cnbc rapid update. we just ratcheted up to 2223. looking at a decent snap in the atlanta fed which people follow had been at 12, now at 2 1/2. we have that problem with the weak first quarter, a perennial problem, but in general, we're looking for nothing to write home about, but still pretty decent. that's a lot of hyphens in there, first quarter. >> got it. >> yeah. our market is going to embrace that. >> ellen, thank you very much. appreciate it. we'll have you back soon. maybe next time we'll get you a
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seat. we'll serve drinks next time. you know, whatever we have been talking about, stocks are higher now. dow is up 39 points. not as high as it was earlier. not as low as it was earlier. there is the s&p 500 up 18 points and the nasdaq higher by 74 at this hour. melissa? we're watching shares of tesla, earnings out after the bell. share at a two year low as oil plunges. that continues to raise questions over the success of the clean energy vehicle. the stock is down more than 38% this year alone as several analysts continue to downgrade the stock. we found one who is still bullish and think the stock could double. colin rush is a managing director at oppenheimer. great to have you with us. >> thank you for having me. >> there are so many concerns through the when it comes to tesla. i'll address them one by one with you. when it comes to execution opn the model x, they're concerned about the demand side of it. other analysts are concerned
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about the production side of it, the execution glitches. what are you expecting on the x? >> for us we have seen this company execute very, very judiciously in the early stages of the work. we're expecting that here with the model x to make sure they perfected the product. that's the core confidence, we think, for this company of making high quality products that really do serve the luxury market and they maintain that brand quality. so we're expecting a relatively slow ramp on the model x production to make sure they have all the processes in place. >> we have to talk about tesla's cash burn. they're coming up on a period where they could be out laying a lot of cash with the battery factory and the launch of the model 3, the more mass market. the share price feeds into that. we're talking about levels not seen for a couple of years. a different picture from when the company raised money last summer when the shares were trading at around $240 a share. how concerned are you about the cash levels at tesla and the cash burn in 2016? >> we have seen these -- this management team be very good
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stewards of capital over time. they brought the numy facility for pennies on the dollar, judicious in terms of cap x and ramping up. the factory is a huge project for them and a multiple of what they spent on capex before. we're seeing them get joint payments from their partners in that factory. because it is a big nut for them. we think they're going to be ramping that factory in segments and walk through the ramp up of the first stages carefully to make sure they got their production in line and demonstrate they can do this. as they demonstrate the capabilities, share prices will come back and they will have access to cheaper capital. >> your target price is 340 bucks. quite a different story from where the stock is trading now. are you expecting a big second half of the year. is this a back end loaded kind of year. the stock trades terribly. anytime you see a pop in the stock, colin, we see it sell
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off. >> we're seeing that not just with tesla but any number of core holdings for long-term investors. i think our price target is looking out to the -- to the successful ramp on the model three which many long buy to holders are looking at. we need to be looking nearer term and i think what we're seeing right now is no real serious problem with the demand. the first quarter could be a touch lighter than where the three estimates are, but i think that's well digested particularly at the stock price. as we look out over the balance of the year, not looking for heroic execution, we're looking for solid execution and continued progress on the giga factor and model three. >> colin, appreciate it. another struggling stock reports after the bell today. twitter. down almost 70% on the past year. sitting around all time lows. the social media giant announcing major changes to the business. is that going to help drive user growth and what is twitter's
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turn around plan? that's still ahead.
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welcome back to "power lunch." i'm michelle caruso-cabrera. gold prices closing lower, a decline of a third of a percent, showing you the rest of the medals, complex silver, copper, palladium and platinum mixed today. platinum higher by 1.5%. silver lower, ditto for copper, trading around 2 bucks there. >> let's get a check on the bond
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market. rick santelli is at the cme. >> if you look at intraday aforementioned tens, you'll see it was a good deal of volatility right around 1:00 eastern when the dutch auction ended. but here we are sitting half a basis point away from unchanged. one with the markets. let's take a macro view. let's open a chart up back to march 2013 for 10s. technicians say it looks like we're coming to an area that could support us. let's look at the five year back all the way to 2011, at 115 and 120 area, looks like it is already gotten to an area of support as the rest of the curve catches up. if we're one with the market, we should see it all fit together. let's look at the dollar index, only since september of last year and you can see the 95, 96 area, a lot of wood there, these are times traders are saying maybe there is a pause to refresh. will it happen? let's wait and see what happens after the bell tomorrow. brian, back to you. >> i'll pick it up, rick, thank
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you very much. and from low rates to no rates, even negative rates, it is nearly impossible to find a return on your investments right now. but no worry, we'll show you three beaten down blue chips with strong balance sheets and really nice dividends. and panera popping in today's market. look at the reaction in that stock, post earnings, up $11 a share. that's 6%. don't miss cramer's exclusive with the ceo of panera tomorrow night on mad money. we needed 30 new hires for our call center. i'm spending too much time hiring and not enough time in my kitchen. (announcer) need to hire fast? go to ziprecruiter.com and post your job to over 100 of the web's leading job boards with a single click.
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welcome back to "power lunch." i'm michelle caruso-cabrera. the dow now is higher by about 11 points off its highs, off its lows. it would be up even moore if not for disney, dragging down the index. that stock is falling despite strong earnings and revenues. but there are more worries about the future of espn. disney stock down 25% in the past three months and now it is lower by 3.5%, down $3.39. if you look at broader markets, the dow is high, ditto for the s&p 500, higher by 15 points, nearly 1%. the nasdaq higher by 1.5% and
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russell higher by 1.3%. sue herera standing by for a news update. here's what's happening at this hour. new jersey governor chris christie expected to announce he will suspend his bid for the white house, according to reports. it follows a disappointing finish in last night's new hampshire primary. now it is on to south carolina for the candidates staying in the race. florida senator marco rubio already on his way, hoping for a comeback because he came in fifth last night. china reporting the first case of the zika virus. the government reporting a 34-year-old man who recently travelled to venezuela has been diagnosed with that virus. he is expected to recover. and customs agents seizing nearly 2400 hoverboards in charleston, south carolina, they say the two-wheeled motorized scooters were made in china and violated federal trademark laws and they posed a fire threat. a similar seizure recently happened in chicago. watch out nathan's. well, burger king is adding hot
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dogs to its menu. the so-called grill dogs will come in two varieties, there you see them. the classic and the chili cheese on the menu starting february 23rd. power lunch. we thought we would do the hole dog story. >> you're making me hungry. we don't serve lunch on "power lunch." >> that's the ultimate irony. i remember ankering it, we don't get lunch? the dow trying to avoid a four day losing streak, something that hasn't happened since last august, believe it or not. so is this the time to start buying stocks, the large caps, joining us are brad mcmillan, chief investment officer of the commonwealth financial network and robert luna, ceo of sure vest wealth management. welcome to both of you. are we either in, brad, or headed for a bear market? the s&p isn't in a 20% decline posture, but as bob by sa pisan reported, some of the qui
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constituent markets are. >> you can make a case we are in the bear market and we might see more damage going forward. i think the real question is this going to be a sustained bear market or a shorter term bear market. i think it is going to be a relatively short bear market if we get that thought. >> robert, how about you, how dire is your view of the market now? i note you're suggesting some large cap picks with dividends that beat the yield, which isn't much. >> it is a pretty low hurdle rate right now, tyler. i agree, i think the point of whether or not we're in a technical bear market based off of a 20% bull ppullback on the irrelevant now. if you look at blue chip stocks, they're trading down 25 to 30%. if you get bearish on the market and think about bailing out, i think it is absolutely the wrong time. >> you missed it. should have done that a long time ago. >> to your point, 1.7% ten year,
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this doesn't help somebody. if you're saving for retirement, looking to retire, it won't get you there. if you're like the average investor out there, retiree who needs 4% to 5% from your portfolio, that won't do it. when the dust settles and you look at microsoft, boeing, jpmorgan, paying 3, 3.5%, with very good different coverage, i think investors will rush back into the names again. >> speaking of microsoft, wasn't to ask you about that one. an environment where in technology we're seeing valuation compresses, we also got data points, workday talking about the challenging business spending environment and concerns about a cloud war going on between google and amazon, and microsoft is in that fray too. the last time there was a cloud war, that weighed on margins. how much of these head winds are you concerned about on top of the general market sentiment, which is not in technology's favor. >> yeah, you know, those are all really good points, melissa. i think you look at the pullback in microsoft, actually, it
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hasn't been nearly as significant as some of the other names in that space. it has been about 13%. only 13%. you know, i think saca is leading microsoft and is really reinvag reinvigorated that company. when people are worried about dividends when you see conoco slashing dividends, look at the free cash flow, last year alone was $26 billion, their dividend payout was $12 billion. they have great coverage there. $86 billion in cash. and first time in a long time i can remember, they're actually making products that people want to buy. i begrudgingly brought the surface pro last year, thinking, oh, no, that's a great product. i think microsoft is turning the tables around. i think it is going to be a great long-term investment. >> if i could go in a different direction with you, they point to what happened in new hampshire, and the way the analyst there sees it, too
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populist or voted for by the various new hampshire voters. they're both, he thinks, anti-trade, thinks trump might start a trade war, both supported singer payer, trump at one point did so and certainly bernie sanders does. there is so much concern, he says, he thinks that's one of the reasons why the markets have been getting hit beyond all the other concerns. are you worried about that? >> yeah, michelle. >> i was talking to brad. >> i'm sorry. >> i am worried about that. because it is a question of certainty and uncertainty. the market hates uncertainty. this is the most uncertain political environment we have had in years, if not decades. even the republican is really aiming toward the populous tone and if that really suggested change in how washington is going to start thinking, then business is going to be affected across the board. it should shake the market. >> are you investing differently right now? are you putting that -- you
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think about what stocks you're going to buy, are you making that a consideration at this point, brad? still waiting to see what happens? >> at this point it is early days. the only sector i'm keeping an eye on because of politics is health care. there is a lot of headline risk there, we have seen martin shkreli come up there. we have single payer, we have obama care. health care, whoever wins, is going to be facing enormous changes in the next couple of years. and that's an area that is going to get affected by the politics. the others not so much. >> brad, we have to leave it there. brad mcmillan, and robert luna with sure vest wealth management. go to powerlunch.cnbc.com now to see which stock he's betting on. scholastic shares are higher, publishing new harry potter book. harry potter and the cursed child. it follows harry as an employee of the ministry of magic, husband and father of three kids. plus, could the u.s. go negative on interest rates and what it
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means for your money if it does. we'll take a closer look. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade. i thione second it's there.day. then, woosh, it's gone. i swear i saw it swallow seven people. seven. i just wish one of those people could have been mrs. johnson.
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welcome back. here are headlines you may have missed today. panera bread shares are rising after an earnings beat, even though sales did miss. panera raised prices. by the way, catch the ceo of panera on mad money with jim cramer tomorrow. fit bit shares rising after it was reported that sales force ceo bought a stake in the company. aramark, earnings met wall street forecasts of $3.71 billion. that was slightly better than expected. all right, fed chair janet yellen grilled on capitol hill. a lot of things including negative interest rates. joining us now, ron insana, who has written about them. you said in the past you think they'll go negative interest rates. she wasn't tipping her hand today and almost sounded negative about negative interest
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rates. >> negative about the negatives. >> rates should be at 4% right now. i think she questioned the legality, which i don't understand. >> somebody questioned her about the legality. she said, no, we have the right. legally we can do it. >> if you read the fed literature. it is part of the toolbox that the fed has, or could deploy at some point in time. the economy looks like the risk of recession is higher. it looks like the earnings recession continues and that the rest of the world with negative rates will force the fed to freeze if not do more. >> what about this argument that we and the united states compared to europe, et cetera, we have this money market system, so huge and the turmoil it would cause would offset any benefits you might get. >> and that's true. i'm sure the fed is cognizant of that. if things get weak enough and big argument if we can import a recession or deflation, if you do begin to see that, negative
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rates force money back into the economy. and if you look at the velocity of money now or theoretically they do, if you look at the velocity of money, it continues to decline. the turnover in the rate of the money supply is very, very slow relative to the level of interest rates and the amount of money available. >> if you think the fed will have to go to negative rates, does that mean you believe the u.s. will be in a recession? or is this all a relative call that we're going to be chasing negative because everybody else is going to be there first. >> i think both. you can have a cyclical bear market which we have now. a cyclical recession and secular recovery, but that doesn't mean given where we are in the rate structure that they won't have to go back to zero or go negative in order to stimulate the economy. listen, the biggest problem and the reason that negative interest rates are being discussed is the total absence of fiscal policy, stimulus, which actually serves us much bet zwlet. >> has the market taken the tool out of fed's hand? >> i don't know either is the case. the market, yield curve is flattening. so that in itself is telling you
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something about where we are in the economic -- >> but there are financial conditions contracting. we see high yields, so much more expensive to borrow, hasn't that done part of the -- >> yeah, it argues against or mill tats against the fed raising rates more and if it gets too tight, it argues they may have to unwind. if i were in the fed's position, i would take interest on excess reserves to zero. and have banks create disincentive so it flows back into the economy. >> we'll see. thanks, ron. ron insana. bank stocks getting a small bounceback today after a couple of rough days of selling. we'll ask a top banking analyst for his top picks in the sector. and the irs once again a target for cyberthieves. what is the agency doing to keep your personal info and your returns safe? coming up on "power lunch." this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture
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even down here in the dark i can still see we're having a great month. and celebrate accordingly. i run on quickbooks.that's how i own it. so what else is new? humm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.
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welcome back to "power lunch." here are this hour's power points. stock is moving higher, the dow is steady, nasdaq and russell 2000 and midcap indexes the biggest winners, up 1.5%. health care, technology, consumer discretionary, those
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are the biggest sector gainers. akamai is leading the s&p 500. the medium continues today as the biggest box office smash of all time couldn't save disney from worries about espn and not just disney. time warner clobbered. viacom.
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disney, the biggest drag on the dow, down more than 3%. the stock down nearly 15% so far this year. meanwhile, viacom seeing a massive decline down about 23% over the past week. so what's going on with the media stocks and how should you invest if you should invest at all. tona amobi, does viacom deserve to be taken to the wood shed the way it has been? >> i think it does. viacom is facing unique issues, both secular and cyclical. i think the company is much more vulnerable than other large media companies in this rapidly shifting landscape. >> why? >> because younger consumer are, you know, basically driving the
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shifts in the media landscape in terms of the consumption of video. i think viacom has not been responsive as it might have been. and now it is trying to play catch up where as some other companies, actually, i think, you know, got out in front and just kind of tried to take the digital initiative, which viacom just started to do. >> so you're basically saying that it is -- the channels that it has, that cater to children, like nickelodeon, have suffered but disney has been able to hold on to them. >> yes. >> disney has a different business. >> that's right. the portfolio, asset mix of the two companies are radically different. i also have to say that disney has been cut up in this -- what i might call the overall recalibration of expectations across the industry. obviously subscriber issues have become paramount. espn, et cetera. but overall, i think, you know, the ecosystem for the long-term remains in decent shape.
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in the near term, a lot of issues that companies like disney and viacom have to navigate as a whole. investors want to know -- >> so you say that viacom deserves to be taken out to the wood shed. do i hear you saying disney, maybe it is overdone there and they don't deserve it as much. >> vie coacom is trading at a multiple discount of 30% on enterprise value to ebitda. for a variety of issues, so your question, yes, i think it deserves that discount, especially given the government's issues that have surfaced in the last few days as well. >> viacom that is, yes. >> that's right. disney, on the other hand, obviously, pure content, "star wars," robust franchise pipeline, even as concerns have appeared on the subscriber side, you know, the content engine remains solid with things, so in the long-term, you know, disney's premium is probably
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justifiab justifiable. >> it is much greater than the s&p 500 and the s&p 500 consumer discretionary sector which is its sector. how much more can that go on given the market, just the environment in which we're taking down companies that are trading at premiums, when there is a question about what is driving the growth and in disney's case, the question is about espn. >> that's right. you know, i think disney has an embarrassment of franchises. no other media company, i think, can say that at this time. the pipeline is exceedingly robust. even espn, concerns appear to us to be overdone. nearer term, sure, they face some issues with growth. we reduced our target yesterday for disney to 108. across the sector we're cutting our target prices. longer term we think the dynamics remain in tact for not just espn, but for the content side of disney, which if you
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think about "star wars," a lot of home grown and acquired franchises, you know, frankly i don't think that we have ever seen anything like this before in terms of the -- in terms of the pipeline and the robust content that the company has. overall, as i said, the violations have come down. we think that there is going to be some caution in the near term as investors sort out the impact of the subscriber issues. >> tuna, thank you very much. good to see you. tuna amobi with s&p capital. >> let's get you caught up on what is going on in the markets now. roller coaster. stocks holding on to the green. the dow jones industrial average higher by .1%. the s&p 500 is up by .8. up to 1881 earlier in the day. look at nasdaq, where the action is going on in the riskier sort of higher beta areas. nasdaq up by 1.5%, within the nasdaq it is worth noting that biotechs are up by about 3% on the day. the crude picture, 2745 is last
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trade. the oil market closes in less than 30 minutes from now. we'll take you there live to the nymex. >> bank stocks rebounding after this hour, after the steep declines and what we had seen earlier in the week. look at deutsche bank, recovering some of yesterday's losses, it is now up more than 6%. analysts atributing it to the news that seemed to break here yesterday, they're considering buying back some senior debt, but seemed to take full day for it to be seen in the stock. what's going on? let's bring in eric wasserstrom. good to have you here. we know so many of the issues facing the banks. how on earth will they be profitable when you have interest rates where they are, going negative and nearly huge parts of the world. profitability just and raise the issue with credit losses rated
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to china, emerging markets, the oil sector. all that being said, is this overdone or could we see even more selling here because of these concerns. >> it is very hard to know if we're going to see more selling or not. from a fundamental perspective, it looks overdone. an analysis that i published yesterday suggested that many of the bank stocks are trading at valuations that are substantially worse than what would be suggested if we didn't revisit the credit losses at '09 kind of levels. discounting in a very, very severe kind of event current. >> i play that out for me. you looked at the level of losses for different types of loans, et cetera, and what did you discover? >> we took those levels of loan losses and put them into the models and compared it against the current balance sheet mix and saw what that would do to earnings and potentially to book value. and then compared that to where
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the current valuations are and the current valuations are generally much lower than that. >> you're discussing -- you're talking about the u.s. exclusively at this point, right? >> yes, the u.s. names. >> not the european names which seem to be far more in the cross hairs, far more worries about overnight funding, things like that? >> correct. i think what that largely reflects is the difference in policy response coming out of '09 from u.s. regulators versus the rest of the world. in the u.s., you had t.a.r.p. and banks were obligated to go out and raise equity and kind of perth their balance sheets of the losses once they recapitalized. in europe, you never had that kind of cathartic event and never got the recapitalization. i think the regulators were hoping the banks would earn their way out of the problem. that's not occurred. >> those countries -- >> how, eric, do you weigh political risk with respect to the biggest banks, two of which you seem to like, bank of america and citi. if a democrat is in the white house, both of those candidates have been campaigning by
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whacking the banks. >> well, i think it depends by what we mean by whacking the banks. the military regime that exists current there and the advent of regulation via a stress testing, that i think, you know, we and the market continue to expect to become more rigorous. if we're talking about actually attacking the banks and breaking them up, you know, when the bank is trading at a 40 or 50% discount to tangible book value, is that a bad outcome? >> you are recommending a subprime lender. explain yourself, young man. simply financial, we're back to that? >> the subprime space i would argue that right now is probably the most attractive space in lending because you have relatively few competitors there, margins are pretty resilient and credit losses, while rising, are rising from very low levels so they seem to be well positioned to be absorbed by pricing. and so, you know, one of the key themes that will play out over this year is the reexpansion of
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the top end of subprime lend and synchrony is how we do that. >> people are saying, what, are you kidding me? is that a good idea? what would you say to critics who say there shouldn't be an increase in subprime lending, look at all the destruction it caused last time around. >> i think the response to that is let's look and take and look at what is actually occurred. what occurred in the downturn was lending to individuals with no expectation that they would repay that loan, but rather that the value of the asset, their house, would simply bail them out. under all circumstances whether that is prime or subprime, that's a bad idea. what is going on is prudent lending to people who have the means to pay it back. >> all right. we'll see. eric, thanks so much. >> thank you for having me. >> eric with guggenheim. >> all of you oil bulls out
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there in america, i want you to listen up. your next guest says the prices are likely to fall, not to rise. joining us now, bob mcnally, former energy adviser to president bush, the founder and president of rabidan group. the bullish -- i had meetings in d.c. all morning about oil. the bullish thesis is simple. eventually we'll put up no new rigs, we'll drain production and suddenly supply and demand will come back into balance. you say that's bunk. at least in the short-term. >> at least in the short-term. in the long-term, i'm there. i'll be the biggest bull you know in three or four years. we're going to have a boost like we haven't seen after the bust is done. but with ev to go down first. prices have not fallen far enough yet. >> i asked about oil, they said the shale wells are lasting longer than we thought. is that the problem? the technology is almost too
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good. >> it is not just that problem. we have been surrounded at how resilient shale has been. here the deal people are missing. opec has been offsetting the declines in the u.s. u.s. has been falling since april. shale has been falling since april. >> couple hundred thousand barrels a day, though, not that much. >> but iraq and saudi arabia, more said it last year and this year they'll do it. it is not just us. eia projects in the next year, stock building for as far as the eye can see. we're not paying attention to that. we have to bust first. >> you think opec is like the kid you think is stealing and you're, like, what's in your pocket and the kid says nothing's in my pocket. will they continue to pump, no matter what they say, they'll continue to pump. >> i'll use a joan jett song, i hate myself for loving you. it is not that they're stealing from us, they're not doing their job and putting a floor on the
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prices. we'll find out why the only thing worse than opec managing the market is opec not managing the market. they said that for decades. now we're testing them. they're proving it. we're going lower. >> let's end on a positive. because you're bearish near term, most people we talked to say prices are going up. that's obviously been wrong. three years out, you say you, quote, super bullish. >> super bullish. >> define super bullish. >> when we get three or four years out, all we have to run the global oil market on. $7 billion go into billion. all very thirsty. it is what saudi has in spare, and that's not much and what shale can do on the bounceback.
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we are going to learn that busts lead to booms. i'll be the biggest bull you know in three years unless we have a protracted recession. >> they had 120 million barrels a day demand by the year 2030. don't know if that will happen, buts' a bullish scenario. bob, real pleasure to meet you. bob mcnally of the rabidan group. >> watching what is happening with airlines overall. we talk about the oil trade. one of the top groups in the s&p 500 is the airline industry group tracking for its second straight day of gains. if you look at united, delta, american, southwest, the members, the larger cap airlines trading up 1% to 3% higher. the index around 2%. all of this as crude oil slips
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between the mark. it has been $29.22 at one to intertoday, down to $27.39. it tells you about how much airlines have been beaten up. >> so for nearly ayear we have been watching oil get pumml pum and airlines, which made no sense to me whatsoever. >> there are a couple of interesting possible sys. y you have a decoupling. they're trading the supposed to. or this could just be short covering. if you look at delta, american, united, all these guys ha s has tra tract tracted changes.
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skeptics will say maybe this isn't for real. >> the airlines happened the previous year. >> correct. and the year before that. >> and the concern is they have more money in their pockets and airlines have done with more money in the pockets, they have spent it. >> i can't wait for them to spend more on capacity. it is a real pain in the neck. >> i've been trying to get a flight to san francisco for first week of april to go see my family. and usually that ticket was around $350, $400 round trip. >> it is probably getting worse as i get closer to the date. >> you're right. they spend. that's what they do. builders build. >> same difference. >> builders build. airlines buy planes. up next, the outrage today over yet another attempted hack attack at the irs, just how safe
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is your personal data in the hands of the u.s. government? we'll dig in on that ahead. if you're invested in some retailers, you're probably feeling the pain this year but you can get serious. earnings dow out after the bell. will this be the report that finally turns around the stock? who knows. nobody is shaking their head on the desk. i won't say who. kind of like vacations equal getting carried away. more proactive selling. what do you think michal? i agree. let's get out there. let's meet these people.
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welcome back to "power lunch." another attempted data breach on servers. let's get to eamon javers with what is going on. >> so much money, so much personal information in the irs' servers, last night they announced they had another pretty serious hacking attempt. here are the details that the irs put out last night and are up on their website for all to check this morning. they said the thieves used previously stolen data to generate what are called e-file pins, personal information numbers. those could be used to file returns in theory, bogus returns and to collect those returns on those returns. the attempts involved about
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464,000 individuals social security numbers. that's a lot of people in this country. but the attack was halted and no taxpayer data was lost in this attempt that they revealed last night. here is the statement. irs cybersecurity experts are currently assessing the situation and the irs is working closely with other agency and the treasury inspector general for tax administration. so, bottom line this one does not appear to be as serious as the big hack we saw last year in which the irs said that the hackers were able to access taxpayer information on hundreds of thousands of people. they say they were able to stop the attack in its tracks. but, it just underscores how much data the irs has and we'll wait and see what the commissioner of the irs has to say in this hearing going on now. >> thank you, eamon javers.
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chris, great to have you with us. when you look at this breach, we should underscore this was an attempted breach. do you interpret this as the u.s. government is doing a great job because they could have gotten away with more information or do you think instead that the u.s. government is doing a lousy job at protecting our information? >> i think they would do a lot better. we know the irs and other government agencies are the favorite target of russian criminal organizations. russian hackers. they made a living off of this. they hit the irs back in may. got over 300,000 taxpayer transcripts and they're using that information to get more information. and, really, the irs and taxpayer data is the gold standard, the treasure trove of information that they're look for. they can do a lot with it. >> i'm sure that on the black market, chris, that information would go for a big bundle of money, wouldn't it? >> it is. taxpayer data or taxpayer returns have so much information that not only can they file tax
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returns and get refunds, they can sell that data on the black market, make an additional profit. this is what organized crime looks like in the year 2016. these are the most profitable, most capable criminals in the world and we got to do a better job of keeping them out. >> how do we do that? it feels like it is a constant arms race. they get smarter, we get smarter, they get smarter. is it money, know how, should they privatize? what? >> the government needs to do a better job of fraud detection and the irs to their credit has been deploying some new technology that has been in the private sector for quite a while. predetective analytics, anomaly detection, things that are unusual. but not there yet. their own inspector general said they're not ready for primetime yet. they need to do a better job of authenticating taxpayer information. when we call in or try to access our own data, they use the standard security questions that
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are available on facetime and on linkedin and those types of social media sites. we got to go beyond that to a biometric system. >> it is getting easier to find my mother's maiden name, that stuff is all over the place. >> who is doing this, chris? >> these are russian criminal organizations. eastern european russian criminal organizations, they invented this crime, really. they perfected it. they use black market sites to sell the data, exploit the data themselves, but they're very capable in their own right and this is sometimesed ed aided an abetted by former russian intelligence officials so they're very cybersavvy and capable in detecting business level vulnerabilities. >> so, chris, i'm sure many viewers at home are preparing their taxes right now. do you not file electronically? do you do it the old-fashioned way? >> no. i mean, i don't think that's the
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solution. you need to file -- if you can, you need to file early. you need to be attentive if you use turbo tax or one of the e-file systems, you need to get into the system early and make sure that no one has filed on your behalf. so don't wait until april 16th or 15th to start looking at that in there and your previous year tax returns and this year's tax returns. >> what if i don't use those. should i logon and check and see if somebody did? >> yes. most definitely. >> what a world we live in. chris, thank you. >> thank you. >> another incentive to not procrastinate. >> right. >> brian. >> the tale of two investments. first, we meet the ceo of a company whose stock has actually made investors money this year. what a novel concept. then, the opposite. and why right now could be the make or break moment for twitter. all this, the dow posts a slight
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gain on wednesday. disn disney, down 3%. we're back with good news as well after this break.
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welcome back to "power lunch." if you're invested in some of these retailers, you had a rough couple of months like kohl's, home depot, bed, bath & beyond. they're down so far. there is a stealthy way to get some serious returns out of these names. shares of kimco up 3%, nearly 20% since mid-september. not many stocks that can say that. kimco owns and operates hundreds of shopping centers across america, some top tenants include home depot, kohl's, among others. here on set is the new ceo of k kimco. you've been with the company a while. >> yes. >> your business seems very, very solid. you call your basic product outdoor malls. >> open air shopping centers. >> the doors are on the outside.
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biggest tenant is? >> hope depot. >> what is your occupancy of the anchor tenants in your mall. >> 98.2%. >> the complementary stores around them -- >> the small shops around 88.7%. and so we have seen that recover nicely and that's where the mom and pop tenetaants have recover and the service industries providing a nice offering for our shoppers. >> lots of talk about whether we're heading into a recession. there is talk that's why the stock market has gotten hit so hard. do you see any signs of that among your retailers and the foot traffic? >> we like to think we're in the sweet spot. it is a lot of off price options and think the american consumer has become very savvy. they like a deal. tjmaxx and ross and other
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retailers, their growth outlet is an off price retailer. the saks off fifth, nordstrom racks, they're doing quite well. >> you're not saying there isn't a recession. you're saying that what you -- the stores you have wouldn't necessarily be a window into whether or not that is happening. >> we need a defensive portfolio because of that. we provide groceries and things like that to our shoppers. you look at the grocery store, they have been doing quite well too. it might be a result of the gas prices being low and many times they talk to us, they say because the gas prices are low, people are buying steak instead of chicken. the basket size is larger, seeing people shop for maybe higher margin items. >> have you seen more activity going on since, let's say, august? that's when the stock market became kind of rocky.
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it seems like the appreciation coincides with growing concerns about the economy and the markets. how has that shaped up through january? >> we came out with our 2020 vision. we are one of a dozen the res that have a triple rating. we're going to try to shore up balance sheet and rolook at the portfolio. we see an opportunity to redevelop our assets and create a lot of shareholder value. we identified over a billion dollars worth. >> you want to spend? >> we do. we see the runway for us to be successful and that's where we're putting our money and investing. >> how closely do you -- i assume the answer is very closely, but how closely do you watch the tenants and heir fortunes and when do you start to get worried?
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i'm thinking of best buy. and kohl's, i assume some sports authorities have had their issues as they come up against in willow brook, new jersey, a big sports authority there and then in comes dick sporting goods. somebody is getting hurt. >> there is a lot of competition to you how do you monitor that and worry about it? >> we look at it as a risk management tool and the percent of income coming from each individual tenant. that's one benefit. we're very large and very diverse. so tjmaxx is our largest tenant. our top ten are all below 3%. so we like to think that's a very wide moat. it gives us a defensive posture if a retailer starts to struggle. we identify the strong and add
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the right merchandising mix. the key is being the best cure rate, that brings more shoppers to the center day in and day out. >> conner, thank you. good luck on your new appointment. >> appreciate it. >> appreciate you being here. final oil trades for the day with crude well below 28 bucks a barrel. the crude closed live from the nymex is coming up when "power lunch" returns.
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here's how your money looks now. the dow is up 45 points. nasdaq up 1.7%. the russell 2000 also up 1%. sue? >> thanks, brian. time for a news update this hour. here's what's happening. puerto rico and other u.s. territories are likely to see significant numbers of zika virus cases. that projection coming from cdc director tom frieden telling a congressional subcommittee today that additional resources will be needed to find the mosquito borne illness. there are widespread media reports that new jersey governor
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chris christie will withdraw from the republican race. the christie campaign is not commenting on those reports. look at this dramatic time lapse video of a series of lightning strikes across europe and africa. tim peek took that video yesterday from aboard the international space station. and getting into harvard, just got harder, as if it was ever easy. just over 39,000 perspective students applied, 5% increase over last year. good luck to them all. that's the cnbc news update. >> that big increase is from overseas too. >> i'm sure. absolutely. >> thanks, sue. oil markets going for the day. >> oil prices closing a little lower today. but actually seeing a big bounce early on in the morning. that was because of some of the headlines that the iranians are willing to talk to the saudi
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arabians about oil market conditions, but, remember, we haven't heard anything from the saudis. we moved higher after the department of energy. we were looking for a big build. upon re flexion, traders telling me they're still worried about the glut of oil out there. production in the u.s. did drop a little bit. the third week in a row. they're looking at it as stabilizing or flatlining. and opec, more than 32 million barrels a day. back to the stock market. the market tries make sense of the latest xh esst comments fro chair janet yellen, kathy lean and jonathan krinski. you're an expert in the currency
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markets. wouldn't to -- >> first and foremost, yellen didn't cool out enough initially, so the dollar spiked when her testimony was released. once she started speaking, everyone realized that bottom line here is the federal reserve, they say they haven't made up their minds about raising interest rates, there is only a 10% chance they will move forward with rating interest rates. we see the dollar ball. central banks are losing the control. it reflects everyone's lack of confidence in the federal reserve. the dollar is down downment problemry more in way of losses before stabilization. >> do you think it was a bad sign for the dollar when she acknowledged that, the stronger dollar has been a head wind? >> i think there was profit taking in the short dollar positions when the testimony was released.
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but you're right, strong dollar is a very big headache. i think that's going to weigh heavily on the stock market going forward as well as the underpins of a weak global economy, which is a reason why they would not want to raise interest rates in march. >> it sounds as if you think it almost didn't matter what yellen said because central banks can't do anything about what is going on. >> we're concerned with what she's saying, but it is not just the fed, but look at the dakotas, the nikkei is down. and the japanese bank index is down 26% since they went to negative rates. the market is telling you the central bank action is not having the impact it once was and it is maybe having negative impacts. we think u.s. stocks are likely to head lower, despite any near term term balances. we have that support level in
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the s&p. >> then what? >> wetally is think there is a 1740. that's an 18% pullback. that's less than we saw in 2011. we think that will get hit in the next couple of months. >> thank you. find more trading nation at trading nation.cnbc.com. >> marco rubio got trump pd aed hillary felt the bern with two outsider outsiders. we'll bring you the story ahead on "power lunch." now the latest from trading nation.cnbc.com and a word from our sponsor. >> some investors find companies attractive when they're buying back their own shares because why would they buy back their
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own shares before they knew it was going to be stronger. they may hide things like declining revenues oregon problems.
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one uses bombastic language, one is a huge source of policy uncertainty. the other wants to raise taxes on millions of americans to pay for trillions of new spending and hates the big banks. america, those are your two leading presidential candidates now. joining us to talk about this is trevor hanger with height analytics. usually, trevor, the big money tends to win in politics, right? those who get backed get first. this is not the case here. how crazy of a presidential season is it so far? >> it certainly, you know, an unusual set of circumstances. i don't think we can rule out the big money yet. we have seen a push away from the establishment candidates, candidates who have been there, done that, asserted their own careers up until now and moving to candidates who are anti-establishment, speak to
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frustration or anger that exists. >> when you look at a bernie sanders, okay, and look at what he wants to do, want to tax everybody's income. when i look at left leaning states, massachusetts and california that are wealthier as well, i think there is no way they're going to allow that, even democratic lawmakers will pushback, will they not. >> i think so. i don't think it makes it realistic in any meaningful way were he to become the nominee and elective. i think his party would push back on a number of things he advocated for. that hasn't stopped him. but that doesn't mean that at the end of the day his -- >> it is what pro pelled him here. if you're campaigning on something that you or members of your own party say behind closed
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doors right back over here at the capital, this is never going to happen, we can't jack taxes up 20%, even on wealthy silicon valley. they're the ones that elect us office. what does that say about his campaign? >> in general, primary campaigns tend to gravitate toward the more extreme pulls of the party platform. i think in the long run, hillary clinton is poised to date democratic nomination. >> why do you say that? it seems like for somebody that was basically written in almost automatically a year ago, the momentum doesn't seem to be there. >> it certainly not gone our way thus far. she has a money advantage that is dissipating somewhat, but i think her, you know, her infrastructure advantage in coming states will be something that takes advantage. i think you may see the high water mark for the bernie sanders campaign now.
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>> let me ask you a different way. with probably angering many people in my own industry, how much do iowa and new hampshire really matter? >> i think they certainly set the table for the conversation going forward. they're not the best states in the union to be first in the nation from a diversity standpoint or well represented standpoint that does change the conversation a little bit. >> does clinton win south carolina? >> yeah, i think she wins south carolina pretty handily. >> who wins the right? is that jeb bush's last stand? >> it is going to be somebody's last stand in the establishment. i think it is clear that donald trump is in a good place heading to south carolina. ted cruz looks like he's going to be around for a while. so what you're left with is even with governor christie dropping
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out, you three candidates fighting for one spot. south carolina could be a state of reckoning for a few establishment candidates. >> one thing i hear more and more and tell us if you believe this to be the case, more and more likelihood that we will not have a sufficient number of votes for delegates come cleveland. >> yeah. on the republican side, i think it is looking less and less likely. i think at this point the road to get an establishment republican nominated ahead of cleveland is a pretty tall order. i think donald trump now you have to say he's the odds on favorite if anybody gets to the delicate necessary -- necessary delegate count to carry the day ahead of cleveland. >> michelle here.
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kasich came in second and the entire conversation, everybody is completely seems to have written him off. is that a smart thing to do considering the strong showing he made? >> he showed well yesterday. the challenge is that this say little late for him to be making a move. he's got a lot of ground to make up on the fund-raising side of things and that, you know, that goes against, i think, some of the conventional wisdom who has been putting money forward. >> trevor, a real pleasure. thank you for coming on the program today. interesting times. we'll see you again. let's look at shares of twitter. stock is higher today ahead of earnings after the bell. what a dismal ride it had. is the sky falling for twitter? we'll debate that. "power lunch" is back in two.
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i'm here at the td ameritrade trader offices.
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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 and 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. td ameritrade.
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twitter catching a break today, higher by nearly 4% ahead of earnings, stock down 35% so far this year. as for earnings, analysts expect 12 cents per share on revenue of
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$709 million. the obsession in the market now is user growth. how many new users will they get, do they expect. let's bring in jason ware, bull on the stock. put his money where his mouth is. theyweir, and they own nearly half a million shares. jason, we're going to start with you. everything is worked about users growth. you're not worried? >> no, we're nod. looking at the strength of twitter, it has a unique platform, which we think is compelling and przybilla value for the users. it's not too dissimilar from what we saw on facebook, which was around 14%. when we look at some of the opportunities that twitter has, you know, there's a massive shift obviously from advertising
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on traditional mediums over to online platforms. we think -- obviously facebook and google being -- >> jason, i hate to interrupt, but the stock is down a% since jack dorsey took over as a permanent ceo, sore whatever swat analysis tells me, the chart says it's a lousy investment and very difficult ride. at what point do you say, i like the long-term story but it's just not working out right now. >> it hasn't been working out. a lot of it has been valuation. we've seen jitters for quite some time. all we look at twister, it's been coming down, and buys the stock at 50 with slowing user growth is going to be a difficult right. down here, you know, around 10.3
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billion market cap, whether you net the cash out it's more like eight. when does it start to become compelling? >> rob, what do you think of that, real ly your price target by the way, is $29 and it's crashed through that. >> yeah. there's definitely a valuation floor. you see the leadership change so quickly, and for instance examples like myspace that have essentially deteriorated to nothing. the influence it is are starting to spend more time outside the network. that could be a -- that's why the street is so focus.
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will there be things that improve the engagement? >> we always hope. we need to see and hear more than just optimism, but concrete examples in user engagement. the adex dose are not positive. sure, if they can stem the decline and show some stability, that would go a long way to lift the valuations from these values. >> i think of that company aung think of it kind of as a pairing with yahoo for some reason. they don't feel to me like they're first in anything. you kin of need to be first at something. i guess they're first in the short message business, maybe they're first as a kind of alternative newswire. >> if you look at what facebook is doing, which is always,
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social media, they certainly have their niche, but twitcher has their own niche, which provides a lot of value. i think most of you certainly in the media understand that value well. we understand it well in our bit. there's a lot of people with great real-time content from both sports and entertainment and politics. every time donald trump tweeting, it becomes mass news that day. what other type of platform is generating buzz to that degree. unfortunately a lot of the -- >> all right. you're good at taking cues. that means we've got to wrap it up. >> certainly don't want to go over my time. thank you. we'll find out what happens. rob sand other son, thank you so much as well. let's take a look at the companies leading the dow higher, as we head into the final hour of trade. visa -- there they are on the big screen. visa up 2.5%, nike up 4.
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unitedhealth up 1.6. more when we return on "power lunch."
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both these companies will be reporting after the bell, so we'll be monitoring these calls. oftentime that is when the fireworks start happens when it comes to the after-hours
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reaction. >> our guest today was taking his numbers down a lot, as i realize, his forecast numbers? >> tesla. his prior tart was still $340 a share. that's still more than double from where it is. the stock is trading at a two-year low, and i think there will be questions about cash burn. >> about elon musk beau on the call? >> yeah, he's usually on. >> usually he's pretty fiery. let's look at did i any shares. talk about an earnings report that was a rodney dangerfield report, it got no respect. record earnings, but still sort of itchiness about what's going on happen with espn. i wouldn't bet against espn. they may have to find a different way to make a lot of money off of it, and their programming costs are going up, but look at that, down 3%. that's one of the big drags in the dow. so many other parts of their business are firing really,
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really well. >> we have to remember it's been a rough week for media stocks so well. viacom was down yesterday and today, and fox as well i have hess on my radar, adding to the conviction buy list. goldman says hess has good liquidity, resource expansion, and is well positioned to benefit if oil prices rebound. so goldman sachs trying to give hess a bit of a boost. >> that's a big if. i'm headed to puerto rico, a big kirsch tomorrow driving by the puerto rican government trying to drive investments into the island, but we'll enter view jim melseen, the world is coming his way. the ceo of ambak as well, and in the interview john paulson. >> that would be a good one.
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big investor in puerto rico, but also in shale. bring back rum and bonds, in that order. thanks, everybody, for watching "power lunch." "closing bell" starts right now. \s hi, everybody. welcome to "closing bell." i'm kelly evans. >> my turn to welcome you back. >> good to be together. >> it says another volatile day on wall street, but the dow is down just eight points right now. we've been all over the map on the back of janet yellen's testimony of the house financial services committee. now investors are looking to a slew of earnings coming out after the bell tonight. we'll have reports from twitter, cisco, tells la, whole foods, expedia, all of them compelling stories by themselves. >> what have we seen after hours, disney,

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