Skip to main content

tv   Power Lunch  CNBC  September 19, 2019 2:00pm-3:00pm EDT

2:00 pm
>> yes not recommending these stocks. we'll see if altai has any value. that does it for this edition of the exchange. the dow trying to hold on to marginal gains "power lunch" picks up right now. >> i'm bill griffith, here's what's new heavy weights delivering in new york city, why one ceo is sounding the alarm on the economy. plus mr. zuckerberg goes to washington making the rounds in d.c. today. we have details on that. and later the streaming wars are heating up as major media giants dive in head first we'll tell you who the big winners could be "power lunch" starts right now welcome back to "power lunch. it's going to be a big hour. i'm morgan brennan, let's look at where we stand with the
2:01 pm
markets the dow and s&p back within 1% of record highs. the nasdaq is higher today as well and 2% from all-time record highs. check out microsoft. that stock jumping to a fresh record high after announcing a $40 billion buy back, that's helping the do you today we'll have more on that later. lots of big names making big news leslie picker has all the market moving news and there is a lot of it. leslie >> it's a busy and eventful day. so i think we're going to kick it back over to bill and i'm going to head to the desk and we'll continue our discussion. >> what a good idea. thank you, morgan. come over. we're wondering how worried investors should be at the alpha conference believe that our economy is being propped up by a strong consumer right now, should investors start worrying our push to record levels is
2:02 pm
going to stall out bring in brian jacobson with wells fargo asset management and christian amami is with investments. >> thanks for having me. >> a lot of the investors, the feeling is that this is as good as it's going to get and if the trade war continues and the tariffs continue higher and the global economy continues to slow down, it's got to take a toll on our economy at some point and evidenced z in our stock market. what do you think, brian >> i think we've seen in the economic data evidence of that slow down. and now i think investors are looking for, is there going to be a favorable resolution. one of the fears that we have is that maybe the rug gets pulled out from underneath us as far as what some of the sentiment, where if there's a backtracking on the status of the trade
2:03 pm
negotiations or if there's something dramatic that happens with brexit. as it is, i believe we've already experienced some of this economic slow down i think it was very evident in the housing data, although that has gbegun to rebound, very evident in the manufacturing data so investors could be whip sawed on any tweets on the trade front. >>an even though the fed seems to signal they're not cutting rates any time soon, you think there are rate cuts coming >> yes in fact, jay powell in a smart way left himself that optionalty and his performance yesterday was meaningful better than last few that he has done so i think the outlook for the economy is definitely growth moderating however, the likelihood that we get to 1% or sub 1% i don't
2:04 pm
think is really in the cards in fact, things are stabilizing rather than deteriorating. if we get any resolution on the trade front, i think the set up is very nice for the markets to move higher, rather than go lower. >> gentlemen, we want to keep this conversation going, but first we're going to head back over to the delivering alpha conference and leslie picker for the biggest market moving headlines coming out of there. >> a busy and eventful day here at delivering alpha, big topics surrounding where some of the world top investors and politicians expect the growth to go pimco's ceo says, issues around the world are likely to drag down u.s. growth specifically. >> we see the u.s. economy slowing down, and the number we have in mind is we are slightly above 1% for the first half of
2:05 pm
2020 and obviously the elephant in the room is the trade war with china. how to resolve itself. and also other distinct incident across the world think of saudi arabia, think of brexit, think of italy all these things basically are a dampner on growth , only so much monetary policy can do to reignite growth. >> but vice president mike pence who spoke with joe kern nan had a different take, arguing the u.s. economy is benefitting from his administration's policies. >> american economy is booming that's absolutely undeniable since election day, 2016, more than 6 million jobs created by businesses large and small, unemployment is at a 50 year low, wages are rising at their fastest pace in more than an
2:06 pm
decade one fact after another, as we travel around the country, the enthusiasm, the confidence you know, the -- a soaring stock market, improving the pension and retirement of working americans. >> when asked about the upcoming 2020 election, vice president pence said democratic socialism would, quote, crush the economy. invester lee cooperman reiterated that concern. >> there is a shift to the left in this country, they won't open the stock market if elizabeth warren is the next president >> so tons more investors, economists to go for the rest of the afternoon here, so i'm sure we'll hear a lot more about everyone's takes on the economy. back over to you >> leslie, what has the, i guess, general motor sentiment been like at the conference given the fact you have so many high profile names there are there certain bigger, key
2:07 pm
broad themes that are emerging here >> a lot of people are talking about public versus private markets, that's the theme that's spanned across the largest panel, it's been in the tech panel, been in the conversation with the sec chairman, it's been a big theme especially in light of what we're seeing with we work and people are trying to understand if there's a disconnect between the public and private markets and what that means for your average investor out there p the economy has been a big theme, the fed a big theme and people are divided on the aisle in terms of what to do about the economy, whether it is booming as the vice president said or whether it is likely to slow down in 2020 as we heard from pimco. fed and where they are in terms of monetary policy, same thing some think they'll stay where they are, some say they'll continue to climb. that's the beauty of the events you can listen to the smart people in the room and get a
2:08 pm
sense of where their head's at. >> brian, just to go back to you here the fact we're in striking distance of fresh record highs for the markets right now, does that make sense to you where does it go from here >> i think we could probably get up to 3,100 on the s&p 500 if there's some sort of -- say tomorrow we get some positive news with the trade negotiations and that continues on through october, that could push us higher however we're a little concerned that really when you think about the fundamental backdrop, the economic momentum having slowed we're probably setting ourselves up for another pull back here as we go into the end of the year my friends at the wells fargo investment institute we agree with their forecast, over the next year probably about 6 to 7% returns on the s&p 500, which is good but it's not great in the context of the last few years where you've seen more double digit returns. >> what we've seen,
2:09 pm
interestingly, is the sectors that have gotten us to these -- close to these all-time highs are the value stocks, not the growth stocks that were so hot a few years ago or a few months ago. do you play value now or are you sticking with growth >> i think the regime change that people are looking for in the market is going to be very short lived. and the reason for that is it very straightforward unless global growth picks up meaningfully or interest rates rise significantly, both unlikely events in our view, that the losers become winners and winners become losers likelihood is pretty small i'm sticking with tech for u.s the credit markets for yield and maybe emerging markets as a bet on global growth stabilizing. >> gentlemen, thanks for joining
2:10 pm
us today >> thank you >> coming up two tech titans in washington today we'll tell you what jeff bezos is pushing for and arcade games, will the gamers come.
2:11 pm
2:12 pm
welcome back to "power
2:13 pm
lunch. apple launching arcade today, a move it hopes will give it entry into the gaming business josh lipton has those details for us >> morgan, more than 2 billion people will play video games this year. apple hopes some of them will give its new service a try today the iphone maker officially launching arcade, that's a single subscription at $5 a month, it includes access for up to six family members service will feature more than 100 new exclusive titles the company reportedly spent hundreds of millions of dollars to secure these new games. it's no surprise tim cook wants a greater piece of game industry, total game revenues this year expected to reach nearly $150 billion, ever core isn't expecting arcade to have a big impact on apple's bottom line but he does think arcade could help bolster the company's
2:14 pm
segment by adding $7 billion in revenue over the next three to five years apple making other news today, too. cnbc was invited to look at the company's new revamped store on fifth avenue in new york city. it's had over 57 million visitors since opening its doors in 2006. it will officially reopen tomorrow morning just in time for the new iphone models. morgan, back to you. >> josh, thank you very much now we've got mark zuckerberg in washington talking behind closed doors to members of the house and senate we've been tracking him down in the halls. >> literally >> did you catch him >> we saw him very briefly he is now heading into the office of senator josh holly, a republican, one of the most vocal critics of big tech here on capitol hill. just before he met with senator holly, he also met with senator mike lee of utah, another
2:15 pm
republican, head of the anti-trust subcommittee in the senate also someone skeptical of the power that big tech wields over our lives. but zuckerberg is here not only to speak to republicans but also offer an olive branch to democrats as well. he had dinner last night with senator mark warner of virginia. they talked about data protection, election security and talked about competition now mark warner was on cnbc earlier today and said that zuckerberg appeared to be more humble, he understand that a new era of legislation and regulation could be coming and he said that the days of the wild, wild west on the internet are over and he wanted to convey that to zuckerberg we know that zuckerberg has been trying to meet with senators individually in their home offices as well. he met with mike shots of hawaii in his office about a month ago.
2:16 pm
so again we see here big tech trying to make inroads on capitol hill, trying to smooth oversome of the acrimony that has existed about their dominance on the platforms and over their privacy practices the fact that mark zuckerberg met with some of his fiercest critics in congress, does this mark a shift in terms of not only how facebook but big cap tech in general is now thinking about the conversation it needs to have the lawmakers given all the swirling possibility around legislation and regulation >> i think that big tech has done a better job of trying to tell their story here on capitol hill and also, get out in front of some of the potential movements. we saw that zuckerberg also penned an op-ed in "the washington post" a few months ago that laid out the framework for what he sees as essential
2:17 pm
movement over privacy. they have a framework of what they would support for privacy legislation to ensure that their platform is not manipulated ahead of the next election they understand they're going to need to work with lawmakers here, not against washington and they're trying to do a better job of that. see if it makes a difference, though. >> and wearing a tie only the second time we've seen that, the last time was the last time he was on capitol hill. >> he ditched the hoodie >> thank you very much. >> when tech grows up, i guess you can say. turning back to apple arcade is the dawn of the streaming age for video games. joining us is brandon ross. >> lightshed partners. >> it should be light stream, don't you think? >> there is one, though, isn't there? >> yes. >> we're happy to have you on. no pun intended, is apple arcade a game changer >> i think it's very interesting
2:18 pm
for the mobile gaming world. thus far, all the games that have been successful on mobile have been in the premium model, which essentially means that publishers are trying to create addictive games that ultimately frustrate players and get them to play. so that's been a turnoff to some creators and a turnoff to some players. this subscription offers a new technique that can incentivize new types of games which may be more fun for players and incentivize players to play mobile games >> if you're talking about new potential business models and way for content creators to make money, who will be, i guess, attracted to do that are you talking about the big tent pole publishers. >> yeah. well. >> -- or are you talking about someone else >> i think the big tent pole
2:19 pm
publishers all have their individual plans you've seen with activision, call of duty mobile is just kind of days from release and that will be in that premium model. but there's a lot of independent and smaller publishers that want to create different types of games that haven't really had the opportunity beyond premium so i think it's an opportunity for them and, of course, it's an opportunity for apple, right >> right. >> they have an install base of, what, 900 million iphone users, which they're looking to add service revenue to and that's service revenue beyond the reallocated equipment revenue that my partner likes to point out. and you've seen them attack that base with everything that consumers are doing on the phone. you've seen music be very successful already
2:20 pm
obviously cloud has had some success. and you're going to see tv and now games. >> are we to view video games the way we're viewing the content we're seeing on the streaming services coming out? in other words, will that same business model work for gamers the way it does for people who love to bing watch tv shows on streaming services many. >> our belief has been that on console and pc subscription is actually not the right way to monetize i don't think there's either a player incentive as players are really just playing one or two games continuously in this new games as a service model where games are living, breathing animals for a long time. they're not playing several different games a year so whereas in netflix you have the consumer need for it, because we watch tons of different video content or on music where we listen to tons of different types of music
2:21 pm
the subscription model probably isn't going to appeal to pc and console players. and then the business model from the supply side has been quite good to date with both upfront sales working for software yvar of games so i don't see subscription taking off strongly there, but we do have more hopes on mobile as we pointed out. >> whether it's the video game creators or the tech companies getting into this or some of the other names that you follow with an entertainment more broadly, what do you like the most right now? >> well, i think our kind of favorite idea has -- right now is madison square garden that's away from our video game coverage, but msg has gotten extremely cheap. especially over the last kind of couple of months as there's been some push back on a project they're doing in las vegas
2:22 pm
but look, this thing has an enterprise value of $5.5 billion right now. the knicks alone we know, which they own, have already received an offer of $5 billion for just that asset then you have the rangers, madison square garden, the forum and several other top of the food chain assets and you have a hard catalyst coming here, the entertainment and sports teams are going to separate probably by january and before that you're probably going to see a partial sale of the sports team -- sports team to a minority investor which should mark the valuation of sports opponently as high as the entire value now. >> thanks for joining us. >> thanks. >> microsoft padding its trillion dollar valuation today, that stock higher as the company raises its dividend and said
2:23 pm
it's going to buy back billions of its own stock again this has been a huge week for the streaming wars themselves, lots of big moves. which ones are going to pay off, we have jim stuart and kay koplovitz joining us don't go anywhere. (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. by the way, she's the it wasnext mozart.g day. as usual we were behind schedule.
2:24 pm
but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what. it's unbelievable what you can do in the prius. toyota let's go places. liberty mutual customizes your car insurance, hmm. exactly. so you only pay for what you need. nice. but, uh... what's up with your... partner?
2:25 pm
not again. limu that's your reflection. only pay for what you need. ♪ liberty, liberty, liberty, liberty ♪ ♪ (classical music playing throughout)
2:26 pm
lunc lunch" microsoft hitting all time highs and leading the dow today, the stock on fire after they approved a $45 billion stock buy back program so do you stick with the winner or cash in for now todd, i'm going to guess, as you look at the chart you're going to tell me being at an all time high is not a bear condition for a stock. >> it's been a bullish stock back to 2015, they've initiated two buy backs, 2013, 2016, and here's the third one the chart below us is microsoft
2:27 pm
into the q microsoft is outperforming the nasdaq and that's what's happening here there's no signs of giving back here on this chart so getting rid of the strength and just focussing in on microsoft itself, we are in a pretty up trend channel. we have this beautiful uphetren here i just put the re of the trade back on about ten minutes ago. i think we will meet resistance around 155 so we start to hesitate there, walk out. >> that looks like 10% up roughly from this level. mark, the technicals seem unassailable is it getting expensive or would you stick with it? >> we'd stick with it. what's not to love about microsoft right now? the valuation is probably fair you're playing for solid growth and execution.
2:28 pm
investors want that and that's what microsoft delivers. the cloud is going to continue to grow at about a 30% analyzed rate at the next 30 years and microsoft is the number two player behind amazon but i think they have advantages over amazon and have the ability to overtake them the next few years. microsoft if you think about it, they're in corporate america with their office suite which pretty much everyone has amazon isn't in corporate america like that. and about 80% of legacy it is still on site and those companies aren't going to scrap that and move everything to the cloud. so microsoft offers a hybrid solution for those companies so i expect the growth and execution to continue which means this is still a buy. >> now a market cap closer to 1.1 trillion than 1 trillion maybe they'll call it macrosoft.
2:29 pm
thank you both morgan, back over to you ahead on "power lunch," what if apple and disney merged bob iger said if steve jobs were still alive it might have happened. the head of the faa making good on his promise, he won't let the 737 fly until he knows it's safe. in today's tasting menu, having breakfast for lunch why one firm is upgrading america's diner, denny's and now the latest from trading nation and a word from our sponsor. liberty mutual customizes your car insurance,
2:30 pm
2:31 pm
so you only pay for what you need. i wish i could shake your hand. granted. only pay for what you need. ♪ liberty. liberty. liberty. liberty. ♪
2:32 pm
welcome back, everyone here's your cnbc news update at this hour.
2:33 pm
a senate panel approving $250 million to help states beef up their election security systems ahead of the 2020 elections. senate majority leader mitch mcconnell announced in advance that he would support the funding. >> i'm proud of financial services and general government bill will include a bipartisan amendment providing another $250 million for the administration and security of elections. to help states improve their defenses and shore up their voting systems drivers stranded by rising waters in the houston area had to be rescued by emergency crews early this morning, the crews were out in force as tropical depression e melda continues to hit south texas. nike has dropped new england patriots wide receiver antonio brown saying he is not a nike athlete. it comes on the heels of being
2:34 pm
accused of a sexual assault in a civil lawsuit in florida stocks are creeping toward record highs >> what are they doing >> they're inching. >> they're not racing? >> they're not racing. i say that because we're off highs of the day, though still in the green the s&p is just about 1% away from the levels. despite recent struggles in the i.p.o. market it seems every dog has its day as well. cloud firm data dog is soaring it's up 40% right now. initially -- 40% also ping identity, another i.p.o. today went public at the new york stock exchange that's also up 25% as well. >> finally some i.p.o.s that went up. >> yes as i get tongue tied myself there. the oil market is closing for the day meantime let's get to don at the
2:35 pm
commodity desk. >> u.s. based crude prices struggling to find direction much like the overall market flat on the day, down .7%. 58.07 ice brent futures rising the u.s. market fairly well supplied, inventories still there, not a lot of that disruption in the middle east affecting the u.s. prices. however global benchmarks are trying to digest the idea there's a higher risk in saudi arabia, iran given this past weekend's bombings coming upnext if it's friday, it must be rig counts, tomorrow we'll see if the rising prices short term have caused more drillers to put more active rigs on the market. that comes out tomorrow 1:00 p.m. eastern time. we the -- where am i going
2:36 pm
the media industry is going full stream ahead -- i'm going over here netflix, hbo max and nbc announcing big content deals in the past week. but with more competition than ever before, who is best positioned to win the streaming wars let's bring in james stewart, and kay koplovitz, i'm sure both of them are wondering what they got themselves into today. jim by my count we have eight streaming services either already in operation or planned at this point and somebody did the math figure if you subscribe to all of them, it would be about $62 a month. is the average american going to want to scribe to eight services bearing in mind there could be others down the road and pay $62 a month for all of them, what do you think? >> i think clearly the answer to that question is no. at least speaking for myself i can tell you the answer is no. it's not just a monetary issue
2:37 pm
even if you could afford $62 for it, do you want that much on there? what i do not want is another world where i have 100 cable channel osthere and i need a specialized guide to figure out what is where, i can't find it, i can't remember what is what. i already find it confusing. i have trouble remembering if the show i like is on netflix or amazon prime or something else look, there's consumer e research going into this, what i heard before is people were thinking maybe six is kind of a in number, honestly i think it could be lower like four or three. >> i heard three or four as well kay you were around during the early days of cable television, so was i, the cost of content and acquiring content back then was minuscule compared to what it is today. it's just eye popping the numbers being bandied about these days are you convinced that these streaming services will get any return on their investment for a
2:38 pm
lot of these dollars what do you think? >> i think it's a start-up cost for a lot of them. they have to have enough content that people want, and each of them is making sure they have some content people want the content rich company is obviously disney it has the most content that they can share on a global basis, i think they're far behind netflix, which has 160 million subscribers around the world this is the battle for the consumer and it's a long-term battle i think that is going to unfold. but game on now because everybody is out there bidding up the price of content. and the big losers on this could be cable networks because cable networks, especially basic cable networks but even the pay networks are going to have a hard time bidding against these dollars that the over the top companies are bidding for the content that they don't already own. so it is really a very big change in the economic model
2:39 pm
but what is happening is that they're following what the con summer habits are. and consumers are all about mobile, always on, all the time, access to what they want and right now, today, the average subscriber number to streaming is four. but that's before a lot of the new ones are being introduced into the marketplace not to mention things like the sports leagues and espn and all of these other streaming media opportunities that are out there today. they're not even, you know, calculated in those numbers. so -- and i think that, you know, you're thinking about, i'm still going to be a subscriber to cable to some degree maybe i'll do a skinny package but a lot of people, especially e millennials and gen zs are not subscribing. they won't get everything they want because there are some
2:40 pm
things they might want are on different services and not willing to pay for those services by the month. the question is without a subscription listcensing for a period of time by the consumer, people may drop in and drop out when they want to see something specific so take it for a month and bing view even if it's a series, not a live event but a bing viewing. bing viewing has completely changed people's habits. >> that's for sure. >> we're in a brand new world. the world i created out there is really very challenged interesting, it's still a subscriber and advertising it's two different revenue streams. it's where those revenues are going to come from so i find it a very exciting time, actually i think that it is an absolutely -- this is a unbelievably rich time for content. >> it is. >> so much good content out there. >> yeah. >> and we still only have 24 hours a day, seven days a week
2:41 pm
so there will be some limitations on how much people can really absorb. >> jim, i'm wondering, p given the fact it does seem to be a content creator's market right now and you have these services built out. when you have reports that disney, for example is looking to get rid of the back end type of agreement with creators, limit the profit participation for its tv shows is that a model that it can actually implement in a market like this, and is it something that's going to, i guess, be adopted by other companies as well >> i think they probably can i mean, everything is being up ended. and that old model where there was a huge payout on the back end, if the series was a big hit, but, you know, not nearly so much if like most shows it only ran for one or two seasons. that was based on the old model and the old model is fast disappearing i think that kind of lottery system -- by the way, except for
2:42 pm
the people who hit it big there, it was never that popular with a lot of people anyway netflix and amazon have shown that you can change the payout model. if you pay enough, people are going to line up to provide the content for them i think disney, there'll be a little pushback from some of the big, successful tv producers at the beginning but i think the model is going to change. >> jim stewart of the new york times and kay koplovitz. thank you. rick santelli is tracking the action >> fascinating day, all maturities are easing back a bit not a lot of volatility since last friday when we spiked up. two year note yields peaked at 180, down two on the day ten year peaked at 190 it's 177 down three on the day down 13 from that high trade so you can see tens minus twos
2:43 pm
over the last several days flat since about september 6th trading three, finally the dollar index it's had a high degree of volatility, especially yesterday but seems to have simmered out a bit. it's down about the same amount today as it was up yesterday morgan back to you coming up the head of the faa making good on his promise he made right here on "power lunch" when it comes to boeing we have those details right after this
2:44 pm
markets. the business of trading goods and services. nasdaq operates among the largest markets in the world. and our technology powers markets from indonesia to chile. great markets are built on a foundation of trust and integrity, forged through leading edge technology and a smart regulatory framework. as technology advances, regulation must keep pace to allow the markets to evolve.
2:45 pm
today we see an opportunity to modernize regulation, to make markets more accessible to investors and entrepreneurs of all sizes. from the graduate buying her first stock, to an institution investing in thousands. the markets belong to everyone and stand as a symbol of economic advancement, social progress and limitless opportunity. that's the tomorrow that we envision and to get there, we'll have to rewrite it today. iit's not "acceptable or nothing." and it's definitely not "close enough or nothing." mercedes-benz suvs were engineered with only one mission in mind. to be the best. in the category, in the the world. lease the gla 250 suv for just $329 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.
2:46 pm
hope you saw this early on -- early this week on "power lunch. the new head of the faa told us he would not let the boeing 737 maxfli until he's sure it's safe that's what he's doing today in washington state phil has more on the story. >> steve dixon told us on monday he would be going to boeing, and that's where he is today he's meeting with executives, getting an update on where they are about fixing the 737 max he's getting in the simulator, he's a licensed 737 pilot, he'll
2:47 pm
get a sense of what the solutions are that they made to the flight control system there. here's what he told us earlier this week in terms of what he's looking for when he's out in seattle. >> i'm anxious to get out to seattle later this week and get into this myself and see where we are with the certification process. as a pilot myself i can tell you that i will not allow this airplane to fly unless i would fly it myself and put my own family on it, and that's my commitment. >> he means that, guys yesterday he said in las vegas he plans to take the plane up and pilot it before he signs off on it. not just get in the simulator, for southwest, american and united, they're counting on the max being back in service, in the case of american by december 3rd. i have to tell you when you listen to steve dixon, others whereby they don't believe it's possible this plane will be ready as soon as the beginning of december. today the ceo ryan lair was out. remember what was said earlier
2:48 pm
this year about the max situation. they're saying they may not have it until march or april. keep in mind they receive payments from their customers as they're working on the maxs, not the full chunk but today ryan air said we're not doing it. we're freezing the payments until we get the max or better clarity on the process to deliver it. >> steve nixon, a no nonsense kind of guy. coming up next we're going g ie to alpha for another bi stay with us for farmers here, this is our life's work. but when a recall happens, perfectly good food goes to waste. now, we've got away around that. looks good. we're on target. blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. it's used by some of the biggest retailers everywhere.
2:49 pm
a nice wedge. so more food ends up on your table, is that daddy's lettuce? yeah. and less food goes to waste. ♪ ♪ you should be mad they gave this guy a promotion. and less food goes to waste. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade,
2:50 pm
who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.
2:51 pm
welcome back to "power lunch. all day we've been hearing from many heavy hitters at cnbc and institutional investors delivering alpha a big focus has been on global uncertainty and the impact of plunging interest rates. bruce richards of marathon asset management says he's concerned about the impact lower rates are having on the treasury market. >> it's a fool's game. and i believe that treasuries trading negative is the most
2:52 pm
absurd thing the central banks have ever done and it will blow up in their face >> let's send it over to melissa lee now. live at delivering alpha for more melissa. >> thanks a lot, morgan. let's pick up exactly where you left off in terms of low interest rates and negative interest rates around the world. i'm joined by michael arifetti of aries management corp the firm specializes in credit, private equity and real estate michael, great to have you with us >> thanks for having me. >> private credit is really where you specialize you've seen that area really balloon because of this desire of investors to search for yield and that has been driven by these low interest rates around the world. >> yeah, i think the global hunt for yield is a long-term secular trend that's hard to ignore. if you look at interest rates globally i know that we're all talking today about negative rates but interest rates have been in secular decline for the last 25-plus years so over that time whether you look at pension funds, insurance companies, retirees, against this persistent backdrop of low rates everybody around the globe
2:53 pm
is looking for alternative ways to get yield >> so in terms of the rate of return for an investor in ares, for instance, a 10-year treasury yield is 1.77% or so right now what is the rate of return there? >> if you ask most pension fund cios they'll tell you they're going to try to make an actuarial return of 5% to 8% now, the problem is with rates where they are today as an example 30 years ago the 10-year treasury represented about 80% of the pensions' rate of return. today it's about 25% what that's done is created a huge funding gap for most state pensions and as they try to come up with a portfolio allocation the typical 60-40 is not working anymore so they're coming to us at a minimum look for 5% to 8% returns and hopefully for those willing to take a little more risk we can do better. >> what sectors are you finding in those opportunities right now? >> in terms of the markets we invest in anything
2:54 pm
self-originated private credit, and that could be in corporates. it could be in real estate it could be in asset backed. but anywhere we can create credit or originate is where we're spending all of our time in terms of the industries, not surprisingly given what's going on in the economy, the bulk of what we're doing is in service-oriented companies health care services, business services really shying away from some of the more cyclical types of things >> are you seeing any evidence because there's the concern we have the i.s. manufacturing number out that was so disappointing. that eventually that could spill over into services are you concerned about that at all? >> i think it's more about the consumer more than services obviously. the services are providing service to the consumer. but there's a real bifurcation in the economy and we see it in our portfolio between the industrial economy and the service economy. right now consumer balance sheets are healthy, wages are up, unemployment is low, savings rate is up so it feels good but if the consumer tips over, obviously that would be a big issue. >> private credit is basically
2:55 pm
shadow banking >> i don't really like that term >> you don't like that because a lot of the banks, the major ceos of the major banks say that this is one of the biggest risks out there. >> so the reason i don't like it is i always picture someone, myself with a black hat and a pencil mustache working in the shadows -- >> under a streetlight >> we in the banking system, that can mean a lot of different things to different people, if it's corporates or real estate or structured, grew out of a persistently low interest rate environment. a lot of regulatory constraint in the system that prevented capital flowing to small businesses and middle market real estate, et cetera, et cetera so i think non-bank lenders are fulfilling a really important function in the capital markets. i think one of the reasons why people use the term shadow banking is up until recently there was some opacity in people's understanding of what it was that we did now private credit, i don't hear it as much because i think most
2:56 pm
large institutional investors have allocated to the asset class, have had a good xherns with it is, they're making good returns. >> michael, pleasure speaking to you. michael arougheti. bill, back over to you >> melissa, thank you very much. "check please" is next do you have concerns about mild memory loss related to aging? prevagen is the number one pharmacist-recommended memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life. they give us excellent customer otservice, every time.e. our 18 year old was in an accident. usaa took care of her car rental, and getting her car towed. all i had to take care of was making sure that my daughter was ok. if i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. we're the gomez family... we're the rivera family... we're the kirby family, and we are usaa members for life. get your auto insurance quote today.
2:57 pm
♪ - [spokesman] if you've tried colleg(group cheering)shed, snhu lets you transfer up to 90 credits toward you bachelor's degree. - [woman] it doesn't matter how old you are, you can do it, you can finish. - [spokesman] finish your degree at
2:58 pm
2:59 pm
we're looking to unicorns all the time we're looking for home runs all the time it's important to be patient, make smart decisions, invest things that you understand, things you can get your arms around, things that you can help grow and then take it from there. >> sound familiar? when shaq was on "power lunch," he said the same thing early in his career he fell for get rich quick schemes, promises to turn a million into 100 million. but when he started being more conservative, he actually made more money that might be one of the few things that shaq and kobe are eye to eye on. >> amen to that. yes. i'm a big laker fan. and i've been so impressed with how smart both of those guys are. with how they manage money especially and of course kobe has an oscar now from his production company. very quickly, walgreen's is going to start using drones to deliver food and beverage and
3:00 pm
over-the-counter medications next month with alphabet's drone service called wing. already they're doing this >> drone deliveries. they're coming faster than i think everybody expected so you've got fedex, walgreen's, ups, amazon, all getting in this game >> this has been fun wasban't it fun >> it was fun. by the way, color coordination >> prom night on "power lunch. "closing bell's" next. wlbl to "the closing bell," everyone i'm wilfred frost here at the grub hub post. the delivering alpha conference highlights are coming up broader market treading water with 59 minutes left to trade. >> welcome, everyone i'm sara eisen let's look at what is driving the action right now trade talks taking place in washington but some hawkish quotes from the u.s. side weighing on stocks upbeat data from the labor market pointing to a steady economic picture and yields lower pressure on the short-term spending market eases a bit.


info Stream Only

Uploaded by TV Archive on