Transcripts For CNBC Power Lunch 20151207 : vimarsana.com

CNBC Power Lunch December 7, 2015

Other indexes. And a new blend. Keurig Green Mountain agreeing to a buyout and those shares are absolutely soaring. Lets get straight down to the trading action this hour. Bob pisani is joining us from the flor of the new york stock exchange. How much of the stock markets drop is due to whats happening with oil and Energy Stocks . Oil and the fed are the two things motivating the market right now, but the problem is there is no trend and thats causing a lot of confusion in the last few days. Just look what the dow has been doing since thursday. Thursday the dow is down 250 points. Friday the dow is up 369 points. Today the dow is down maybe 200 points, we dont know where its going to end up but right around there. Is your head spinning . Mine is. And the Trading Community is having trouble figuring out where they want to go. Fed and oil two big things. You mentioned some big oil names. Theyre all down 2 , 3 . But were hitting a lot of new lows in some of the smaller names, particularly the exploration and production names. Your cabots, anadarko petroleums, chesapeake down 7 approximates. They are new lows and many of them were at new lows even last week. Kinder morgan sparked a big discussion friday when they announced they were reviewing the dividend. They didnt cut it. Look whats happened again today, still following on, and the problem is a lot of these energy plays are based on the dividend staying or growing. Now a big name and this is a Pipeline Company, not an integrated company, saying the dividend is under review. The problem is this is a high dividend, 13 . Chevron, exxon are much smaller. Theyre an integrated Company Versus a Pipeline Company but still across the board people are saying how safe is the dividend in say 2017 . Two years from now what if oil is still below 40. Thats the problem we have. Material names also weak right across the board. Theyre taking down the commodity complex once again. Back to you. And we have so much more coverage on this topic during the show. Lets get to dominic chu for a market flash. Mandy, shares of both smith wesson and ruger up by around 5 to 6 in midafternoon trading. Among the catalyst for todays move, the Supreme Court has declined to hear an appeal to an illinois law that bans certain assault weapons and accessories for those weapons. That may, again may, open the door for legislation of that similar nature in other parts of the country. This comes on the heels of recent Mass Shootings both here in the u. S. And abroad that involve possibly terrorist gun violence. Apparently prompting people to buy guns for self protection or get ahead of the possible tightening of gun laws in the future. But it hasnt just been in the wake of what happened in San Bernardino. Prior to that Law Enforcement statistics show there was a surge in background checks tied to gun purchases that on the day after thanksgiving. Both stocks are tracking for their fourth straight week of gains. So far this year ruger has gained over 60 and smith wesson has more than doubled in price. These could both be companies to watch as this national dialogue, tyler, continues over gun laws. Back over to you. All right, thank you very much, dominic. To the big deal of the day and it is a big one. Shares of keurig Green Mountain soaring 75 . Yes, you heard me right. That is a caffeinated gain. The company being acquired by an Investor Group for 14 billion. Keurig still down more than 30 this year. Morgan brennan takes a closer look at whats driving this deal. Hey, tyler. Were going to call this coffee talk. So keurig Green Mountain going private in a deal valuing the single pod coffee brewer at 92 a share. That is a heady 78 premium to fridays Closing Price and its really not bad for a stock that before today was down over 60 this year. A huge reversal from 2014s 75 run up. So weve seen that due to slumping sales and so far disappointing roll out of keurigs cold brewer but the takeover is being led by jab holding company. Jab managing the multibillion dollar fortune of austrias ryeman family. Jab already controls roughly 10 of the global coffee business. Thats thanks in part to caribou coffee, petes coffee and tea and a joint venture with mondelez. This deal is about distribution, potentially accelerating an International Roll out of Keurigs Kcups and other products. This is good news for keurigs top holder, cocacola. Coke invested 2. 4 billion on a 17 stake in the company only to watch keurig stock sink this year and that deal values its stake at 2. 4 bltz. That allows coke to break even on this volatile investment. One of the questions analysts are asking now is, does this heady price is it warranted. Exactly. Thats a lot of kcups. Thank you very much, morgan. Lets just point out before we move on that oil is now at or near a sevenyear low. Look at that. 37. 58, off 6 today alone. Thats more than 2. 40 of decline. Lets pick up where we just left off and that is with the keurig deal. We bring in caroline levy. Welcome to power lunch. Whats the game plan . They have a lot of coffee brands. Why this one and do you expect them to do . Well, this is a very, very shrewd Management Team at j. A. B. , and maybe one of the first things they do is cut the 125 million of losses on the Cold Initiative at keurig, and that would bring the ebitda multiple down from 13 times to 11. 5 and, of course, you can borrow or they can borrow at less than 2 right now. So the timing for this deal is very good for them. So is it worth what theyre paying for it . Even if the financing is good, the Interest Rates are low, is it really worth it . Im totally intrigued. This came out of left field. I see it as a private label coffee manufacturer. They may see it as a way to distribute their own strong european brands into the u. S. As well as perhaps be able to use the manufacturing skills on the pod side in europe and the rest of the world. But, again, such shrewd operators and a very sort of low trading ebitda multiple at the time they made the offer, but i still think the keurig shareholders and coke got very lucky here. You just answered the last question. We have to go to some breaking news, but obviously you think this coke has a sigh of relief here as a result of this . Absolutely. Absolutely. Caroline, thank you so much. To sue herera we go for breaking news. Thanks, ty. The ftc is challenging the proposed merger of staples and office depot. They basically say that the staples proposed 6. 3 billion acquisition of office depot would violate antitrust laws by significantly reducing competition nationwide in the market for Consumable Office supplies sold to Large Businesses. The ftc goes on to say that in general staples and office depot are the top two bidders most of the time for Large Business customers so they are filing suit and they are challenging the proposed merger of staples and office depot. Office depot, as you can see, now down better than 17 . Staples is off about 11. 5 . Both of these stocks we should note were lower going into this announcement but they have taken a second leg down, mandy, on this news. Back to you. They certainly have. Thank you very much for that breaking news, sue herera. To the Ongoing Investigation into last weeks terrorist attack in San Bernardino. Cnbcs jane wells joins us now with the very latest. Hi, jane. Reporter hi, mandy. Im outside San Bernardino Police Headquarters where in a couple hours police and the fbi will update us on the investigation, perhaps we can start to learn more about enrique marquez, the man whose home investigators raided this weekend. They believe he legally bought the two rifles used in the shooting. Nbc news reports marquez checked himself into a Mental Health facility since the shooting but has since left. Theres a custody hearing over the 6monthold daughter. The sister and brotherinlaw want to adopt the little girl. Government facilities here are reopening with higher security, and we heard from the head of the county Health Department who was at that Christmas Party when the shooting happened as well as the first doctor on scene, an immigrant from iran. I want to thank the incredible outpouring of support nationally and internationally. We have received your words of support, your offers of condolence, and your offers of help, and we are grateful for them. Im here because i came for democracy and its sad to see that you come miles from across the world and see Something Like that happen here. There are questions over whether the two killers had help. Farooks salary was 50 grand a year yet somehow they had amassed an arsenal worth thousands and thousands of dollars. There are published report the couple had a u. S. Bank corp account with 40,000. The bank telling Mary Thompson we are cooperating with the proper authorities. Beyond that i have no further comment. Finally the president outlined last night what the u. S. And allies are doing to fight isis and their income streams. Theres a report this morning from ihs estimating that isis makes about 80 million a month, most of it not from oil, guys. According to ihs, but from taxes from the territories that they control, and that could be a target much harder to target. Back to you. Jane, thank you very much. Left turn now, a big conference down in florida today. Its focusing on closing some of the gaps, income and otherwise, in the american economy. Our robert frank is live in palm beach. Robert . Reporter hey, tyler. Well, john scully is of course the former ceo of apple, now an entrepreneur, investor, and mentor in all things tech. John scully, thanks for joining us. I want to ask you about apple and i want to talk about some of your current ventures, but first we just finished talking about San Bernardino, and when we look at Cyber Security and technology, what more of a role could Silicon Valley play in battling isis and battling terrorism . I think you have to have the perspective that crises always create opportunities for innovation in the hightech world, and i know of a number of Cyber Security technologies that will move up to the next level, so i suspect that the conversation today is about getting access to todays devices, but i think youre going to see more and more advancements in Cyber Security technology over the next year. You just sold one of your companies, misfit, that was to fossil last month for 260 million. Youve got the obi world phone. Now i gather youre into Cloud Computing. Many people say cloud compute something a bubble, there are just too Many Companies in this space. Where do you see an opportunity . Im not investing in the technology of Cloud Computing because the technology has basically been scaled, its been vetted, its been commoditized and thats all because of the tremendous success of Silicon Valley new kinds of businesses like facebook and snapchat and linkedin and so fort. What im focused on is particularly in the Health Care Sector a new company i cofounded which is called rx advance. Were going into the 350 billion Pharmacy Benefit Management industry. So were taking an existing industry and applying cloud. Were going to take out the inefficiencies. Rx advance we expect well do 400 million revenue and probably scale to over 1 billion in 2017. Very exciting company. I notice youre not wearing an apple watch but you do carry an apple phone. What do you think of apple as an innovative or not Innovative Company right now. Would you buy apple stock right now . I think its a great company. Tim cook has been an outstanding ceo. Hes different than steve jobs, so he doesnt necessarily invent new products but what he does is run supply chain very complex businesses better than anybody in the world. Apple has at least another two years of refreshing its iphone install base, so the outlook for apple over the next couple years is pretty good. Tyler . Can i jump in here as well . Going back to the original topic. Hi there, john. Good to see you again. I wonder if you think Silicon Valley is doing enough to provide backdoor access so the government can comb data more effectively and if there is a socalled backdoor key, how do you stop people with bad intentions of using that backdoor as well . The backdoor issue is not a technology issue. Its clearly an issue about privacy, and obviously these companies are concerned about their customers. Thats what its all about. So theres going to have to be some balance and a lot of conversation beyond what weve had today to figure out how do you keep the country safe . This is obviously a very dangerous time that we live in. At the same time recognize that privacy is something that is well understood and expected by Consumer Reports co consumers. I wonder how many of them would give up a certain level of their own privacy in return for perhaps the knowledge that the government is doing all it possibly can to keep america safe . Well, i think if you were talking to millennials, they have no problem giving up their privacy because the reality is they dont pay a lot of attention to privacy. Its older people who probably pay more attention to privacy and older people tend to be the voters. So well just have to see where it goes in a political Election Year like 2016 will be. But i think realistically i would give more priority to the safety of citizens in the United States and give some backdoor access. One last question sorry, go ahead, tyler. Go ahead. Ill jump in if theres time left. I just wondered, your panel here is titled moon shot and the ideas here are huge in terms of their ambition. Do you think that when it comes to the middle class, mobility, how we deal with technology as a Workforce Needs a moon shot idea as opposed to what were seeing now with government which is frankly not much. Well, first of all, lets acknowledge the problem. The problem is that wages have gone down in the last 15 years, and this is largely a fact of very cheap capital and capital has been replacing labor, and its an issue because we have a serious gap. The middle class is really not sustainable in its current form, so whats happened, people have taken on a lot of debt. So i do believe that weve got to think about the implications of technology. I happen to think that there are going to be a lot of jobs in the Health Care Industry because people are going to live longer. By 2030 they will probably live ten years longer on average than they live today. Who is going to look after them . Who is going to keep them out of assisted living . Who is going to keep them out of hospitals . You combine med Tech Technologies and im involved with some with giving People Better skills to use these technologies and there will be a lot of jobs out there. The problem is the colleges dont train them. The high schools dont train them. Its a skills gap. We have people getting out of school, we give them a College Degree and a lot of loans that they have to pay back but were not giving them any of the vocational skills that they need and thats a real problem and were addressing that here at this conference. Mr. Scully, somewhat randomly, way tonight get your thoughts on whats going on at Silicon Valley company yahoo . You have had experience on the inside of companies that were in distress and in need of turnaround. This one sure seems to be that. So my questions are do you think anyone could turn around yahoo , and do you think that it will remain, survive as an independent company lets say within two years . Well, you have to qualify to say i have no inside information. I have never actually met Marissa Mayer and i hear only good things about her as a very bright woman, but the reality is that you could build an argument that you ought to spin out the old business yahoo to someone else who could find it perhaps accretive into something theyre already doing. And i think whats interesting is just on the rumors, how Many Companies have been speculated about that they could actually buy yahoo that may not be great as a standalone business in this day of were into mobile and into search and theyre really a portal. Its an idea of 15 years ago, but it may be a valuable company to a verizon or to a news corp. , someone who can tuck it into another business and find value that it cant be able to create on its own. So i dont think its a criticism of Marissa Mayer as the ceo. Its saying where does this business as 15 years old, a port, where does it make sense for someone else. Ill jump in because i want to show everyone what is going on with crude prices. Down by nearly 6 . The august low was 37. 75. We are below that level at 37. 62. Well keep on watching crude as the close occurs in the second hour of power lunch at 2 30 p. M. Eastern. Make sure you stay with us

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