Transcripts For CNBC Power Lunch 20160803

Welcome everybody to power lunch. Im Tyler Mathisen. Glad you could be with us this afternoon. Lets take a look at the dow trying to break an eightday losing streak. That kind of streak hasnt happened since august of 2011. Right now the dow up 23 points or 0. 13 . Energy and financials leading the way. Oil back above 40 a barrel. Despite a surprise build in crude inventories. Brian. Hi, im brian sullivan, thanks very much for joining us. Heres what else is happening at this hour. Walmart reportedly in talks to buy web retailer jet. Com. Dow jones says the deal could have a price tag of up to 3 billion. Also, 33 u. S. Service members have been reportedly infected with the zika virus. All of those cases were contracted overseas. The magic apparently still alive. Scholastic says more than 2 million copies of harry potter and the cursed child were sold in north america in just the first two days of sale, melissa. Welcome everybody. Im melissa lee. Straight to the breaking news today in fact from the Federal Reserve. Lets get to Steve Liesman for that. Melissa, thank you. Chicago fed president Charlie Evans says one rate hike could be appropriate this year. He doesnt love the idea of it but said it could be appropriate. He really wants inflation to be closer to the feds target before hiking. Whats the importance of this . Well, other fed officials in recent days have been speaking about just one hike this year suggesting the fed could be backing off once again from its projections coming back towards where the market is as measured by the cnbc fed survey. The feds own forecast in june showed the average fed official looking for just looking for two hikes this year. That was before brexit and the recent disappointing gdp data. One hike this year looks to be the fed flavor of the month. On growth, Charlie Evans said, quote, u. S. Fundamentals continue to be strong, labor market is displaying resilience and Second Quarter inventory decline was likely transitory, so he could see strong q3 growth. More on that in a second. He was disappointed that cap x has performed so poorly. On the Third Quarter more breaking news, we have the cnbc rapid update. The first look at the Third Quarter as a result of those automobile sales yesterday, strong auto sales. Were tracking 2. 5 to start the Third Quarter with a wide range obviously the beginning of the quarter 2. 2 to 3. 7. Second quarter you can see there disappointing at 1. 2 . Look at where Steven Stanley is, hes the bull of the quarter here so far at 3. 7 . Action economics at 2. 6. Goldman sachs right on the average of 2. 5. And moodys analytics which puts the survey together for us at 2. 2 . Here we go again, melissa, expecting a rebound and the question is whether or not were going to be disappointed once again as fed officials continue to say, hey, you know what, maybe one rate hike is more appropriate than the two we thought back in june. Steve, how does evans view fit in . Hes definitely on the dovish side. This notion that one rate hike is appropriate comes from the idea that, hey, its a committee, theyre going to take the vote the way theyre going to take it. So i could live with one. Hed prefer none until you get to that 2 inflation target. Its interesting because this seems to be coming more in line with what the markets view is at this point. You know, it has been a trend. And people complain that the fed has led the market kept rates down. I think whats been happening is the market has led the fed here. Time after time we see the chart looks just like the one i put up where the market is below the fed and the fed comes down to the market. I have to agree with you. Steve, thank you. Yeah, thanks. Steve liesman, ty. Melissa, thank you. We turn now to trouble in trumpland even though the campaign released news that they raised 80 million in july, a good showing for sure. The dominating headlines at this hour is talk of a candidate who is, quote, unraveling, and word that a possible weekend intervention is coming. Our john harwood is here with the latest. John, tell us about this idea of a meeting, a retreat with mr. Trump led by whom, and where. Well, it would be involving the trump children and senior republican officials like reince priebus, newt gingrich, rudy giuliani, to try to influence him. Well see if that actually takes place. And youre right, those money numbers are very good, but its still high anxiety time in the trump campaign. And the Republican Party generally, because of the candidates insistence of going off script and doing things that dont advance his campaign. Last night i talked to a longtime ally of trump chairman Paul Manafort who said that manafort has given up on challenging donald trump and is just mailing it in. Now, Paul Manafort a short while ago went on fox. When he did he didnt exactly offer a ringing endorsement of his ability to steer this ship. First of all, the candidate is in control of his campaign. Thats number one. And im in control of doing the things he wants me to do in the campaign. The turmoil this is another clinton narrative being put out there and that the media is picking up on. Now, Paul Manafort said it was the first hed heard of a potential intervention, didnt say it wasnt going to happen. But the concern is evident from a conversation i also had this morning with vin weber, a friend of manaforts, friend of House Speaker ryan and reince priebus, saying he was rejecting the trump candidacy that it was a mistake of historic proportions for the Republican Party to nominate him, were to collapse the markets if he were to be elected and is hoping that other Republican Leaders will distance themselves to save the Republican Party from trump. One who did that yesterday, meg whitman, the ceo of Hewlett Packard and the former california governor candidate for california, she called donald trump a dangerous demagogue. Donald trump may have to up the game that produced the 80 million in july because of course Hillary Clinton raised 90 million. John, tell me where this word intervention comes from . Is this being used by a source within the campaign . Are the people trying to organize the meeting . Its a very charged word, right . Its what you use when youre going to do some kind of drug interdiction, somebody addicted to drugs. Do they think the situation is so serious with donald trump that its got to be called an intervention . Well, im not sure that it means in this context something as medically influenced as you were suggesting. But this is reporting from our colleague chuck todd at nbc. And he posted a story on that this morning, and others are saying, well, were waiting and seeing if this is actually going to materialize. You know, one of the things they might be trying to intervene on it would seem to me is mr. Trumps prid lix for making things worse. If hed shown more graciousness or grace with respect to captain khan and his family, today we would be talking, i believe very strongly, john, correct me if im wrong, we would be talking about Hillary Clintons interview with Chris Wallace on sunday where she said basically that jim comey, the fbi director, had fundamentally given her a clean bill of health on what she has been saying about those emails. Something that clearly mr. Comey did not do. And the Washington Post gave it four pinocchios by the way. Well, if donald trump also did not go after paul ryan, say he was still thinking about whether to endorse him or the same on john mccain or belittle kelly ayotte, yes, maybe we would be talking about Hillary Clinton. The fundamental problem that donald trump has is that hes better off if the elections about Hillary Clinton because her reputations very mixed with the public. But he continues to make it about his own behavior. He likes the attention. He does not have the ability or at least has not displayed the ability to discipline himself in what he says and cut off unproductive conversations. Remember, he did win a crowded republican primary field with a 40somepercent of the vote. But youve got to expand millions and millions of voters into your coalition in a general election. Hes not doing that right now. A lot of selfinflicted wounds. A lot of selfinflicted wounds and a lot of selfconfidence under the idea, john, i think that he feels like, well, i did it my way and i knocked 17 out, 17 down, one to go. Were doing it my way. I can talk my way out of this, out of anything. Well see. John, thank you. Tyler, thank you. Another big story we are watching today, what else, oil after closing below 40 a barrel First Time Since april and falling nearly 20 over the past six weeks, a surprise turn in crude oil today. It is higher despite a big build in oil inventories. Lets bring in onset kyle cooper, Energy Consultant and Mike Kelly Seaport Global Securities managing director and Senior Analyst, he looks more at the stock side of things. All right, kyle, thanks for joining us. Good to see you in from houston. We got a bigger build than we thought in oil inventories. Why is oil higher today . I think its rebounding just because weve slid so much recently. Weve had a tremendous drop after getting above 50, you know, from the january low. We had a really bullish market. We got to that level. We hadnt been able to maintain it, now weve slid significantly. Markets dont go down forever. Even though it was a total build on total petroleum, i think this is nothing more than a rebound. When a stock doesnt fall or goes up on bad news, we say maybe thats a bottom. Because the market has priced everything in and its not as bad as we thought. Can we do the same with oil . Possibly, the problem is that the last five weeks now have seen total Petroleum Inventories rise. The problem with that is thats still showing that the excess supply is still there. Even though a lot of people have an expectation that the oil market is rebalancing, the total inventory levels are just simply not showing that yet. Weve seen five consecutive weeks of total Petroleum Inventory build. Weve built almost 29 total barrels over the last inventory of weeks. How oversupplied are we . Where do you see prices going over the next nine weeks, kyle . On a basic level we built a little over 2 million barrels, thats about 300,000 barrels a day of oversupply. Still here in the u. S. Alone. You know, i think its 35 maybe might be a 35 . So lower. Theres a lot theres Technical Support around 38. I think you could see some support there. But if that doesnt hold, then certainly around 35. Because we just continue to see inventories build. Unless we start to see those inventories tail off, start to slip actually, then, you know, then i think the path is still lower and that this is just simply a needed rebound within a market that sold off a lot. All right. So with all this said lets turn to mike kelly to get his picks. Mike, you say you have got to have exposure right now to two areas and these are areas brian has talked about especially in light of the decline in oil weve seen, economics is very important for these oil companies. But youre saying Delaware Basin as well as the stack play. What is the cost of production in those areas . Well, we just had two important Conference Calls today, new field the big player in the stack. And big player in delaware. Really encouraging data points for both. In newfield they said 40 oil their now making 40 rates of return at 40. So you could go lower than that, you know, down to that 35 level and still make the case that youre above break even. Concho said somewhere between 30 to 50 of their entire position makes money at 40 oil as well. So thats kind of where youre at. Yeartodate these stocks have given investors some pretty nice gains. Is that all factored in at this point . Whats up with gas star . Thats the one name on your list that has not done well this year. Yeah. We think theres still more room to run, especially in these two plays. We get more results. And give investors more confidence that these plays are really for real. I mean, this data out today from newfield say 40 return at 40. Two weeks ago the market thought, you know, really it was a 20 return at 40. So the data is happening very, very realtime here. Industrys getting really good. The Technology Revolution is upon us here drilling better wells, cheaper wells. And to your question gastar, theyre in the stack, a small player there. They got debt up to their eyeballs, but we think if you take basically recent deals around them, i mean, this pegs a 4 stock if you want to take recent a d transactions. Its got some risks with it, but we think the reward basically offsets that. Were going to leave it there. Mike, thanks so much. Mike kelly of Seaport Global and kyle cooper. Straight ahead, we talk to the green partys candidate for president jill stein, her platform, the state of the race and why her name on the ballot could put donald trump in the white house, a mustsee interview when power lunch returns. [chains dragging] [eerie music playing] [crickets chirping] [owl hoots] announcer if you dont fix them, sparks from dragging tow chains can cause a wildfire. And that could be scary. Bye, smokey only you can prevent wildfires. Welcome back to power lunch. Im josh lipton. Some new data out just now from apple showing its progress to increase diversity at the company. In the past year 27 of new hires in the u. S. Were underrepresented minorities, thats up from the previous year. Also 37 of new hires globally were women. Also higher than a year ago period. Apple noting it had made greater strides as well in pay equity here in the u. S. Still looking total work force 68 of apple employees are male, 56 are white. Many tech giants we know in Silicon Valley are working harder on diversity. So why is there greater minority representation . Some try to blame that on what they call an education pipeline problem. Others say its a matter of corporate culture. But apple today arguing it is working harder to address that issue. Guys, back to you. Thanks, josh lipton. Both donald trump and Hillary Clinton have very high negative ratings with voters. Many of whom expressed unhappiness with their choices. Next guest refutes the notion American Voters only have the choice between clinton or trump. It makes sense because shes also running for president. Were talking about Green Party Candidate dr. Jill stein. Shes pulling around 4 to 5 nationally right behind libertarian nominee gary johnson. She hopes to heavy court disenfranchised Bernie Sanders supporters. Dr. Stein, welcome to power lunch. Great to be with you. I want to get to the heart of the question that we highlighted in the tease which i heard a lot of last week when i was at the dnc, that you have the potential you have 4 or 5 , which means you dont win necessarily, but do you siphon off enough voters from Hillary Clinton that you end up being the ralph nader of this election . So its important to remember the American People are actually clambering for more choices. And are unhappy with the democratic and republican nominees who are the most unpoplar, the most untrusted and the most disliked in history. And its no surprise because the policies. And you can look at the policies of Hillary Clinton who supported nafta, sending our jobs overseas, who supported wall street deregulation which led to the loss of 9 million jobs and 5 million homeowners losing their homes, destroying aid to families with dependent children, throwing millions more children into poverty. So people arent happy with this rigged economy, or this rigged political system. So, you know, my view is all about getting the word out and letting people know that they actually have choices here. But do you really think you can get a big enough number . I mean, at this point if what you do is end up pulling voters from her, does that mean this was a more relevant conversation when donald trump and Hillary Clinton were closer in the polls. And thats another discussion, but things could change. Theres a point where it could be that you could be the reason that donald trump might become president. Well, you know, there are several responses to that. One theres another person in the race, gary johnson. And you might say hes having the opposite effect. So would you silence all opposition parties . You know, thats what that essentially says, silence all voices of resistance. Thats the definition of tyranny. There are ways to solve this. We could pass a reform through our voting system, which we actually have in cities all over the country called rank Choice Voting which takes the fear out of your vote. But the bottom line is voting your fears, voting against someone, democracy is supposed to be an affirmative agenda, it means a moral compass, we have to bring that moral compass of what we want to this election otherwise we keep getting what we dont want, jobs going overseas, downward pressure on wages, Means Health Care people cant afford. And you mention the point where do the numbers come from. And thats the really good news of this situation. There are 42 million young people, and not so young people, who are trapped in Student Loan Debt with no real way out. Im the only candidate who will do for a generation of young people what the democrats and republicans did for wall street, which was to bail them out. If we can bail out the crooks on wall street, we can bail out the students. And thats a winning vote. Dr. Stein, its brian sullivan. If you were allowed i know theres been a lot of fight to get the third party in to sort of the main debates. If you were going to debate donald trump, how would you attack him . Where is his weakness . His weakness is all over the place. His weakness is that he doesnt have coherent and consistent policy. He changes from day today. He has a track record of bankruptcies, of cheating on his students, of shipping his jobs overseas. He needs to be held accountable. And also his militarism like Hillary Clinton is costing us half of your income tax is going to these wars which are failing madly costing us 6 trillion for the wars since 9 11. Thats 75,000 by the time weve paid for all the Health Care Costs for our wounded veterans. 75,000 on average per american household. Yet what we have for it is failed states, mass refugee migrations and worst terrorist threats. We need a very different way forward. Dr. Stein, thanks for joining us. Well see how this goes throughout the campaign. Its certainly been an interesting one. Shes the Green Party Candidate for president. Thank you. And up next, were talking i. C. E. , drugs and a stealth apple play. Saddle up, folks, the good, the bad and the ugly in todays trade when power lunch continues. I enjoy keeping people up at night. My Analysis Shows your stories are actually about human connection, even love. Great storytelling needs drama and empathy. My cognitive apis can help any business Better Connect with its audience. You should try writing a book. Find a remote hotel. Bring the family. I do not think that is a good idea. Welcome back everybody to power lunch. Im Tyler Mathisen. Saddle up, it is time for the good, the bad and the ugly. First to the good, int intercontinental exchange, announcing a 5 for 1 stock split and new buyback program. Thats why the stock is up 6. 5 . Now to the bad, shares of biogen hot yesterday, not so today pulling back after a huge spike yesterday. Down 4 . Takeover speculation from rivals merck and allergan drove the stock higher. But shares are pulling back now on doubts that that deal could happen. And finally, ugly, ugly day for qorvo. They need a u in there, thats why. Cant spell a q without a u. Company posted weaker than expected profit margins, it is down nearly 12 . Bri. All right. Well, when some very smart money is bearish on stocks and bonds, is that the perfect time to maybe buy both . We are talking about what might be the ultimate contrarian plays straight ahead on power lunch. [announcer] is it a force of nature . Or a sales event . The summer of audi sales event is here. Get up to a 5,000 bonus on select audi models. Im Sharon Epperson and heres your cnbc news update for this hour. White house spokesman josh earnest says u. S. Officials are willing to consider a range of options to control the spread of zika including relaxing restrictions on some pesticides. This as florida senator marco rubio called on the federal government to allot states money to fight the outbreak. I find it inexcusable, as i have said repeatedly, that congress waited for months and did absolutely nothing. I find it unbelievable that an issue of this magnitude could become a political volleyball. And i think both parties are to blame for this. Meantime new York Attorney general eric shoochneiderman sa his office has sent cease and desist letters to Many Companies and also issued a consumer alert warning against the companys advertisement for the repellants. Goldman sachs has agreed to pay 36. 3 million to settle allegations by the Federal Reserve that it obtained and used confidential regulatory materials from the Central Bank Two years ago. An emirates flight to india with 300 people onboard crashlanded at dubais main airport causing a fireball and black smoke billowing into the air. All the passengers and crew were safely evacuated. A firefighter though was killed battling the blaze. Thats the cnbc news update at this hour. Back to you, tyler. Thank you very much, sharon. Weak earnings across a variety of industries stoking fears of an ongoing earnings recession. A lot of writing, a lot of talk about it. Lets get to bob pisani on the floor of the New York Stock Exchange for more. Tyler, the good news is were moving in the right direction, bad news is maybe not fast enough. Lets look at where we stand threequarters of the s p 500 have reported so far. Bottom line here were down 2. 4 compared to last year. Earnings still in a recession four consecutive quarters of negative growth. Good news its not as bad as it was earlier. Were moving in the right direction. Probably wont be positive, but the hope is q3 will be positive. Remember the narrative here. We bottomed out on earnings in q1 it was down 5 , q2 down 2. 4, q3 is supposed to go positive just barely and q4 supposed to get notable Earnings Growth. Why is this so important . Why are we obsessing about this . Because guys like Dennis Lockhart are out saying right now that asset prices, the stocks are relatively buoyant or relatively high. The bulls have got to start showing this earnings recession is ending and were moving into an Earnings Growth phase. And if they can, the argument that stocks are overpriced like lockhart is implying will get much louder. Lots at stake in this earnings season right now. Wheres the growth . Three main areas right now for the Third Quarter, consumer staples, but this depends on the Global Economy improving a little bit and the dollar staying stable. Thats a big order right now. Materials are supposed to get better as Commodity Prices firm up and a stable dollar. Again, thats a close call. And finally, financials, guys, low Interest Rates thats another tough one. The answer is we might do it, but its going to be close. Back to you. Thanks so much, bob pisani. Can we expect any improvement in earnings this year . With us alan bond, jansen Quality Growth Fund and zachary karabel. Perhaps a light at the end of the tunnel in terms of growth but s p 500 yesterday hit an intraday high, are we pricing it in already. The market is a discounting mechanism. Did we see the writing on the wall and did we see stocks run up accordingly, allen . Yeah, i think we saw Earnings Growth pick up and go positive. I think one catalyst is comps get quite a bit easier in terms of currency. But what weve really seen so far to date is a grind higher and i think its more of a stock pickers market and for us in our strategy that means focus on stocks consistent for cash flow generators, stable businesses and high return in equity stocks. You know, allen, its funny because your fund is called the Quality Growth Fund, so when i think of growth i think of tech, right . Sure. Yeah. But your top holdings, johnson johnson, pepsi, 3m, microsoft. Why are those Growth Stocks . So quality growth might be better described as stable growth. Those are companies we think have longterm positive stable growth prospects. Certainly not explosive Growth Stocks. Thats not what were trying to do. Were trying to provide a steady ride. Both Companies Benefit from stable and longterm advantages. All are consistent cash flow and resilient Business Models for the long term. So let me ask you this, i think of people who say, well, earnings wouldnt be so bad if you just took out energy and oil. Thats like a baseball player saying if you took out the times i didnt get a hit, id be batting. 1000. But can earnings actually materially rise if the Energy Complex broadly defined doesnt and if financials dont . So the Energy Complex certainly the Energy Complex just has to stop falling for the rest to rise and financials i think become an x factor but market leadership given up by financials incrementally year by year since the financial crisis. Youve basically had financials moving out of market leadership just like you had Semiconductors Leading in the late 1990s into the 2000s. I will say in terms of this whole argument, lockhart, people coming on saying sell everything, batten down the hatches, go to gold, i find that extraordinary in that these have not been frothy markets. Were up a few percent this year in the s p, emerging markets better, its not like were talking these incredible double digit returns. No, but we were talking about very high p es for the s p 500. We are. Were at the upper band of the range. But were at the lower band of the interest rate. These should be talked about as yinya yinya yinyang. And in melissas original question is, okay, if were about at the turn of earnings. Right. Have the markets been telling us that its coming already . And is it priced in . I mean, clearly what the market is pricing in is improvement in earnings after five quarters. This will be the fifth consecutive quarter of negative rates. Worst fivequarter period since 0809. A little Revenue Growth this quarter, so you havent seen the earnings turn. And you have had a very modest equity not really rally, just not selloff. And i think thats sort of saying, yeah, we might do a little better going into the rest of the year. Were not going to do a lot worse. What happens to the bond market . What happens in terms of interrelationship . Because theres some that argue that because the valuations in the bond market, equities are not overvalued in fact. But we have all these prominent guys out there saying that there is a problem in the bond market. They are bearish. We had gund lach say sell everything. We had gross today saying he does not like bonds and had jamie dimon the other day on power lunch saying he would not be a buyer of bonds. What happens when that slows down . Does that then drag down in any way the equity markets . Well, i think what weve seen broadly in the equity markets is sort of a reach for yield, right . Right. So the tina argument is in place because of what is going on in bonds. Right. So if that no longer exists, then what happens to that tina argument . Well, i mean, i think right now in terms of stocks were looking for catalyst in terms of something to drive earnings. We talked about i mentioned earlier comps get easier, but theres really no big broad story in terms of either economic improvement or real help from the fed. Like i said, i think but isnt there an inevitable turn in stocks if Interest Rates for whatever reason and these people believe thats going to happen, rise . Because the tradeoff, the choices that you make. And at the very least in these areas that have been the yielding areas, that have high valuations, historically to themselves. Right. Well, theres obviously tradeoff between high yielding stocks and Interest Rates. I dont know whats going to drive Interest Rates higher any time soon. Theres certainly not a lot of inflation out there right now. This trend could go on for longer than maybe we think. Look, one thing, and ive been wrong on this too, most investors have been wrong in buy emerging market because it looks cheaper and get out of bonds because Interest Rates go up and for the past six months thats been completely wrong. In the winning trade. Right. Its been the chronically wrong argument. And if rates are going to be really low and negative Interest Rates are going to be very low, you could actually do well from 1. 7 yield on the tenyear to a 1 yield on the tenyear. Im not necessarily making that call. And just because i think its an impossible call. But it does mean that in a world of such limited returns, equities and youve made this point quite well they offer some yield, and they offer the potential of dynamic change in future growth. And thats ten seconds, very quickly to you. You love automatic data processing, a d, p, half audience is probably paid by them, friday is the payroll number. Do you like adp because youre bullish on jobs and the economy . Or is that a separate Company Specific thing . Its both. But we are certainly bullish. Adps employment number they produce suggest a very strong employment market a great tail wind for them. We like them specifically because they dominate the north american Payroll Processing market for Large Businesses and their customer tension rates are very high. Its a sticky business. We use them here. Just they dont screw up on us thats all i care about. Can you do exact in your sweet voice, tyler, in a world of zero return they should do that. I want to see how that movie ends. Thanks, guys. Allen bond with Jensen Quality Growth and zachary karabell. A fashionable disaster z as jour ahead. This staple down 20 today after reporting earnings. Were going to name names and tell you why its down when power lunch returns. Hey gary, whatd you got here . This bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade the check they sent isnt enough to replace your totaled new car. The guy says they didnt make the mistake. You made the mistake. I beg your pardon . He says, you should have chosen fullcar replacement. Excuse me . Let me be frank, he says. You picked the wrong Insurance Plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, well replace the full value of your car plus depreciation. Call and if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call Liberty Mutual for a free quote today at thats liberty stands with you™. Liberty mutual insurance. Will your business be ready when growth presents itself . American express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. Find out how American Express cards and services can help prepare you for growth at open. Com. A very fashionable disaster du jour, it is kate spade, the new york based Fashion Design how getting whacked down after 20 after reporting earnings. Bring in Courtney Reagan on more on why this stock is dare i say out of fashion. A number of reasons, kate spades weak tourism is a big one. Customers looking for deeper discounts than the handbag maker really wants to offer and not enough inventory of the newer styles that customers did want. All of that contributed to the very disappointing quarter. Falling short of expectations and same store sales improving only 4 . Actually, only 1 when you take out the effective online sales. The street was looking for comps to increase 13 . As a result kate spade slashed its full year profit and sales guidance. As you might expect results are weighing on michael kors, coach, fossil and others because if these are the external headwinds that are the main issue for kate spade, its going to hurt across the board too. Not an isolated problem. We also want to get your take, a lot of times stock analysts will come up with sort of correlations, right . Well, exxon and oil, michelle. They move together. Exactly. We understand that one, i guess. But cred sweeit suisse out with note on a bizarre correlation between nordstrom and the Cheesecake Factory . Analysts have done this before and you might remember many retailers used to report monthly comps so that gave us a glimpse into the quarter, so very few do so now. So analysts get creative when it comes to getting a read on the quarter. Credit suisse retail analyst tracks the Cheesecake Factory, same store sales because the restaurant shares a similar customer and locations with the regular nordstrom fullline department store. So hes trying to get a read through for the Department Stores results. Thinks its potentially a negative indication this time around Cheesecake Factorys Second Quarter comps tracked 0. 3 , traffic dropped 2. 7 . Its not an exact science, there are many elements like seasonality and nordstrom increasing online sales upwards 20 , but i guess its at least something to look into what nordstrom might be telling us. I would think the correlation would have broken down because consumers of late have been spending on dining and experiences and not at nordstrom. Exactly. So when you start tracking this in 2009, the correlation was much higher when you use regression analysis. So youre right. Its still there, but i want to know what the r squared is. Actually, i think it was 0. 76. Thats not bad. Not bad. It sounds like in 2009 it could have been 0. 8 or 0. 9. Which comes first, cheesecake or skinny jeans . Thats a tough one. Does one lead the other . Youre always at the short hills mall. Theyve got a nordstrom im never there. They have a Cheesecake Factory right there. Youre acting like you dont know. We know youre not at home goods because you hate home goods. That was good, courtney. Thank you. Drop mike, walks off. I knew she would know. I know some stuff. I knew she would know. Go ohio. I went to business school. Exactly. Thats home of the wife. Thank you, courtney. The next time youre at a restaurant, like a Cheesecake Factory, or i dont know were going to find out at a ball game or on vacation, everything you post on social media sites may be monitored by the company which owns the venue. You may be being watched by a number of fortune 500 companies. Growing use of a technology called geofencing making it easier for companies to listenin on customers public conversations. The goal is to better engage with them and increase their brand presence awareness and then hopefully sales. At marriotts Corporate Headquarters in maryland they call this glassenclosed room m live. Its a modern day command center for the hotel chain where employees constantly monitor social media platforms such as instagram, twitter, facebook and youtube. Every day more than 300,000 guests post on social media from a marriott property. Executives know this because of a technology called geofencing. Each yellow dot is a hotel a location. Reporter marriott has geofenced more than 4,000 properties worldwide. That means basically in the area around a hotel the conversations that are on social media, we can tell whos geographically around that hotel. Reporter and they watch as guests post about everything from breakfast in bed in amsterdam to pool selfies in the caribbean. Sometimes marriott reposts them using their account. And sometimes they reach out to the customers directly. So when a guest posts about a special occasion, for example, like a birthday or engagement, the team here can notify the manager of the hotel. And that guest can get a special Something Like bottle of champagne or perhaps a free appetizer at dinner. Maybe a room upgrade. Its designed to make the customer feel special, not spied on. The idea that you can see what people are posting within a geographic area, do you worry that that creeps out your customers . We think that the people who are actually on social media are delighted at the ability to have us amplify their conversation. Reporter the ceo of the Company Behind this platform, hyper, says investors frequently ask about privacy concerns. Hes quick with a response. Our partners are only engaging and interacting with people that have shared their comment publicly. Using hyper to surprise guests, not to try to sell them something but to try to elevate their experience. Its really about a personal relationship that were having with our customer. Joining us now is carlos garcia, he is the ceo of hyper, the company that provides the Technology Platform to use geofencing. Good to have you here. Thank you for having me. My colleagues have so many questions about this. Brian, go ahead. I was just curious, so if im in a marriott somewhere and i send, i dont know, tweet out, even if i dont tag marriott, you guys see that . So basically if you have a location enabled of your tweets or instagram posts are publicly shared with everyone, marriott will see that. But only if your location enabled. Because you can disable that. You can disable that. Okay. So you would know lets say theyre a customer, they would know im sitting there and im saying nasty things about the service at Yankees Stadium. Would they know my seat so they could come see me . Its interesting, you know. We have a partnership with ticketmaster and with tickets. Com mlb so we can match the data of ticketing with the people that are posting on the stadium. So we could so the answer is yes. If you purchased the ticket i didnt get my french fries that i ordered there from my seat and im ticked off. And the idea is to elevate the experience, the ingame experience. We have over a dozen sports teams, professional sports teams, that are using our platform. There they are. There they are. Golden state warriors. Would they want to do is it just about getting complaints taken care of . Why would they want to know all this . So usually in social media when its Customer Service related, the consumer is mentioning the brand. So if youre at american airlines, you will attack american airlines. But when you are at an event, youre not necessarily tagging junkies, youre having a great experience there and sharing with everyone. Right now everybodys tagging the yankees. Theyre losing. Theyre bad. Tagging them out. What do you see as the next application for this sort of technology . Right now it seems like youre managing a relationship. Is there a point at which you can use this to actually push promotions or push a sale and use that information to actually, you know, add to revenue . Our partners understand that the best marketing is accommodation. They dont try to sell, theyre focused on elevating the experience on making it better for the guest and that has a Ripple Effect that comes back hopefully all the way to sales. We posted a story on dot com, the commentaries have been very negative. Wow, this is creepy. Theyre spying on me. This is weird. What do you say to them . Well, spying implies that we are tapping into private data. And thats not what is happening here. We are looking at public data that is posted publicly openly on social media. Its just what is new is that we are aggregating that data by location and not by hash tags and mention. When you look at the use case of marriott, before hyper or the content that we service for them only 4 has identifiable hash tags and mentions. The other 96 gives them the opportunity to engage most important customers. So what are the web platforms that youre monitoring . I assume youre not monitoring whatsa whatsapp. Youre not monitoring my verizon or msn or nbc email. All of that that you mention is private data, so we would not be looking at that. Were just looking at publicly published. Like Facebook Public post, a youtube post, an instagram post. Do people think thats public . Yes, if you have a public account, you make it public for everyone to see. But do you think most people think its public in the way youre suggesting . Actually, in the case of concern people tag the location, so they are purposely saying i am here and they have a public account. Yeah, but thats for their friends. Well, its for everyone to see. Actually, the numbers do not lie. 100 of the reactions from marriotts guests are positive. And 82 of them actually go out of their way to follow them on social media, post again or comment mentioning them in a positive way. Who would be concerned with marriott saying happy birthday to someone celebrating a birthday . Me. Are governments doing this . Are any of your clients governments . No. But they could, right . They could. You know, were not the nsa, right . Were not tapping into peoples phones or anything like that. Were just aggregating social media in a way that makes sense for businesses that have locations. So in the case of marriott you have 4,500 hotels around the world, soon 6,000 when the acquisition of can i ask a really uncomfortable im never stopping making people feel comfortable so go ahead. How do i ask this question without coming across like a total you know what . Just ask. Do you identify people that have a lot of followers and give them special treatment . You know what i mean . Like if Tyler Mathisen is in Yankees Stadium and everyone else has eight followers and Tyler Mathisen has millions of fans and you know that and he says something, is he going to get his hot dog because hes Tyler Mathisen . You know what im saying . Its a great question. The value of that. Big celebrities like michelle get special access. She always does. But basically the influence is just one of the signals. Like we always look at is this the first time someone is posting from this stadium . So we can send them a welcome message. Or is this person talking about a live event . Maybe im there celebrating my dads birthday during a game, you know, now the team knows that and wants to upgrade us to a suite or Something Like that. So thats really, you know, like the positive aspect of this. Let me tell you theyre going to geofence me. I hated that technology until just now. I think the better answer to your question we built this platform to make marketing efficient for the business and delightful for the consumer. Delightful. Carlos, thank you. Thank you. Ceo of hyper. All right, up next, forget trump versus clinton. Jane wells knows whats really driving america. And she joins us next with some mad love. Offers on our complete lineet of f sport performance vehicles. At the lexus golden opportunity sales event. Welcome back to power lunch. Gossip edition. Im mario lopez. Forget donald trump, we know whats really dividing america. Jane wells explains. I make that [ bleep ]. Reporter kanye west called taylor swift a b word in a call suggested they might have sex, she got mad and now a hit. Now we got problems reporter hold on, Kim Kardashian showing west ran the song by swift ahead of time though he didnt tell her about using the b word and it appears taylor had no problem. Oh, fakers going to fake, fake, fake, fake. So who came out on top . Short term kanye, his album is moving up the billboard charts as taylors is moving down. But swift will win later. Anyone who crosses her always makes her richer, as she turns bad blood into big hits. You just cant ever, ever, ever, ever, ever help herself. Be careful, tom, but the biggest winner, Kim Kardashian, not only did she defend her husband, she waited patiently to release news about the video on her Reality Tv Show for maximum ratings and she boosted her snapchat following. Dont act like i never told you dont act like i never told you. However, forbes says while kardashian this year will earn estimated 51 million, taylor swift is earning 170 million. And kanye didnt even make their top 100 list. Ouch, guys, heartless. Back to you. So there. Jane wells, thank you. I dont like bonds, those words from onetime bond king bill gross. Really . Hes going to tell us what he does like when power lunch returns. Im melissa lee. Heres whats on the menu. He doesnt like stocks and he doesnt like bonds. Bill gross tells us what he does like. A trump intervention, the most indepth and personal look yet at the man who would be president. Tesla earnings after the bell. What will elon musk say about production numbers in the coming quarters . The second hour of power lunch starts right now. And im michelle carusocabrera. Lets get you up to date on whats going on with the markets. Two hours until the closing bell. Stocks are off bottom for sure theyre in positive territory posting modest gains. Dow trying to avoid its first eightday losing streak since august 2011. The dow higher right now by 15 points. You can thank oil. Stocks are moving higher after crude went back above 40, a gain of more than a buck right now, 1. 30 to 40. 81. Energy, financials and materials the leading sectors right now. Gaining more than 1 for the s p sector. Im Tyler Mathisen. In the headlines this hour chicago fed evans saying one rate hike could be appropriate this year. Apple out with new numbers about its workplace diversity. 37 it says of its new hires globally were female up from 35 a year ago. And a new survey by the Conference Board Shows Companies are likely to hold back on pay raises next year. Most Investment Managers would like you to buy something, usually stocks or bonds. Who can blame them. Its their job. But investing legend bill gross breaking the bit of the mold today saying he really doesnt like stocks or bonds as investments right now. Which begs the question, what does he like . Lets find out. Bill joining us now. Bill, welcome. Listen, as lead Portfolio Manager of janus capital, you have to have a portfolio to manage. So if you dont like most stocks or bonds, what is going into that portfolio now . Well, if you dont like bonds, brian, you shorten your maturities and the unconstrained fund of which im the sole Portfolio Manager by the way owns one to twoyear corporates that yield 2 , not much. But something thats protected in terms of price if Interest Rates go back up. We also own a few, as you know, stock arbitrage types of situations, which i think are close to closing and which provide actually an annualized return of about 15 if closed in the next several months. I believe you are referring to sabmiller. Because we got a little scare there last week, bill, when there were some reports that maybe the deal wouldnt go through. You didnt flinch. Well, no, i didnt flinch. American investors can buy that through the american listed on the new york and the symbol is sbmry, be careful, its very thin but its got two months to close. Basically busch buying miller or bud buying miller. Like i say its a 3 or 4 gap to close and annualize that two months. And its a 20 type of return. So those types of things i think are relatively safe and much safer than bonds or stocks in this type of environment. Stocks, by the way, have been in an earnings recession for five straight quarters. And theyre working on six. So we dont love stocks. We dont love bonds. Is there anything we do love . If you had to recommend sort of one purchase to our audience, you know who our viewers are, between now and year end that could give me both safety and a little bit of return, what might it be . Well, if an investors looking for income along with that return, tyler, id recommend a series of build america closed end funds, bbn is my favorite. It yields 6. 5 . Susceptible to a price decline if Interest Rates go up, yes. But its a relatively low volatile type of investment. And its 35 guaranteed by the u. S. Government. I like that particular asset. I like gold too. I think ultimately if fiscal stimulus comes in and weve seen that in japan, by the way, a Remarkable Program in japan if youve got ten seconds ill talk about it. But if we see fiscal stimulation in japan, china and ultimately the u. S. After the elections, then, you know, i think we should be invested in real assets as opposed to financial assets. By the way, i know youre in like a little room, bill, but bbn just popped a percent when you mentioned it. I know thats not your intent. Im just saying in some ways and i will not ask you to wade into the morass of politics, but is that arbitrage call in a sense that the only thing both candidates agree on is that we need more building . Yeah, i think thats true, maybe trade. But i think clinton will go the other way on trade eventually. So i think Infrastructure Spending, i think if the Republican Congress whether its the senate or the house, you know, has weakened, then their opposition to any type of spending will diminish. And i think Infrastructure Spending has a good sound to it and will probably be the initial thrust. Obama did that back in 09, 2010, did he not with the build America Program . And i think were headed in that direction not just in the u. S. But on a global basis. Theyre finally figuring out your Investment Outlook is always very readable, very worth reading. This one you begin with this sort of colloquy about this mother asking you as a young boy where baby kittens come from. And your answer was the pet store. First, do you still believe baby kittens come from the pet store, bill . And, second, what does that all have to do with stocks, bonds and the Investment Outlook . Its just something interesting. You know, i learned long ago, 30 years ago that people find bonds very boring. So from my perspective, others have a different perspective, i want to introduce the topic with something interesting. I thought that was interesting. And, no, i dont believe the kittens only come from the pet store. Ive tried not to tell my kids that, but somehow did your son give the same answer when you asked him . Did your son give the same answer . Yeah, hes 28 now. Hes 28. When i asked him how babies were born he or kittens were born have to have a sitdown with him soon. Yes, hes getting married soon. I cant match that. My next question is going to suck because its much more wonky. I got to ask you about this. All right. Im sure you saw this. Its kind of going around the bond pits here. There was a credit strategist at nomuro securities in tokyo, thank you if hes watching, that the u. S. 30year treasury could go to 0 over the next two years as the world rushes in to buy it. Do you think thats possible . I dont. And i think the recent evidence in the past week or two, just short tem, you know, of whats happened to 30year jgbs or japanese swaps proves the point. When Prime Minister abe introduced his fiscal program, it was the biggest since 20 009n japan, basically introduced helicopter money. The press has pushed that down a little bit, but basically for 30 million low income citizens in japan hes offering 150. Thats 4 billion, 5 billion, thats perhaps 0. 1 of the economy. But in any case its the beginning of actual helicopter money. Hes giving it to the people. And so, you know, if that becomes the trend, then, you know, fiscal stimulus and growth becomes back in favor and 0 bonds or negative bonds as in japan become autoof favor. Bill gross, sole investment manager of the janus investment fund. I couldnt follow up on your question, tyler. Watch some cat videos. Thats michelles area. Melissa. The onetime bond king as you heard doesnt like bonds anymore so whats the reaction in the bond pits of chicago . Rick santelli joins us now. Rick, a lot of people have been calling for the end of the bond run and theyve just been plain old wrong. Bill gross even in january of this year said the good times are over. The bond etf is up 15 yeartodate. So do you believe him this time around . Do you believe the others this time around . See, heres the issue, bill gross, jeff these are all really smart guys. When you try to apply logic to a situation that has no logic, no footing in financial common sense, i think it gets very hard to come up with the exact time that all the cars and buses are crashi ining in the future intersection. I do agree there probably will be a crash. I mean, just look at today. Charles evans right across the street talking about theres a window for one tightening. Heres a man when the economy was cooking a whole lot more in greece in 2012, 2013, 2014, even part of 2015, no way, nothing has improved since then. So what is it exactly . This is so highly subjective, and all the people riding the horses of their economies from Central Banks, they just they dont apply common sense. So its hard to disagree with the logic. Now, if you take that logic and take it to the next step, bill gross is saying, listen, if its on paper i dont want it. If its tangible i do. A lot of people agree with that. But as i talked about today in the santelli exchange, the currency of everything hes saying to avoid is margined basically with things like treasuries. And as all this winds down they are going to end up in the market. And i think many investors underestimate what happens when those things come back into the marketplace. And the only market for them is all the housed paper that the sfral banks have that could get a bit ugly. Thats a great point, rick, because justin said the bond market was going to be the supernova that imploeds. If that happens that would send rates spiking higher and Ripple Effect as you mentioned. How do you buy land . The tangible assets that hes saying to buy. And that is the problem. Yeah. A lot of these alternative investments are wonderful, but theyre not really liquid. Right. And that is another problem that we have in society that whats best for us is not necessarily the easiest to deal with. And the Central Banks know that. Thats why theyve corralled us into these different aisles of investments they prefer we have. Rick, thank you. Rick santelli from chicago. The Obama Administration reportedly sent 400 million in cash to iran, on the same day that four americans detained in iran were released. Eamon javers joins us now with more. Coincidence . Yeah, hi, michelle. So this is a big the wall street journal story this morning that is making serious waves here in washington today. Lets run through the bullet points here of what the journal reported and then some of the political followup here in d. C. Today. The journal reporting that the u. S. Shipped 400 million as you say in cash to iran. Thats physical cash. And it coincided with the release of four americans from iran. The shipment was in euros, swiss francs and other currencies. It was made on an unmarked airplane, the palettes were physically shipped on wooden palettes of cash. The white house says this is just part of a 1. 7 billion settlement of an old 1979 claim that the iranians had on money that they had inside the United States. And white house spokesman josh earnest said there was no quid pro quo between the payments and the release of the americans. We have not, we will not pay a ransom to secure the release of u. S. Citizens. Thats a fact. That is our policy. That is one that we have followed. Now, michelle, i want to read you the statement here from paul ryan, speaker of the house who said this report confirms our longstanding suspicion that the administration paid a ransom in exchange for americans unjustly detained in iran. Now, thats significant whether or not this was a ransom payment is the political debate here because of course paying any ransom out for americans would have the effect of putting a price on the head of other americans around the world who could be taken hostage in the future and future hostage negotiations then would be set on that price point. And presumably the hostage takers would seek to go up from there. And it would put americans abroad in more serious danger, michelle. Yeah, things the Insurance Companies worry about whether or not you actually incentivize the very behavior youre trying to stop. Exactly. I want to understand the facts here, this is money that in theory was supposed to be going to iran at some point anyway. It just happened to go on the same day that they released those hostages. It just was part of this negotiation where there were separate teams of negotiators, the white house says, negotiating on the Iran Nuclear Deal and negotiating on the hostage withdrawals. Now, what theyve said is ultimately this was money paid by the prerevolutionary iranian Government Back into a Pentagon Fund in 1979. That money was then stranded in the United States after the revolution in iran. The revolutionary government in iran wanted the money back. And as part of all these negotiations that were going on on separate tracks, ultimately though by the same administration, all of that was resolved at the same time. Who are the people who were being detained . And what were they alleged to have done . Well, there were four americans detained for a variety of reasons. One of them was a the Washington Post reporter. I dont have the names of the others handy here. Important in all of this is that the United States doesnt want to leave any people in iran. In fact, today as the white house was briefing on this they were asked whether there are other americans currently being held in iran, and the u. S. Doesnt even generally comment on whether or not that is the case because they dont want to put a price on the heads of those people. They dont want to endanger anybody who might currently be being held by the iranian government. All of this is done with a great deal of secrecy, tyler. Thank you very much, eamon javers. Trump campaign in turmoil with reports of an intervention by his allies to reset his campaign. Well talk to a person who literally wrote the book on donald trump. And Interest Rates are at record lows, so ronn insana wants to know why we arent building our brains out. Hiim here to tell homeowners that are sixtytwo and older about a great way to live a better retirement. Its called a reverse mortgage. Call right now to receive your free dvd and booklet with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money. And more. Plus, when you call now, youll get this magnifier with led light absolutely free when you call the experts at one reverse mortgage today, youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home and heres the best part. You still own your home. Take control of your retirement today just 96 days until the election, but how well do voters really know the candidates theyre voting for . The making of donald trump is a new biography released this week chronicling the real estate moguls rise to power and prominence far before he decided to run for president. Joining us now is the author david k. Johnson, a Pulitzer Prize winner, former Investigative Reporter at New York Times and many other places. Longtime tax correspondent for the New York Times. David, welcome. Good to have you with us. Thank you. Has anything mr. Trump has said or done or not said or done in the course of this campaign, and youve known him for 30 years, met him many times, talked to him many more, has any of that surprised you . No. Not at all. Understand that donald is masterful at two things, creating this image of himself as a modern midas and a modern don juan and secondly at extracting money from enterprises. Not building a business, not creating wealth, not working with other investors but extracting money. He doesnt know anything else. And in my book i cite testimony hes given where hes asked questions that any business student, my graduate business and law students at Syracuse University would know the answers to. And his answers are gibberish. Go ahead. Is he really running for president . My father has this theory about donald trump, springtime for hitler, he really didnt think it would be this successful when he started out. Donald started talking about it maybe five, george bush Vice President in 88, ran in 2000 on the reform party ticket. When he ran in 2012, only people said hes running for new contract with nbc and quit said my show needs me. This time he said hes serious about this. Believes he should be president. Believes hes a great man and should appreciate how great he is. So these conspiracy theories to sabotage because he actually doesnt want theyre nonsense. The heart of this campaign is revolving around Hillary Clintons reputation or lack of reputation for truthfulness. Right. Talk to us about your observation of mr. Trump and his relationship with the truth. Theres a minimal relationship with the truth and donald. And if you listen to donald carefully, he will say things, tyler. And a moment later contradict them. He has given testimony under oath mr. Putin is a perfect example, i met him, no i didnt, i think i did, no, i didnt. Theres a violent convicted felon, he says i wouldnt recognize him if he were in the room, in my book i tell about how they traveled all over the world together, photographs and videotapes together, of course he knows the guy, he signed documents with him. Donald makes up things. He creates his own reality. In his mind theres nothing wrong with that. Does he care . No. I dont think he cares at all. Do you think theres an element of him wanting to become president that is purely financial . I mean, president s are taken care of the rest of their life, free transportation, free health care, a lot of benefits. Bill clinton is worth 80 million. Right. Is there an element of this which is literally if i can become president , thats the greatest business move of all . I dont think so. Donald doesnt think that far ahead. Look at the deals donald does. People come to him and say if you put your name on this, ill give you 2 million. If you let me sign neckties ill give you a stream of income and not spend anything. Donald does not think ahead. The running of his casinos know that. His casinos are among the first to fail. He was a poor manager as Fortune Magazine documented years ago when they compared almost 500 of the Biggest Companies in america and he came in last or nearly last in every category they measured. Youre a tax expert. What do you think Donald Trumps tax returns would tell us about him . Oh, a great deal. I embarrassed Hillary Clinton by reverse engineering hers years ago and she was furious at me for this. Donalds tax returns would tell us how much his buildings are really worth, what his equity stakes are, if hes been paying income taxes at all. We know he didnt pay taxes and i was the one who broke these stories in 78, 79 and 84 and then 92 and 94. But in all likelihood and credits for some reason there. Well, there r two things. There are special rules for people in real estate, private equity and hedge funds that allow them to live tax free. So thats the big one for donald. But secondly, we have this 1984 tax appeal donald filed for the state of new york and city of new york, two separate appeals, in which we know he paid no federal income tax from it and we know he submitted a tax return not prepared by his tax preparer because under oath his tax preparer said thats my signature but i didnt prepare that document. He showed zero income on whats called his schedule c and over 6 00,000 of deductions. Thats because its carried interest. No, its not thats not there was absolutely no justification for the deductions. And he was fined im not justifying. Im saying this was business consulting. If hes not taking carried interest as the income then, what is he considering the income then . He reported zero income. That was the whole point. Theres no explanation for this whatsoever. The judges were mystified. And why he appealed these thats why im reacting this way because both my parents are accountants. Ive done my own taxes for 20 years. So what was the money . I mean, if he had no income but there is was there revenue . He was unable to produce either during audits or the two trials any documentation showing he was entitled to these deductions. And he lost the cases. So based on what you know about donald trump and it is extensive, what do you think could torpedo him . Whats the biggest wild card here at this point . Well, because donald doesnt know anything, you know, if you i have three questions i would like to ask him and six id like to ask Hillary Clinton. Hers are tough, his are very easy. If i was on national tv and had to ask them you are. Well, i need them in front of me to do it. Im sure he couldnt answer the questions. And theyre really simple basic questions. What are the gist of the questions . If i told you it would lose any value if i get the opportunity. Okay, david. Ill put the questions up as soon as the election is over. Lets be fair, if i said to melissa line 48 on your schedule no, no, these are these are questions eighth graders should know. Business questions. The type of questions. Make up a question. Well, donald was asked whats net present value. All my graduate business students in syracuse can tell you what it is. Donald gave an answer that i quote its in the book its gibberish. Melissa asked what could torpedo him. Himself. Hes done all these crazy things and nothing torpedos him. Just donald. If he continues to attack the military and the families of gold star you know, gold star parents theyre playing our music. Final question. Has he ever sued you for anything youve written. No. Threatened to . Oh, yeah. Hes threatened me and many other journalists. I know several he has sued. Yep. David cay johnson, thank you very much. Power lunch back in two. And move only when you hear the seatbelt click that says theyre buckled in for the drive. Never give up till they buckle up. Month after month. Year after year. Then one night, you hydroplane into a ditch. Yeah. Surprise. Your Insurance Company tells you to pay up again. Why pay for insurance if you have to pay even more for using it . If you have Liberty Mutual deductible fund™, you could pay no deductible at all. Sign up to immediately lower your deductible by 100. And keep lowering it 100 annually, until its gone. Then continue to earn that 100 every year. Theres no limit to how much you can earn and this saving applies to every vehicle on your policy. Call to learn more. Switch to Liberty Mutual and you could save up to 509. Call Liberty Mutual for a free quote today at liberty stands with you™. Liberty mutual insurance. Im Sharon Epperson and heres your cnbc news update at this hour. A Police Officer with the d. C. Metro Transit System has been charged with providing support to isis. 36yearold Nicholas Young was arrested and is due in court this afternoon. Investigators searching his home, its the first time a Law Enforcement officer has been accused of aiding the terror group. North korea launched two Ballistic Missiles from its west coast this morning. One of them fell into waters of northern japan. The japanese government lodged a strong protest. The u. N. Secretary general says he is deeply troubled by the launches. Gop Vice President ial nominee mike pence telling fox news he is endorsing House Speaker paul ryan in his upcoming primary. His president ial running mate, donald trump, has said he is not ready to endorse ryan while praising ryans opponent. Venezuelas president shaking up his cabinet. He named a military general accused of drug crimes by the u. S. As his new interior minister and removed his top economic official who was used as a potential reformer. The moves will undoubtedly increase tensions with washingt washington. Thats the cnbc news update at this hour. Back to you, tyler. Sharon, thank you very much. Checking now on the markets as we are 90 minutes from the closing bell. The dow trying to avoid an eightday losing streak. And right now its doing it by just look how little. 0. 01 . Dont blink. And look at nasdaq there. Its higher. What is this bedtime with tyler . Move on. Mr. Rogers here taking you through it. Its okay, honey, the dow is up 0. 1. Big day, a gain for oil as the closing trades cross. Lets go to jackie deangelis. Shell wake us up at nymex. Good afternoon to you, tyler. Yes, the crude oil jumped today. The percentage is a lot more clearer than what you were pointing to, but we did turn into negative territory to start. It was that inventory build in crude that was a problem at first for traders. Then we turned positive because they digested the report. We had a drawdown in gasoline of over 3 million barrels. And remember the last few days the conversation has been this gasoline glut. So the hope is were working through it. But looks like were going to close just under 41. Back to you. Thank you very much. Tesla reporting results after the bell, but the big thing everybody is looking forward to elon musk on the Conference Call. You never know what hell say. Were counting down to tesla next. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Welcome back to power lunch. Im phil lebeau in chicago. One of the big Earnings Reports after the bell today, tesla. And for the Second Quarter tesla is expected to report a loss. The consensus is for 52 cents a share, but theres a wide range, so dont be surprised if its faraway from 52 cents a share as a loss. Revenue coming in about 1. 61 billion. Three things to watch for during the Conference Call and the Earnings Report from tesla. Production guidance, where are they in terms of weekly production at their plant in fremont, california . Gross margin the consensus is that its going to be about 20. 9 . Anything above that would be considered good news. And model 3 reservations, last time we heard from tesla they stood around 373,000. Has there been an increase since then . And then theres the big piece of news, is there any change in teslas guidance when it comes to annual deliveries this year . The expectation, the guidance from tesla is that it will deliver at least 80,000 vehicles. Of course theyre going to have to ramp up production in the second half of the year to make that happen. As you take a look at shares of tesla keep in mind that this Conference Call starts at 5 30 this afternoon. So during fast money, guys, we will have the latest from elon musk and what he has to say about the quarterly numbers they report. Back to you. All right. See you then, phil. Thank you. So what do the analysts think . Can tesla actually deliver . Lets bring in Senior Analyst with Consumer Edge Research and Senior Research analyst with oppenheimer. Guys, great to have you with us. James, ill start with you. How much longer its pretty much expected. We know tesla missed q2 numbers. They have a history of missing numbers on deliveries. How much longer does tesla have a free pass given the solarcity acquisition . Well, first of all, thanks for having me. And good afternoon. I would say that as you pointed out we know they missed delivery. So we know theyre going to have some pressures on margin. And phil just mentioned one of the key items everyone is looking for is that 20ish percent auto gross margin. So we think theyre going to have a tough afternoon because theyre going to come in lower than that number. As it relates to solarcity, youre asking a cash flow question really. So to the extent we get a pretty good read on the Production Guidance for the full year, 80,000 to 90,000 units, running about 2,000 units a week, that should be their answer for, you know, cash flow expectations going positive later this year and early into next year. So you think thats still intact . I certainly dont see them raising 80,000 to 90,000 unit targets. Okay. The risk is to the downside obviously. But, yeah, i think they standby based on what they said on the solarcity call earlier this week. Collin, go to you. Youre in the unique position of covering tesla and solarcity, whats your take on the impact on cash burn in teslas own protection that it will be cash flow positive later this year, early next year . So were thinking about these as separate entities. Solarcity has a fairly large asset base it needs to refinance to generate cash to support ongoing operations. And thats really that business model. Its a Specialty Construction and Specialty Finance entity. And so, you know, what were concerned about is distraction finance team tesla trying to move those projects forward and finish those deals. In terms of cash flow and auto business, im in agreement here that theyre running at fairly high levels on production. Theyve talked about that publicly. I dont see them backing down from the production targets that theyve stated in the last couple of months here. Getting back to the question i originally asked jamie, colin, that is, you know, investors for a long time bought into this vision, they bought into this being a car company. They forgave tesla for missing delivery and production targets time and time again. At this point with so many people not necessarily on board with the solarcity deal, does the Expiration Date on that free pass just get moved up much closer in time . I think weve seen a divided Shareholder Base on tesla in that those divisions have gotten deeper with the solarcity deal. We believe the true believers are still long the stock and still there and will give him a pass. I think what were looking for is, you know, the incremental investor getting involved here. I think weve seen a little bit of that over the last couple of weeks with folks kind of betting on a short squeeze here after the quarter. And some of those folks might be disappointed, but i think that sort of selloff would likely be short lived on the trading perspecti perspective. Should be an interesting quarter. Thank you, gentlemen. A 7 swing in tesla moves on earnings either up or down tonight, so should be a wild ride. Yeah, volatility. Every business has to find creative ways to attract customers and keep them coming back. Some of the things Fitness Studios are doing are really over the top. Diana olick is in what appears to be a human pinball machine. Diana, what is that . Michelle, a pinball machine, giant whackamole, none of the above, competition in fitness is getting fierce and that means pushing the envelope or literally, you know, almost got it, throwing yourself up against the wall. Were at upper east sides ag6 studio where theyre taking jumping up and down to a whole new level. The idea is that you exercise both your body and brain and burn up to 1,000 calories while youre doing it. Yes, its a human video game. The technology is by a Spanish Company started in flooring but have now put in over 30 of these workout studios mostly across europe. They tell my they will double that in the next year. The one studio in the u. S. Is just two months old, but it is already getting great reviews. Its easy to follow, but i think its a new way to motivate yourself as opposed to the regular routines that you go through. Its a totally different concept. And speaking of different, we tried another one, try aerial yoga in arlington, virginia. Its taking your downward dog up in the air which apparently strengthens both your core and grip and decompresses your spine but whatever the benefits the mantra is always you have got to mix it up. So important. I think nowadays the students are getting much smarter, theyre getting much more educated about fitness and wellness and all the different offerings. So its always important as a business to constantly innovate. Now, i dont usually like doing my fitness while hanging from the ceiling, but i will say it felt great. As for this whole studio here, not only are they pulling people in for 35 a class, these folks are coming back for package deals. Theyre also training elite athletes and sports teams here so you know this will expand. Weve got lots more video online. Cnbc. Com you can watch me, you know, swing from the ceiling. I am going to check it out, diana, because new york city loves an athletic trend for sure. Thanks. I dont know how to followup on that except to say americas roads and bridges are in desperate need of repair. Pretty soon your car will be hanging from the ceiling. Interest rates are near record lows, so heres a good question. Why arent we borrowing the money and building like crazy . Well discuss that idea coming up on power lunch. Long term rates are low, likely to remain low. Cnbc contributor ron insana asking why arent we building our brains out . Not a tall order. Borrow money for a long time at very low cost and in theory build a lot of stuff we need. And in practice weve done it before, a variety of different Infrastructure Projects throughout the history of the country. And i spoke to david cotack whom you know expert on the fed, municipal finance, we talked about how the federal government would finance this. You could lets say we have rather large Borrowing Capacity and demand for treasuries is quite great and the cost of doing this somewhere in the neighborhood of 4 trillion to build out the entire infrastructure of the country. Thats not just rebuilding bridges, painting things and doing surface work. Nobody doubts that we need more infrastructure. Right. Nobody doubts a borrowing costs are low and the government still has the capacity to do a 100year bond at a very low rate. 1 . Heres the problem, every time you give money to congress for infrastructure, we dont actually get any. They doll it out to junkie you got to fix the mechanism in order to achieve your goals. Okay. Thats a separate issue. I mean, if we were talking strictly about the infrastructure needs and the financing theyre in, we have the Borrowing Capacity to do it. We sure do. We can use users fees and excise taxes on the other end to make what would otherwise be an expenditure. Why did the last one fail . Talking about 2009 . Yes. 2009. It was 780 billion. Yeah. Of stimulus. I believe 250 billion of that was a tax cut, and a lot of the money that was supposed to go to, quote, shovelready projects, they just werent. It filled state budget gaps. Every county in ohio built a garage, an aluminum garage, ive looked into this extensively for school buses, i called one they said they didnt need it but told they needed to build it. To wit. Now you get me fired up from seven years ago, tyler. And it had nothing to do with rebuilding the nations infrastructure, which is as we all know sad need of repair. But thats how it was sold. Stupid pet projects. Not really. If you look at it only 50 billion was spent on infrastructure Shovel Ready Projects as they are liked to call. How deep do you want to go into this . Ill go as deep as you want to go, brian. I agree 100 what youre saying. Some of the issues with infrastructure are congress, weve had guests on this, think about this way. The deepening of the charleston, South Carolina port was first suggested in the 90s. And is just getting done. The regulatory and environmental burden to get anything of size done makes any politician who tends to be a fouryear type person say, its not going to get built in my term. Under the circumstances which you are both describing you are suggesting dont do it because it cant get done. So if it is a political impossibility, then i have no interest in discussing the political possibilities, but im talking about the economic necessity, the forward looking need for a 22nd century economy. But if you raise the money [ overlapping speakers ] otherwise to michelles point it just goes into the giant kid di of congress and never there are high efficiency rates in Southern California where i used to live. Sometimes after lets say the earthquake in 1994, the north ridge quake, they bid projects out that got bonuses if they came in on time and under budget. There are ways to accomplish this. It doesnt necessarily mean it cant be done because theres currently political gridlock. Both president ial candidates are in fact discussing the need. And i think their numbers are way too small to build out and rebuild the nations infrastructure. Politics is definitely the art of the possible. Ron insana, thank you so much. This was a fascinating conversation. Thanks for having me. I look forward to driving the insana park way. Between new york and washington hyperloop, supersonic travel. The grid. I mean, theres so much. The list goes on. We got an upgrade to a stock thats so surprising the analyst had a note upgrade. You read that right. That and three other calls in street talk. When it comes to medicare, everyone talks about what happens when you turn sixtyfive. But, really, its what you do before that counts. See, medicare doesnt cover everything. Only about eighty percent of part b medical costs. The rest is on you. Consider an aarp Medicare Supplement Insurance Plan insured by unitedhealthcare Insurance Company. Like all standardized Medicare Supplement Insurance Plans, it could really save you in outofpocket medical costs. So, call now and request this free decision guide. Discover how an aarp Medicare Supplement plan could go long™ for you. Do you want to choose your doctors . Avoid networks . What about referrals . All plans like these let you visit any doctor or hospital that accepts medicare patients, with no networks and virtually no referrals needed. So, call now, request your free guide, and explore the range of aarp Medicare Supplement plans. Sixtyfive may get all the attention, but now is a good time to start thinking about how you want things to be. Go long™. Time now for time now for street talk. Analyst recommendations on the stocks you need to know about. Four names, not five. We cut you short. Deflation. First up, psx the ticker. Refinery upgrades outperforms for three reasons. Lower valuation. Cash flow influx in the next year or two. Cyclical troughs emerging in refinery. Target states refinering. Thats nice. Stocks to 76. Thats about 20 upside to the current price. Zynga getting upgrade from cowen. You read that right. Rating goes to outperform cowen. This is the first time in its coverage of the stock. It is actually recommending it as investment behind the change of heart here the success of the recent release of csr plus steady mobile growth. That price goes to 350 from 250. Not too long ago the stock was a buck 80. So a winner so far. Third stock here, mosaic, underperforming with 21 price target. Worry that estimates are not reflecting pricing head winds, volume guidance remains quote unquote euphoric and skeptical of the pot ashry bound because of regional and latinamerica remains problematic. The dividend stands at 4 yield. Down over 36 over the past year. Years and years ago in a life far far way, watch natural gas. Chemical fertilizers natural gas. If it falls it helps input cost there. Last stock, always smaller cap under the radar call of the day, zebra technologies. Lincoln, Illinois Technology for supply chains. Csla starts with a buy at 74 target. See the company is earning its stripes. Get it . I love analyst humor. You like that . Haha. Thats the elephant in the room. That pun. This is a 100 stock, back in early 2015 and late 2014. Zebra bought motorolas business and whacking the stock by the way, largely mind the company. Surge in Free Cash Flow is expected. They think margines have bottomed. Risk guidance because of head winds. Csla is still optimistic on zeeba. 74 target on the stock. Fallen by about half. Now about 35 or so percent upside to zebras current price earning its stripes. Almost as good as your joke. Not even my joke. No, the elephant in the room joke. Oh you like that . No. Its been a good year for u. S. Stocks but emerging markets are doing even better. Eem which tracks emerging markets is up 12 this year. Lets talk about where you should put your money now with trading nation team. Crossing wall street blog. Head of derivative strategy. These emerging markets, many have done spectacularly well. Do you see more gains ahead . Hey, brian, great to see you. Emerging markets, youre right. Fan favorite in terms of the etf world. This year youve got about 12. 5 year to date, 7 million which is post brexit. What i think is interesting from an investment perspective is the name that everyone recognizes because that has the Trading Volume on both the option side and actual etf side. But a lot of the flow has gone into what we call longer term type of investment type of products. That would be iemg. Which is ishares core market or iimv which is i shares merging market and 40 billion market and vanguard ftse emerging market. They are not as much of Cash Management tool so longer term i would say investors still like markets. Three months is a long time in the options world. Sentiment there is more that we may take a breather here. Little bit of a pause but investors are comfortable getting in and doubling down down around 10 here. Protecting a little bit. Willing to get in more down 10 overall. I think people like emerging markets. And your view on emerging markets . Yes. Stacey is right. This has been a good year for emerging markets. But really its been coming back from last year which was a disasterous year for emerging markets. And here is the thing, is emerging markets are very much driven by the dollar. When the dollar is strong thats like a magnet and just pulls all the money. Stacey said its the cash flow that gets sucked way from these country answers then conversely remember we will have those four rate increases. That never materialized. That was green light for people to go back into the emerging markets. Weve seen huge gains from places like brazil. Even argentina and russia are doing well. But i think this is a good time to take profits off the table. There are a few things that concern me. One is that the Federal Reserve still may raise rates going down the road. Dont know exactly when. Also worried about slowing growth in china. And im also very concerned about oil which has been falling in recent day answers thats in many of the emerging markets are heavily dependent upon commodities. This is a good time to take some profits off the table. Well said, eddie. Appreciate it. If you want more trading nation, and who doesnt, go to tradingnation. Cnbc. Com. Power lunch back in two. Now, the latest from trading nation. Cnbc. Com. And a word from our sponsor. Welcome back, everybody. Michelle, what are you watching today . Fit bit. Have you seen the stock in up 14 . Guidance company says a bunch of new stuff coming out this year. Theyve had a bunch of rough Earnings Report. This is the first one that went their way. I was in love with my fitbit for about three months, then i got board with it, then it broke and wouldnt take a charge. Really . Like how my High School Girlfriend felt about me. Three months. Two things bill gross recommended. There you go. Tesla right now approaching lows. After the bell of course what it says about Third Quarter production. That matters the most here. Should be a wild ride. Watch fast money tonight. Full coverage of that Conference Call. Options pricing at 7 swing on earnings. I love a tesla Earnings Report. Closing bell starts now. Hi and welcome to the closing bell. Im kelly evans at the New York Stock Exchange. Im bill griffeth. You know the last time there was a sevenday losing streak . That was this narrow . I like 1940 or something. No, a year ago right now as a matter of fact. Oh. We had seven consecutive down days. But with stocks at alltime highs, bill gross, remember the bond key, he joins big name investors now saying gold is your best buy right now. And we will talk about whether gold still has room to run. Both sides of that coming up. Now kate spade