tv Power Lunch CNBC February 18, 2016 1:00pm-3:01pm EST
calls against the stock that i bought and against the options that i held last week. >> so you made some trades. >> nordstrom not for me. continuing to of a tough time as was macy's. >> thanks to all of you. that does it for us. "power lunch" begins now. scott, gentlemen, thank you very much. welcome, everybody, to "power lunch." tyler mathisen here along with michelle caruso-cabrera, melissa lee, brian sullivan, and we have a jam-packed two hours coming your way. going to kick it off with a look at yahoo! as marissa mayer once again makes the case for mobile. the question is, is yahoo! one to love or loathe. we'll dig in on that one. more ahead this afternoon as the markets fade as well. stocks struggling now to make it four straight days of gains. they were in the green earlier. now just slightly in the red. later, with he will talk to steve wozniak, the apple
co-founder. he is fired up over apple's big fight with the fbi over privacy. we will hear what he has to say. melissa? >> first, we start it off with the yahoo! news. happening right now, yahoo! ceo marissa mayer is taking the stage at the yahoo! mobile developers conference in san francisco. so let's get straight to cnbc's josh lipton live at that conference. josh? >> well, melissa, you know, the challenge for marissa mayer, she's talking to these 1,000 developers behind me, is to really try to separate the reach of yahoo! from the health of the business because for all its challenges, yahoo! still does touch a lot of people, 1 billion monthly active users. we know she's concentrated a lot on building out that mobile business so in that last reported quarter mobile revenues clocked in at 25% of the total. of course, the challenge for yahoo! is just that fierce competition. according to e marketer, last year you saw yahoo! control less than 2% of that mobile ad
market, and just compare that to nearly 20% for facebook and more than 30% for alphabet. you'd expect maier today when she's talking to these developers to tout the company's suite of products which she says can help them improve user engagement and monetize their apps. i'm going to head inside right now and bring you all headlines as they come. back to you guys. >> thank you so much, josh lipton. digital tech publication the information out with a new report entitled the death maech of yahoo!'s core products. the information says the number of yahoo! daily active users has taken a nose dive. we're joined by brian weezer of pivotal research and our very own jon fortt. amir, let's kick it off with you. the numbers are staggering. why don't you rub throun throug us. >> these are the numbers marissa does not want you to see. you have the three most important products, mail, the home payment, and yahoo! search. they're tanking. they've had double digit percentage declines in the number of daily active users
over the past year. they are not making the transition to mobile very well, and it's really, really hurting the business and contracting the business, and it really does not make much of this asset look great to a potential buyer. >> brian, it almost seems like it doesn't make a difference what marissa says at this conference today when the core business is on the decline. we're really looking at a business that's like a melting ice cube. >> that's absolutely correct. there's almost nothing the current management can say that really has any bearing on the business at this point. it's a question as to how long they will be around, not whether they will be around to execute on any changes. >> so why do you have a buy on the stock and why do you have a price target that's $6 higher than its current price? >> there's value there. there's still value. >> broken up. >> under many different scenarios there's value, yes. >> one of the guys out there was
on halftime report and he in his note outside today he says they have information that at least 20 different buyers have approached the company and management isn't acting with enough haste on that interest. in fact, calls them the independent board members to do something and wrest control of that process away from management. do you have any reporting or information about whether or not you believe that's true, that they've actually had that many people interested in buying the core assets here? >> i wouldn't be surprised. i mean, there are a lot of potential buyers for a lot of pieces. this is not a monolith. you have the home page, mail, and search which are all very intertwined. they come together, they come together as a group or they don't come at all because they're all tightly connected but you have other parts of this business. you have tumblr which is the crown jewel and yahoo! which is the only thing that's growing and growing on mobile. you have yahoo! weather that's not that valuable and you have
yahoo! finance which is not growing but is a healthy business. you can generate tens of manufactures of dollars a year in cash from that. >> you take a look at these numbers and think the price for yahoo! has got to come down. you might take a look at the numbers and think you know what? the case for yahoo! to do something strategic has just gotten a lot bigger and more important. >> yeah. yahoo! is not big enough. that's part of their problem. that's part of why people are talking about combining them still with aol even as part of verizon combine them with other things. i think taking the home page and search number in isolation doesn't tell you the full story. yes, the web in general is in secular decline. so you would expect home pages not to be that popular anymore. people aren't going to home pages. they're going to facebook. maybe they're going to google search. you've seen kind of this bifurcation, google and to some extent bing getting stronger, yahoo! getting left behind. they don't have their core technology. same goes with mail.
chances are you're just pulling yahoo! into whatever your phone's main app is also. you're not going to those pages. but yahoo! has got this argument about mavens revenue, that including mobile, native advertising, video. bright roll is also an important property for them. so there's a story that they can tell. i don't know if they can tell it to developers because you usually bring in developers when you've got a powerful, growing platform that you want other people to come in and take advantage of. yahoo! doesn't really have a coherent story to tell along those lines right now. >> but, brian, here is the thing, everybody seems to want to pile on yahoo! and marissa mayer all the time. she took over the company in july of 2012. the stock was at 15 bucks. it's at 30 now. all that's happened under marissa mayer is yahoo! shares have doubled. i mean, you listen to the news -- >> thanks to alibaba. >> which has nothing to do -- >> i was about ready to get -- >> i could have grown it. >> the stock would have been worth $15 at that time. my estimate on the value of the core business is about $2.
so you could look at it that way too. no, i mean, there's been incredible value destruction over that time. it is fair to say this was a thankless task. it was not a given that anybody could have caused this business to grow. the big problem facing them is that facebook and google are eating everybody's lunch, but our benchmark is that we can look at what aol did. it's not as if the portal business is in any good shape, but they actually turned that enterprise into a slightly better one and they got a good exit out of it. >> so you're saying yahoo! the stock is at $29.50. yahoo! is effectively worth $2 and alibaba stake is worth $27.50. >> there's yahoo! japan, cash, et cetera, et cetera. there's a lot of assumptions -- >> but the core of the question is true. >> yes. >> the operating business is basically worthless. >> correct. you can't gave -- you can give her credit for not selling parts of alibaba, but on the other hand it's not exactly a given that that was the right choice either.
it might have been better to have spun it off earlier. there are so many different choice that is could have been made. you can only look at the core operating business, and they have not come up with a better plan. it's been a very expensive process to get here, and the case is whether or not they're burning too much cash for a business that has very little prospects for growth. >> is the board doing a good enough job here? >> almost certainly not. >> yahoo! backed themselves into this corner. it was their fault that they -- they decided lunch was going to be their whole life and now facebook and google are eating their lunch. they had small business, they had different lines of business that were causing people to pay subscription fees. >> those were the good old days. >> diversification would have been a good idea here but they bet it all on consumer, s. >> i recognize the core business is now 2 bucks of whatever it's worth at this point but i'm curious, is there any hope -- i mean, brian, i'm curious what your opinion is. we could have made these same arguments about ib m&i and they
were a big enterprise. they did play catch-up to some extent at least to the point mr began stanley was saying those are growing businesses behind an upgrade today. is it possible they could do something? >> yes. >> or maybe do something in the right hands. >> possibly. i was to say the least befuddled when they appoint the mayer to the job in the first place. my only assumption was clearly they're going to do something other than advertising because she has no real experience with madison avenue and all their conjecture suggested they didn't understand what they were doing in that space. so i assumed they were going in a different direction. i think it is possible that they could find something to do with the platform. more importantly though, there's going to be dozens of other potential buyers who will themselves think that they can do something with it, rightly or wrongly. there will be probably a buyer out there that will overpay it and that will be good for a yahoo! shareholder.
>> is it too much to say that yahoo! is in crisis at this point? we heard about executive upheaval, questions about strategy, layoffs, et cetera, but when i see your numbers that you uncovered, i think, wow, this is incredibly bad. sell it soon or else then what? >> yeah. the game is over. it's a contracting asset. you need to do something with it. you need to get rid of it. the cash flow from operation activity has been taking a nose dive. so they really need to jettison this thing, cut the head count, and somebody will want this cash. i mean, it does generate cash. there is value there. it's just getting smaller and smaller and smaller, and as they wait, the value of the asset will go down. >> all right. thanks, guys. thanks, amir. check out his article on the death march of yahoo!'s core products. that's the title of his article. brian and jon. seema mody has a market flash. >> shares of emc spiking on a
report saying regulators are expected to approve dell's $67 billion bid for data storage company emc. dell unveiling that deal back in october of last year and if approved, this would be the biggest ever in the technology sector. it would also allow dell to better compete with rivals cisco syste systems, ibm, and hewlett-packard. the deal has not been approved by u.s. regulators. we're looking at shares of emc up better than 1% on the day, brian. >> thank you. here is what's on your menu for the rest of the hour. bank of america's top commodity guy is with us. you will want to hear his long-term price target for oil and gold. plus, we're on the hunt for some texas-sized returns for you. is the lone star state down and out because of oil? your guest says heck no and he's brought some picks to prove it. later on, apple co-founder steve woz ni ak will join us to sound off about apple's big battle with the fbi.
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welcome back. shares of ibm jumping a bit today. morgan stanley upgrading big blue. we have more on that call in "street talk" coming up in the next hour. a mixed bag for marriott last quarter. it was better than expected but analysts were disappointed at the guidance. shares down 3%. and jack apparently is in the penalty box. earnings and guidance at jack-in-the-box leaving
everybody hungry for more. blaming traffic and aggressive competition from its rivals. i apologize for the food puns. >> no you don't. you love them. >> no, i don't. >> james bullard changing his tune saying it would be unwise to continue with rate hikes for now. used to be one of the most hawkish members of the fed. more about what the next fed move, randy crosser er icrossn now, preno now. this is a definite signal we're going to get a slowdown. how many rate hikes do we get it bullard says it's unwise. >> i think it's not just james, but i think the fomc as a whole, they really need to see some evidence of inflation and inflation expectations moving up towards their 2% goal. i think janet yellen was able to manage the committee to say, okay, we'll make this first step, but unless you get concrete evidence of rising inflation or rising inflation
expectations, it can't just be that, well, that might happen. they're not going to move, and i just don't see any move happening for quite some time. i really don't think it will be a serious consideration at least before june and probably they won't even move towards the end -- until at the earliest the end of the year. >> you're thinking only one rate hike potentially this year. >> yeah. it will depend i think very much on inflation and inflation expectations, and so obviously there's a lot of uncertainty about where that's going but it's hard to see the pressures right now that are going to be leading inflation and inflation expectations moving up. >> how do you generate inflation or inflation expectations, randy? >> well, there are good and bad ways to do that. so if we look to some of our friends to the south like what happened in argentina and venezuela, you know, the technology is still there for central banks to create a lot of inflation and that's really bad. when they lose credibility, when people don't trust them, when they're just an arm of the fiscal authority.
but there are other ways to do it, to try it make these type of commitments, say that they are going to do what's necessary to get to a particular inflation goal. that can be helpful, but it's not perfect. i mean, we can see japan having challenges, ecb having challenges. so there's no simple formula that you just get it right. >> randy, what's your take on what role, if any, market volatility should play in the fed's decision on whether to raise or not raise? we're just coming off a massive three-day rally. should we then think a rate cut may be more on the table than prior to the three-day rally when we were down? >> so i think the fed usually looks through the short-run movements, and what they try to do is see what's behind it. is it something that's fundamental about the economy that is driving the volatility or the movement of the market or is it just sometimes some transitory factors? i mean markets move up and down a lot in the short run. what the fed is trying to look for, what is this telling us about where the economy is going? and i think you could see from the minutes that just came out some questions were raised, but
at least so far the data for the u.s. doesn't suggest recession on the immediate horizon. >> let's get your reaction to remarks of neel kashkari a former associate of yours in calling for potentially the breaking up of large systemically important banks. how do you react to that? >> so i think you look at his speech. i very much agree with the approach that he takes of let's try to do some cost/benefit analysis. i don't think we've done enough cost/benefit analysis on financial regulation. he also focuses on a lot of subsidies to leverage in the system. he says we should rethink those. and so i completely agree with his goals. i'm not sure that the most effective way to make the system more robust is to break up the institutions. if you look back to the 1930s, we had restrictions on banks branching across state lines. we had more than 20,000, 25,000 small banks.
didn't prevent a collapse, and the great depression from coming because you had correlation and that's really the key. you want to look for the risks of correlation in the -- across institutions or across asset classes. size of institution might be relevant, but the key thing is the correlation. i'd really focus -- >> are the big banks safer now than they were eight years ago? >> i think definitely they are. the amount of capital they have is much higher. the amount of liquidity they have is much higher, and sort of a testament to that is that the credit rating agencies have almost completely taken away the so-called uplift that they used to give. they used to give a regular credit rating like they did for ibm or any other company, and then they'd say, well, there is a chance there could be some government support, we'll add a little bit to that. now that's virtually all gone, suggesting we have made some progress or at least there's some market participants who think we've made some progress. >> were you surprised it takes over the minneapolis fed, and, boom, this is one of the first
things he does and how do you think it went down in the halls of the fed? >> the minneapolis fed has a long history of focusing on this too big to fail issue. i think that is a very important issue, and so i didn't at all mean to dismiss or diminish that. i think it's -- the key thing is the stability of the system and how the size of the institutions fit in with that. people have different views, but i think it's important to be focusing on these issues. >> thank you. we really appreciate it. joining us from chicago. thank you randy kroszner. >> seema mody has a market flash. >> shares of perrigo falling. missed analyst estimates for the first time in five quarters due to higher costs and disappointing performance. they also cut the high end of the 2016 forecast, which it had raised in january.
you're looking at shares down about 13% over the last 12 months. tyler? >> thank you. up next, the one consumer products company that's seeing a huge sales boost because of the zika virus. we will bring you that name ahead. but first, the final gold trades are crossing. the metals close is on deck when "power lunch" returns. in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. like in the hudson valley, with world class biotech. and on long island, where great universities are creating next generation technologies. let us help grow your company's tomorrow, today at business.ny.gov do something! get on the floor! oh i'm not a security guard, i'm a security monitor.
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lunch." treasury yields moving lower in today's session. rick santelli is tracking the action at the cme. >> indeed, they are going lower, and what is not lost on traders is as we look to break the equity record, how are they stacking up together? it's an important day. so that's the theme here. look at a one day of 10s compared to a one day of the s&p 500. look at a 2-day. maybe the most important chart i see is a month to date of the comparison of the two. and think mario draghi, think your last interview, think the changing dynamics of fed funds futures and it looks like the three-day rally, a lot of roads point to the notion of less fed. is that good for bad? that's for you to decide. the last chart is a 2-year chart of the dollar/yen. there's been a lot of activity in the options with a 110 strike below the market. you see on the left side, you see on the right, it looks as though we are filling down into an area that was thinly traded about year ago so you want to pay close attention to 110 on the bottom. back to you.
>> all right, rick. thank you very much. people falling in and out of love with gold lately more than a contestant on a reality show. today the affection is back. gold is up more than 10 bucks an ounce. still down for the week, however. as for the other metals, silver, copper, palladium, and platinum. for those of who you care, three of the four are down, only silver is higher. coming up next, some texas-sized returns for your portfolio. one wall street pro is making three big bets on the lone star state. he'll give us those names when "power lunch" returns. this just got interesting. so why pause to take a pill? and why stop to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night.
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welcome back to "power lunch." i'm michelle caruso-cabrera. we have just about 2 1/2 hours left in the trading session. the industrials lower by about 37 points, a quarter of a percent. nasdaq lower by 33 points. and the s&p 500 lower by a third of a percent, 7.5 points. russell 2000 down two-thirds of
a percent. here is what's happening this hour. democratic presidential candidate bernie sanders meeting with civil rights leaders at the national urban league in washington. he says he understands the struggles the african-american community goes through in america. >> i understand that the african-american community has been harder hit than any other community in america. i understand that it is unacceptable that 35% of black children in america are living in poverty. the funeral for the former u.n. secretary-general was held in cairo today. he served from 1992 to 1996. making him the only u.n. chief to serve a single term. iraq says more than 100 iraqi migrants who had sought a better life in finland returned home today. some said they were homesick while others could not find a proper job. they are received by iraqi
officials at baghdad's airport. and over a third of american adults are not getting enough sleep on a regular basis. the cd c has recommended adults age 18 to 60 sleep at least seven hours a night to promote health and well-being and failure to do so increases the risk of obesity, diabetes, blood pressure, and heart disease. that's cnbc news update at this hour. back to you, tyler. do you get enough sleep? >> i get enough sleep. my wife who mornings at the "today" show does not get enough sleep. >> no one there gets enough sleep. >> do you get seven hours? >> yes, yes. >> absolutely. >> about four. that's an average night. that was like that before the kid. >> yeah, yeah. >> now you have an excuse. >> i wish i didn't -- i anchored the morning show for years and went to law school. i hate it. it's boring. >> sleeping? sleeping is boring. you should tune into my dreams.
>> if you're dreaming about me, you need better dreams. >> i'm not dreaming about you. guys, despite today's slide, stocks are still up 3% on the week. is this the green light for invests to get back into the market? with us is craig hodges, portfolio manager of the morningstar four star rated hodges small cap fund and michael cogeno. welcome to both of you. this could be an interesting conversation because, craig, i know you like texas stocks that don't have anything really to do with the energy world and that have been tarred by their sort of texas association with it, and michael, you like energy stocks that have been beaten up, not necessarily texas ones, though i guess some are. let me start with you. why are you focused on texas? >> well, it's been interesting. it's very understandable when oil goes from $100 to $30 that energy stocks would go down. >> you can figure that.
>> that's pretty much a given. >> you get paid for those kind of blazing insights. >> exactly right. but the shocking thing has been a lot of companies, a lot of industries that have very little to do with the energy business may, may have a slight part of their business associated with energy -- >> like? >> look at the hotel business or the bank -- the texas banks have been -- even a united rentals, it's been cut in half. they do about 25% of their leasing stuff to the energy business. but there are other businesses. the rail car business. >> but those have been affected by the drop in crude. >> well -- >> the rail car business, they're not building as many tanky cars. >> and that peak eed about 2014. so that's already factored. in you had stocks a year ago trading eight times earnings and now four times earnings. there's an algorithm that's taken anything having to do with texas or like -- >> you mentioned the shipments of oil and gas peaked in 2014.
were we seeing the residual shipment of the tubes or things needed to drill as well? why do you think it's a perception that they're exposed to energy when they're not when we've seen the volumes go down on the railroads. if the railroads are the end user of the rail cars, why wouldn't that be correlated to trinity? >> for example, there's very many other -- the auto racks is a growing part of their -- the intermodal is coming on. and, you know, in a situation like trinity, they've got a two-year backlog that's in there, that's built in. and so, you know, trading at four times earnings i think it's very low risk here. you've seen insider buying at 30. it looks extremely cheap. >> michael, i want to get you to give me a little liquid courage here for some of the stocks that you picked. chevron, newfield, and freeport-mcmoran. the best of those is chevron, is down 20% over the past year. the laggard, freeport-mc which
we've documented down 70%. why do you like them now? >> a fundamental belief that fossil fuels are not going away. yes, we have weak global demand. yes, we've had a strong dollar and those have obviously weighted on natural resource stocks. for the long-term investor and we think three to five years out or more that natural resources and commodity are an int gregra part of a diversified investor's portfolio. the trough of a typical commodity cycle in our view, this would be the time for a long-term investor to get involved and go with these companies. albeit you have to have a strong stomach. these are all energy names. we do other things. we actually own kansas city southern which is a rail stock that's been affected by some of the fossil fuel issues in the u.s. as well. but, you know, our view is in the long term these companies are going to grow. fossil fuels are not going anywhere -- >> on that note, michael -- >> yeah? >> on that note chevron is a
much discussed stock here on krnts. it has a yield of nearly 5% at this point and the discussion always is can it hold the yield. do you like that because you think that the yield is safe or despite the concerns about the yield? >> well, the yield is attractive. whether they cut it or not for cap ex reasons, you know, or conserving cash, fine with us. in the long term we believe that, you know, at this point they could cut the dividend in half, and it's still yielding more than 10 to 15, 20-year treasuries. >> we interviewed john watson, the ceo, back in december exclusively and he said i will never, ever, ever, taylor swift style cut the dividend ever. >> i saw that interview, yes. >> he could not have been more adamant. in my view if they have to end up cutting the dividend, someone is going to have to step down. >> well, i mean, i saw that interview and conditions change. so i wouldn't hang him on that. but chevron has been a company that has wanted to protect that dividend. that's an attractive situation about it.
and, hey, 4.8%, 5% where it's currently wait, we'll take it and wait for the growth story to play out. from a total return perspective, you know, you take that dividend plus the trough of a commodity cycle, the likelihood that fossil fuels aren't going anywhere in the longer term, great total return potential for a longer-term investor. so, yeah, i know it's a contrarian area. i know it's been a beaten down area, no question. we've been penalized it for the short term a little bit, but we're big believers in the long term. >> talk to me about american airlines, why you like it at this price. dallas-ft. worth company. >> sure enough. trading at very inexpensive price. the airlines are having their best results they've ever had in the airlines' history, and the stocks are trading towards their 52-week low. you can buy a lot of these things at four times earnings. >> why is that? you know, with the fuel prices as low as they are, is it as we've discussed here the fear they're going to add capacity which is what has often tripped
them up in the past or have they learned their lesson? >> i think they have. the thing about the airline business, it's a lot like what happened in the rail business in '03-'04. you had a bunch of rails the 30 years before that and the stocks never did anything. when you down size the rail business to three or four players, it came right-sized. we've finally done that with the airline business. it's been right-sized -- >> the seats are definitely not right-sized. >> they've been downsized. >> they've been downsized. the seats are anything but right-sized. >> what happens to the airline trade in gem and american in particular when oil prices go higher? we have been trading right now with oil prices so low. >> the good news is they spent about five years getting their models used to $100 oil where they could actually make money at $100 oil. they won't be nearly as profitable if it goes back to $80, but just about everyone thinks -- >> it seems like high risk. >> no, no, no -- >> despite the capacity increases and oil -- >> the airline business has had a history of losing money,
making money, losing money, making money. >> they lost more than they make. >> if oil goes back to $100, which is highly unlikely in the short term -- >> let's say it goes to $40. >> they will do extremely well. they are making money at $100. so at $70, that would be fantastic for them. even at $70. so, you know, they're earning so much money they're going to be -- start to pay down their balance sheets. you're going to get more of a market multiple at some point. no one believes it yet. it's going to be a prove it thing. >> craig, with he have to leave it there. >> appreciate it. >> the other thing to consider with the airlines would be economic growth or lack thereof. energy prices are important but if nobody is traveling, that's another reason for the cyclicality. >> one thing to watch. thank you very much michael with permanent portfolio, craig hodges with the hodges small cap fund. go to powerlunch.cnbc.com. do not delay, to see other stocks craig and michael are
adding to their port right now. that's "power luncpowerlunch.cn. >> crude is higher just barely. up by 0.2%. coming up next, we're talking the global game of chess in the oil markets. stick around for that. ♪ they say that in life, we shouldn't sweat the small stuff. but when you're building a mercedes-benz, there really is no small stuff. every decision... every component... is an integral part of what makes the 2016 c-class one of our most sophisticated cars ever. because when you're setting a new benchmark for refinement, it is the small stuff... that makes the biggest impression. the 2016 c-class. lease the c300 for $399 a month at your local mercedes-benz dealer.
welcome back to "power lunch." shares of la-z-boy hitting a two-month high, up double digits as third quarter profits and sales beat estimates. the company says results were helped by strong demand for upholstery. the stock is down nearly 6% over the past 12 months. michelle? >> thank you, seema. welcome back to "power lunch." i'm michelle caruso-cabrera. we're getting more signs of the intense distress in oil-producing countries. in venezuela last night, the president, nicolas maduro, announcing he's raising the gas price for first time in 20 years in the country.
gasoline was heavily subsidized. it still is but the move will save the government some money. also, he announced a massive devaluation of the currency. 37%. those moves likely designed to help them hoard dollars so they can pay international creditors more than $2 billion next friday. saudi arabia also seeing the effects of falling oil prices ahead of the opec cartel getting downgraded by s&p and moody's revising the growth forecast. some of the lowest levels of growth in decades. back to you. >> so venezuela and saudi arabia clearly feeling the pain of low oil, but if prices remain stuck between $20 and $50 a barrel, who else may be on the big losers list? who might be the winners? francisco blanch is head of global commodities research at bank of america merrill lynch. francisco, lower oil prices at this point are no longer a new thing. i mean, maybe they are a little lower than 12 months ago but last january they were in the 40 buck range too. i understand your points these price levels are unsustainable
but they have been sustainable for over a year. when do we finally start to see production crack? >> well, we've seen production coming down in the u.s. shale patch now for several months, for several quarters actually, three quarters. so, you know, i think it's a slow-moving process. if you look at shale, shale is extremely sensitive to price, but production elsewhere in the world doesn't really respond to price movements over the first couple years. you have to look out into 2017, 2018 and beyond to really start feeling the impact on the supply side. so i think we're starting to see the bottom on the market. we've seen opec coming in and talking about that production freeze with russia. an important signal. we are seeing u.s. shale production coming down. we're seeing a massive cap ex cut. all the signs are there and very importantly as you pointed out, the level of distress across the energy-producing community is
humongous whether you're looking at venezuela and credit default swaps or many other u.s. corporates are really starting to look very, very distressed here. >> but production in the u.s. has come down. let's be generous and call it 500,000 barrels a day. it's probably a little too much but let's be generous. iran is upping its production by that much. have we seen any real global supply change? >> well, production is, indeed, still pretty flattish now because iran is coming back, to your point, as the u.s. comes out of the market. but i think demand is going to continue to pick up from here. remember that the oil collapse has had a very negative effect on many markets, whether it's equities via earnings or credit via higher yields and lower bond prices or even foreign exchange. we've seen many currencies getting hammered by the lower prices. but eventually lower oil is going to really help the
consumer. we are seeing a $3 trillion transfer a year from the hands of producers to the hands of consumers, and that cannot be a bad thing. moving money from saudi and russia to india and china is a good thing down the line in my view for economic growth. >> francisco, i want to ask you about your call on gold. obviously this is one of the best performing asset classes year-to-date. it's up about 16% or so. you've gone from uber bear ish to supportive of gold. i'm wondering if part of this call today and part of the calls in the past when you have been supportive on gold and bullish on gold is partly the view also that the fundamentals for the rest of the metals complex which you cover are negative. that stocks will go down. i mean, the extrapolations of being positive gold is pretty negative for a lot of other assets. >> well, i mean, the gold story is very much linked to the interest rate market. i mean, there's been -- for the last three years or so, gold has divorced other commodities. it's been a painful divorce, but
it kind of has. gold is moving really on the u.s. dollar and it's moving on interest rates, and obviously negative rates in europe and negative rates in japan have given gold a big boost. now, i'm in the -- not saying the prospect of negative rates in other parts of the world is great for the economy. but i also think negative rates in europe and japan are actually not a bad thing for china because, remember, for the last couple months we've all been very focused on the chinese yuan. now you have the japanese pushing rates. same thing in europe. the pressure on china suddenly starts to fade. capital outflows out of china may not be accelerating here because where do you go? in that sense it provides a bit of a cushion, but obviously also i think sets a more constructive
tone on gold, particularly if the u.s. economy fails to deliver that strong growth that the fed is depending on for an interest rate hike path they've set. >> francisco, it's michelle. if i could ask you about venezuela and specifically about -- talking about when are we going to see production coming back. back to brian's original question about when we might see some response. venezuela has been so focused on paying its debt. they're not buying food for people. they're not buying medicine. people are going hungry. it's horrendous down in the country, but they're focused on paying the debt, so that way they can keep the oil company running. if they don't, then suppliers stop giving them stuff they need to make the whole thing function. if they default later this year, could that actually help drive a drop in production? would that actually help bring the oil production in the country to a halt or slow it down at minimum? >> i think it is. i think it's inevitable.
if you look at the credit markets, what's being priced into them for that particular country and the quasisovereign that brings most of the revenue. we've seen already a big hit via credit. we've seen also a big reduction on imports. and, remember, if you can't feed your people, you can't feed your workers, eventually you're going to have to really do something, and that something is probably going to be either default or restructure the debt and, frankly, i think when saudi embarked on this oil price meltdown, and they've really forced it by increasing production themselves in a very oversf oversupplied market, they didn't really have shale oil in mind or just shale oil in mind. i think they had in mind a lot of different players and maybe venezuela is one of them. i don't know. i don't know if venezuela is on the target list for saudi but -- >> wow, that would be
interesting. >> if venezuelan production starts to decline, that would be a win for saudi arabia long term in terms of market share, right? but certainly it's made things very difficult within the cartel and venezuela has been perhaps the one country that has been rushing most to get a deal done with opec, and they've -- >> because they are the most desperate. that's right. >> the weakest. >> thanks, francisco. >> thank you. >> fraction blanch wincisco blaf america merrill lynch. we have our eyes on shares of dish network falling steadily in the last hour. currently down more than 4%. the satellite tv company's earnings dropping in 2015 hurt by a decline in paid tv subscribers and a wireless air waves auction related expense. today's drop pushing the stock down about 23% year-to-date. tyler? >> seema. thank you. still to come, our interview with apple co-founder steve wozniak. he is fired up about apple's privacy battle with the fbi. you and we will hear what he has
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welcome back to "power lunch." i'm melissa lee. marissa mayer says yahoo! has 600 million monthly mobile users, making those comments at the developers conference currently under way in san francisco. shares of emc spiking on a reuters report saying regulators are expected to approve dell's $67 billion bid for the storage company. and walmart a big drag on the dow after reporting a quarterly sales drop. we have more on that in the next hour of "power." we have a big interview coming up with apple co-founder steve wozniak, the woz. likely with a lot to say about the big privacy battle between apple and the government going on, and he will join us
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let's get to cnbc's papal correspondent john harwood. he's on the campaign trail in south carolina. hi, john. >> reporter: tyler, you know, donald trump has tangled with various people in the course of this campaign from businesses to debate moderators to rival republicans, but this dispute is on a higher level. pope francis after a six-day trip to mexico made some remarks very critical of donald trump saying that for a person to support the building of walls without the building of bridges is not christian. donald trump needless to say didn't take kindly to that. he said not only was it wrong for the pope those things but it's something the pope may come to regret. >> for a religious leader to question a person's faith is disgraceful. i'm proud to be a christian, and as president i will not allow christianity to be consistently attacked and weakened under like what is happening now.
if and when the vatican is attacked by isis, which as everyone knows is isis' ultimate trophy, i can promise you that the pope would have only wished and prayed that donald trump would have been president because -- it's true. >> reporter: guys, we also have to note the other news made by the pope in these set of remarks. he seemed to be open to an exception to the vatican's ban on artificial contraception saying that if necessary to prevent the spread of the zika virus, that that might be an acceptable exception to that ban, guys. >> all right, john harwood. thank you very much. if mr. trump gets over that self-confidence issue he has, i think he might go somewhere. speaking of zika, more than 5,000 miles from the epicenter of the outbreak a household name is working overtime to provide a critical weapon in the battle against the virus. mary thompson joins us now from
sg johnson's waxdale plant in mt. pleasant, wisconsin. mary? >> reporter: this plant is over 1.7 million square feet and it makes household products including scrubbing bubbles. it also makes the bug spray off 24/7. it's one of three s.j. johnson plants doing so. of course, the bug spray is in high demand these days as it repels the mosquito that carries the zika virus, a virus suspected of being behind the increase in brazilian babies that are born with microcephaly or abnormally small heads. here is ceo fisk johnson on the surge in the increase in demand for off. >> what i can tell you is that
in brazil and argentina, we're running about 900% of normal. so a huge increase there. we're just beginning to see an increase in demand here in the united states, an increase of about 40% from what would be normal at this time of year. >> reporter: of two months ago the family-owned firm began increasing production of off and other bug repellents here and in plants in brazil and argentina. production increases are on the drawing board for mexico. the firm is working closely with suppliers and governments to assure the surge in demand can be met. in argentina it's also agreed to the government's request prices be cut by 25% on its top selling bug repellent so the neediest cases can afford to buy it. keep in mind bug spray and insect repellants are big business for s.c. johnson.
given this is now a public health emergency, the company is far more focused on maintaining the supply chain so that production can remain steady and increase if needed rather than the potential profits and sales increases that might come from this virus. back to you. >> it makes sense. people are frightened, mary. all right. thank you. it's 2:00 p.m. on wall street. let's look at what your money is doing at this hour. stocks are lower across the board. still positive for the week because we've had a strong couple sessions but right now the dow is lower by 29 points. basically flat when you're talking percentage terms. nasdaq is lower by 39 points and the s&p lower by half a percent, down eight points to 1918. tech privacy and apple on top of the news once again, and a "power lunch" exclusive now just for you with apple co-founder steve wozniak. he is calling in from his home in los gatos, california.
what is your take, steve, on this fight between apple and the fbi? should apple build that new version of ios allowing them to unlock that phone? >> i'm notintimately involved in the fight but i'm definitely against that. i don't believe the phone should have backdoors. i believe apples brand recognition is based on an item called trust. trust means you believe somebody. you believe you're buying a phone with encryption. it shouldn't have hidden backdoors and ways that -- you don't know what's going to happen in the future. what -- tell you what, you don't have anything to hide, right, brian? >> what's that? >> you don't have anything to hide. you don't care if i have got a backdoor to everything you have done for the last five years, right? >> i would like to believe no, but in the blog age perhaps i do, steve. i might say yes. >> okay. well, you could send me your hard disk. you wouldn't mind doing that. >> no, but -- okay. i hear your point, buddy. but how about this though?
i also am now being accused of terrorism. i mean, and i think that the public is saying, well, we understand your concerns about privacy, but this was an incredibly terrorist act and that the government is saying, hey, it's one phone. we don't want a back door and we're not looking to populate the world with this new software. >> it's a crack and i don't believe it's being -- terrorism is just a phony word being used. the case involved actually with apple right now had to do with i believe it was a shooting or a murder or something. it wasn't terrorism. you know, what is terrorism? it's just a deeper crime. anything you can associate with politics. no, i don't think we want leaders -- we're human beings. i have been with apple my whole life, and apple has had a reputation for building devices that work in the human way. let humans be humans. >> steve, i think, steve, the record shows that the shooters in san bernardino were
affiliated with or had connections into known terror groups and that this was an intentional terroristic act. i don't think that's -- >> you can't generalize that and say that's the only way embarrassing information would ever be used. i mean, ask anybody on facebook. also you can't trust who is in power. it's like believing the authority and police wherever they go. generally when they write the rules, they're right when they're wrong. but this is just totally arbitrary. how it will be used in the future is out of bounds and not needed. >> you're saying there could be mission creep down the road. in other words they say they want it for one thing today, but then it's used for something else. still, how do you look -- could you look a parent in the eye or a relative in the eye of somebody who died that day and tell them this exactly and say, you know, we don't want to help them get that information?
>> no, i'm not judgmental. when i look people in the eye, i don't think they're wrong if they think differently than me. they're right in their world and my thinking is different for my reasons. first of all, i believe that we are very much respecting what is a human being and what sort of respect does human being mean? our rights over time in the justice system have come about because of abuses that happened in the long run when you have things like kings and high authority making their own rules, going after who they want to go after. disliking you, making up stories. a lot of rights have been built into the court system, if you will, and they have a background that says protect human beings from things like torture. >> steve, it's melissa lee. i'm wondering if your view is absolute or does it change? let's say the circumstances were different where it was clearly an act of terrorism. there was no doubt about it. something along the lines of the paris attack or 9/11. would your view change? could you actually tell authorities, no, i believe that privacy of every customer
including these proven terrorists is worth protecting? >> there will always be terrorism. i don't believe that protects terrorism. there are other methods of doing investigation. we're talking about one case or a general category of cases, which is, you know, basically everybody -- there's a backdoor for everyone and if that gets abused it could be conquered by hackers. it could be future people that run companies like apple decide to use it in ways they shouldn't. privacy has -- i grew up and was taught that the bill of rights was really absolute core values that we should have, and now i find out, oh, well, we can disagree and go around them anytime we feel like it and the word terrorist has been used way too often to scare people -- >> but the question, steve -- i'm sorry to interrupt. the question that i put forth to you is what if we knew this was a case of terrorism, there was
no doubt about it. would you be able to say comfortably that apple should not build any backdoor even though we know there is a terrorist attack, there may be other plots being brewed right now? >> you know what? i think with court orders and whatnot, that apple would respond, you know, in an individual case. however, the case is more like should you build in a backdoor that you can always find out what somebody had, they cannot have a realm of privacy, and i'm on the privacy side. >> okay, steve, let's broaden this out just a bit because it was a really interesting article in "the wall street journal" yesterday about a company called castlight health care. basically that they track everything you buy and do and then they let your employer know, for example, if i like wine and chicken wings, which i do, both those things, they know and so maybe my employer knows that, oh, he's eating fried fooed and he's drinking wine and, therefore, maybe his health care costs are going to go up. is there an implied understanding when you buy a
phone, any smartphone, that you're going to be tracked anyway? like where do we -- >> that's obvious. in a sense technology has won a lot of the battles but the human versus technology, we should hold out what we can for the human also. >> what do you think steve jobs would have done? >> steve -- once we have artificial intelligence doing the searching of these databases can we trust it? i think steve would have gone for the privacy. one time we talked to the fbi. they came into apple and notified us how to watch for all these chinese spies that were going to try to get our ip, and steve asked the fbi one question. he asked them -- we do the same thing, right? and the fbi guy said, no, we don't. i believe in truth. i'm sorry, i follow the person who is being honest before i feel the person i want to feel an emotional attachment to what
they say. >> you think the fbi was lying to you that day in other words. >> that the u.s. don't do spying also to get i.t.? yes, i think they were lying and i think -- and i don't respect that answer. >> how much -- >> i think it's well known that the united states has been spying and espionage and cyber espionage. steve, let me ask you this. if on the phone of the san bernardino shooters who i think were terrorists, i think most people think they were terrorists, there was information that would have led -- that indicated that apple's headquarters was the next target of an attack, a biological attack let's say and that phone was still locked up and may still be locked up. that information was on there and that happened, how would you feel? >> you're kind of off in left field is how i feel right now. >> i don't see why i am. i have no idea why i am.
if there's vital information on a phone that was -- it wasn't -- it was owned by the county of san bernardino -- >> everything we've ever done in our lives should be open to exploration, we should have zero privacy because that if can apply to anything. >> well, if you're involved in a criminal conspiracy of some sort or another, your right to privacy -- it seems to me that the society's interest in protecting the common good would trump my individual right to privacy. >> you're talking about if something that isn't -- hasn't been decided and it's something that probably doesn't even exist. if they have something on their phone that said apple headquarters was the next target, that's out in left field. >> you get the spirit of his question though. >> you get the spirit of my question. if it could have prevented 9/11, something that actually did
happen. >> you're off -- >> you're about protecting the ability to unlock the phone. >> you're talking about ifs to get an emotional feeling. you can't show us there is actually a connection that could be stopped that way. >> we will only know these things though, steve, in hindsight. getting back to the case in hand. the fbi has said they want to unlock this phone for this particular case only. why do you not believe them? you sound, with all due respect, a little pour noaranoid, in you distrust of the authorities. >> i'm talking about the general case. the fbi wants a permanent backdoor built in and i think that's wrong. i think you should buy a product and feel this is my product. what i have is what i think i have. i don't have companies playing tricks behind me in the background. even google marketing to me is something apple doesn't do. >> obviously we sort -- there's going to be people -- i did a poll on this yesterday on
twitter. half the people agreed, half didn't. we're never going to agree not you, not me, not my parents, not tyler's family, whatever. everybody has their own views. let's talk about the technology. the government says that if we build or if apple builds this, they want one copy, they will destroy it afterwards i presume. how does the technology work? if companile does have to build this software that would allow this backdoor, would it be possible to simply destroy it or would it be kind of like creating a new type of bacteria or a virus that potentially could be then spread out? >> you're trusting somebody who has not lived up to the trust in the past and that you have no idea who is going to be operating in the future and you give up too much. >> would it be easily duplicated would be a smarter way to ask my question? >> i don't know what you mean by easy. i presume everything technology is easy. >> let's call it ios 12.1. they create one version of this
new ios that would allow the government to get in, where would that ios sit? because privacy advocates are worried this will spread and, therefore, you could get on my phone or i could get on your phone. how does the distribution of a technology like that work, steve? maybe my question is a little crazy but i don't know 1% of what you do about technology. >> what do you mean? it would just be built in. >> but how could it spread? apple is worried this could spread to steve's phone, michelle's phone, melissa's phone. would it be that easy to move it around to where this would become sort of a pirated version of a dangerous ios around america? >> i'm not sure what you're asking exactly -- >> i wonder, steve -- >> me neither. it makes two of us, steve. >> when i read tim cook's letter, reading between the line, to what degree do we know about foreign spies working in silicon valley if this backdoor
were created? could it be cop taured by the chinese? could it be captured by the russians -- >> past history has shown us that these little secrets can be discovered, explored, broken. every day you read about a new company that hundreds of thousands or millions of accounts got violated. so you can't be sure no matter how confident you are in the mathematics. so who knows. >> steve, is it possible for apple to build this backdoor and keep control of it, not hand it over to the government but use it to unlock the phone which would then be handed over to the government? or is that just not a possibility? >> well, we know who apple is today and we trust them and they're good but who is apple tomorrow? who are the people involved? are there insiders who would be secretive just like you can put data on a flash drive and walk out of a company. >> could somebody else besides apple engineer the kind of backdoor that apple would prefer
nobody have in in other wor? in other words could the national security agency find a way to break into the operating system and open the phone? >> in my mind, it doesn't matter. it's an assault on a right that people should have in my mind. and you disagree. you have your reasoning and your logic and i have got mine. it just comes from my whole background. >> steve, the bottom line is do you think apple ends up having to do this? do you believe that the court orders them, they will do it? >> my hunch is yes, but i don't know. i don't know. if i were there, i might fight it quite vigilantly but -- >> i assume, steve, you use an iphone. if the answer is yes and you're afraid about this backdoor being released, would you then switch? how would you then protect yourself if you then believe that could be used for harm? >> some of us fight for privacy
in our lives. i have had a life of being totally open, of sharing all sorts of data about me, even when i did wrong things, breaking the law. i would tell my parents because that would keep me from doing things i didn't believe in. i share so much with the whole world and i don't hide out. i don't make myself unfindable, so to me personally it doesn't matter. i'm standing up for other people. >> steve wozniak, it was very interesting, wide-ranging interview. steve, we appreciate you taking a little time for us on cnbc today. i know pretty much when we do these sort of off-the-cuff polls the split is about 50/50. so there's a lot of people who feel exactly the way steve does and then there's others who say -- steve, thank you very much. we do appreciate it. >> interesting stuff. here is what's on the menu for the rest of the hour. as pitchers and catchers report to spring training, we'll take you to the code media conference. silicon valley is in the spotlight from apple fighting the feds to a pull back in startup spending.
two top venture capitalists will give us their take on tech and their take on the interview we just had. there really is no small stuff. every decision... every component... is an integral part of what makes the 2016 c-class one of our most sophisticated cars ever. because when you're setting a new benchmark for refinement, it is the small stuff... that makes the biggest impression. the 2016 c-class. lease the c300 for $399 a month at your local mercedes-benz dealer.
man 1: he just got fired. man 2: why? man 1: network breach. man 2: since when do they fire ceos for computer problems? man 1: they got in through a vendor. man 1: do you know how many vendors have access to our systems? man 2: no. man 1: hundreds, if you don't count the freelancers. man 2: should i be worried? man 1: you are the ceo. it's not just security. it's defense. bae systems. ( (. >> reporter: welcome back to "power lunch." i'm julia boorstin at the code
media conference. i'm joined by casey wasserman, a sports management and brand advertising -- sports marketing company. i know you're sort of rebranding a bit here. >> we are. >> but you represent 1,500 athletes as well as a bunch of big brands including american express and pepsi for their live events. here we are at this conference talking so much about the changing sports landscape. what is your outlook? do you think millennials are no longer going to watch sports as part of a tv bundle? >> well, i think sports is still a very valuable piece of the live entertainment package, and how millennials decide to get that package is clearly evolving. you've seen the decrease in homes. i think it's slowing down, and i'm not a believer that it goes to zero, so i don't think b i don't believe that 100 million households go to zero. the bottom is the question. is it 75 million homes? the real question for the media companies is how do you make up that delta? how do you maximize revenue from
the customers you do have, and how do you create products for the way the consumers want to watch the products. i think you see sports at the heart of the strategy and it's why all the big technology companies are focusing on a sports strategy before they figure out another live event strategy. >> what does it mean for you as a sports agent? >> obviously the media dollars sit at the top of the funnel. as long as those dollars continue to come in and for the next foreseeable future they're contracted and i'm a believer that when the big rights deals come up, that there will continue be an escalation in fees, that means the system continues to stay strong and that ultimately funnels down to the athletes and that's our job to make sure they get their fair share of it. >> do you think fewer people paying for a big tv bundle means that the rights could go down and athletes could end up getting paid less? >> obviously no one could predict the future, but i believe the value of sports rights will continue to increase because it's the one thing that's predictable and definable
in a world where literally almost nothing else is. >> there's a lot of talk about the skinny bundle, espn's role in the spinny bundkinny bundle. do you think people will continue to pay for sports? >> everyone is talking about the degradation of a bundle and yet what they're moving to a different kind of bundle, and the first thing they try to get as part of the bundle is sports. so a little ironic people are running from the idea but yet ultimately having to use sports as the key to engaging people going forward. the big transition for media companies is going to be today they are b to b companies. they sell their product to a handful of aggregators. i believe the aggregators will change. there is a part of their business that will be direct to consumer. it's complicated and it creates new opportunities. >> what are the opportunities for your clients to create new revenue streams in this new landscape? >> well, look, athletes are the
focus of what sports is about. it's about the competition on the field of play, and athletes have a more meaningful opportunity to reach their fans and consumers in ways they never had before. whether it's through social media or other platforms, their value is going to increase because their ability to monetize their reach and their creativity and their connectivity is unprecedented. >> you're representing athletes in deals. you're also doing sports marketing sportsmanshinsorships sorts of live events. how do you use technology in your business? >> technology is a platform for distribution to tell a story and amplify a story. for athletes it's a way to have a direct connection for their fans. for brands it's a way for them to amplify what is otherwise a relationship that only lives for the people in a facility or in a blog or around a singular event. the ability to execute and amplify a relationship for a brand is meaningful and you see that certainly this weekend at the nba all-star game. the way brands were telling their stories beyond the court.
it was meaningful and their reach was significant and the value they created throughout was really because of that sponsorship but you need technology to enhance that relationship. >> i know you invested or you purchased a social media platform called laundry service about a year ago which must be what you're referring to there. but we're running tight on time so i want to hear about the olympics. i know you're championing the choice of los angeles for the olympics. why does this make sense? there are all these horror stories about how costly it could be. why should the olympics be in los angeles? >> well, l.a. has incredible olympic history but what makes l.a. great for the olympics in 2024 is what l.a. is today in becoming, which is one of the great cities of the world. we have an incredible sporting infrastructure. other cities struggle to find olympic stadiums, we have the most expensive and technologically stadium being privately financed in l.a. that will host the los angeles rams. we have the infrastructure that can handle the olympics without
that risk of filts anacilities delivery. we're in california today and in southern california and the companies that exist here, the reason this conference is here is because that culture of innovation and creativity that exists here is not an accident. when you want to talk about what's next and how the olympic games gains a new generation for the next 100 years, with he think that's all about what california is. >> i have to ask you quickly about the nfl coming back to los angeles because i know you were part of that. what does that mean for you to have the nfl back? >> i think the second biggest city in america and the biggest sport in our country are a great combination, and the ability for the nfl to connect with a whole generation in los angeles and in southern california that they have missed out frankly is exciting. and what that building means to this community in terms of beyond the nfl, super bowls and final fours is exciting. it's another great step in the right direction for l.a. as a global city. >> los angeles olympics, we'll
watch out. back over to you. >> thank you very much. i might also add that there's a lot of conferences in california in february because it's 80 degrees versus 30 degrees here. oil closing in just a few minutes' time. we'll take you to the nymex to see will it be above $30 or $31 a barrel? stay tuned to find out. was engineered... ...to help sense danger before you do. because when you live to innovate, you innovate to live. the all-new audi q7. a higher form of intelligence has arrived.
the final oil trades are starting to cross for the day. let's get to jackie deangelis. >> it looks like we'll close over $30 a barrel but it was a seesaw day. we were strong ahead of that inventory report but then mixed messages within that kept sending us back and forth. the bearish news with the build of 2.1 million barrels. more oil going into inventory and storage. the bullish news was the u.s. production number. it dropped for the fourth straight week in a row. it's not that impressive but four weeks is starting to show us a little bit of a trend here. bottom line, not a lot of conviction today when it came to this trade. that range is still $27 to $32. to the upside, we got to $31.98,
so very close but we couldn't break through that technical level. >> thank you. if you are a regular viewer of "power lunch," you may have seen one of our traders make a specific call on a bottom or oil. we will check on that call. it's "trading nation" coming up on "power lunch." ♪ ♪ ♪ for your retirement, you want to celebrate the little things, because they're big to you. and that is why you invest. the best returns aren't just measured in dollars. td ameritrade®.
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welcome back to "power lunch." i'm melissa lee. it does look like we will snap our three-day winning streak. all three major indices are trading lower right now including the russell 2000. on the s&p 500 we should note only two sectors are trading higher, utilities and telecom, each up more than 1%. let's goat to sharon epperson. >> here is what's happening at this hour. the international monetary funds board is set to confirm christine lagarde for a second term as its leader tomorrow. that's according to a french newspaper. she was virtually assured of a second term when nominations closed with no challengers. john kasich meeting with a group of campaign volunteers in mt. pleasant, south carolina. he discussed his campaign and how to move forward over coffee and bagels. the first of two explosions to demolish the daniel boone
bridge in missouri took place today. a new bridge opened to traffic last june. the explosion forced the closure of all lanes on the new bridge to clear debris. and the nhl stanley cup champion chicago blackhawks visited president obama at the white house. obama calling the stanley cup the best trophy in sports. he also noted it was the team's first visit to the white house in the last six years. and that's cnbc's news update at this hour. back to you. >> sharon, thank you very much. let us now talk oil with the "trading nation" team. today your team is todd gordon and boris schlossberg. todd, we will give you some props because three months ago you said oil would fall to 26 bucks a barrel. listen to this. >> i think you guys are going to be shocked to hear this. technicals say in a good solid pullback we should see an equal leg push in the current move lower. a 77% drop from the reactionary high up at about $114 puts this
at $26 in the crude oil market. >> all right. fast forward to last thursday, oil fell as low as $26.05. todd, why were you off by a nickel? i'm just joking. now you are the oil guru technically, where do you see oil heading from here. >> with that, don't listen to me going forward. with he have to look at the decline oil has seen bringing us down to the $26 mark. history would show us that oil most recently did a 50% rally and yet the bear trend continues. so what we need to see is a break above a 50% rally. currently we're about halfway there from the lows, so the level points out to be about $38. so if we can hold below $38, the bear trend might continue. on top of that, we have an old low that was right around the $37.75 mark. if we're to break through that, then i could say the low is secure and i can pat myself on
the back but not until then. >> we patted you on your back but we hear your mod did he. b boris, $25, $50? >> i think the party -- >> the hangover. >> the hangover is not over. i think the interesting thing here is, yes, we're clearly in a short covering basis and we're clearly in an uptrend as everybody is trying to run and cover their shorts. long term, russia has to pump it out, saudi arabia has to pump it out, iran has to pump it out. it doesn't matter what the price is. they don't have any other alternative and i have a feeling they'll flood the market again. my view is it goes higher short term, lower long term. >> $25 before $50. i think we already had the party, boris. i'm worried this is the headache and a lot of advil. thank you very much. todd gordon, great call on the $26. for more "trading nation," go to
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liberty mutual insurance. welcome back to "power lunch." i'm michelle caruso-cabrera. is there a big fat venture capitalist slowdown happening in silic silicon valley. >> carol cheng and joining us from san francisco is ethan kurzweil. they have 116 ipos under their belt including linkedin and yelp. i want to get to what's happening in silicon valley, but, first, what's your take, cheryl, on the situation between tim cook and the federal
government here? would you pick a side? >> i do not envy tim cook and his position at all. i think it's a difficult spot to be in. i think one request, while it might seem benign, can lead to others, and i think the tech community is definitely taking a stand around privacy which we think is very important as we invest in new technologies as well. >> how about in your shop, ethan? what are you guys talking about when it comes to that point? >> well, i agree with apple that our collective privacy is much more important than one particular terrorism investigation in this case. i think they've taken the right stand on that issue. however, i think they're probably deluding themselves to say that they hold the only -- they create and exploit the only key to get onto this phone. someone is going to do it whether it's a good guy or a bad guy and so i'd rather a good guy be the one that developed the exploit than somebody else which compromises our security even
worse. >> that's an interesting take i haven't heard before. >> it was what i was trying to ask wozniak the last half hour. could someone else develop the backdoor key? is it only apple that could do that, whether it's a state actor, whether it's a good guy or a bad guy. right, ethan? >> oh, absolutely. i think somebody could develop this capability. unfortunately, it's far more likely to be a bad guy to do that. and so, you know, on balance i'd much rather have privacy, especially given what we've seen from the federal government in terms of their lack of transparency around that. however, it's a delusion. it's not actually the case that apple is the only one that can get access to those phone. >> they have an advantage because they know where to put the backdoor. >> they have the home field advantage. >> obviously it's a difficult thing to do, but hackers can see where the money is and i would think there's a lot of money in unlocking every single iphone on
this planet, cheryl. i mean, i would think this think exists already if it was going to exist. >> i'm sure people have tried in the past, undoubtedly, but ethan is right in the sense that should somebody develop it, should it be a good guy versus a bad guy, of course you want it to be a good guy. from apple's perspective though they also have to think about general public policy and are they going down a slippery slope. so they're not in a great position and they're up against some very national security, you know, other issues, so -- >> they're taking the position they have to take it seems to me. >> yes. >> i think they are. >> the position they have to take. >> i think they are. i agree with you on that. >> cheryl -- go ahead, ethan. >> i agree with that as well. i think what the government is asking them to do, put a vulnerability in everyone's iphone, i would not endorse that, but i think in the end some exploits will be developed here.
>> would either of you back a company that comes to you and says i can develop the backdoor to apple's iphone, cheryl? somebody comes to you and they can do that, that would be a moneymaker, wouldn't it? what would you do? >> i don't know that it would be a moneymaker and i don't know that i would want to back a business that makes money doing that. i think that if somebody has the ability to build a backdoor, they're very technically competent and their skills can be used in many different things. you know, bessemer, ourselves, we've all backed companies that have been approached by the government, by other organizations because the data that they have is so valuable. the question is how do you use that data and what type of businesses do you build around that technical functionality is what we look at at the very early stage. when two entrepreneurs that are technical founders come to us and say they have a great idea, hour job is to help them build a business around that idea. >> but i find -- am i the only one that finds this whole conference a little
hypocritical, ethan? because venture capital, most of the guys you guys are backing now, your entire business model is basically invading our privacy. i mean castlight health care, the big "wall street journal" article. they track -- they know if you're not taking your birth control pills so they can tell your employers you might be looking to get pregnant or if you're fat because you're eating potato chips. waze is track wing where we dri. twitter and facebook is us posting stuff about ourselves so data can be mined so they can sell it to advertisers to they know brian sullivan likes pringles and doesn't jog enough. i'm not sure i agree with the premise that the whole business of these companies is as you say. it's incumbent -- >> what is facebook's business? what's their business? how do they make money? >> well, their business is advertising and they have to be transparent with their users
around what data informs those advertising and how it's used and give people the ability to opt out of those afds. i think that's a case where perhaps facebook needs to do more but i wouldn't indict all of silicon valley -- >> just taking to make the point that privacy took a u-turn a long time ago. when i'm using my waze apps to see where the potholes and the cops are, i know they are tracking where i go, where i like to get gas, that i prefer this station over that station, i'm not knocking it -- >> you embrace it. >> well you have to. >> it's the trade-off. >> the point is why is everybody making such a big stink about this when you're backing all these companies who are basically telling our employers that we're eating bleu cheese potato chips too much? >> well, i think there's a big difference between giving somebody an exploit that gives access to private data and using data to inform a better consumer
experience. i follow your premise, it's a slippery slope to that, but there's a big distinction there, and i think at bessemer we're careful to only back companies that are going to stay on the right side of that line and they have to be transparent with their users, have to be clear about how data will be used and hopefully the data is used to make the experience better. if the data is used to make the experience better, that's okay. consumering will adapt to that. when the data is used in creepy ways or ways that manipulate a consumer experience, that's a problem and that's what you're reacting to. >> cheryl? >> and i completely agree with everything ethan is saying and on top of that the onus is on the company, the startups, the technologists to develop controls so the person who controls the data is the consumer. so if it's health data, it's fine to democratize health data but you have to give the control to the customer and say, i willingly give my employer information that i'm pregnant or i willingly give information to
my employer that i jog five times a day. whatever that is, that control has to reside within the customer, and if they don't do that, then that's when you start to say, hey, you're watching me and using information about me unbeknownst to myself, and that's very -- >> i know that almost no app seems to work on my phone anymore unless i enable location services. unless your location service is on, almost nothing seems to work. i'm just taking the other side, guys. i'm not trying to be a pain in the rump. i'm just saying i think the privacy bus pulled out of the station a while ago. >> guys, good discussion. very provocative. thank you. we're sure everything is fine in silicon valley which is what we thought they were going to talk about. cheryl and ethan. good to see you. >> thanks. >> thank you very much. good to be here. all right. i'm just pondering my own existence. up next, we're upgrading your printer, giving you guidance on
gps because it seems appropriate giving the conversation that we just had. i'm going to fake out the government and stop at a completely different gas station tonight. we're back straight ahead on "power lunch." welcome to opportunity's knocking, where self-proclaimed financial superstars pitch you investment opportunities. i've got a fantastic deal for you- gold! with the right pool of investors, there's a lot of money to be made. but first, investors must ask the right questions and use the smartcheck challenge to make the right decisions. you're not even registered; i'm done with you! i can...i can... savvy investors check their financial pro's background by visiting smartcheck.gov
time for street talk, the analysts recommendations you need to know about. it's deflation today, we're going to do three. ibm, big call from morgan stanley, upgraded to overweight and say the transformation to anl lit ticks and cloud computing is under appreciated and like disclosure and new operating segments which should build confidence and stock trading six times enterprise value. price target is boosted at 140. not a lot of upside, 7%. but an upgrade for ibm, we don't say those things. >> lex mark, the grading go to a neutral, under $31, the main driver, the company is considering strategic alternatives.
it's a tough business though. disappointing hardware sales have been in decline but this stock popping 7%. third stock is red hat, up to a buy, says it sees the company as a share gainer and financial model protects downside and interesting call because part of a broader call by analysts cutting estimates for all kinds of other software companies, he did cut red hats price target, about 20% upside. >> and that's it. >> that's it. >> if you're in walmart, more on big slide and remember the dow next. i've been called a control freak...
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shares of walmart under pressure, reporting lower quarterly earnings and cutting sales outlook. ken perkins is equity analyst, one of the only few analysts with a buy rating on the stock. great to have you with us. >> thanks for having me. for walmart, forecasters disappointing and even though they spent more money on wages and despite spending more money on renovations to stores as wells innovations like bringing more fresh goods to the grocery store. why are you telling clients to buy this stock? >> yeah, i think there are a couple of things, one is that of brick and mortar retailers out there. walmart is better positioned to compete against the likes of
amazon over the long term. given their scale and given that they have a grocery mix that is other than brick and mortar retailers in the same space. the second is, these investments take time to pay off but we think they are the right moves, it's typically because an amazon threat or in store experience isn't good. over time, it still looks like customers are going to walmart stores and traffic is still up. that's suggesting that walmart's brand is still intact. even if it's not growing at the price they want. >> i get this whole best positioned to compete against amazon but that sounds like a long-term thesis to be in and other analysts think walmart is losing ground to grocery stores, a lot of supermarket chains outperforming walmart on grocery side of the business. >> that's a risk and i would clearly say our recommendation is definitely longer term investment. if you're an investor and
looking to make money in a company like walmart, it's going over a 2 to 3-year time who oho. if you invest in wages and e commerce, that takes a lot of time to flplay off. you need the consumer to feel comfortable spending. if you're looking quarter to quarter for walmart to produce, it's not realistic given the company's size. if you have a patient attitude you could realize upside. the company is outperforming year to date. there is upside toob had but it will take the longer term for the company to get on track to push it higher towards fair value. >> when you've got a big, big ship like this and you've got other companies big and small, big like amazon, like target and smaller like dollar general and so forth, you have a lot of competition here. that seems to be the fundamental thing that's changed in the mix
here. >> i think that's fair to say, for a company like target, interesting thing is that the company sells much more of its products from discretionary categories in the cross hairs of an amazon, general merchandise, apparel, those are categories target could struggle in. you think about walmart, 55% of the groceries, with the other competitors, dollar stores or kroger, any of these can't do the same scale walmart can do is both grocery and general merchandise, with 70% of u.s. population within five miles from a walmart store, walmart is well positioned to drive a click and cluk business where you can get consumers to buy general merchandise. that's where they have the advantage. the question is if you're thinking about e kmer versus anything else, it's capability versus driving customers to the site and walmart's problem is getting people to the site. ken perkins with morningstar. >> i surprised they haven't -- we've been surprised the whole
time, the lower oil prices and gas prices were supposed to help them out. >> and it didn't happen and in two or tloo years is it going to be better? interesting position. thanks for watching "power lunch". >> "closing bell" starts right now. hi, everybody, welcome to closing bell, i'm kelly evans. >> and i'm bill griffeth. >> happy second thursday. >> you didn't think i would do that, did you? >> the s&p on track to break its three-day win being streak. right now down three points. but it's been on either side of unchanged and energy sector has been the biggest loser so far today which we'll talk about and those numbers from walmart disappointing as well and that's been a drag on the dow for much of this day. we'll see if they can turn things around into the close. >> speaking of