Transcripts For CNBC Power Lunch 20150910 : vimarsana.com

Rental homes. Forget about foreclosures, theyre buying new. That could mean a big boost to builders. Diana olick is actually here shes in the house, excuse the pun to explain how it all works. Li, mandy. Love a good pun. Look, it was supposedly a temporary trade. Largescale investors turning foreclosures into singlefamily rentals. Then when home prices recovered, theyd sell the homes and pocket a nice profit. But investors say it is not a trade. A bunchburgeoning new asset class. Theyre now going to new Home Builders buying in bulk to rent. A californiabased publicly traded reit in Single Family rentals has already bought a few hundred homes from builders and its ceo says that is just the beginning. I spoke with him outside one of his new rental near atlanta. You have no reason to sell any of your homes. No. I actually think we are coming into the most compelling three or four years that ive seen since ive been in the business. Ryan says not only is this a promising new frontier for his company, but as this grows, it could finally bring the nations Home Builders back to normal production levels. Were starting to talk to more and more builders and starting to get baltimore and more interest in not just selling us a couple of homes in a development, but talking to bigger builders who want to set up a buying program with us. So where is all this demand coming from . Well, of the 120 million u. S. Households in this nation, just over 44 million are rentals. 27 million are apartments. 15 1 2 millions are singlefamily homes or condos. Singlefamily rentals jumped by over 2 million since the housing crash, thanks to investors buying foreclosures to rent. Over the next three years analysts project 9 million new households but only 5 million newly built homes and that leaves 4 million homes that could be rentals. Diana, thank you. Thank you very much. Lets talk about how investors other ways investors can get into home builder stocks as these rentals surge. Were joined by chief investment strategist at janney stocks. You are a bullish mark on Home Builders. Is the fact, as diana points out, that they are building now to rent not to sell is that one reason why . It certainly is. Obviously it is an incremental one and relatively new one. The fact is we knew that Institutional Investors glommed on to Single Family Residential Housing a couple years ago in the aftermath of the financial crisis, and now were starting to see players like starwood come in and actually buy directly from the Home Builders which is a new phenomenon and i think it is only going to be incrementally helpful to the story line behind the Home Builders which is there is still too little supply being put on the market to meet the demand and thats a good equation for their share prices. When i think of Home Builders and i dont mean to knock them at all i think of their stocks as very cyclical, that they can go up and down a lot with the building cycle, with the Interest Rate cycle. If i wanted to play the boom in rental housing, talk to me a little bit about alternative ways to do it. Two seem to me that maybe i want to buy a reit that owns apartment buildings. Maybe i want to buy some of the apartment large apartment operators as an alternative way in. Yeah, most definitely. Theres clearly precedent to Residential Real Estate Investment Trusts in the form of other property reits, both commercial and apartment as well. We know that vacancy rates in the rental marketplace are at multidecade lows. So the landlords have all the leverage. So participating through the increase in rents that are likely to continue to come as a consequence of household formation in the United States, thats one way to do it. This is a in youer way to do it. There are still only three or four really operators like a starwood thats in this residential singlefamily space but i think it is a nice compliment for an investor, a way to sort of diversify or round out ones portfolio so you arent purely exposed to the cyclicality of the Home Builders and get some distribution through the reit structures. Is a builder oriented etf or housing one that you favor . There are actually several out there. The one that we most like is under the symbol itb. It is an Exchange Traded fund that really is predominantly hosting pure Home Builders as opposed to housing related stocks like home depots, Home Furnishing space. Thats one we think would be best aligned to take advantage of this opportunity. Mark, thank you for the crisp answers. Lets take a look at the big wall here behind me. This is the picture right now for the markets. They are managing to move higher but it was kind of interesting earlier on in trade when we did see not only a narrow range in the first couple of hours but also movement between gains and losses. Right now were moving higher with the dow up by 82 points. If we do see a tripledigit gain though, that would be the 14th tripledigit move in 16 sessions. Hedge fund titan david tepper was on squawk box earlier today talking about this recent market volatility. You might know hes made some pretty bold calls in his time. Let me take you back, september 230 1 2010. He said the feds Asset Purchase Program would be known as the tepper rally. The s p soaring 73 since then. Then may 2013. Tepper urging the foed taed to. But in october of that year, he predicted the fed would not taper for three or four months because of the fiscal cliff budget overhanging washington. Then in may of 2014 he issued a warning to investors say he is not going short but that investors should not be too long right now. In december of last year, he emailed with the squawk gang writing, this year rhymes with 1998. Russia goes bad, easing is coming from europe, what this market called right now . Im not probably as bullish as i could be because i have problems with earnings growth. I have problems with multiples. I have problems with all kinds of problems so i cant really call myself a bull. However, i will say this if you invest today in the stock market and i think people have said, in five years even whether you invested 1,800, they grow 5 a year or Something Like that, you will make money at the end of five years. This is really an individual stock picking moment. Were going to be talking about with a stock picker later on in the show. Lets get a news alert frr sue herera. Strong demand for the 30year auction. The bid to cover ratio was 2. 54 compared to the previous auctions where they averaged about 2. 32 . The indirect bids came in at 66 versus 50 for the recent average. And the 30year direct which bi 7. 4 , little below the average. Lets look on the 10year note on the back of that auction. Lets just hang here. Look who showed up . To take a deeper dive on teppers calls, ron insana is here. Where do you stand on this . Hes been a real bellwether kind of forecaster. Great investor. Whos to quarrel . You make tens of billions of dollars in a single year . Shut up and dance. Right . Listen. I would agree with the longer run forecast for the u. S. Is still positive, that over five years youll make money in stocks. Come on in here, mandy. They send her all over the place. Almost tripped her on her way over here. Amusing would be one way to say it. Unfortunate would be another. But i dont think the market will fall as hard as mandy would have had she tripped by the cable. There is a possibility we thoroughly retest the lows of this move but the market is holding up reasonably well. Your comment earlier this week was that likelihood was thatty in your view the worse owas over, that thousandpoint day and the bungee make may have sort of been that capitulation selling event. In the last week or so we had the big down, then the big rebound. Our processes are not point in time moments. In retrospect they are but you never just sit there and try to call were down 1,000 points, okay, thats it, were all over. Technical damage has to be repaired, fundamental issues have to be resolved. The market hates uncertainty. Theres so much uncertainty still going into the fed decision next week. Do you feel like if they just got it over an done with, say look, were going for a hike, do you think the market would calm down . I think it is less of an issue for the u. S. Than it is for the rest of the world where you have these extensive carry trades undertaken by highly levered players. If rates change here granted, theyve unwound a lot of this around the world and emerging markets in china and other places. I think it exacerbates problems overseas which creates a negative feedback. You see everyone weighing in to the pboc. Larry summers this morning on cnbc saying there is really no reason to do it. I would agree. Why take the risk of restarting this vicious cycle we just went through when we are maybe about to embark on china, and japan easing as well. Tepper saying it is a good time to take some money offer the table right now. Which stocks have held up the best since the market turmoil began . Dominic chu, what have you found . We took a look at the s p 500 and looked at performance since the turmoil lows, closing lows on august 25th. We screened s p 500 members and looked at which ones had positive performance since that october 25th. It is a lot of them. The markets higher, it makes sense. 430 members are higher since august 25th. Now among those, a good chunk of them, 166, have mediumterm relative strength. Theyve held up year to date as well. Among the names, a wide variety of them. Oil refiners on the energy side very much a part of play here. They gain 10 . Since then, 31 year to date. So still gains there. Amazon. Com, up as well during that particular time period. Vulcan materials. Think asphalt, concrete, could be instruction. Up 50 year to date. Cablevision and Newfield Exploration on gas and oil side. It could be a battleground stock whether it comes to oil and gas and those stocks whether they are a buy, sell or hold. Vulcan materials, you bet your asphalt, dom. Thank you very much. Lost bags . I had one on a recent flight. Flight delays, consumer complaints. What is it really like to fly in the u. S. Right now. And the transports getting a nice bounce today. Stocks driving gains in the transports. You are watching cnbc. But you probably knew that, because we are if irs in business worldwide. My name is mark amann. Im a gas service rep for pg e in san jose. As a gas service rep we are basically the ambassador of the company. We make the most contact with the customers on a daily basis. I work handinhand with crews to make sure our gas pipes are safe. My wife and i are both from san jose. My kids and their friends live in this community. Every time i go to a customers house, their children could be friends with my children so its important to me. One of the most rewarding parts of this job is after you help a customer, seeing a smile on their face. Together, were building a better california. Welcome back to power lunch. Im Mary Thompson with breaking news concerning dow component general electric. The company says that its exploring the sale of its ge Asset Management unit to another leading investment firm. This unit has about 115 billion under management and it is separate from ge capital. Remember the finance arm that ge where ge is reducing assets. However, the company says this plan to sell ge Asset Management does align with its plans to reduce the size of its financial business. Ge in a press release saying that it is looking to integrate the Asset Management business into a premier Industry Firm with scale and competitive advantage and that the buyer will should possess considerable experience managing retirement assets. Of course which are included in this. As a note, ge says it will deposit the net sales proceeds into a ge Pension Trust and that there wont be any changes to the pension benefits received by ge pension plan participants as a result of the sale. Once the sale is complete, if it does go through, it is anticipated that the buyer will acquire not only ge Asset Managements assets but also a team of managers that already work there with the exception of a couple who will stay with ge to handle some of the primary investments there. Once again, ge continuing to reduce its financial footprint looking to sell its Asset Management unit to another investment firm. Right now ge shares, as you can see, up just about 9 cents. Now over to dominic chu for a market flash. Thanks for that, Mary Thompson. Wynn resorts, the secondworse performing stock in the s p 500. Susquehanna has cut its outlook citing underground banking and new headwinds for currency devaluation. The analysts also cut wynn and Las Vegas Sands price targets as well but raised mgm citing smaller exposure to some of the ma u coucao gaming market. Lululemon shares tanking 15 . The retailer beating earnings estimates but the companys fullyear forecast fell below expectations. Krispy kreme also getting slammed missing estimates and giving a weaker than expected outlook for the full year, maybe because of sliding international sales. Seagate cutting 1,000 jobs as part of a Restructuring Plan thats about 2 of its workforce globally. The transports get a nice pop this hour and on their way, by the way, to the best week since the end of july. The gains come on the back of some m a action in the sector earlier this week. Truckers involved there. Morgan brennan has some of the big movers. Whats going on, morgan . So transports are outperforming the broader market. This is on Xpo Logistics acquisition of conway. Conway shares are up more than 33 right now but they are not the only stock catching a bid on this news. Other trucking and Logistics Companies are soaring as well. Names like old dominion freight line. Yrc worldwide. Hub group. Echo global logistics. Universal truck load services. Even covenant, westerner enterprises and knight transportation. The conway xpo deal could shore up pricing for the overall sector and more pricing is likely to come. You would think with all of those players out there, a lot of them could eventually merge. Weve seen a number of multibillion dollar deals in that space. Thats why some of these names are up higher than they are today. Speaking of transports, new report card out on the state of the airline business. We get it pretty much every month. Which carriers are doing well, which are failing at the grade. Our phil lebeau knows whos up, whos down, phil . Tyler, it is the usual suspects who did the best in july. Thats the latest ratings coming from the department of transportation. Most ontime flights in the month of july. Hawaii once again at the top of the list as they usually are almost every single month followed by alas today, delta, american and express jet. Which airlines struggled in terms of ontime arrival performance in the month of july . Bottom of the list, spirit, only 68 of its flights on time. Frontier, southwest, united and jetblue. By the way, about 78 of the flights on time in the month of july. When you look at how the month went for travelers, generally speaking it was pretty good. You had fewer bags being mishandled by the airlines. You also had no extended tarmac delays. Though customer complaints were up 31 , but if we take a look at shares of the Airline Index which is had an interesting last two or three weeks given the fact that they were down in large part with the rest of the market, even though when you look at jet fuel prices, tyler, these guys have a great headwind. Watch the earnings coming in the third quarter. Theyre going to be really strong for the airlines. Phil, thank you very much. Growing tensions between big tech and Big Government over the encryption of data. Now the fbi has fired another salvo and well have the fallout on Silicon Valley when we return after this. Youre watching cnbc. Seems like weve hit a road block. That reminds me. Anyone have occasional constipation, diarrhea. Gas, bloating . Yes one Phillips Colon Health probiotic cap each day helps defend against occasional digestive issues. With three types of good bacteria. Live the regular life. Phillips. Hi mim raph. Tom. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here, were here, and weve got your back. Legalzoom. Legal help is here. Welcome back to power lunch. Shares of discount retailer dollar tree are hitting their worst levels today down by 3 . Analysts at Credit Suisse counsel graded it from underperform from a prior neutral rating pointing to execution risks pointing to the countrys recent acquisition of rival family dollar. Shares are still down 6 so far this year as well so a lot of pain here for dollar tree shares on this particular day. Lets get a check on how oil is faring in todays trading session. Were currently up by nearly 3 at 45. 46 for wti. We did see crude paring some gains though earlier on after the eia came out with a bigger than expected increase of 2. 6 Million Barrels in crude supply last week and crude has fallen about 3 this week on continued concerns about Global Demand and the supply glut. Today though right now they are rallying. Lets also get a check on the bond market. The 10year note currently yielding 2. 217 . The 30year is 2. 976 . Thats a very quick bond report. Yields up a little, prices down a little. It is the latest salvo in the battle between the Technology Industry and uncle sam. Eamon javers is in d. C. Now t