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tv   Power Lunch  CNBC  June 27, 2016 1:00pm-3:01pm EDT

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yield at all. >> i feel safe in the utilities, but not buy them. as a trade you want to hide out get your 4%, 5% yield, i would not own them for six months. i think they're the bond proxy trade and come down in multiple compression. >> we're out of time. that does it for the halftime report. "power lunch" begins right now. and welcome to "power lunch." i'm melissa lee along with tyler mathisen and brian sullivan. michelle caruso-cabrera is off today. brexit sparking another big selloff, stocks hitting three and a half month lows. what do you do with your money right now? check where we stand, we are off session lows after friday's 610-point selloff, the dow is down by 254 points. the s&p 500 is down by 35. good for 1.75% loss there. we should note the s&p 500 is below its 200-day moving average
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for the first time since march. as for nasdaq down by more than 2% right now, the nasdaq 100 in correction territory today. investors are in fact looking for safety, no surprise. we have the ten-year yield lower from friday. and that is at 1.456% right now. as for gold holding onto its big gains we've seen in the past couple of days even with a big 1% rally in the dollar index we are seeing gold up by 0.2%. let's get straight to bob pisani on the floor of the new york stock exchange. bob. >> let's take a look at the markets in the middle of the day. we've had a modest bounce since the european close, but not much. 5-to-1 decline that's been most. volatility is lower right now. look at sectors here, biggest damage far and away in the banks once again. but materials and energy also having problems. that's partly due, again to the stronger dollar. take a look here financial
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stocks, and i'm talking right across the board. i have been noting the board in the life insurers like metlife and lincoln national, low rates for longer in general, much more difficult for them to meet their obligations. regional banks like fifth third don't have exposure in europe, but even the big money center banks like bank of america also notably down again today. i've mentioned that dollar up about 3%. that's playing havoc with material stocks. and it doesn't matter where your exposure is. for example owens illinois gets about 40% of revenues from europe, that's a big one, but mosaic and international paper, they don't get a lot of exposure to europe. but they do have exposure to dollar because they are in the other parts of the world. overall that dollar strength winning on materials in general. same situation with industrials. it doesn't matter what your situation is in terms of your exposure to europe, big names, everything down 3%, 4% and even in some cases 5%. much more than the overall
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economy. finally seeing that same problem overall in airlines that we saw on friday. these are new 52-week lows for all the major airlines. of course this is a general concern of a slower international traffic. guys, back to you. >> robert, thank you very much. days after the vote banks across europe have more questions than answers, of course. will the uk be cut off completely from the eu markets? or will the norway model that allows for partial access be an option? kayla tausche live outside canary wharf, the heart of london's financial district. kayla. >> reporter: well, tyler, the selling continued as bob just mentioned in both sides of the atlantic in the banking sector. you can choose any one of a dozen reasons for why that is. people coming to grips with how chaotic the political process of figuring out what happens after a brexit is, maybe it's goldman's call for a uk recession in early 2017. j.p. morgan cutting the price targets on nearly 40 european banks. and deutsche bank calling for more monetary easing. that's going to hit the margins
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of all the banks. and then throw in some concerns about maybe the health of the balance sheets of the uk banks for good measure. but there are a lot of political uncertainties around these institution. and the most important one these banks are grappling with right now is how to preserve their access to the eu's single market. the single market is perhaps the biggest perk of eu membership to big companies that operate across the continent and here in the uk. it lets them move their people, services, money across the borders at no cost. basically a highway with no tolls. but if the uk leaves the eu, then the companies who have businesses here don't really get access to that benefit. so banks have been lobbying and thinking about and working behind the scenes to figure out how they can do it, figure out whether there is maybe an exception to the rule. there is one exception, and it is the example of norway. norway decades ago put its own deal in place to pay dues into the european union to get those trade benefits.
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the wrinkle is they don't get any voting rights and they still have to follow a majority of eu laws. and of course because they're paying into the budget it's not free. but because norway does so much trade with the eu, it makes sense for them. but of course that deal was inked a very long time ago. it has a totally different constituency than the bitterness we've seen here in the uk and the consternation between the leave and the remain camps. and so something like that as much as the companies might want it, as much as some of the officials might think that it's possible, really remains to be seen whether these companies can actually achieve that. we won't have any answers for several months, but that is one thing that could help remove a very complicated financial burden from these companies removing at least one wrinkle that is going to be moving these stocks for the months to come, guys. >> kayla tausche, kayla, thank you very much. kayla hit on europe's succinct. now let's talk about the u.s. banks which also have not been hit nearly as hard, j.p. morgan chase, bank of america and citi
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group all down between 7% and 9%. let's bring in analyst and managing director, obviously royal bank of scotland, barclays, these down 35.2% in two sessions. we're not down as much, but i wouldn't call 9% nothing. are we going to be for lack of a better term sort of infected by the brexit contagion with our banks? >> to a degree. this is a serious issue for the large u.s. banks for what i call the four cs. one is the extra cost, more expensive to do business in europe. second would be capital markets. a risk-off environment's not good. the third c is currency risk as you translate those earnings back to the united states. and the fourth c would be central banks with lower for longer interest rates. we think the largest banks have earnings at risk from 10% to 15%. that's some short-term pain. >> 10% to 15% is a downside on the eps. >> that's a lot. >> in what year? >> over the next couple years.
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and there's wide variability to this. >> sure. >> we just point size potential hit to earnings from those factors. there is some short-term pain potentially for banks. >> what part of the business is most at risk? bank is a big word. there's a bank we may use to put money in we have a checkbook. then there's traders. but the bond market may seize up, not seize up but slow down, stock trading may slow down, investment banking may slow down. what types of businesses do you think, mike, are the most at risk? sfwl you know what's ironic here, for all those risks you just mentioned the business most at risk is traditional lending because the ten-year -- >> the spreads. >> the spread lending, the net interest margin, that's still most of the banks revenues. so that's why you're seeing regional banks get hurt in addition to the largest global banks. >> which of the big american banks that you follow is most exposed revenue and profit to europe? >> well, the big five banks have about on average 15% of the
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revenues. those are the three big banks, citi group, bank of america, j.p. morgan and then you have goldman sachs and morgan stanley. >> state street had a lot though. >> state street, yes, absolutely. they have more than that. >> does that mean they're the most exposed? or not necessarily? >> all this is not necessarily. that's the bad news. okay, i'm giving bad news first. want to talk about the good news? >> sure. >> is there any? >> yes, absolutely. for the u.s. banks -- the u.s. banks took their medicine. the european banks didn't take their medicine. the u.s. banks are healthy. the european banks have a situation going on right now. so we think the u.s. banks eat the european banks' lunch. so this could be an epic market share grab over three to five years for the banks. the u.s. banks have already been pushing for more market share, so that's a big factor. the other factor, please don't get this lost, thursday night we have results of part one of the stress test. so based on that the u.s. banks can absorb multiple brexits and still have strong balance sheets. earnings at risk, absolutely.
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downward revisions can be coming, but the balance sheets you're not going to get capital raises. the dividends are safe. you take a 3% plus dividend yield at a wells fargo, they can only pay that dividend after assuming a scenario like the global financial crisis. i love the bank balance sheets in the united states. >> but all that doesn't make bank stocks go higher. that's really the issue. banks can come out of ccar and say we're going to raise dividend by whatever percent or however many pennies a share, that's not going to offset the pain in decline of share. how do you justify to investors now is a time to get in when you gave me four cs reasons why i don't want to go near bank stocks. >> well, short-term there are some issues, but i see this as the opposite of ten years ago. in 2006 you had strong earnings and weak balance sheets. today you have strong balance sheets and weak earnings. so at least you have the potential for that earnings
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power. it's not happening when the ten-year treasury bond is, you know, 1.57%. that's the downward earnings revision. now, if you think it's going to stay that way for the next five to ten years, then we might have an issue. if you think things will normalize over time, this could be a unique opportunity to get in for the kind of one to five-year horizon. >> you've got a buy or outperform on most of those five big banks you mentioned. did this change that at all? >> well, we said earnings could be at risk by 10% to 15%. but i get very excited about these large banks, buying back stock, being able to buy back more stock after next -- after this wednesday night we get -- >> the second stage of the process. >> part two of the fed stress test. look, the whole decade -- >> we're going to call it part. >> we have been complaining about the regulators, we have record capital and record liquidity and record oversight and the volcker rule and all this the banks too safe. no one's complaining now.
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now you're going to see the benefit. in fact, this might be the u.s. banks, you know, a fine hour for the u.s. banks if they show the resiliency even more during a scenario like brexit. >> we're going to let you go. got 115 stocks on my faxit right here. every one of them down over a week. the least worst cincinnati financial, so congratulations cincinnati financial. mike mayo, thank you very much. >> by the way actually we're just getting this headline. the uk government is set to put the sale of rbs lloyd stakes on hold. this according to roeuters. that's the headline right now. mike, what's your reaction? does that change anything at all? >> my reaction to that is the relative strength of the u.s. banks versus the european banks is even stronger. that's something to look out for over the next several years. >> we're not going to let you go just yet. a lot of raw nerves, mike, in britain following that brexit vote. we caught this exchange on the banks -- these are not the same banks, the banks of the river
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tem -- [ bleep ]. >> hey, come on. [ bleep ]. >> tinfoil on your head. tinfoil on your head. [ bleep ]. >> just say on the forms -- >> it doesn't say it on the voting forms. it says it in the polls. it says it on the polls. >> great for england, america out next -- >> america out next what? america's not in the european union. [ bleep ] disgusting man. >> he's gone. >> i didn't really understand much of what they said. they were speaking english. >> they actually were speaking english. they were speaking english. >> there were a lot of beeps there. and one guy looked like he had a black eye. he looked like he'd been
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punched. >> i mean, you look at this -- >> i don't know what to say, mike. they wanted you to stick around to react. >> that could be 5:01 today if iceland beats england by the way. >> but look at the self-inflicted pain. look at the european banks, the uk banks, this is self-inflicted. so i'm looking at the u.s. banks and they'll be working for j.p. morgan. >> david cameron too. >> is it a surprise that the uk government would put that sale of the stake on hold? i mean, a, you don't sell it -- >> they just lost 30% -- >> you don't want to scare people by selling into a weak market and adding sell pressure. plus, to melissa's point, you're selling at 30% potentially less than you were going to get a couple days ago. ride it out is your sort of -- maybe not barclays but here ride it out. >> well, that's their view. luckily the u.s. banks took their medicine. >> all right. mike, thanks very much. appreciate you're being with us. treasury secretary jack lew says the uk leaving the eurozone is a headwind. how he sees the u.s. weathering that headwind next.
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♪ welcome back to "power lunch." i'm tyler mathisen. the u.s. secretary treasury jack lew weighing in on brexit today in an interview with our steve liesman. he joins us now with the highlights. >> secretary treasury jack lew and his historic comments since that historic brexit vote telling cnbc in an exclusive interview, asset prices have to change but the change appears to be going orderly in financial markets and didn't represent another financial crisis. >> there's no question that this is an additional headwind, but i think it is something that we can manage through. and europe and the uk can manage through. you've seen policymakers act in a very responsible way in the days leading up to and through the vote. there's no sense of a financial crisis developing. >> lew urging world leaders to work together to provide stability and confidence to
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markets and to the public. and he said more had to be done to promote the benefits of globalization. but he said that any new trade agreement between the uk and the u.s. that would have to wait for the u.s. >> we have been negotiating a trade agreement for a number of years now. that negotiation is ongoing and it will continue. any separate negotiation with the uk will have to take a course that is in part determined by what happens between the uk and the eu. >> so have to wait for the agreement with the eu. meanwhile, he said that the treasury was watching exchange rates very closely. and when asked about what you guys were talking about the sharp selloff in european banks, he said not all institutions have the same degree of safety and soundness. he said others need to catch up with the u.s., guys. tyler. >> steve, thank you very much. steve liesman reporting from washington. melissa. shares of gw pharma soaring right now even on this down day up 27% this year. wall street expecting this stock to go much higher from here.
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gw's ceo joins us next. plus, find out how brexit will impact this uk-based company. "power lunch" back in two. >> need to reconsider and i think it would be great to have another vote. >> i think it's just going around on media and i guess it's hope that people will maybe have another referendum. >> i think it's ridiculous because what's the point of a referendum have to follow the result of it. ♪ it's here, but it's going by fast. the opportunity of the year is back: the mercedes-benz summer event. get to your dealer today for incredible once-a-season offers, and start firing up those grilles. lease the e350 for $499 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.
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welcome back to "power lunch." i'm melissa lee. take a look at some of the largest pharma companies in the european union. in ireland mixed bag here in terms of trade, but these stocks have been down by at least 4% last friday following the brexit vote. how big of an impact could this referendum have on the pharma industry? meg terrell's got that story. meg. >> melissa, that's right. the big question for the pharma industry is actually the location of europe's drug regulator, the european medicines agency. now it's currently in london. the ema is now expected to have to find new european home as a result of brexit. what does this mean for british patients accessing new drugs? well that depends on what happens next. but it could mean serious delays. if britain separates completely with its own regulatory system, drug companies may deprioritize the market as they seek new approvals. now, aside from being a smaller market in terms of population, the uk has been a tough environment for drug companies because of its reimbursement authority called nice. drug makers say it's anything
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but. but there is a way for the uk to have its drugs regulated by the e.m.a. if it chooses a model similar to norway for example. now, the uncertainty around that and many other aspects sure to continue. joining us to discuss this now is ceo of the pharmaceutical. we will get to brexit, but we want to get to the data on your new drug. just finished for rare syndrome causing seizures in kids and adults. tell us about the regulatory path forward here in the u.s. >> well, as you mentioned today's news despite a gloomy market backdrop's been a hugely important event for gw. it follows on the heels from an announcement in march for product and the treatment of a form of epilepsy in children. today's news trial another highly treatment form of childhood onset epilepsy.
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we've had some fantastic news and really catapults us forward to the next phase, which is to think about a filing with the fda early next year and to plan towards a launch of this important new medication. >> so the compound here is actually derived from the cannabis plant, but not from thc, which is associated with giving folks a high. but does that present any sort of complicated regulatory pathway here for you in the u.s.? >> it's certainly interesting for everyone including the regulatory authorities, but actually scientifically relatively uncontroversial. cbd is non-psycho active. the product is a liquid formulation of pure cbd. and as such we think we'll go through the regulatory process in entirely the normal way. >> i want to ask you about the safety that you saw in the study. more patients did see serious adverse events on the drug than taking placebo, though you did see a very good efficacy signal double the lowering of seizures than on placebo. but tell us about the safety
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risks here. >> well, all drugs of course have an element of a safety profile which needs to be well-characterized. and this study as you suggest there was some adverse events, but they're well within the norms seen in anti-ep lileptic drug trials. we're confident the safety profile is consistent with others we've seen. >> you mentioned filing for the drug as well as lgs some time early next year. company came out with the note saying that's what they expect as well and as a follow-up they said fda approval will come in the first half of 2018. does that sound reasonable to you? and what does what's going on in the uk, how does that push back potentially approval in europe? >> well, our primary market is indeed the united states, melissa. so everything that we're hearing today is only having
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contributing towards the momentum towards the regulatory filing in the united states and plans towards launch. our plans for europe are entirely unchanged actually. in likely to follow very shortly after the u.s. in terms of the filing and the launch. the trials that we've been conducting so far in fact includes clinical sites in both geographies. so we're well set up initially to focus on the u.s. and thereafter to look at europe and beyond. >> and does the impact of brexit if the uk splits off from the european regulator, would that make you de-prioritize the uk? you'd go for europe first because it's a bigger market? or does it change anything? >> i'm not sure we'll need the choice actually. if there are different regulatory systems, we're accustom to finding parallel in multiple geographies. if the uk and europe need to be dealt with in different ways, the file i would imagine would be simultaneous or near simultaneous. >> melissa. >> actually, i think we're wrapping here. melissa, we'll toss back to you. justin, thank you so much for joining us.
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>> thank you so much. >> thank you, meg tirrell. companies scrambling to assess the impact of brexit. first, final gold trades for the day. metals close on deck when "power lunch" returns. people talk abo" on their auto insurance. wouldn't a deal involve two parties discussing something? a little give? a little take? because last time you checked, your rate was just, whatever they say it is. why not give you some say in the matter? or -even better- let your driving do the talking. liberty mutual righttrack finally puts you in control of your rates. all you have to do is connect, drive and save. in fact, safe driving could save you up to 30%. with 5% off just for signing up. for righttrack. and the discount is good for the life of your policy. to get started, visit a local office or call liberty mutual today at take control of your rates.
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hello everyone. i'm sue herera. here is your cnbc news update for this hour. british prime minister david cameron addressing members of parliament on the eu referendum result saying the decision to leave must be respected. >> the british people have voted to leave the european union. it was not the result i wanted, nor the outcome that i believe is best for the country i love, but i am clear and the cabinet agreed this morning that the decision must be accepted and the process of implementing the decision in the best possible way must now begin. >> syrian president bashar al assad paying a rare visit to government soldiers on the front line. he joined his troops in a damascus suburb, the location of an air base that was recaptured by government forces in december after three years in opposition hands. the visit was broadcast on syrian television. back here at home a fire hazard has prompted the recall
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of about 255,000 tommee tippee baby bottle and food warmers, they can overheat and catch on fire. there have been six incidents reported. recently retired nba star kobe bryant training young players in taipei during his two-day visit to taiwan. he conducted a training session for elite female high school basketball players who were selected for his academy camp. best of luck to them. that is the cnbc news update this hour. melissa, back to you. thank you so much, sue herera. final gold trades for the day. we are holding onto gains even though we're seeing a big increase in the dollar index today, which should theoretically be a wait on gold. we are seeing gold higher despite an almost $1 increase today. we have a mixed bag, silver and platinum trading to the downside. palladium up by 1.6%. now let's head to the bond market. rick santelli is tracking all the action at the cme. rick. >> hi, melissa lee.
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of course it's been wild. and the big deal today is two-day charts. remember, equities are below friday's range, but not a lot of other markets are. look at a two-day of tens for example. 1.45 is today's low, 1.40 was the low on friday. look at a two-day of 30s, basically the same low two days in a row 2.27. why are the long important? because unlike the short end the 2s are down 5, 10s are down 11, 30s are down 14. look at a two-day of bunds they were minus 17, did most of the work at minus 11 today. speaking of the yield curve i spoke about a moment ago, look at tens minus twos month-to-date. this move today is putting them basically at levels we haven't seen since november of 2007. and finally, all this talk about all the weakness in currencies and i know the dollar index is a loose index, it's mostly euro centeric, but here's a year-to-date chart. read it and weep, yes, we bounced to the highest levels since march 15th. we couldn't even get to the 99
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level from the end of 2015. why do i bring it up? because even though foreign exchange is active, the dollar index unlike other markets has been so much better behaved. melissa lee, back to you. >> rick santelli, thank you. companies with business in the uk are scrambling right now to assess the impact of a brexit. sarah eisen is live in london with that story. hi, sarah. >> reporter: hi, melissa. those post-brexit profit warnings are really piling up here for british business. i'll show you a few industries that highlight just how much is at stake and how much could change from britain exiting the eu. how about autos. well, you might think jaguar land rover now owned by a foreign company, rolls-royce, but a lot of the manufacturing still happens in this country. in fact, 1.6 million cars were made here last year. and most of them were exported. 77%. most of those exports actually went to the eu. so of course the concern here is that post brexit they could face tariffs if there's no uk-eu
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trade deal, as much as 10% if they have to revert to wto rules. another sector in focus, airlines. the discount carrier easyjet and british airways parent iag in focus. they've been hammered by traders. and the concern here is that they have benefitted from the eu's open skies agreement. it could be harder if britain is shut out of this to say set air fares, to create now routes to european cities. they could also face taxes and other regulatory pressure. there's also the demand concern here as that british pound faces a record fall in the last two sessions making those british holidays a lot more expensive abroad. and finally wanted to mention the pharmaceuticals because while the giants here astrazeneca and glax smith klein benefitted from the falling pound, they do a lot of business overseas, there is a lot of concern. and the eu's fda is headquart
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headquartered here in london, there already have been calls to move that to a european city. there are questions what would happen coming to prioritizing treatments and approvals when it comes to drugs, funding research and regulatory headaches and red tape there. clearly you have heard a lot about banks and property stocks getting hammered on the ftse 100, but this just shows you how widespread the impact is going to be on business, how much uncertainty there is right now and how much negotiating and working out of all these issues there's going to have to be by leaders over the next few years. >> may want to stop calling it the brexit and start calling it the wrecks-it because all these ripple effects getting wrecked. sarah, thank you. if you're watching this network, you probably care about that big british vote and it's fallout. but let's say for some reason you don't care, well, you may not but your money probably does. so on our website, on my facebook page i posted seven reasons why the brexit may matter to the markets, real estate, even greece.
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also, a big wild card, you can go to "power lunch" on cnbc.com or facebook.com/sullycnbc to check it out. in the meantime a handy list of the s&p 500 companies most exposed to the uk from a sales perspective. here they are. ten companies with the highest percentage of revenue exposure to the uk, gold miner newmont mining, also the best performing stock in the s&p 500 this year, molson coarse, invesco, lkq, news firm cbre group. also check out the sectors with exposure to the uk from the most to the least. the most is energy. then i.t. materials, consumer discretionary, consumer staples, health care, industrials, financials, utilities which almost none buzz they're local and lastly telecom, i don't think verizon has any revenue overseas, pretty much 100% here.
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>> it should be mostly here. it's interesting they broke it down according to uk exposure, but that number is going to balloon if you look at eu or europe exposure. at this point we're talking about if you're forecasting recession in the uk, you're also forecasting lower growth across the eu. and that of course is going to have further impact in those areas. >> it was interesting because one thing i wrote about go to facebook.com/sullycnbc. gold has been bought, yet the number one stock in the last few days and this year has been the biggest gold miner in the world, which is newmont mining. so it seems like something may have to give because they've got so much exposure to the uk. >> absolutely. >> tyler. >> folks, thank you very much. the dow, nasdaq and s&p down about 5% over the past two sessions alone, so has this selloff created investing opportunities for folks like you? joining us investment strategist at edward jones, and bill stone, chief investment strategist at pnc asset management. folks, welcome.
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good to have you with us. kate, is it too soon to start scooping up opportunities, or is now a good time to do it? and if so, where? >> we think it is a good time to do it. and we think we'd look for companies that pay dividends but aren't the highest yielders and still have the opportunity for dividend growth. we do like companies with international exposure, but what we're really looking for is companies that have a history of being able to make their own luck even in challenging environments, ones that have a stable track record. and in this environment are likely to continue to power through even though they too may face some challenges from the eu -- the brexit. >> quick question, kate, i assume you just saw that list of companies that have revenue exposure in great britain. do you avoid them? >> no, i wouldn't avoid them because in many cases even though it's very likely the uk will go into recession and that means lower earnings there, they
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could easily find themselves better positioned because of the fact that they're not a uk-based company. and they do have other revenue sources in other places. i think also if you look at the price reaction in many cases the prices have dropped more than what you would expect from that kind of revenue percentage. >> bill, you're not expecting any cataclysmic event as a result of this vote to leave the european union. you do however like utilities and consumer discretionary like nike, like home depot. why are those on your buy list? >> yeah, i think it's because we aren't looking for particularly out of the u.s. consumer some sort of collapse. and i think it's similar to what kate was talking about. it's two companies with very strong dividend growth. i don't think she mentioned this but i think very strong balance sheets. so even if things go badly worse than we expect, they will survive, we think, to get to the other side. so i think you have some downside protection there. i think in terms of particularly
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home depot is a great one to focus on because it's really exposed to the u.s. housing market, not really to britain. and i think the u.s. housing market is a pocket of relative strength here. >> bill, neither you nor kate think there's going to be any kind of financial crisis ensuing here, but are you wary about further downside risk over the summer? >> i think you have to worry about it. it's really hard to know how much because i think what you've probably been talking about all day is there's so many unanswered questions. but i think the key is does it make sense to start at least nibbling here. i think when you're in an environment like this where you say, hey, i'm probably in a low return environment in the world, any time you can buy on dips when you don't think the world really is going to come to an end, i think is what you should at least start doing. it is hard to say how much further down you go, but we had a nice stress test at the beginning of the year that said financial market much worse than this didn't lead us to a global
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recession. so hopefully this continues and we don't have another one again here. >> kate, one of the lessons of this experience is one -- one of them is polls can be wrong. headlines can bite you in the you know where. and in a moment like this gives you an opportunity to really get in touch with your own risk tolerance, right? >> it absolutely does. that's why we're always recommending a well diversified portfolio. that means you want some exposure even to the areas that look bad right now, like europe, like the uk. as well as as bill suggested exposure to u.s. housing and stocks that benefit from that so you've got both sides of it. the opportunities may be better in one place at one moment better than the other, but if you're building that well diversified portfolio, then you're okay. and in this overall environment you don't have to make those calls. and you don't have to listen to the polls or the forecasts. >> i'm going to ask both of you to stay for just a moment while we go to dom chu for breaking
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news. >> perhaps something bond investors were already anticipating, we now know the standard and poors credit rating agency has lowered the credit rating of the united kingdom's sovereign debt to a double-a rather than a triple a rating. it is now aa and the outlook is negative. you may recall late last week as a result of the brexit situation moody's had talked about the idea they may be looking to possibly downgrade the united kingdom. now standard and poors has taken that effort here. we are seeing more headlines coming out here, the downgrade also reflects the risk of a market deterioration of external financing conditions, s&p and the united kingdom also says they lowered the long-term rating itself also again some more coming out of this as well the s&p in the united kingdom vote for the remain in scotland and northern ireland also creates a wider constitutional
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issue for the country as a whole. so some of the bullet points about why s&p is lowering the credit rating of the united kingdom to now a aa. it used to be aaa. back to you. >> dot com, take a look at the d maybe what you were referencing traders anticipating this, we already saw it break 1%, which was a record low. right now a new record low on the ten-year gilt on the heels of this credit rate e rating downgrade. >> as dom referenced they'd gone negative, s&p kept aaa but gone negative in april. there were 13 countries that were aaa rated. the united states not one of them. remember, we're aa-plus. so now the uk is going to join us. so now there will be 12. of course a lot of this output -- a lot of the concern here is not just, oh, these stocks are going down. it's bond markets, you mentioned the gilt's sovereign bonds, but also what happens in southern europe as well? what happens to the credit markets generally? are we going to see another 2010 like situation where you get some of these sovereigns, the
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weaker sovereigns, the greeces of the world, tyler, perhaps priced out of the market. remember, greece didn't fix their problems. that can just kept getting kicked. >> exactly. and so what will we see with those yields in the southern part of europe would be one question among many others. bill stone, let me get your quick reaction to this news out of s&p. >> well, i guess i would say it was fairly well anticipated in the sense that, you know, again we kind of saw some words around that. i also think a lot of people, ourselves included, believe that the chance of recession, the chance that they'll have to do more fiscal spending certainly rises, obviously you've got to add what we talked about here which was the added political risk. i think you gave the perfect example joins the united states, we're not exactly having a tough time financing our debt at 1.5% on the ten-year. so i guess it's not going to keep me up at night. >> i'd go borrow as long as i could at these rates. kate warne, your thoughts? i'm perplexed as to why the yield goes down if the credit
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just became riskier. >> i think that's actually the best question to ask because typically if it became riskieri you'd kbexpect yield to go up. first of all, it was anticipated, second, investors reacting by taking less risk. that's part of why you want to own bonds as well as good quality stocks in your portfolio because you're always looking at an environment where with risk you never know exactly what's going to happen. but i think it's because we're still seeing money move into fixed income and out of equities, that's what's creating the opportunity in equities, and that's why we'd be actually adding to portfolios with equities -- or with stocks today. >> bill, kate, thank you very much. we appreciate you being with us. go to powerlunch.cnbc.com for two other large cap stocks bill and kate like right now. brexit is hurting the u.s. stock market, but will it actually help u.s. real estate? we'll take a look at that when "power lunch" returns.
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welcome back to "power lunch." if you are just joining us we had some breaking news out of standard & poors, they just downgraded the uk's credit rating from a aa to a aaa rating. of course one of the biggest issues around the uk leaving the european union involves trade and the hundreds or potentially even more trade deals which may soon have to be renegotiated. fred camp is president and ceo of the atlantic council and joins us now. fred, first off back it up just a bit. i understand all the worries, and it's probably going to happen. but even if this does happen, and it -- there are some provisions where it may not. we don't have to get into that, but let's assume it does. but down the road, when do these trade deals have to start being renegotiated? because we can have a five or ten-year timeline on this. >> first of all i think you're absolutely right to raise the issue of whether it's going to happen and when is it going to
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happen, because nothing starts in the eu until you trigger article 50. and article 50 isn't triggered until the prime minister signs a note to the eu saying, look, we're ready to start our exit. that may not happen until october. and we don't know with which prime minister. so you're going to have a long time of uncertainty, which is what's shaking up the markets is the uncertainty. >> got more than 3 million people signed a petition calling for a re-vote, you have the scotland act of '98 whereby scotland or northern ireland may not veto the entire thing in general. let's assume it does, fred, obviously the reaction is now. things will calm down. what's the next six months going to be like? >> on the trade issue the elephant in the room is the transatlantic trade investment partnership where they were hoping to do final negotiations for framework by the end of the obama administration.
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for the uk to be out of that would be just terrible for the uk. but also terrible for the united states. we've been doing our communicating with the eu through the uk for the last 40 years. and we've been hearing what's going on in the eu more than from any other country from the uk. and so for them to be out is bad. and you already hear today in the state department, a few of us have been invited over, that we would like to look to perhaps even a fast track of trying to get some sort of trade agreement with the uk, not necessarily officially from the government yet, but a lot of people are talking about how we protect that strong bilateral relationship. >> i'm glad you mentioned the state department. let's talk about something i don't know if anybody's talked about, at least on this network, which is nato. any impact there? >> oh, i think it's huge. the nato summit is going to be july 8th and 9th in warsaw. and now it's nato post brexit. so before the nato summit i don't think much of the world
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would have paid attention to what happens in warsaw despite the russian saber rattling, but now people are going to see it as a sign of president obama's intent to reinforce transatlantic relationship after brexit. at the moment he's planning to meet with three eu leaders, the head of the eu council, the commission and the parliament. but we're hearing rumblings of people putting some pressure on the white house he should meet with all the european leaders and talk to them about what a crucial moment this is for us all to hang together. so i think that nato summit is going to be one of the biggest in nato's history. >> okay. we appreciate it, fred kemp of the atlantic council. fred, good stuff. see you soon. >> thank you. all right, folks, it is another big down day for most of your stock investments most likely. the trillion dollar question now is, what do you do in the weeks, months and even years ahead? we'll try to answer that protecting your 401(k) coming up.
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a number of stocks hitti it fresh 52-week lows. goodyear hitting a low. nordstrom, this is not just a 52-week low, this is a multi-year low, more like a five-year low on this stock.
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signature jewelers down by almost 4%. goldman sachs trading at lows not seen since april 2013. interestingly time piece in barron's of the weekend saying goldman sachs could rise another 30% especially givern selloff o friday. look at invesco, exposure to the uk, stocks not seen this low since 2012. >> you heard jim last night and had your special and jim was talking about it today. go goodyear. >> yeah. >> are they going to sell fewer tires because they're leaving the eurozone. can't repair the flat, love. >> want us to believe the uk is going to fall into recession, there's going to be slower economic growth in the eu -- >> by 1%. >> i'm saying fewer cars will be sold, fewer cars on the road. >> which means more tires because the old cars need newer tires. >> maybe people won't buy tires as frequently because they're cash strapped. >> what will they go back to mules? >> no, but they might make that
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tire last a little longer because growth -- >> you can't make a tire last longer. it either blows or it doesn't. sal the mule, not sell, sal. >> still ahead, a look at the rich donors who funded the leave campaign and how they may have benefitted from the brexit. "power lunch" is back in two.
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the financial fallout from the uk leaving the eurozone will be felt worldwide for a long time. some of the billionaires who funded the brexit campaign, they're losing big right now. robert frank is here with the details. >> yeah, melissa, the leave campaign was funded largely by a handful of billionaires who said brexit would help the economy and stock market. so far both are down, along with some of those billionaire fortunes. the biggest funder of the leave campaign was billionaire peter h hargreaves. he gave 3.2 million pounds to the leave effort. he funded the largest mass mailing in british history as part of that. when asked before the vote if he was worried about a negative impact he said, quote, i have 2
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billion pounds in the uk stock market, do you think i would be intent on leaving if i thought that was going to endanger my wealth. cmc markets, a currency and derivative exchange, he gave $350,000. cmc stock down more than 20% since last week. now, the stay campaign, they also had a lot of donors including a lot of big u.s. banks like morgan stanley and citi group as well as bloomberg l.p. now, over the long-term this could all boost the economy, and these fortunes could come back, but the domestic uk financial insurance companies all these guys could benefit if those big global banks pack up and move to europe and it becomes a more domestic focused industry. but so far this has proven expensive to them not just on what they spent on the campaign, but now what it's shaved from
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their fortunes. >> robert, thank you very much. robert frank. two hours left in the trading day now at 2:00 p.m. in the east. another big selloff underway on wall street. let's look at where the dow sits right now down 276 points, off the lows of the day but certainly not showing any signs of jumping back up off the canvas. 1728 we find the dow. the nasdaq off 2.3% at 4597. the russell 2000, the biggest drop coming in those small cap shares off more than 3%. generally those small cap stocks have less global exposure. financial stocks hit hard again, goldman sachs, j.p. morgan among big losers there with losses of 1.5% for goldman and more than that for j.p. european banks down even more, look at the drop for barclays now a $7 stock. look at royal bank of scotland losing 13%. that's today, folks. and huge losses over the past
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few weeks. do you want to jump in? >> i want to point out something not brexit related but of note i think to our audience and "fast money" later, valeant, can we throw it up? down 6%, it is now at $19 a share. another multi-year all-time low for valeant. >> what was it a year ago? 2.50? >> standby. i will let you know. last september $2.40 a share. last july it was $255. it is now $19 per share. >> it's a risk-off environment and valeant has a bunch of risk, so why be in that? >> there's a one-year losing 91% of its value. we'll get more on the financials though back to them in just a moment. but first let's get to bob pisani on the floor of the new york stock exchange. he's got some market movers. >> hello, tyler. we did try to rally a bit after the european markets closed, but it's really faded particularly after we saw s&p lowering its
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credit rating for the uk from aa to aaa. see slight move to the downside. heavier than normal volume, this is the second distribution day is the word we use when institutional sellers are coming in. take a look at sectors you've been talking about the banks, but the strong dollar, dollar index up 3% in the last few days that's really hurting materials and energy, commodity stocks as well as technology names overall. you were talking a risk-off day, melissa was, i'll show you what i mean, high beta names, names that move when the market moves are down 9% in the lastweek. the low volatility, the low beta names are only down 1%. who are those? well, biotech is the big high beta name. look, we've got 52-week lows in some of the big names today. biogeneral, regeneron and gilead have collapsed in the month of june. this is straight line down didn't happen in the last two days, been going down since the brexit thing. low volatility ones have been doing a lot better. what's low volatility? well, you're dealing with con ed, for example.
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and the read simon property on the low rates, and of course your traditional consumer names, dr pepper and clorox and campbell's those have been doing well. so low volatility, dramatically outperforms high beta in these kinds of situations. then you've got your usual suspects that are 52-week lows potential slowdown global names, global economy. there you see the airlines sitting at the bottom. back to you. >> thank you, bob pisani. those brexit fears have people piling into safe haven as bob mentioned like gold, treasury bonds and utilities. our next guest says he would not add to them and also sees four things that can push us higher. jim paulson, also with us david kats chief investment officer. despite the downward spiral in those banks, he recommends holding u.s. bank positions and would be adding to names like j.p. morgan. david, why don't you explain your position on financials. even if you think brexit will be very limited impact, what we do have right now is a stronger u.s. dollar, we have a challenging capital markets environment and potential
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slowdown investment banking revenue, and we could potentially have lower rates for much longer. so how has the backdrop in financials improved or at least stayed the same from pre-brexit days? >> well, the stock prices have discounted all of this negative news and are down very sharply, so it's not that the fundamentals are better, but the stock prices are so beaten down. >> but have the fundamentals gotten worse? >> they haven't gotten worse. basically the earnings are going to take longer to turn around, but on thursday evening you did have the fed come out with stress test, the banks did exceptionally well. pretty much across the board. even with these very low interest rates and they are going to stay lower for longer, the companies are making a good deal of money. the valuation on the basket of stocks we talked about, the banks we talked about are about 9.5 times next year's earnings paying a 3.3% yield. if you have a six or 12-month time horizon, we think they'll be higher. >> six to 12 months, all right. jim paulsen, what's been going on the past couple days i want to ask you about that is this flight to safety.
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even in today's session for instance s&p utility sector sitting at a fresh 52-week high. this is a sector, jim, trading at a 23 current p/e compared to the s&p, which is what around 17, 16 at this point? >> right. >> i mean, what do you tell people who are piling into something like a utilities or consumer staples outperforming the overall markets today? >> well, i think it's fine to own some of that stuff, melissa. i mean, you want to stay diversified. but i think all that safe haven stuff should be significantly underweighted right now. i think you should take advantage of the panic we got here in the short-term. and let someone have some of those safe havens if they're willing to pay those kind of prices for them right now. and take days like today and redistribute some of those funds back towards some of the stuff that's just being thrown out indiscriminately. the more cyclical, the more risk-on sort of assets.
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i think whatever happens here, i think there's strong probability that the emotional intensity that we've had here the last couple days eventually starts to wind down a little bit and investors and people start to focus on the fact that whatever happens out of britain it's going to take awhile to unfold, the negative fallout from that will be over a number of years, not days. and we've already had a pretty big price change. and maybe you'll start to see people calm down and buyers come back a little bit, looking at -- values and not coming back for the safe havens, come back for cyclicality. >> price change is a nice way to look at it when we look at a dow down more than over 800 points. so in terms of being thrown out with the bath water, jim, what specific sectors would be in david's camp and say financials are pricing in the worst at this point? >> you know, melissa, i want to say real quick on price change, the s&p right now as you said, you know, it's down 6%, 7% off
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its highs from a couple days ago. but it's only off about 3% for where it was a week ago friday. the bond yields in this country are down maybe 10 or 15 basis points from where they were a week ago friday. even the dollar on the trade weighted dollar is only up about 2% from where it was a week ago friday. a big part of the drop was due to the rise that took place in the early part of last week. so i think it's overstated how much damage is being done here. >> so what are you buying, jim? >> i think it's not nearly as severe. i would be buying more of the industrials, the materials, energy. i agree i would buy financials right now. i would look at technology stocks, all those areas including looking at taking advantage of overseas. maybe not great britain, but overseas markets as well. >> got it. guys, got to leave it there. thank you so much. jim paulsen wells capital management, david katz of matrix
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advisors. bring in someone with nearly a trillion dollars in investment says brexit is not the end of the world. david chief global strategist, david, not the end of the world. i agree with you on that. i think britain is going to exist in a few hundred years from now one way or another. may not be as great a britain, might be smaller, but who knows might be larger. i want to ask a question about where you think the economic effect of this move is going to be greater. will this hurt britain more or the eu more? >> it's a great question. i don't think we'll know for a while. my initial reaction is it's going to be more difficult in the uk for reasons that i think most people understand in terms of protecting the european union. the eu has some incentive to be pretty difficult as part of the article 50 withdrawal process. so i think there's -- i think the idea behind what the eu will try to do is make it difficult as sort of a deterrent to other
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core members of the eu. i think that will take some -- add some stress to the uk economy and some uncertainty. i think businesses will be able to plan for this, but it's going to add sort of a wet blanket over the uk economy. that will be probably the most proximate issue that we run into. >> i want to come back to that. i would assume that you think that the market reaction which we've seen is pretty much immediate. the economic effects, because we don't even know when they're going to submit their letter of divorce or intent to leave the eu, the economic effects are going to be much more gradual. more is going to stay the same at least over the next few months than is going to change, correct? >> yeah, absolutely. i think this is a great point. i actually think cameron has done a pretty good job here in the sense that pre-brexit he said, look, we may incorporate the article 50 withdrawal process as early as monday.
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and now he's really backed off and said he's going to leave that to his predecessor. i think going slow on the withdrawal process is actually a very good thing. i think some people might argue, well, it prolongs the pain. but i think it gives consumers and businesses, ceos, investors and most importantly some of the policymakers some time to adapt to the changes. might make the market a bit soggy for a while, but i think a slow and steady type process is probably better in the long run than maybe compounding the mistake that many people feel brexit was in the first place. >> so you mentioned this is going to be a wet blanket on growth. how wet a blanket and for how long? and if you would take it from the european perspective and from the british perspective. >> yeah, well, it's probably anywhere from, you know, 50 basis points to 1% annually out of gdp, maybe for the next couple of years.
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it will probably be a little less than that on the eu side. i think the important thing to remember 50 basis points might not be the end of the world, but it does highlight a world where geopolitical risks have become so important when global real gdp is in the 2.5% to 3% neighborhood, geopolitical risk can derail the market a little bit more easily than if the global economy was say growing at 4%, 5%, or 6% real. so i think it's a bit easier to derail the market at these lower nominal and real growth rates. >> if you're growing at 1.5%, not 6.5% in britain, and you lose one percentage point of that, you're pretty close to in recession if not already there. david, thank you. >> thanks for having me. >> money continues to go in this market meltdown. one of the places has been gold, up about $5 an ounce. and money also pouring into treasuries sending the ten-year yield down to 1.458%.
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coming up we're going to look at the impact that the british exit could have on real estate. and it's not just about interest rates. back after this.
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welcome back fo "power lunch." two standout stocks. with the s&p 500 just about five points off session lows, look at shares of tesla and solarcity. these are two stocks basically beaten since last week when tesla announced intention to
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offer a takeover -- offer solarcity a takeover bid. tesla shares up by 1.7%. gains of solarcity up 1.7%. over the weekend there was a report that two more solarcity board members would recuse themselves from voting on the deal because of ties to the tesla board, which means majority of the solarcity board will not be voting on that deal. we are seeing gains today despite the market downturn, bri. >> and the market downturn mitigated just a bit. i should note there is one dow stock higher today, guys. apparently the world has woken up with the idea that even if there's a brexit and you skin your knee, you're still going to need a band-aid. johnson and johnson is higher. apparently the brexit will not eliminate the need for pharmacies or bandages. but will the british exit from the eu, if it happens, actually help u.s. real estate? diana olick looking at that angle. diana. >> well, brian, it's the safety play and the yield play, plain and simple. real estate investment trust,
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offer both dividends and earnings growth so the lower bond yields go the better the buy in for the reits. take a look at how they faired friday when the broader market sold off. reits with around 6% to 7% earnings growth, what's not to like. as anxious investors globally look for a place to park their cash, u.s. real estate is a prime target. that is already underway. trophy markets like new york city and san francisco have seen big money come into both office properties and hotels. brexit could trigger a new wave of foreign capital coming in. chinese investors who favored london recently may switch strategies, as for reit exposure overseas, a warehouse reit with exposure in the uk and europe but it could benefit from a potential increase in imports to the u.s. simon properties, which has stakes in malls in europe and asia is still at a pretty good
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place because the underlying fundamenta fundamentals, low vacancies persist. also u.s. rents high, more foreign borrowers, even metros nationally keep home prices inflated and keep some renters where they are. there's a lot more of this online realtycheck.cnbc.com. thank you very much. here now alex joining us a reit analyst, welcome to "power lunch." >> thank you for having me. >> how do you walk through the impact on brexit? will it attract money here to the u.s. because it's a safe haven? >> well, if you look at what's gone on with brexit, you know, in the reit space it's one of a continue y continuum, right? if you look at the brics, they fell over, asia fell over, europe had its issue. the u.s. was sort of the strongest of the bunch. what was happening is money was flowing into the u.s., rates are low, the economy was so-so, so the ten-year was staying low. never going up. what that meant is more and more
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investment into u.s. real estate at the same time lending conditions are tougher so we don't have the supply. so supply has been in check. the economy has been growing, and that's allowed landlords to really drive rents, which means we've had 6% to 7% earnings growth, 3% to 3.5% dividend yield, when we look at the reits, we see a favorable outlook. obviously brexit was a shock, right? but if you look and see what it's done to the ten-year, it's gone down. that's going to drive u.s. real estate up. >> is there any effect that you see? >> for the companies that we cover which are mostly u.s. domestic, not really. in fact, new york could actually see prices go up. if you look there is a saudi group that just bought the va can sony building pre-brexit 1600 a foot, empty, except one restaurant. you saw what the chinese came to do at the waldorf. there was a private european buyer paid a two cap for the
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val valentino. >> you know, in my calm manner, every stock is being sold. here's what i don't get. i mean, what's happening in the market? forget about your space. simon property, whatever it is, because the market's acting like there's people in the middle of the country going, you know, we're going to saks to buy some jeans but we better not because england is leaving the uk, said nobody ever. what's happening in the market? >> so it's great when you get on an earnings call say east group -- >> now blame the brexit for everything. >> so you talk to an industrial landlord he'd figure whatever is happening in the world is going to immediately effect warehouse space. and they go our tenants don't even know brexit from china from whatever. they just know their local business and what they're doing. so to the local person -- >> plus they probably have a ten-year locked in lease. >> they do. but drive past any shopping center. go past a dvr power center, a simon mall, you see the parking lots full and people shop. people continue to rent apartments. so life does go on, but for the global investor who's looking
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for safety and security -- >> a lot of malls aren't doing well though. >> those make great headlines, but if you go past short hills, roosevelt field, saw grass mills -- >> high end. high end malls. >> but also powerhouses, go to danbury in danbury, connecticut. solid mid level mall, that parking lot is jammed every day. what's happening is retail is gravitating towards the most productive centers in the relative price points. but you know what, those dead mall stories are great, but when it comes time to drive earnings for cash flow, which is what investors want in stocks, that's where those big powerhouse malls really show through. >> so, simon, boston and vernado. >> simon, boston properties all very good in this environment. >> all right, alex, thank you. >> thank you. >> are you going to eat today because of brexit? >> i've already eaten. and i will eat again. >> i passed breakfast because of brexit. i was like i had a -- i just felt like the world is ending why should i have breakfast.
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>> you can skip right to dessert. >> i got up at 3:00 this morning. i'm a little grouchy. >> i took brexit 159 today. >> did you wind up where you wanted to be? >> no, no. molly pitcher. >> heavy metal band and bad woman. the russell 2000 a sharp lead down today about 6% in a week but coming up in street talk we have one small cap stock. "power lunch" will be right back. ♪
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even on a brexit monday we didn't forget about street talk. how would we? we're going to dig into some analyst calls, maybe more important today than any day in american history. >> wow. that's quite a proclamatioprocl >> first stop, alexion, upgrading to a buy, their target 154, about 35% upside. the analyst says the weakness of this stock versus its peers post brexit is a good entry point. part of this is a foreign exchange call. says their analyst suggests no impact due to recent currency moves. think the valuation assumes the worst for the stock. they call the current price, quote, dark sky valuation, but
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they do note investors need to watch for clarity on alexion's pipeline. >> part is an fx call by saying they have no exposure to fx issues. >> wouldn't be impacted that much. >> i get that. in a risk-off environment it's very difficult -- >> every analyst note in the world is going to have to be, well, post brexit. >> if you got a buy rating on a stock unless it's got direct uk or european exposure going to challenge revenues, you have to say it's cheaper now -- >> are people going to stop buying drugs because the uk is leaving the eu? can't treat that disease? >> no, pricing issue is a much bigger issue that does not go away. manpower credit suisse downgrading from 88 to 73. credit suisse economist expect uk to slip into recession by later this year. the analyst does concede where he might be wrong, first of all brexit not as detrimental or if aggressive monetary policy by
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the uk or eu props and actually drives growth. >> that's a call that makes sense though. you may say, well, we don't know where the business is going to go or what's going to happen. let's be clear with all due respect to everybody that comes on this show, this network, whatever, everybody's kind of guessing. we don't have any idea where anything is going to go. so if you're a business owner you might say let's put things on hold. all right, third stock, applied materials, upgraded to a buy from neutral by d.a. davidson. they bumped target from 28 to 24 stock almost at 24 before today. they say several waves of growth are more important than the brexit. >> i love they say that. >> they actually said that. over the long term. they are china's domestic semiconductor market expanding, greater adoption of ole derkss because they require the number of tools and rollout of the memory all positive for them. new target implies little more than 22% upside. >> and of course one thing is oled devices such as smartphones decline because growth overall
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is stunted, then that's an issue. i mean, there's this sort, well, this could be good. >> that's what i'm saying. ultimately everybody is sort of guessing because we don't know what's going to happen. >> a difficult situation here. priceline another potentially brexit impacted stock because of its highest exposure to europe among the online travel sites. jeffries today defending priceline saying it's been unfairly punished with the 11% decline on friday and a quote/unquote, nice buying opportunity. the analyst points out the decline and make it easier for travelers to go to europe and that could decline from within europe. pound would have a minimal or less than 1% impact on bookings and revenue. but over two days this has been a painful ride for priceline. >> it has but this is the perfect call to highlight what we've been talking about which is it may result in less travel. it may result in more travel. hey, things are cheaper in europe. >> a push and pull. >> more travel this way, less travel this way. we see that -- notice what i did here very high-tech.
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lastly, your under the radar name may be a brexit beneficiary. litoss holdings, intelligence and defense company, cowen and company reiterating positive view on the stock noting selloff on friday but says the company could be a relative net beneficiary of a brexit. they like the 4% dividend yield, potential stock support also direct impact of a brexit looks minimal. company has only modest uk exposure. they have a $56 target. about 20% upside. think about it if europe does get a little shaky and the u.s. government wants to kind of focus in on the military aspects. >> defense spending is often seen as sort of a safe area, safer. >> yeah. things shake out and maybe just like peer down from our drone a little more. >> anyway, pop in the stock today despite declines overall. >> up 0.2%, tyler, 0.2% today. >> and 2% on the s&p. >> a huge, huge move.
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huge. >> thanks, folks. which hedge funds and investors made the right bets on that british exit? kate kelly is looking at those that made money off this move. >> hi, tyler, how are you doing so far? interesting so far to see the impact on hedge funds. we don't have a ton of losers we know of quite yet, but we have seen some winners emerging already. i will add though that obviously the big move on friday meant that people lost some money. and we'll find out who that is, so one hedging i talked to estimated people might be down a half a percent if not full percent just on that day alone and no doubt some of that may have been continuing today. in terms of what we know so far on the upside george soros, an interesting example, he of course famously broke the british pound in 1992 with a short bet. this time however from what we're seeing he was long sterling and was talking his book on that score with a pro remain rhetoric before the vote last week. despite that profited from bearish bets elsewhere in his portfolio what we know from looking is he was long baric
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gold, the mining company as well as long the gold etf. and he confirmed in a statement to the media that some of his positions anyway were profitable. other winners that we've heard of in the last day or two include o day asset management. that's a london based firm as well as saba capital. they were structurally long volatility. that's a new york based credit oriented firm and based on a number of things in their portfolio they were long volatility, and benefitted from that. finally, duquesne family office, to the extent we know what positions were, they have tech companies and a number of other things in their portfolio, but they were also long gold according to filings, which would have seen to benefit them. couple other things to keep an eye on, continued volatility of course in the market. i spoke to the head of citadel, the large hedge fund surveyor unit, todd barker, and he said to me that he thinks at this point i look at the names that are getting disproportionately getting hit. it makes sense. we may be seeing a slowdown in the eurozone.
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he's actually hoping, tyler and guys, that it may emerge into more of a stock picker's environment. that would be beneficial to them going forward. the other thing to look for the vix today down a little bit earlier today. not moving quite as much, which is giving some people a bit of assurance that perhaps people are not as worried about continued volatility throughout the week and things could be settling out. that's a big if though. >> all right, kate, thank you very much. kate kelly reporting from the new york stock exchange. oil market closing for the day. let's check in with jackie deangelis at nymex. >> good afternoon to you, tyler. that's right. oil kicking off the week on a negative note following a turn of the markets a little bit today. the stronger dollar is your honorly the culprit here, dollar index over 96. that settling price $46.33. i will note that we did pair some of the earlier losses today at the close. but there is a little support here as we're heading into july 4th weekend expecting to see a record number of motorists hit the road for the holiday weekend. and 5 million more than we saw on memorial day. so about 43 million americans.
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remember, the national average for a gallon of regular according to aaa is $2.31. it was $2.78 a year ago. that's a substantial savings that's going to get the consumer out there traveling around. and that will probably hold prices up for the next couple of weeks or so. expect the demand not just to be for crude but for refined products as well. back to you. >> all right. thank you very much, jackie. coming up, more advice on what you should do with your retirement savings right now amidst this big selloff. that and more coming up on "power lunch" right after this. ♪ ♪
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thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride.
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you're promised one speed. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. hello everybody. i'm sue herera. here is your cnbc news update at this hour. at a news conference in brussels secretary of state john kerry called for a cool-headed approach in the transitional period after britain voted to leave the european union. >> the vote did not come out the way president obama and i and others hoped that it would, but that's democracy. and we respect the rights of the voters. and we respect the process. so it is now incumbent on leaders to implement the will of the people and to do so in a way
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that is responsible, sensitive, thoughtful, and i hope strategic. >> iraq says it has completely retaken the city of fallujah from isis after a month-long operation. it's one of the biggest victories since the extremists swept across large parts of that country in 2014. a spectacular lightning strike was caught on camera sunday in oklahoma. in the dash cam video you can see lightning striking a pole and taking out power and sending sparks flying. oklahoma has been hit by heavy rains that triggered flash floods over the weekend. and tennis star maria sharapova says she's headed to harvard business school while she serves a two-year doping ban. she posted on twitter and facebook that she can't wait to start. no immediate comment from harvard. that's the news update at this hour. back to you guys. i don't think the tuition will be a problem. >> melissa noted that it is the -- >> executive program. >> it is the executive program at harvard business school, not
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the full -- >> not the full-on. >> not the full -- >> but does she come out with an mba? >> no, come out with a certificate. >> a certificate. >> but it's from harvard. >> that's from harvard. >> it is. harvard with three rs. it's time for trading nation because traders do trade better together. you might have heard banks are going through a financial fallout after the big british vote to leave the european union. will they drag the market even lower? joining us now bks asset management, rich ross of ever core isi. bor boris, british banks have been whacked, our banks hit but not nearly to that effect. do you think the pain is over for most of the big u.s. financials? >> not even close. >> not even close? >> not even close. i think everybody's being way too complacent about this thing. if brexit actually goes through, i think the pain cob horrid on the uk's side. we could get double parody meaning europe goes to parody,
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goes to parody. uk is the most indebted nation in g-20 universe. uk bonds, which are now trading at like 1% yield are going to be worthless. it's one of the best shorts in the world right now. >> is the gilt, the uk bond is one of the best shorts in the world? >> yes. and i think that obviously is going to effect bank balance sheets. and i think it's going to be more pain to come if we actually go through with this. >> do you think that's why we're seeing royal bank of scotland, barclays and others down 17% to 20%? >> absolutely. and i think any bounce here is a short unless, unless they can fix this problem. >> any bounce is a short, one of the best shorts. boris, you're clear and you're on the record. we appreciate it. rich ross, what are you charting and how does it look? >> yeah, brian, without stating the obvious, allow me to state the obvious here which is to say that banks both foreign and domestic do not look very good. in fact, they look outright bad. first, we're going to take a look at the bkx, those are our banks here in the states. and what do you see? you see a group down 10% post
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brexit alone you're down 25% from this time last year, very well defined down trend. you broke that mini up trend we had off the bottom with that sort of pre-brexit euphoria that's failed miserably and still $5 or so from the highs you set back in february. but back in february interest rates were higher, we're now 1.45 on the ten-year, the 2/10 spread was steeper, now back to both negatives for the group and we know about unrest in europe. i think this is the chart that's really telling here, brian. you look at this multi-year chart. where are we on the euro stock banks? we're as low as we were at the depths of the 2012 european banking crisis. that's a bad place to be. you're even lower than you were in the financial crisis 2008, 2009. it's not lehman brothers, it's worse to a certain degree when we're talking about europe. sure there's a lot of support
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but doesn't give you confidence banks are going to hold and rally. i don't know if i'm overtly bearish as boris, but certainly paint a grim picture in the absence of signs of exhaustion. >> i think it's fair to say without stating the obvious i'm going to state the obvious harder to be more bearish than boris. rich ross and bearish boris, little finger -- game of thrones. thank you very much. for more trading nation head to our website tradingnation.cnbc.com. airlines also among some of the hardest hit groups. look at ryanair, down 16% in a week. apparently no one will travel again. u.s. airlines falling as well. united, delta, much more of our coverage of this market selloff when "power lunch" continues. and now the latest from tradingnation.cnbc.com and a word from our sponsor. >> while it is true that volatility can benefit the trader, it can also lead to
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chaos and a greater amount of risk. in volatile markets consider narrowing your risk parameters to help limit losses while capitalizing on the swings that do go in your favor.
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welcome back to "power lunch." i'm melissa lee. let's get a check on where we stand in the markets. the dow jones industrial average off the session lows down by 277 points. take a look at the heat map here because not surprisingly the two dow components in the green reflect the flight to safety that continues in today's session. johnson & johnson which of course is a dividend yield of about 2.75% is higher on the day by about 0.6%. and verizon among telecom also higher. in the pain camp, of course financials we've been talking about that all show long. but amex is down by 4%. bob pisani is on the floor of the new york stock exchange. also kenny with o'neil securities. kenny, start with you. in terms of the losses do you think we're closer to the end of the post brexit fallout or closer to the beginning? >> well, considering i thought on friday we were going to bounce and actually be safer at the 2020 on the 200 day moving average. i was wrong on that. we sliced right through that like a hot knife through butter
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this morning and every major index is now below their 200-day moving average. we're kind of in this level of perg to purgatory. quite honestly if it continues to get tough, we could see a test of the january lows. and on the s&p that could take us to the like 1830 level, 1820 level, which is down another 8% from here. which puts us solidly in correction territory. >> one thing that worries me a little is we're getting very heavy volume today. >> right. >> and this is volume where most all the volume is going to stocks on the downside. >> right. >> so there is what we call distribution. this is the second day where institutional selling is coming in for a second day. >> is this -- >> no yet. not a dramatic selling climax where we take this woosh down. it's been heavy volume all throughout the day. >> and bids are not disappearing yet. melissa, that's the other thing. capitulation, you're not getting
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that at all today as ugly as this feels it doesn't feel -- it actually does not feel panicy, just feels sluggish and heavy. >> both days have not been pa c panic panic panicky, but that doesn't mean there's institutional selling going on two days in a row. >> clearly at what point if we don't get a break from this that's where i think all of a sudden, boom. >> the only good news here, melissa, we're starting to get more towards more reasonable p/e levels, we're down to about 17 -- >> on the overall market. >> right. we're down about 17 on the forward earnings levels. the question is will the earnings come down. >> we're at a new high on the year for the s&p utility sector and you've pointed this out before there are strategies out in the marketplace, low volatility strategies which are putting money into these places like utilities and telecom, exactly, those are the outperformers. is that a concern for you? >> sure, yes, absolutely. >> kenny, you? >> well, at the moment it's not a concern. it makes perfect sense money are
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going -- >> she's talking about a valuation basis. >> a 22 p/e for utilities. >> there you go. >> well, look where rates are. rates are near zero, where else are they going to put their money? that being said i don't think we're going to see any turnaround in rates at all in 2016. i think it's off the table completely. i think money will continue to go into that -- into those groups. >> all right. what a bear party we're having today. >> yeah, yeah. >> guys, thank you. bob pisani, kenny from the floor of the new york stock exchange. the one thing many of you want to know right now, what should you do with your money, your investments, your retirement savings? we'll get advice coming up on "power lunch." ys and greens, drivers and irons. it's also a game of big data and servers. just as pga tour pros need modern analytics to improve their scores, businesses need customized data center solutions implemented by cdw, using hpe proliant gen9 servers with intel xeon processors to improve their bottom line.
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if you're hoping for a bounce today in stocks, you are not getting it. the dow down 300. down 301. with friday's loss, we have lost more than 900 points in 2 trading sessions. obviously, volatility continuing to ride after the friday vote for the uk to leave the eu. you are probably not a trader. you are a 529, a 401(k) plan. here's the question. what do you do with your retirement portfolio? how do you keep it safe in these turbulent markets? let's find out.
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rick ettleman joins us. i'll say it to everybody. no one really knows when's going to happen. it could go terribly in europe. it could go smoothly. it may not go at all. should we stop investing? >> no. for exactly the reason you just cited. because we don't know what's going on and happen next, keep doing what you've been doing. if you're participating in your 401(k) as you should be, then keep on participating. and recognize that each contribution is going to buy in at the new lower price if that's where it is. nobody ever objects to buying as prices go up and as prices go down, you should be thrilled because everything is on sale so don't use what's happening at the moment to interfere with your strategy. >> you know, our ability to invest is very limited. but, you know, i have a european part of the 401(k) and friday you're thinking, oh my gosh, the fund down 10.8% and thinking,
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oh, should i change it? it takes intestinal fortitude to withstand this kind of stuff. does it not in. >> you are absolutely right ft it takes -- easy to up when you're up and challenge is to be up when you're down emotionally and psychologically. rebalance. instead of selling and running for the hills, recognize that you have assets that are higher priced because of the flight to safety and lower because of the turmoil. sell some of the higher priced assets and use the cash to buy more of the prices currently down. >> how about just put it in cash? does cash itself just cash, not invested in anything, i know it's -- sometimes cash works. is there a role for a little more cash now? because we don't know. >> no. i don't think so. because that would force you to sell to raise that cash. and that means you would be buying or the cash while the prices are low. you would be selling low out of
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the securities. and i think that damage outweighs the advantage of increasing your cash allocation. >> time frames matter. listen. 75 or 45, you've got to take this segment differently. correct? because we don't know what's going to happen one or two years. this divorce could turn into the messiest hollywood story of all time or it could go smoothly and the market goes up or not happen at all. because we don't know and let's say -- >> i would agree. it's how soon are you going do use the money? in other words, if you're going to use the money in the next year or two, that shouldn't be invested in overseas stocks. you're absolutely right. not touching the money for five years, ten years, ignore this whole thing. >> ignore the whole thing? >> ignore the whole thing. stay focused -- >> doesn't make for a good segue. we can't have that because, again, we don't -- we don't know. one thing i am sure of is that people buy band-aids and car tires tomorrow and six months
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from now. how many of each? what other strategies should we employ right now? not for traders but people just put a couple hundred bucks every month away to their 401(k)? >> since we can't predict what's going to happen tomorrow and there's massive uncertainty at the moment, only thing to do that works is stay focused on the long-term goals. this is going to be old news. you won't remember that brexit occurred in 2016 anymore than you can remember two summers ago ebola had the word in the tizzy. we don't need to change the portfolio today if we have a long term focus. >> china fears rattled the markets earlier this year and the dow was 1,500 lower in february than it was right now or is right now. rick, a pleasure. good insight. thank you very much. >> you're welcome. well, the markets are still rattled today, folks.
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continuing from friday and another big selloff. we are down could it 300 points. near session lows. let's look at the etf losers at this hour. consumer discretionary hit. remember the financials perhaps the most beaten up group. more to do covering the selloff. back if two. real is touching a ray. amazing is moving like one. real is making new friends. amazing is getting this close. real is an animal rescue. amazing is over twenty-seven thousand of them. there is only one place where real and amazing live. seaworld. real. amazing
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take a check on the markets. we are approaching the session lows right now. 13500, 1991 the session low. a few points off from there. the nasdaq composite is worse of the three, down. as for technology stocks, you had mentioned you're watching one in particular, bri yn. >> looking at twitter because it widely traded. stock's down another 5%. brexit and euro and the soccer, you think it's twitter's moment to shining gaining attention on social media. it might be and not being reflected the stock price. >> priceline also down a good bit again today. i guess travel in europe or you think that u.s. travelers might want to go to europe because the dollar is strong. the euro is weak and the pound. intraeurope travel may be affected there. down another 60 bucks a share at 11.72. >> i think "power lunch" should be live in europe. >> plenty of great reporters on the ground there.
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they don't need us. chemical stocks, exposure for them. they're exposed to global growth. when that's in question, they go down. >> dow down another 300 points, tyler. >> all right. teeing up a big hour coming up. >> "closing bell," that is next. hi, everybody. welcome to "the closing bell." we are seeing another brex brexit-related selloff. >> yes, we are. following the historic vote last week and turning lower after standard & poor's cut the uk's credit rating. >> coming up, we have an all-star lineup of guests to help you make sense of the market. it's chief investment officer, technician and former wells fargo ceo. meantime, goldm

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