tv Power Lunch CNBC March 30, 2016 1:00pm-3:01pm EDT
after i announced was in philadelphia. and the ovation and reaction that i got from philadelphia fans was the most amazing and unbelievable thing. gave me goosebumps, gives me goosebumps to this day. >> we're going to have more on cnbc.com later including how he admits it took him a while to learn to be a team player and the importance of team work. back to you. >> jane wells, thanks so much. thank you for watching. "power lunch" begins now. welcome to "power lunch," everybody. along with tyler, melissa, michelle, i am brian. welcome. lots to talk about this hour including a possible big dark cloud on the horizon for your money. how is that for a tease? right now, the sun is shining on wall street. we continue this run that we have had in what is going to turn out to be nearly a record month of march. the dow jones industrial average higher, s&p higher, nasdaq higher, russell higher. do you see a trend yet?
let's get to bob pisani on the floor of the new york stock exchange. this is what it sounds like when doves fly. >> very good. that was a good song. the important thing about it is since yesterday, we're up 1.5%. the s&p 500, we turn positive for the year. let's look at what the markets are doing in the middle of the day. brian is right. we're in a bullish situation now. two to one advancing declining stocks. new highs are expanding 200 at the nyse. volume is on the moderate side. volatility, well, the vix is at new lows for the year essentially. so let's take a look at the s&p 500, we are at highs for the year and, yes, that's only about up 1%. we'll take that and most of those gains for the year have come just in the last 24 hours. big caps, new highs, i mentioned some expansion of new highs and we have ge and coke and johnson and johnson, all names you know at new highs. united health. we track that on an intraday basis. travelers also on the upside here. so most of the new highs recently have been consumer
names. this might start to change if we keep the market movesing forward at this point. broad rally. energy, tech, staples, industrials, everything to the upside. health care is the laggard. biotech being used as a source of funds out there. what is also interesting is we're getting modest moves up on the weak dollar play. but maybe not as much as you think. this say much broader rally than play the week dollar. if you look at the commodity names, you see some of them up a little bit. alcoa was positive. it turned negative a moment ago. this is not a weak dollar rally. my point is it is a lot broader than that. finally, the insurers, met life, u.s. district court, metlife, not a systemically important financial institution and that's big news for them and maybe some of the other insurers. >> where is the market headed from here? is the next stop for the dow 18,000 or could we go back down and test 17 grand? let's bring in charlie bobinskoy
and brian jacobson. welcome. charlie, i'll begin by asking you why you feel the market is too pessimistic now. what are the things that make you feel that way? >> the earnings estimates that people have are just too low. we earned about $115 on the s&p two years ago. down a little last year. only saying we're going to make 119 this year. that's a 1%, 2% increase. that's too low. companies, the economy is stronger than that. companies are buying back stock. there say little bit of what we would call a safety bubble in the market right now. people have bid up the price of johnson & johnson. but anything that is tied to the economy in any way is very cheap. so we think there is more upside in some of those names. >> and so you're definitely -- 18,000 camp. more likely to be above 18 than around 17 at year end. how about you, brian. do you buy what charlie is selling? >> well, i like what charlie is
saying. i think people are very pessimistic, that's showing up in the data, if you look at the sector that has done fairly well. it is much more defensive as opposed to investors being on the offense here. if we get above 18,000, which i believe that we could within the next couple of days here, i am concerned about whether or not we'll be able to sustain that. one of the issues that investors will begin to have to reckon with again is that the fed is likely going to hike in june. so if the market expectations right now are that they're only going to hike once or maybe not at all this year, we could encounter a little bit of volatility or that could be the dark cloud that kind of hangs over the markets over the next few months. even though we did get a nice ray of sunshine from janet yellen yesterday. >> indeed. the markets are certainly still basking in that ray of sunshine today. it would appear. charlie, you know, i notice that your choices in the equity area are financials. but they're financials of a type. asset managers more than the classic banks. why?
>> well, for what i said earlier, people are just very afraid of the market. they don't want beta, they don't want any kind of downside moves. names like morgan stanley are trading at 70% of book. which just makes absolutely no sense to us. names like kkr a month ago was trading below the balance sheet, giving them no credit for the carried interest in their business. these are businesses that will underperform if the market is down. relative to the intrinsic value, the financials are very, very cheap. >> let's turn back to the earnings season, brian. what do you see there? do you think charlie has it right that we're being too conservative about the profit potential of american corporations? >> i'm not sure if we're being too conservative about them. at least in the near term here. perhaps over the long-term we certainly are. at least according to the way i'm looking at the world. i agree with charlie we will see a better economic growth in the quarters ahead. but i'm just a little fearful about what first quarter earnings season might look like. if you look back at what analyst
expectations were back in december, anticipating about $29 per share for the s&p 500 for q1, that's come down to closer to $24 per share. we have been saying that we think it is going to be closer to 23 to $24 and then begin r p ramping up from there. it looks like the market moves toward what our view was as far as having muted expectations. i'm hopeful we will see that ramp up of earnings going from q1 to q2. i expect we'll see that. we'll have to see what the data tells us. >> do you think the final three quarters of the year in terms of earnings will be better than the first? >> absolutely. we have all kinds of tailwinds, foreign exchange head wind will turn neutral, another industry is stronger, the housing industry is stronger. we think we have seen the worst of the energy numbers. the bad stuff is mostly behind us and we have a lot of good tailwinds. >> charlie, thanks very much. good to see you. and brian of wells fargo.
with today's move higher, the s&p 500 is hitting highs for the year. there could be a big dark cloud on the horizon. the man here with the dark cloud is dom chu. give me the details. >> pig pen. i got this dark cloud all around me. let's put meat to the bone of the data they -- charlie and brian were talking about. the expectations for earnings season. so let's reset for you guys. ahead of -- two weeks here, the week of april 11th is when we kick things off. the folks at thompson reuters ibis compile the estimates and in aggregate the expectation going into earnings season is that s&p 500 companies are going to have a decline of nearly 7% in terms of their earnings over the same quarter last year. it is not just the earnings, top line also seeing weakness here. we're seeing 1% declines possibly if analysts are right in terms of year over year revenue declines. so both earnings and sales set for decline, now energy has a huge amount to do with this
discussion. just how big? well, it is not that much of a wait, 6%, 7% of the overall s&p. if you strip out energy, hypothetically, earnings growth is only down around 2%. that's a big move here between down 7 to down 2. sales are up by 2%. if you look at the sector breakdown for where we're going to see the most gains, and where we're going to see the biggest losses, again, consumer discretionary, interestingly enough, on the positive side, up by 14% year over year for earnings. telecom stacks up by 5.5%. meanwhile, we told you about the sticker shock numbers here. materials, forecasted to post declines of 19%. and this one here, melissa, a 99% decline. that's not a typo. according to analyst estimates, 99% is what we'll see a drop in profits for in the oil and gas industry for s&p 500 companies. that's a huge drag. >> what i think is interesting is telecom with the 5.5% gain in
earnings growth considering it is one of the top two best performing sectors of the year with utilities and the growth is there behind the performance. >> it is also not a lot of growth. just enough growth to get you positive when you look at 99% drop. >> exactly. dom, stay right here. let's bring in lawrence scallop. bringing us the results of the index. welcome to the show once again. the reason why we hear about the index is because it is well correlated with the s&p 500 as well as with gdp. so tell us what you're expecting when it comes to earnings of actual companies, dom mentioned energy and you're saying even without energy, without financials, it is going to be a pretty bad earnings season. >> thanks, melissa. thanks, dom. glad to be here. our information is directionally very similar with what dom presented. a little bit more optimistic, though, when you take out energy and look at our numbers, which are monthly results from real companies, in our portfolio. we're showing results that
indicate more of a flattish zero to half a percent growth in earnings as opposed to the down 2%. we also see double digit growth in consumer discretionary. the area of weakness is industrial companies where they continue to be outright declines in profits. so it varies quite a bit from subsector to subsector. >> lawrence, it is interesting here because we focus so much about -- on energy. and we know it has been bad for a lot of quarters now. besides energy, you mentioned a couple of other sectors. is there one in particular that you think becomes the linchpin, the real key to what is going to happen with earnings season for that next leg higher in the markets overall? >> i think for this quarter the cake is pretty baked. i think there is a lot of margin compression in every area except consumer discretionary. for the past five quarters, our index shows profit margins declining. we think about it as a profit martin recession. i think that wage rates and the impact of the stronger dollar
are having a very broad impact in pressure on profitability. when i talk to the ceos of our portfolio companies, they all say, yes, wage rates, national indices show not much growth, but the people we're hiring, we have to pay more to. the people in our geography, our industry, our specialization. and when there is such a broad disagreement with the national statistics, i think the conclusion that we reach is really that whatever is being measured in terms of national wage rates is not really the same thing the companies are paying. i think that's go to be a crucial factor. >> so, lawrence, what would you say is the biggest head wind to companies in the past quarter? >> in the past quarter, in the industrial area, the impact on pricing pressure of the dollar and the cost going up. in health care, there is a slowdown in the growth, the tailwinds that have come from the affordable care act and, again, wage pressures and reimbursement pressures have come in.
those are the principle head winds. >> lawrence, great to see you. thanks so much for your time. >> thank you for having me. >> thanks to dom chu as well. news alert from the bond market. seven year notes up for auction. to sue herera for the details. >> $28 billion worth of seven year notes went off the board. average demand was 2.51. the average, the last few averages of the bid to cover ratio came in at 2.47%. indirect bids came in at 57.8. and indirects are important because they are used as a proxy for investments made by foreign investors, foreign central banks are considered indirect bidders. they watch that indirect number and the average on that is -- this is a little higher than the average. 57.8%. so average seven-year note, $28 billion going off with a bid to cover ratio of 2.51%. back to you guys. >> slight improvement compared to what we saw earlier this week. thanks, sue.
coming up on "power lunch," crisis in brazil. the president loses the support of brazil's biggest party, what do you do with the stock market there? we bring you the latest. financials are on fire since february 11th. is now the time to bet on the banks? or too late? straight ahead. ♪ we built our factories here
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welcome back to "power lunch." we want to update you on a situation regarding metlife. earlier today a district court throwing out the federal government's -- siding with metlife in its appeal to have the systemically important financial institution designation removed from the insurer, something placed on it by federal regulators. in response to this ruling by the district court, metlife issuing a statement saying that it -- this say win for metlife's customers, employees and shareholders and validates its decision to pursue this in court. in response, the treasury speaking on behalf of the federal oversight committee saying that it disagrees with the court's decision and will defend the council's designation process vigorously suggesting it may appeal this decision in federal court. the news giving a big lift to metlife because had it been designated systemically important, it is also giving a
lift to a number of other insurers today on the heels of that decision out of district court. michelle, back to you. >> thank you, mary. police announcing one officer was killed, two more injured in a roadside bombing. the news agency which supports the islamic state terrorist organization posted a statement saying that its local affiliate was behind the attack. the boston bombers from the marathon were originally -- had spent time in dagestan. brazil's president dilma rousseff saying there isn't enough evidence to impeach her. still, every day it becomes more likely. yesterday the biggest party abandoned rousseff's ruling coalition making it tougher for her to stay in office. the turmoil has been good. scratch that, great for the brazilian stock market. up nearly 20% year to date, one of the best performing markets in the world because investors want, hope rousseff will be gone. neil schering is with capital economics and larry mcdonald with acg analytics.
good to have you here. neil, what do you think when it comes to the chances that rousseff will be impeached? is it likely because the market certainly is acting like it. >> i think it is certainly more likely than not at this stage now. the game changer really was two things. one is her predecessor, the president was pulled into this probe, the probe into corruption at petrobas. so he's been pulled in. now she's lost a coalition partner. i think the time is up probably on president dilma rousseff's term in office. the question really in my mind is what comes next? how quickly that transition happens and how smooth that transition is and i suspect many in the market might bank on it being too smooth. >> you're hinting you think -- what would you do? buy into this rally or has all that news been priced in? >> i think there are reasons to be bullish. that sounds paradoxical given the recession since the turn of
the 20th century. i think assets are quite cheap. i think that commodity prices have probably hit bottom and expect them to edge up over the course of this year, predominantly because china, brazil's major trading partner, the outlet is not too bad. but i think the politics will be a head wind. there are reasons to be bullish, but i don't think they're the politics. i think the politics will be a head wind. >> i'm confused. bottom line, you would buy the market or wouldn't? >> i would buy the market but cautious about the politics. >> okay. i don't know what that means. larry, what would you do? buy the rally or sell it? >> i would fade it pretty hard here. you had due le engines powering this market, up 50% from the january lows. but there is a big mac row picture here as well. on december 31st, 85% of the street's economists and strategists told us the fed would hike in march/june. and the dollar was -- we're
supposed to have this great divergence. they lectured us on this great divergence and how the dollar would wage higher and leave e everybody else behind. now the dollar is raging lower. so this is helping brazil. it is helping oil. so that's probably at least 40% to 50% of the upside. the second part, the politics is also another huge positive. but as we have been pointing out here on the show, the government in terms of -- the honeymoon period and the things that have -- in terms of the austeri austerity, the hurdles are very high. once the change comes in, i think that the government change is at least 90% priced in now. >> got it. fade the rally. neil and larry, thank you for joining us. up next, one home run investment. we're talking about the big money in baseballs. as we head out, check out some of the stocks that might be in your part folio. some of the more widely held
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(patrick 2) pretty great.ke to be the boss of you? (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro. welcome back to "power lunch." i'm tyler mathisen. all new season of secret lives of the super rich kicks off on cnbc this time around, robert frank found one home run investment. take a look. >> i buy expensive items. but i just buy them just to collect them. >> sometimes just to wear them.
he's casually sporting a 100-year-old rare baseball uniform, the hat is worth $200,000 because it was once owned by legendary slugger babe ruth. >> that's cool stuff. joined by robert frank and jim ansel who brought some of his multimillion dollar collection along with -- this isn't the hat you were wearing in the scene, was it? it is. that hat is worth 200 grand? >> it is. tell them how much you paid for it and how long ago. >> approximately $50,000. >> $50,000. and now it is four times -- worth four times as much. >> yes. >> that was worn by babe ruth. this was a babe ruth bat. tell us why it is so significant. >> this is a game used bat from the 1920s. and for one year babe ruth notched the bat for every home run that he hit with the bat. and this bat has -- >> he hit a lot. >> he hit a lot. 714. so he -- this bat has eight notches in it, so this bat, particular bat, he hit eight
home runs with it. >> and you bought it for how much? >> after a few cocktails one evening. a few too many. >> it happens. >> $65,000. what is it worth now? >> appraised at over a million dollars. million and a half dollars. >> $65,000 to over a million dollars. >> yes. >> you have a valuable baseball here. this is a christie masterson ball. how much is that worth? >> that's been appraised at over $300,000 now. >> the rest of this collection, who are these signatures and where did you get them? >> these i have been collecting for the past 25 years, which are all signatures on -- from presidents signed on the baseball. >> you have presidents going back to teddy roosevelt. >> ronald reagan is there. woodrow wilson is right there. and then some -- who is that? >> howard taft. >> howard taft.
a big man. first guy to throw out a baseball at a game. >> he created this. >> here is a wanna-be presidential person. hillary rodham clinton, and john mccain right there. how much are these worth? what is most valuable one apart from christie masterson? >> they all are. the collection itself is worth several million. >> the collection as well. >> going again, back to -- an amazing investment it has been for you, you spent what, around, $200,000 to assemble a collection that is now worth many say at least $2 million, right? >> correct. >> how many years did it take you to get these? >> this took 20 to 25 years to -- >> what was most expensive one? >> the most expensive was the harding signed ball. >> we got to go. thank you very much. appreciate it. we'll be watching tonight. more with robert later on. you can see more of jim's collection and other toys of the wealthy on secret lives of the super rich tonight.
some say "free the whales." for them, nothing else is acceptable. but nothing could be worse for the whales. most of the orcas at seaworld were born here. sending them into the wild wouldn't be noble. it could be fatal. when they freed keiko, the killer whale of movie fame, the effort was a failure and he perished. but we also understand that times have changed. today, people are concerned about the world's largest animals like never before. so we too must change. that's why the orcas in our care will be the last generation at seaworld. there will be no more breeding. we're also phasing out orca theatrical shows. they'll continue to receive the highest standard of care available anywhere. and guests can come to see them simply being their majestic selves. inspiring the next generation of people to love them as you do.
hello, everyone. i'm sue herera. here is your cnbc news update for this hour. the fda is relaxing requirements for taking a medication that induces bor induces abortion. it is a victory for abortion rights activists who were fighting laws in several states that require providers to follow the requirements on original fda labels. french president fran swaco hollande says he will not push ahead with plans to change the constitution. this follows parliament's failure to approve the measure. 14 people from bull gare ga roma minority went on trial today. they were shouting islamic slogans. syrian security forces are clearing mines and disarming other explosives left scattered around by isis in palmyra. film footage showing the extent
of the damage to the historical area with large columns reduced almost to nothing. syrian forces drove isis out of the city on sunday. and thatted is t is the cnb update at this hour. back to you. look at gold prices now. they are just about closing. this is a two-day chart we have of gold, the most important part of the chart here is that the ta tail end when markets overall took a leg lower. we saw massive reversal. gold started to turn lower as well. gold closing the day down by .7%. looking at the rest of the commodities complex, seeing give back from the yellen rally we saw in yesterday's session. we have copper and palladium down by more than 1%. let's take a check on the bond market since we're talking about the impact of yellen yesterday and the impact of yellen in today's session and we're seeing gains across the board pretty much in the bonds, particularly on the shorter end, which saw the most pressure in yesterday's session.
it is worth noting that the two year yield now this is a one month low here, .768% and on the ten year yield, looking at -- if i step out of my way here, 1.25%. stocks off their session highs, but holding their gains that the hour. let's get it over to bob pisani for a market check. >> that's right, tyler. we're still up. i want to show you the significant gains we had in the last 24 hours since janet yellen's speech here. the s&p 500, we're up about 1.4% or so on that important gauge. that's very notable. we're off of the highs on that. still, this is a pretty broad rally. look at the material. that's a two-day s&p, materials, a lot of people say it is a weak dollar rally. materials had a nice move up. they're up about 1.4%. industrials also up better than 1% overall. my point is this is pretty broad, even if you look at consumer staples, they're up the same amount since janet yellen's speech yesterday. and even the financials, which really didn't do that much
yesterday, we have seen the financials also up nearly 2%. guys, back to you. >> robert, thank you very much. we're joined now by john merrill, ceo of tangle wood wealth management and robert pavlik at boston private wealth. welcome. bob, let me start with you. do you see new highs for the s&p and the dow anytime soon? >> i do. i think the market could power right above the 2130, the old high for the s&p 500. i think it gets there probably with very little trouble. now, this market is being fueled by liquidity being added by the central banks and the market happens to love that. the market breaks out the playbook, it flips over to the page what to do in the case of central bank liquidity and that's what is going to get us higher. >> john, how about you? i know you're a little concerned about earnings. a lot of people are concerned about earnings and you see that as a possible impediment to higher highs. >> i do. earnings are the natural result
of revenues, less cost, less taxes. we have pressure on revenues as you've been reporting today. cost as we're seeing labor costs, other costs are going up for corporations. and taxes. not only in the u.s., but around the world are being raised, starbucks, you know, companies like that, being asked to pay higher taxes in britain and europe. so you're going to see pressure on all three areas that affect earnings. i think that puts a lid on the market. >> if i buy your thesis and i look at potentials in the market as somewhat capped or limited, how do i make money in 2016? what are you suggesting? >> well, i think that our belief is that you should have the natural asset allocation that you -- accept your personal risk and your personal reward potential. over the long run, just staying close or your asset allocation is the best strategy for most
people. if you try do too many tactical things, it will get you into trouble. we think that we increased our high quality bond and gold and international exposure at the beginning of the year to get close to our asset allocation because we thought natural edges like gold and high quality bonds would be helpful. and international stocks we think offer a better valuation metrics. >> you suggest the way to do that is through a vanguard global non-u.s. etf or index kind of product, right? very quickly. i want to get back to bob. >> sure. the easiest way to play it veu, it is all international stocks merging and developed, less u.s. stocks. >> bob, let me turn to some of your more recent purchases. they include some sort of consumer discretionary or consumer staples i suppose you would say. mcdonald's, kimberly clark,
at&t, the ctelecom and next era energy. >> these are great companies for the long-term. the market has very weak underpinnings. you have to understand what the underpinnings are and the earnings are are not what matters to the market. what you want to be doing in this kind of environment with the central banks and the liquidity is buying the risk on assets. the ammazons, under armours, these are the types of names. look at the energy space, the weak dollar powers the energy space. just like john, i have a perfect solution for you. the boston private, large cap growth strategy. i think if you get into these types of names, i own my strategy, it is what powers your portfolio going forward. >> we appreciate you being with us. john merrill of tangle wood wealth management, bob pavlik. go to powerlunch.cook rignbc.co now.
coming up, we're going to talk to a fund manager who thinks even after this little rebound bank stocks still cheap right now. we'll ask him why. that's straight ahead on "power." professor richard thaler. you are called the father of behavioral economics. i've been called a lot of things. i have read all of your books. did you learn anything? i learned that humans are complicated. we're emotional. absent-minded. and we make some really bad decisions. my trade-off analytics can help companies make better decisions, but i am still learning what makes people tick. what makes you tick watson? natural language processing, reasoning algorithms, statistical parsing. now you are just showing off.
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you know it! now i'm seeing dollar signs. you should probably get your eyes checked. good one babe. optometry humor. right now get up to $650 in credits to help you switch to at&t. welcome back to "power lunch." united pilots announcing plans to pick at the headquarters of shareholders and altimeter capital. the two hedge funds are trying to overhaul the board of directors. stock higher by 2%. boeing will cut jobs to reduce the cost of jetliners. shares down nearly 2%. valeant pharmaceuticals saying it has not seen any additional issues affecting its prior financial statements. that's following a review of the statements. also asked for an extension of time to file its annual report as well as its report for the current quarter. valeant shares off by about
6.5%. melissa? >> michelle, thank you. the kbe bank index rallying, but not the same story yesterday with the big banks sharply lower immediately following the speech. let's bring in anton schip of menden capital advisers. is she simply meeting what the markets had expected already for rate hikes or is -- was it more dovish? >> i think she was more dovish. given some of the other fed governors including some nonvoting who have been hawkish lately, i think she came in. if you look at the number of times she said dovish things versus hawkish things, 4 to 1 ratio. i think we still get two rate hikes this year. but she took april off the table, which some had put back on it. >> i guess why i ask that is because financials had reflected the notion of two rate hikes this year prior, right, that's why they sold off into february 11th that's when we sort of saw that turn around of the overall markets. >> i would say that when we had the big sell-off earlier this
year, i think sovereign wealth funds doing the heavy selling, you know, people are saying no rate hikes this year. and i think the march meeting was very helpful with the fed basically moving the dot plots to two and that's more rational. makes sense. we have labor in pretty good shape, consumer confidence in good shape. u.s. economy is doing fine. >> 63 stocks in that kbe. just because i knew you were coming on, i went and looked, 62 of them, hang cocock holdings i down. the best performers are the ones that are the most exposed to oil. where is the oil thesis in your bank thesis. >> i think it is a little early to still buy banks in the oil patch. one of the ironic things -- >> it is up 15% this month. >> i worry about their reserves. only 3% reserve energy loans. so i think they have got some more fessing up to do. hancock is up at 8%, did it in
the fourth quarter. i can be short them, i don't talk about shorts on the air. it is a place i would avoid for sure. any energy producing states are going to be in tough shape. a while to play out. got a little syndicated national credits that are kind of -- it is going to take some while. it may take eight quarters. >> under over 3 1/2. how many times in the remaining two minutes are you going to say yadkin. >> as many times as i can say it? yadkin, yadkin, yadkin. >> it is your biggest holding. >> i love the economies of north carolina. they're in charlotte, raleigh, research triangle and a good shareholder base. told everybody they don't want to get pass the 10 billion level. >> something else happened since the last time you were on when it comes to north carolina. dozens of companies petitioning the governor to repeal this anti-discrimination law which would exclude essentially sexual orientation and gender identity.
they're threatening to pull out of north carolina. there are states saying no nonessential travel to north carolina or no travel to north carolina. does that have an impact? is that an overhang? >> i haven't spent a lot of time on it. i think some is symbolic. i understand people's positioning on it. but there is still a lot of good underlying fundamental things going on in north carolina. whether this happens or doesn't happen, you know, it is a potential small head wind if, you know, if this stays as law. but, you know, overall, the carolinas are -- both carolinas are good, george why ia is doin well. you've got people moving to southeast, corporations moving to the southeast, deep water ports. >> is that behind your sinovus love. >> it is one of those smidcap
banks. >> small to midcap. >> why do they want sinovus? >> they have presence in the states that are faster growing. the floridas, the georgias. >> why do they want to sell? >> a lot of recovery from the bottom. got rekapd a buncapped a bunch . i think a lot of guys worked very hard to bring it back. >> i'm going to throw a total -- can i ask you about valeant pharmaceuticals? not about the stock. here's why. here's why. you and i have known anton for years and you've won numerous awards, steady eddie, right? great over time, look at balance sheets, you dig in. forget valeant's numbers. as an investor, would you invest in a company that is asking for extensions on -- forget about valeant. don't mention valeant. what does that tell you when companies can't get their ten q or ten k in on time. >> look, you come in the deep
value investing, things have gone wrong, people have gone wrong. accounting has gone wrong. typically, you know, i'm going to avoid a situation like that. if something bad happens, i look at my thesis and go why did i own this in the first place? and sometimes the first loss you take is the best loss you take. and it is a very difficult pill to swallow but if you had taken that first loss when valeant first got hit, you would be really happy today. can buy many multiples of what you first had, the same thing with edson. i would say one of the advantages i've had over the years, i've been doing this over 20 years or for chase ten years before that is i know a lot of people in the industry. there are people i will trust over and over and over again and people i will never invest with no matter how good the story looks because that management is so critical because they can do it all right or do it all wrong. >> as we have seen. anton, thank you. stay with cnbc. coming up this afternoon on closing bell, an exclusive
interview with former lehman brothers cfo erin callan. she talks about the rise to the top and the fall of lehman. that's coming up at 4:00 on cnbc. considering how expensive weddings have gotten, it was bound to happen eventually. a wedding in russia cost, get this, an estimated $1 billion. we're guessing it wasn't a cash -- we'll bring you all the details. straight ahead. what if it were your job to make the world a more beautiful, colorful place? at ppg we think that's something we all need to do. we create, invent and formulate amazing paints, coatings and materials. so we can make the world run faster, stronger, fresher, smarter, cooler, lighter, greener
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welcome back to "power lunch." shares of sonic nearing the best levels, up by 5%. the drive in fast food chain's second quarter profits rose on continued strong sales. sonic says core menu items with limited time offers drove results and helped it gain market share. the stock is up 5%, 6% year to date. brian, guys, that's how you sonic. back over to you. an oil tycoon has a net worth of $6 billion. let's cut to $5 billion. he threw his son a billion dollar wedding. you heard correctly. a wedding with a reported cost of $1 billion. the extravaganza included fireworks, nine tiered wedding cake and, of course, like
everybody's wedding, performances by jennifer lopez, sting and enrique iglesias. >> how do you spend a billion dollars? >> there is also a london wedding. one in russia, and i guess a second one, so the combined cost may be around -- one of my favorite singer/songwriters, graham parsens, he passed away, my favorite song from him is thousand dollar wedding. how far we have come. how many multiples away are we? >> this guy is acting like it is forever or something. >> really cynical. >> imagine oil prices we're at 50 or 60 or 70, what would he have spent on the wedding then? >> a conspiracy theory. >> what? is he laundering the money? >> yes. that's what i was going to say. >> through the wedding cake. >> yes. nine tiers. >> why are there hundreds in the cake? >> the best thing about this guy is, you glance at wikipedia as a basic reference, but has some stuff -- so we --
>> not a red check source? >> wikipedia describes it as a media and oil tycoon and poet. >> and a poet? nice. >> all right. >> beauty is in the eye of the beholder. >> he just didn't know it. >> i was waiting for that line. the fbi dropped its case against apple saying they can get into the iphone on their own. so up next, how the fbi did it, what it means for you and your privacy and whether other products in your home may be basically listening to what you say. that's coming up.
big developments in the fbi investigation into the iphone owned by one of the terrorists who killed 14 people in san bernardino in december. nbc reporting an israeli company called se eed sele brigh eed ce party that helped them get into the phone. the ceo refused to confirm the story saying, quote, we are in the security business and that comes with a set of ethics we will never violate. here is what we do know. the company is based in israel with offices all over the world including right here in parsippany, new jersey. cellebrite is owned by a
japanese firm, sun corporation. cellebrite has several hundred employees, the company is often contacted by law enforcement officials and presumably corporations to retrieve data through its universal forensic extraction devices. ufed. what we're about to show you is one of the company's devices that extracts data from cell phones, though we're not sure this was the device that helped the fbi crack the phone in the san bernardino case. >> complete with user instructions. every connection port possible in a fully equipped mission ready kit filled with every mobile frenzics aorensics acces need. >> we do not know if this is the device used to help the fbi in this case. but it does show basically how it works. the phone's usb cord goes into the cellebrite device, it tells the machine what it wants from the phone, capable of retrieving memory, other kinds of data,
deleted or not, cracking passwords, and replicating sim cards. that video, by the way, and all others are available in the company's website for marketing purposes. the parent company sun corporation trades in japan. the stock is up 15% in a week and up 43% in the last month. >> i would suggest someone knows something about cellebrite. eli drodo is at the mercada center outside of washington. welcome to "power lunch." we appreciate you being with us. you're the director of technology -- the program there. are we safer now than we were two, three, four months ago with respect to our privacy in light of the ability of the fbi using presumably one of this company's devices to crack that phone? >> well, i think it is great that now we know there is vulnerable exists. so a few months ago, we didn't know this existed. and hopefully now the fbi will
disclose exactly the technique that was used and disclose that to apple and they can make their devices more secure. >> you expect them to do that? >> i don't expect them to do that. i think they should. this is a foreign company, they probably have clients in other countries, other governments, and the last thing we need is for, you know, u.s. state department official traveling abroad to have their iphones seized and read using this firm's technology. >> that sounds like you think we're less safe as a result of this because the device that enabled or the technology or the intellectual know how that enabled this company to get into that phone could be vulnerable to use or purchase by people who would mean us harm. >> well, i think that's right. it can be used in that way. however, i think we're better off now that apple knows this is a threat to its phones and
apple's security engineers are working very hard to make sure that future models of the phone or even possibly present models of the phone aren't vulnerable to the same technique. so -- >> you're predicting an arms race in encryption? >> yes, absolutely. we have been having that for a long time. this will end with apple being able to create devices that even apple can't get into. so devices that even if apple served a court warrant -- a court order and they're required to go all the way to the supreme court, the court still says you have to comply, apple says, sorry, there is nothing we can do. >> what if congress passes a law saying you cannot sell in the united states a phone that cannot be decrypted because of national security interest. what happens then? >> that will be a really interesting case if that happens. i think we'll see a lot of this technology moving offshore. it could put apple at a competitive disadvantage in the
global market if other countries have better policies with regard to encryption. but let me tell you, i don't think that will happen in congress. i think congress will take a good hard look at this question over the next year or two. but i don't think there is a constituency for degrading access to encryption because -- >> where are we now? it was this whole big mystery thing, now we learned a company that no one ever heard of can sell you a suitcase that can extract information. where does this put us in the privacy debate? >> i think it just underscores how important data security is, how hard it is. how hard it is to get right. and that just undermines further the government's case that we can have somehow a back door and good security. real security is very, very, very hard. and even if a company like apple that throws billions of dollars at it can't guarantee that its
device will be perfectly secure, then that means we can't tinker with this. >> eli dourado, thank you very much. >> thanks so much for having me. let's reset now. around 2:00 eastern time. here is how your money looks. we're a little bit off our highs. the dow is up, we'll call it 82 points now. still, it has been a good month. the dow is up 7%. this is one of the single best months for the stock market in years. even better than the down, many of the bank stocks, we talked about them earlier, the kbe bank up 8% in march. of the 63 stocks, just one, hancock holdings, is down in the month of march. among the big cap banks, citigroup, one of the top performers, look at other names, wells fargo and jpmorgan chase. not only up today but this month as well. capital gains, panda bears and why being bad at basic bond math may come back to haunt us.
those are just a few of the topics in the always interesting monthly investing outlook from bill gross. let us bring bill in. i think this is one of your most entertaining lines in years, capital gains and the expectations for future gains will become giant pandas. very rare and inefficient at reproduction. take that and help your clients and our viewers and listeners understand what that means for their future returns. >> all right. well, the pandas and the bond market, brian, are rather obvious. for instance, in japan, 75% of the bonds are negative yielding and in europe, about 40%. and most developed markets are of a similar sort. and so when yields are negative, instead of capital gains, you produce capital losses. example, a german five-year piece of paper, has a zero%
coupon, we know there is no interest income, but trades at 1001 101.5. capital gains in the bond market are becoming scarcer. and this is the important thing, most investors are interested in stocks and high yield bonds and so on. those asset classes, those risk assets are basically correlated to the same thing. and so when bonds, you know, can't produce capital gains, it is going to be very hard for other risk assets to do so as well. >> this is a little bit wonky, scary, so we'll try to keep it -- stuff we want to talk about now. you bring it up, you bring up a really important point because we highlighted the other day the amount of global credit that is outstanding. the bond market as we know really runs the show. yes, you're right. stocks are easier to understand. easier to buy. but the bond market runs the show. you and i did an event last year, i asked the audience how many of you were doing this job as financial advisers during the
credit crash. and about two-thirds raised their hand, meaning a third did not. a third of financial advisers may or may not have been running money during the last crisis. why are you so concerned about the fact that if people don't get what you just talked about, that the bond market, i don't want to say, could be at risk, but is in kind of a fragile place. >> well, because it is so easy. it is first grade math here. here is a nonwonkish statement. when money yields nothing, it will return nothing. so when bonds have zero percent interest rate, there is nothing to gain from owning them. why do people own them? well, because certain central banks are imposing restrictions on other banks and electronic money and so they're forced to, but this is a situation in which the capital market place, in which our financial market place has been elevated in price and lowered in terms of perspective return. so it is easy when money yields
nothing, then you're not going to get anything. first grade math. >> that makes perfect sense. except when i look at the bond auctions we talked about every day, bill, and i see two, three, five, seven times oversubscribed. why do you think bonds, despite to your point, are returning nothing, are so in demand. and what does that tell you? >> in the united states, the yields are high, right? the ten-year is 1.8%, so it creates the illusion that there is something there. my point is is that since treasuries are related to bounds and yen in terms of inflation rate, it is pretty easy second grade math to understand that perhaps all developed bond markets are sort of in the same pot. yes, you can get 1.8%, but you do so with a lot of risk. so i think that's why they buy them. they're at the highest yielding bonds and highest aaa quality
category in a bond market. so japanese investors buy them, german investors buy them as an alternative. but the bond market is telling you a simple story. when yields yield nothing, returns are going to be the same way. and those panda bears are not going to be getting together. >> tremendous rally, not just in emerging market stocks, but also in bonds, where even with the rally you can still get some pretty big numbers. eye popping when it comes to yields. would you recommend somebody getting in there and where? >> well, my recommendation would be to observe it and not that the stock market can't go up, it has as you just pointed out. certainly the last month has been wonderful in terms of capital gains. for the year and for last 15 months, it is starting to flatten out. my remedy to all of this is not to despair and give up and leave
the zoo because the pandas won't be mating anytime soon, my solution is instead of investing at nothing, then to tri and borrow at nothing and how do you do that? to some extend, in terms of janis, leave the borrowing to us with our unconstrained strategies, doing very well by the way for the year. and since inception, since they came over here. by the way, whipping the neighbor down the street by a lot of margin. and in any case, that's one solution. the second one would be to simply buy closed in funds at a discount. you're buying money at a discount and because they can borrow money, you know, for you, institutionally, they can produce yields of 6%, 7%, 8% with asemblance of safety. two recommendations before i finish here. dpg and fpf, preferred stock funds and utility stock funds but yield 7%, 8%, 9% and trade
at a big discount. let the company borrow money for you and produce a return higher than zero. >> dpg and fbf or fpf? >> fpf. >> frank, paul, frank. thank you. final question. for 800, do you think we have a fractured fed in. >> i do. yesterday, yellen acknowledged the fed was concerned about global conditions, which was a switch for her. but i'll agree with that switch. i think we have a fractured fed. i think there is, you know, mild hawks, williams, evans, bullard, fisher, the vice chairman. but i think the chairman yellen or chairwoman yellen is definitely in charge. she made that point very obvious yesterday and so i would listen to her as opposed to the presidents and the others at the fed. >> well, you know, i know you're probably like a little box,
we're showing it on the screen here, bill, it is whatever you people listen to you and the thing went like this. bill gross of janis capital. watch out for panda sex. best advice i've bigiven today. to bob pisani with the big movers this hour and maybe talk of pandas down there. >> we're all listening. he did move that closed end fund. just off the high, 7, 8 points above here. on a recap where we are, it is a good 24 hours since janet yellen spoke. 2 to 1 advancing declining stocks today. new highs expanding 200. buys on the moderate side. new lows on the vix. 13 or so. important thing today, it is a broad rally, some people say, weak dollar, that's just helping material stocks. but we're doing well here, financial tech, look, consumer staples are all leading here. industrials and material. and i mentioned the new highs expanding, bunch of big caps at new highs including general electric, coke, johnson and
johnson, united health and travelers. stocks are off their highs today. but what a march it turned into. the s&p 500 hitting its high of the year. the dow and the s&p seeing third best monthly gains in the past four and a half years. what do we go from here? let's bring in kenny paulcary and ben wilson. looking cozy at the new york stock exchange. kenny, janet yellen was dovish, free money rally. we lost oil at 10:30 and other thins rolled over. what is go on. >> i think don't discount the fact that it is the end of the month and the end of the quarter. a lot of window dressing going on. janet's gift yesterday was exactly that. she put it all to bed, took the five from last week and told them to sit down and be quiet, stop talking. this is the way it is. she's the chairman. she laid it out. she was dovish. that's the rally you got. >> ben? >> i agree. the rally was on janet yellen and continuation of the currency
wars started by the united states eight, nine years ago, we weren't sure where the currency war. here we are saying we're ready to move forward. all the -- indications that the fed told us they were going to use to move rates higher, suddenly are off the board and we're going to take a global perspective on exactly what we need to do with our rates, bowing to the pressure that the fact that the rest of the world's economy is not quite up to speed the way the united states has been picking up. so this is really a function of currency more so than anything else and we were talking before this happened, transparency of the fomc, but we're witnessing really is a sausage factory, do we want to see all this noise going on. >> we're witnessing -- we witness it with every single fed official that comes out speaking, right? that's when -- if interest rates stay lower, does that mean we need to re-evaluate how we look at the valuations of a lot of the dividend paying companies that have gone to all time highs in some cases. consumer staple names,
utilities, telecom, they offer yield, there are questions about the valuation, in this market environment, do we rethink that? >> i think you have to rethink it. as long as rates stay lower, you have to rethink the whole portfolio. look at everything and what does this rate environment mean for not only utility stocks or high dividend stocks, but stocks across the board. that makes perfect sense. i think she also made it clear that even june is now suspect, right? is june really the date to aim for or not? i think that's also adding to kind of this euphoria in the market. >> don't fight the fed. don't fight the central banks of the world. you're being forced into riskier assets, which is the whole game plan with what is going on with the central banks around the world. that being said, the less risky of those plays are the dividend paying stocks. >> look at what is moving in today's session, what moved in yesterday's session, it is risk on. a lot of traders out there are translating what janet yellen said in saying, it is time to put on the risk, we're going
into financials, into technology, going into emerging markets, ben. how can you have a -- let's play defense over here with the dividend yielding names but also let's play risk on over here. >> don't fight the fed. the most important part to me in watching this and the leadership has changed from some of the more risky leadership that we saw earlier on. the oil market has been taken out and people continue to try and use oil as an indicator of the market direction. that kind of was taken out of the game again yesterday if you will. but that being said, keep a closer eye on what is going on the russell 2000, institutional money has been trying to find a home and a little more difficult with the nod from janet yellen and team, i would say there is more specifically to her, i don't believe this is the overall concept of the fomc, i think we'll see that battle continue as we continue to see evans this morning on cnbc. so that being said, risk on, but the money flows that continue to see from institutionally investor side is still looking
for a little bit more protection and that's again why the bond market i believe also saw some buying yesterday as well. >> guys, got to leave it there, thanks so much, kenny and ben. here is what is on the menu for the next hour of "power lunch." microsoft going to make a bid for yahoo!? we'll put that question to a high ranking microsoft exec. lululemon shares surging. is now the time to buy the stock? secret lives of the super rich, we'll take you inside an aspen ranch and show you the biggest hot tub in town. over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? it's time to bench the benchmarks.
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man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time. man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems.
microsoft is holding a developers conference today to show off what it is planning in the year ahead. first on cnbc, yousef matty. welcome to "power lunch." good to have you here. >> thank you very much. great to be on. >> i want to talk about what you're discussing there. but, first, i apologize, i want to bring up brand x and the news that somebody besides apple has been able to crack the iphone for the fbi. i wonder what your reaction is. you've been with microsoft for a long time. did you see this and think, duh, i bet i know the company that did it or is it okay, they found a big vulnerability there and i wonder what it is and how they're going to fix it? >> you know, i'm not familiar with it. we just finished our two hour
conference here announcing next version of windows 10 and a bunch of innovations, i haven't had a chance to see that bit of news. >> okay. where do you think we are, though, in terms of your role at microsoft when it comes to privacy versus the government and what they would like to -- >> i lost her. i don't hear her. >> can you hear me? he's lost his ifb. >> hacked. >> darn it. >> been hacked. >> this happens all the time, but does anybody else find it odd when you talk about privacy -- >> like raul castro last week. >> somebody cuts the cord. probably not microsoft. fbi, if you're out there, we're fine. we're not doing anything wrong. >> you're back. mr. matty, good to have you back. >> i'm back. >> there you go. >> so in terms of where we are, though, how does microsoft think about this debate when it comes to privacy versus what the government would lake to know? >> well, look, i think privacy is something for us as a
company, is a foundational element, something we design into the work we do, we think, you know, respecting consumer privacy is a top item. same time we also work, you know, and follow the laws of the country in which we operate. and that balance is important, no black and white, it requires really smart judgment, but i think respecting user privacy and working within the law are two things we stand for as a company. >> is this coming up at the developers conference or are people asking about particular issues and whether or not there is vulnerabilities related to microsoft. i ask because just for today, reports there were hacks into some of the major wall street firms where it appears hackers are figuring out if they can arbitrage potential deals that are thus far secret and these white shoe firms, you advertise at 80% of the s&p 500 uses microsoft, i bet they're not using -- to what degree do you have to work with the companies and defend the vulnerabilities
or lack there of the platform? >> one of the things we have put a huge amount of effort to deal with windows 10 is to have the most secure operating system available. this is a thing we have been working on for some time across a great many dimensions, enterprise data protection, which lets you protect data in your enterprise, some of the new work we have done with windows defender advanced threat protection, a post breach being able to detect and monitor when someone breached your network and find out what is going on. a huge amount of work that helped us get to windows 10. i think relative to any other operating system, we have done a huge amount of advancement. that said, look, we live in a world where there is a lot of attacks and threats and i think being up to date and having the best software possible is a critical thing for any enterprise. >> we see hacks over and over again. the government getting hacked. what is going wrong here? are we not thinking about this in the right way?
have we not put enough resources toward it or is this just going to be a war we continuously fight, an arms race day after day? >> i think what you said there at the end is the key thing. we live in a world where security, privacy of your data, of your information, is always under attack in the wr. in the world we live in. you know, is technology empowering and improving our ability to maintain privacy and security? or is it making it more accessible? i think that's one of the questions the industry faces and we're trying to talk with some of the best work we can to make windows the best place for people to run their computers and devices. >> if we move on to a slightly different topic, there has been reports that microsoft would be interested in once again perhaps helping to acquire yahoo! and the search engine. you're in charge of products at
microsoft. if you suddenly had a new search engine t deal with, what would you do with it? is that something you're interested in? >> i'll be honest, we're very excited about the work we're doing with bing and search engine, progress we made, we have been able to grow our bing share every month for the last -- three quarters. having great success with bing and microsoft edge and windows 10 and that growth continues. we're focused on that. pleased with the progress and we see continued opportunity for us with the work we're doing internally at microsoft. >> tell me about the -- how the launch of windows 10 is going and the uptick in the market. is it going well enough based on your expectations. how many people are using it now? >> we're delighted with the progress of windows 10. we launched it eight months ago. as of today, we announced this morning we have over 270 million monthly active devices running windows 10 which is amazing in eight months, the fastest start of any version of windows.
we feel confident we're on path to get to a billion monthly active devices within the next couple of years. feeling great about the start. feeling great with both enterprise accounts as we talked about earlier and the security driving that. also great with some of the new applications and the new features we're driving, things like ink and hello and some of the new platforms where windows goes, like hallow lens and windows on xbox to make any xbox console a development kit. >> the president of china is in town this week, meeting with president obama over nuclear issues. i bring it up because frequently there are complaints when it comes to software had china, it is used but not paid for. how many people use microsoft in the world and how many people are paying for microsoft in the world. do you know? >> when you say microsoft, that's a broad statement. if you look across office, we have over a billion users, windows, a billion users, in the cloud now, we have many, many,
many accounts that are running their business with microsoft cloud with azure. and the business we have in pretty much every country are significant. and, yeah, there is -- there is different approaches we have to take to be able to have people use the software, legitimately and legally and we're constantly at work on that front and we're working with many companies and governments to make that happen and the progress is there, we feel good about the progress. >> good to have you on. thanks so much. one big name stock that you probably own in a mutual fund, getting close to an eight-year high, we'll tell you what it is coming up. the pursuit of healthier.
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eese. trees? eese. xerox helps hospitals use electronic health records so doctors provide more personalized care. cheese? cheese! patient care can work better. with xerox. that's it. welcome back. i'm tyler mathisen. an interesting day for general electric. intraday high of $31.95. last time ge traded at $32 was way back in 2008. shares of carnival cruise lines floating higher today. the company beating estimates on earnings and revenue raising its guidance as well. acadia pharmaceuticals soaring, an fda advisory panel backing
hello, everybody. i'm sue herera. here is your cnbc news update. gop presidential front-runner donald trump campaigning in wisconsin, continues to defend his campaign manager corey lewandowski who was charged with battery for allegedly grabbing a female reporter at a rally earlier this month. >> okay, so a lot of you saw the tape. did anybody think it was a horrible thing what happened? i don't get it. i mean, we have people whose heads are being chopped off because they're christian, and for other reasons, in syria, all over the middle east. >> a legislative amnalysis says raging the minimum wage in california would cost taxpayers $3.6 billion a year. the california legislature could consider the agreement reached between governor brown and labor unions as early as tomorrow. to tennessee based canc ircharities labeled shams have
settled a massive fraud case by agreeing to a $75.8 million judgment and the dissolution of the businesses. the settlement with cancer fund of america and cancer support services along with president james t. reynolds was filed in federal court in arizona. the ncaa announced that this weekend's final four and national championship games will be live streamed in virtual reality. fans who own a samsung gear vr will be able to watch the game with a court side perspective for free. that's the cnbc news update this hour. ty, will you be doing that? >> looks like you have to sit in a glass box to do it. >> i don't know. >> virginia is out, i really don't have a -- >> i know, i know. i'm sorry. >> yeah. all righty. sue, thanks. oil closing for the day. bertha cooms is at nymex today. >> we had a pretty good rally at our hands, extending yesterday's gains this morning and it was beefed up by the fact that we did get a slightly better than
expected eia inventory report. crude stocks were up 2.3 million barrels, the estimate had been for 3 million barrel bid. but as you can see, we pretty much lost all of the gains that we saw today. did have a pretty good number when it came to the gasoline withdrawal as well. but overall, that number as well has faded. nat gas hitting the highest level in seven weeks ahead of tomorrow's inventory report. back to you. >> bertha, thank you very much. as bertha said, crude oil inventories rose again. crude prices surging overall this month. let's talk more about this. kyle cooper, managing director at criterion research and dr. kent moore, executive chairman at energy capital research group. been a while. it is amazing, we're talking about near record or record inventories and yet i want to show our viewers this graph of the number of imports we're
still bringing in are up about a million from last year. so we're producing slightly less oil, but too much. we're importing a million more barrels per day than last year. and inventories are at record highs. how does this end? that's not a good trend. >> well, it may not be a good trend short-term, brian, but a balance has to be reached in the market. and we're never going to be in the situation where we're going to be cutting imports for one very simple reason. the primary end users. that's american refineries, are also the largest exporter of oil products in the world. that means they play the game between prices of imports and prices of domestic product and those imports will always be a factor. >> in other words, we should -- it sounds like you just pacifically ignore the import number. is that correct? >> that is correct because we know there is a ceiling. unlike five or six years ago,
where we expected as much as 70% of what we needed on a daily bates is to be imported, we know that's no longer going to be the case. we're looking more here for cost differentials from the standpoint of refinery than anything else. >> you mean, if i run a refinery, i'm deciding will i import my oil or get it from a local producer. that's it. bottom line, those refineries have to buy it from somewhere because they're going to export whatever product they make afternoon the world or to other parts of the country in. >> that's absolutely correct. that's absolutely correct. >> kyle, jump into the conversation. that's an interesting viewpoint because it would seem to sort of pit then the refiners against the oil producers. by the way, some are the same people. plenty of big integrated that do upstream and downstream. what is the take on the current situation of inventory and what it tells us about the path of prices. >> as you said, even though the crude build was lower than expected, the product draws were not quite as big. so total inventories rose to yet
another all time record of 2.05 billion. also, along the same lines in terms of the refinery crack is a -- the crude market itself, not only can the refiners make a profit by returning it -- by turning it into refined product immediately, they can buy it now and plan to use it two, three months down the road. >> kyle, just so our viewers may not know, can tango means it makes sense to buy now and store it. has that nair rorrowed or reduce curve at all? >> it is still profitable but not as profitable as a while ago. as you get close to invitations, that's come in a little bit. but even if you're not going it refine it, there is still probably a slight profit for some of the players to buy it, store it, and sell it out a few months down the road. >> based on what we talked about, where do you think the
price of oil is bit end of the year? >> i think it is going to be 42 to $45 by mid-june wti and closer to about $50 brent by the same time of that year. we may add $4 to $6 by the end of the year to each of those. but it used to be that you could tell this is a supply/demand situation and you have to balance the two. and that's still the case, but for the first time in recent memory, supply is no longer an issue. we know we have considerable excess, extractible crude out there and that's going to limit the upside potential. >> it sounds like we have gone from peak oil to peak demand. the new book, michelle. thank you very much. >> thanks. last may shares of the restaurant chain shake shack hit $92 a share. and it has been falling ever since. but one analyst thinks that slide is about to end. that call and four others,
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first call, 3m. ubs more bullish than it was. they had investor meeting with 3m and keep their buy rating, but they raise the price target to 190 from 170. they think the company's five year plan will boost gross margins and operating margins. they say innovation is a key lever for the company and the current business transformation could drive another 500 to 700 million in operating income. that 190 target on 167 stock implies call of 13% upside. >> next stock we're watching, cabela's putting a price tag on cabela's in the midst of a strategic review. worth $65. media reports say bass pro shops may be interested in buying cabela's and reported that they have opened its books to a number of private equity shops. another possibility here, they sell the credit card operations which is a high quality portfolio. the average score there, 794. that's high. really good. >> that's good stuff. one thing that else is high is the stock price.
not too high. but of the analysts that cover cabela's, the median stock price average target is 46.5 bucks. the stock is above where the consensus on wall street -- just something to take note of. third call, shake shack. long bow research upgrading the shack to a buy from a neutral. likes the prospects of store growth outside of new york and says the concept is one that can succeed multiregionally if not nationally. in other words, maybe not for everybody, but a lot of other places too. he also likes the widening menu items. the chicken sandwich. chicken shack on a $46 target, that implies about 25, 26% upside. you talk about it on fast money, wall street is falling out of love with the shack. it is a hold now. >> all about the valuation. you noted before, it is around 80. for mcdonald's it is 23 plus and dividend yield. you got to wonder where is the value here in shake shack?
maybe already priced into the shares here. look at shares of apple. we should note today apple is emerging from bear market territory and price target of 135. analyst excited about the potential use of oed and the iphone 7 could get a boost from the 6 and 6 plus entering the upgrade cycle. all the early people who got them, they want to upgrade their phones. and on valuation, the analyst notices apple will trade at 25%, 30% discount to large cap check. >> anybody else get an update, like all my phones, apple stuff, everything, i have -- there say software update. did you notice that? >> yeah. you updated, right? >> i did. i felt like i probably should. stock five, as always, our smaller cap under the radar name. today it is agios pharmaceutical. this stock has been walloped, beaten up the last year, down 60%. but sun trust starts coverage
with a buy and a $57 target, about 50% upside to where it is now. the analyst as a company has a precision approach, is the leader in the emerging field of cellular metabolism. just started a phase two study. they think that any early approvals, melissa, could drive significant appreciation. target is $53 and change. a dog, but sun trust says that dog may have its day. >> big dog in a doggish sector, right, where the sentiment is not good. shares of lululemon rising. look at that. 11.5% today. 30% so far this year. coming up, we'll talk to one analyst who likes the stock. another who says sell the stock. we'll debate next on power.
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year. can it go higher from here? let's bring in brian tunic, he's bullish on the stock, outperform rating. omar son of ever core isi who is more bearish with a sell rating. brian, why do you think the stock can go higher from here where it seems to have already hit your price target of 65 bucks. >> well, this morning they issued a five-year growth initiative target, which is to double revenues and to double earnings. so now you talk about $4 of earnings potentially by 2020 and high 20s, 30 multiple, you could dream of a stock being over $100 over the next couple of years. we just don't see that kind of earnings or stock price appreciation for a lot of other retailers now. >> we had on a retail analyst and he's raised a key issue with lululemon, brian. he thinks athleisure has peaked. that would be pretty bad for lulu, wouldn't it?
>> it would be. but we don't see that. we still see a trend the next three to five years of where this category is going globally. lulu has a very, very tiny share globally of the athleisure market. if you look at what nike and under armour and adidas look like, we see a lot of growth. 8% for the athleisure category, that's phenomenal. and pricing power. no one else in retail is raising prices, so we think that's a very good sign, a lot of people getting into the category, but, again, a lot of people going out of business in the next three years, we think lulu is the real deal. >> you have a sell on this stock. i assume that means that you think lulu can't grow without becoming something that it isn't today, which is basically a niche premium brand and to grow, it has to grow.
>> we're looking for lululemon, which has an authentic original position and heritage and really is a unique brand, but we're looking for a transformation in the business, in the brand, in terms of global recognition, how consumers interpret and personalize the brand in a much broader way and what we have been seeing in the trends the last several quarters, even this quarter, a good quarter, admittedly, is a little bit of inconsistent results across categories, the store comps tend to be moving around, the gross margins tend to be moving around and fluctuate. we're landing on the idea that lululemon is a good specialty retailer. and healthy category. but it is not making this pinnacle transformation into a global aspirational brand. >> we have historically seen very high end fashion houses, when they go public, in order to increase revenue and increase profits over and over again, had to become ubiquitous. they're no longer seen as high
end because everybody is wearing them. you're suggesting a slight parallel to lulu in that sense. >> it hasn't reached that point of you bi ubiquity. there is a way for brands to become large and remain way to non-ubiquitous. we think these are the key areas that lululemon needs to accelerate investment in. either the duration of sales growth is there for a brand like lululemon or they have to lower the margin targets to accelerate investment. which isn't a path we would prefer to see the company pursues. >> thank you both. well, stocks overall extend yesterday's and the month's gain. the dow is closing back in again on the 18,000 mark. what could take us there besides a few more hundred appointed. chad morganlander, and dennis
davis, the obvious more buyers than sellers will take us there. do you think they'll come in. >> i think the market will continue to grind higher, albeit we don't think at the end of the year it will be a terrific, perhaps 5% to 6% total return, but this is on the back of a dovish federal reserve, the ecb that's quite accommodative, the pledge from china to stabilize their currency, as well as potential fiscal response. we'll see if china actually does do that, and of course opec holds hands and singing kumbaya. so they think the hark will be less volatile and you should look at people markets of opportunity. >> 18,000 on the horizon? >> yeah, i mean, it doesn't seem it's that far away considering where we were a monday ago. on the bag of what chad said, p,
with the vix down around 13, that's sending a stability message out to the public. one of the things i would look for, though, it a lack of deflation in the market and maybe some inflationary things. move stocks that dragged us down were commodity and non-inflationary type assets. if they start to rebound. in the short term i think that will drive us higher, long term that's yet to be seen, but in inflation in commodity and those sort of prices will drive the marge higher. >> so if, may. >> final comment, chat. >> if i may, the dollar weakness will have an impulse not only one earnings and revenues for s&p companies, but also the stabilization within the commodities market. you're starting to see that reflected. >> in a good way, right? >> in a positive way that albeit may be somewhat temporary.
>> there you go. chad and dennis, thank you very much. we're watching 18,000. if you're counting at hole, the high score for the dow is 18,351 hit may 15th l.a. year. last year. we're going to take you inside an $80 million aspen ranch. if no-no other reason, you just want to see the hot tub. we're back after this. and now the latest from tradingnailed.cnbc.com, and a word from our sponsor.
the premiere is tonight at sock p.m. robert frank is here with a preview of a guy who lives pretty large out there in aspen. >> yes, very large. in fact the largest in aspen. we'll go inside the 0-acre compound on the other hand by billionaire bill cook. take a look. our cameras were the only ones allowed inside his aspen hideaway. the super lux injureual log
cabin unfolds over 15,000 square feet. everything is massive. from the private chef's kitchen to the stone fireplaces. the dining room is set to seat 20, and we're told the hot tub is the largest in all of aspen. but the main house is just the beginning. there's more. much more. yeah, the price tag for that much, $80 million, but that's marked down from $100 million, so you're not spending 80, you're saving 20. >> look at it that way. >> maybe i could have afforded one of those outbuilding like outhouses. >> my favorite thing about this house, which is the first time i've ever seen something like this, the home theater is a hyper objectionic room, which means it has the little holes that bring the entire room down to sea level in case you don't like being at eight attitude.
>> if you're sick, too, start to feel queasy, hang out in that room, watch a movie. >> this is an entire home theater that is brought down to sea level in aspen, colorado. that is pretty cool. >> this prove once again that things go better with koch, right? >> this is not one of the two brothers that run the company. >> charles and david, almost the most politically active, this is bill who loves sailing, he's a famous wine collect or, lives in palm beach, runs his own company, now starts a school. as a matter of fact he built his own village near denver, colorado, which is why he's selling this place. if you have your own town, you don't need a compound. >> where is the town? >> i think it's boulder? it's got a general store, everything, it's like an old western town. >> by the way, i'm -- >> it's the biggest in aspen.
it's the biggest in aspen. >> i told viewers to stick around, and -- >> all of us could easily fit in that. >> there was another -- more than $100 million house in aspen, wasn't there? >> prince bandar's place. that ended up selling for about $47 million even though it was for sale for 100. >> and what's good about this is you can just buy the main house for 60. so before you had to buy it for 100, so you can see. >> now you're saving $40 mill n million. >> what is the billionaire vinegar scandal? >> this is when he bought a thomas jefferson bolts of wine from the 1800s and it turned out to be fake. p. >> it's called the vinegar scandal? >> they tore down a paris
townhome and purported to have found -- check on the the premiere of "secret lives of the super rich q. that's tonight at 10:00. and thank you all, by the way, for watching "power lunch." "closing bell" starts right now. s. hi, everybody. welcome to "closing bell." aisle kelly evans at the new york stock exchange irnts and i'm bill griffeth. stocks rallying again today. the janet yellen impact is starting to recede just a bit. as we approach earnings season, new data shows that things could get ugly. we're not talking about just the energy sector. we have details you'll want to pay attention to. just a couple hours ago dug