Transcripts For CNBC Power Lunch 20240622

A new plan to revamp them expected to be announced this week by president ial candidate Hillary Clinton. Cnbc chief washington correspondent john harwood is in d. C. Now with details. Reporter mandy, Hillary Clintons beginning to lay out all of the components of her Economic Program to try to relink middle class incomes with the profits of Corporate America. Last week she talked about a plan to link employee tax policy or employer tax policy toward Profit Sharing with employers. Now shes trying to encourage longterm investment. I just want to go back to the history of Capital Gains rates to illustrate what shes the system that shes trying to tweak. Back in 1986 when Ronald Reagan was president , we had a tax reform plan. The Capital Gains and top marginal income tax rates were the same 28 . Then when you move to the bill clinton balanced budget deal in 1997 you had the top income tax rate up to 39. 6 . The top Capital Gains rate had gone down. So they brought back the separation between those two. That was 20 . Then when george w. Bush was president , both of those rates came down. Top income tax rate of 35 , top cap gains of 15 . Now back to the clinton top rate of 39. 6 after the fiscal cliff deal that president obama struck two years ago and the top Capital Gains rate is 23. 8 . With Hillary Clinton, she is trying to have a gradation between investments held for a year, under a year of course theyre taxed at ordinary income rates. But those held for a short duration two or three years, are going to face a different rate than those held long term. She is making the pitch that Corporate America needs to get out of the quarterly capitalism trap and into longterm investments for the health and productivity of the economy. This incidentally is a debate that we had at delivering alpha last week with larry fink and carl icahn. Carl icahn representing the activist investor saying that we need to be responsive to the immediate needs. Shareholders. Larry fink said take a longterm view. Tyler, when Hillary Clinton actually lays out the numbers here that debate will be engaged more fully. John harwood from washington. Is Hillary Clintons plan to change the Capital Gains tax good for investors . Jared bernstein, senior fellow at the center on budget and policy priorities james petikoukis from the American Enterprise institute. Both are cnbc contributors. Jim, let me start with you and ask whether you think this idea has legs. Well it doesnt have legs. Battles over tax rates, particularly Capital Gains tax rates are one of the toughest battles in washington but occasionally they do thing as john pointed out. I think the merits of having sort of a gradated Capital Gains tax rate there might be something to it to try to Push Companies to have more longer term emphasis to focus more on longterm investment and less perhaps on share buybacks dividends, that sort of thing. But i think this is basically the larry fink plan. But his actual plan though would have taken that bottom Capital Gains tax rate much much lower, maybe to 0 . Im not sure Hillary Clinton is going to go for that. Sounds to me that she for two or threeyear holding periods, maybe take that top rate to 30 by would be the buffett rule rate. Fine, you want to raise the rate for shortterm investment . Thats okay but lets lower the floor for longterm investment. This is all be driven i guess by the idea to ten courage patient capital. Which i think intuitively is very appealing. But let me throw a different spin in here. What if all income was considered the same . All income was income. I love it. And tn doesnt matter whether it is Capital Gains income or carried interest or salary income or whatever. Independent contractor income. And you tax it at a couple of flat rates. Whats wrong with that idea . Well i think there are problems with the flat rate but the idea that you would tax income as income regardless of its source is very smart in the following sense. I have what i call jareds first rule of tax avoidance, which is that if you tell me that income source x has a preferential rate then anybody with a tax lawyer has now discovered all of their income comes from source x. We see this all the time. I think johns introduction was very helpful in this regard because it showed there was a time when there wasnt such a big gap in the tax rates. That big gap insentcentiveizes a ton of inefficient tax performance. I think second stare clinton isretary clinton is on the right track. I can think of some ways that might be a little more kind of a little simpler than changing the cap gains tax. Is there an argument jared final thought from you, then back to jim for what jim said which was to take the Capital Gains rate if youre going to stick with a differentiation between regular income and Capital Gains income to take it all the way down to really a de minimis or even zero. Yeah. In my view again, sticking with this tax avoidance problem, there is a very strong argument going the other direction. A lot of what jimmy said made sense to me. Not that part. Because i think the minute you take the Capital Gains rate down that far, everybodys going to define everything as Capital Gains. So, jim, theres the thing why not have a tax simple with a couple of graded rates where the income is all the same. The minute you do make that distinction, you encourage everybody to chase that lower rate one way or another. Just as we do with the tax inversions and so forth. I dont think thats necessarily a bad idea but we have to remember that capital income is taxed twice. Its taxed at the corporate level, then at the individual level. When youre looking at the capital income tax rate it is really a continuum. You really have to add together the Corporate Tax and Capital Gains tax rate. If you want to say the Capital Gains tax rate ordinary income no matter how long you held your investment, at the same time eliminate the Corporate Income tax, which most people think is a really bad tax, i think that would be a fine idea. Remember this is sort of the larry fink plan. Also Clayton Christianson of harvard has also talked a lot about shorttermism and bringing that cap gains tax down to 0 . If you do that you move the tax code more toward a consumption tax. Im sure well be following up on this interest conversation. Watching gold at this hour. Prices hit fiveyear lows today. Heavy selling and fears about demand in china. Jackie deangelis has been tracking the gold action. We saw a near 50 drop in gold prices last night. Weve recouped some of those losses trading just over 1,100 right now. China is one of the issues traders are throwing out there as the reason for this. The other is that increasingly strong dollar battering the whole commodity space. Some are suggesting maybe this was speculators dumping gold trying to rotate into other Asset Classes or perhaps margin pressure. Margin calls in both equities and the commodity space that was causing the selling. Others say that it could potentially be this idea that the fed is going to raise Interest Rates and that is why people dont want to be in gold but right now, the 1,130 mark we broke through technically was the key resistance. Then it got really hairy. Strardz traders are saying they could potentially bounce but they do anticipate gold could go lower. Remember, it is not a safe haven anymore. Traders as it as an inflation hedge and theyre not using it for that either. All of the aspects to trade gold right now are not really in favor. A lot of Metals Trading down in sympathy. Well get to that later in the show. Youve been tracking the gold stocks and gold miners which have been getting whacked on the back of this. Gold prices and gold stocks pretty much hit their peaks just around the same time. Talking about the beginning of september 2011. You can see back there that peak. Again, weve sunk quite a bit. If you look at the gold mining stocks the gdx, this is the etf that tracks a lot of major gold miners. This if you count the intraday peaks, its lost 80 of its value since those levels. This used to be around a 67 share. Now it hit a low of 14 bnt 14. 50 earlier today. Year to date some real losers behind some of these stocks are names you recognize. Gold corp. You can just see whats happening here on a threeyear basis down anywhere from 60 to 85 . A lot of these major gold stocks taking a huge hit because these gold price declines. Dom, thank you. Investors gearing up for another big week of earnings. Morgan stanley beat on the top and bottom lines thanks in part to strong trading revenue growth. Hasbro also beating the street. Revenue at the toymaker in well above expectations despite the impact of the stronger dollar. And hall burt. Comfortably beating estimates. Oil Field Services company seeing a sharp drop in drilling activity compared with a year ago but it is being helped by strength in its International Profit margins. Stocks are trading in a fairly narrow range today with the nasdaq hitting another alltime intraday high. The s p 500 also now trading above its record closesing level. Bob pisani joins us from the it nyse floor. There is some troubling divergences going on. On the surface, youre right, all indices are on the up side today fractionally. If you look at where we are, were basically at highs on the ones that matter on the s p and the nasdaq. Were poised for a record close on the s p 500. The nasdaq set a record high. Nasdaq 100 is at a 15year high. All is good. But it is not that good if you look under the surface. Look at today with new highs on the indices, nasdaq is 21 declining to advancing stocks. Twice as many declining as advancing. New york stock exchange, 32. We had this same problem on friday. Leadership is getting narrower and narrower. A lot of stocks are at new lows today. Look at Energy Stocks. A dozen stocks in the s p pp, Energy Stocks are at new lows. The list goes on and on. The list is very long. Material stocks commodities are getting hit again. Alcoa is at a new low. Nucor is at a new low. New highs is a very narrow group of selected tech stocks and financial stocks including Morgan Stanley which had a decent report. My concern here leadership is narrow and im going to show you why a select group of tech stocks leadership is very troubling for the overall market. Thats in the next few minutes. Bob, thank you. Bob pisani. Wicked weather out west to tell you about. A fast moving brush fire scorching at least 3,500 acres and more than 20 vehicles out in california. At least six vehicles and a car trailer were destroyed on interstate 15 just outside of los angeles. The highway has now been reopened. Much needed heavy rain in Southern California turning dangerous over the weekend. Rain pummelling san diego watching out roads, tearing out trees, even taking out a bridge that collapsed into the water that built up after the afternoons thunderstorms trapping a truck beneath the debris. Fire Officials Say this is some of the heaviest rain theyve ever seen. I was in l. A. Over the weekend. Everyone was saying thank goodness we got some rain but this scene is terrible. They were really popular before the housing crash interestonly loans. Theyre making a comeback. Are we headed back into trouble again . The battle against alzheimers. Every 67 seconds in the u. S. Someone will develop the disease. By 2050 it will be every 23 seconds. Back in two. It took Serena Williams years to master the two handed backhand. But only one shot to master the chase mobile app. Technology designed for you. So you can easily master the way you bank. No fifth graders ever sat at the cool table. But your jansport backpack is permission to park it wherever you please. Hey. Thats that new gear feeling. Now get a swiss gear backpack for only 10. Office depot officemax. Gear up for school. Gear up for great. Lockheed martin buying united techs helicopter business sikorsky for 9 billion. But tax benefits will drop the actual price down to 7. 1 billion. Egg producer calmaine posting weaker than expected earnings. A sign of the booming airline industry. Boeing out with new forecast saying nearly 1. 2 million new eye lots and technicians will be needed over the next 20 years. Mandy, a big alzheimers conference is going on right now down in washington. A lot of progress has been made in the fight against the disease but where do we stand and how do some of these new drugs work . Reporter first, put alzheimers into perspective. In the United States 5. 3 Million People are currently living with the disease and that number is expected to triple by 2050 according to the alzheimers association. As baby boomers age the problem will just get bigger. 28 million baby boomers will develop alzheimers between now and mid century. Currently it is the sixth leading cause of death here in the u. S. So Drug Development is extremely crucial. But people are more optimistic than ive heard because of new drugs in the pipeline. Lets look at how they work. Alzheimers disease is characterized by buildups of black in the brain called beta amayloid, key for memory and thinking. Medicines currently on the market may temporarily alleviate symptoms of alzheimers. By increasing levels of certain brain chemicals. But they dont reduce the black buildup associated with the disease. New streermtal drugs from eli lilly lilly, biogen aim the black it selves reducing the betaamyloid hoping this will slow the cognitive declines that are hallmarks of alzheimers. Well tell you more about those drugs and the companies that are making them and the stocks to watch in the next hour. Thanks meg. Well catch up with you shortly. Return to cuba. Diplomatic ties restored today with the opening of the Cuban Embassy in washington. Michelle carusocabrera has gone from athens over to cuba. Shes there live. Michelle youve been tripping all around the globe. Reporter hey there, mandy. As you can see over my shoulder the cuban flag now hanging into front of the Cuban Embassy. Used to be the intersection. Even though this big event occurred today there is a big long to go before true normalization between the two countries. Big Financial Issues actually between cuba and the United States. Im going to explain right after this break coming up on power lunch. [dad]i wear a dozen different hats doing small gigs,side gigs. Gig gigs. Quickbooks selfemployed helps me get ready for tax time. To separate expenses,i just swipe. Its one hat i dont mind wearing. [passenger] i work for me. And so does quickbooks. It estimates my taxes,so i know how much stays in my pocket. And thats how i own it. [announcer]stay in the flow with quickbooks selfemployed. Start your free,thirtyday trial today at joinselfemployeddotcom. Are you moving forward fast enough . Everywhere you look, it strategy is now business strategy. And a partnership with hp can help you accelerate down a path created by people, technology and ideas. To move your company from what it is now. To what it needs to become. An historic day. For the first time in 54 years and a Cuban Embassy is open in washington. The cuban flag raised earlier today. There you see it happening. Diplomatic relations now formally restored between the United States and cuba. Secretary of state john kerry set to speak about it this hour over at the state department a few blocks away. Michelle carusocabrera is live in d. C. For us today. Michelle . Hey there tyler. Yes, full diplomatic relations restored today. However, the embargo against cuba is still in place and the law that has the cuban embargo on the books says that something very important has to be done first before the embargo can be lifted. Talk more about that. Joining us here is an attorney sanctions specialist also dealing with cuban issues. Jason, just down the street sit thousands of old documents which represent claims by u. S. Companies against the cuban government major fortune 500 companies that lost property, et cetera, in the early 1960s. Outstanding value on those is 7 billion to 8 billion. The embargo law says those have to be settled before it goes away. What are the real chances of that . Some progress has to be made. We just cant leave those there and not address them. Some of those claims are part of the overall fabric of why the embargo was put in place in the first place. Sell them for 10 cents or the dollar . 50 cents on the dollar . Is there any precedent for this . We settled a lot of cases, soviet union against vietnam, the east german republic. It is the dollar amount that people are going to start quibbling about. But the position that was addressed last week two weeks ago at a congressional hearing made sure we were starting 20 cents on the dollar. Cuban exsils liveiles live here in the United States and lost money. They would like to sue the cuban government. What are chances theyll get anything in the future . The certified claims are the priority claims for the u. S. Government. Uncertified or nonu. S. Person claim, those people who werent in america when their property was confiscated fall in a different category the cuban government tohis one or the next one to start a process to start addressing these. The u. S. Embassy will investigate claims and all sorts of propertites issues that havent been addressed for quite a long time. Theres ways to do this. There is a lot of ways to do this. I just think folks need to get more searsess about it. Wed hope instead of opening the embassy ahead of time theyd have taken care of some of this beforehand. I guess we can argue that the cuban government owes the rest rft free world the represent. It is a specious argument. This is a focused process. The claims process is settled here and now we have dollar amounts affixed through a process reviewed by the departments of justice. That dollar amount is the one we will negotiate of o of some day. Jason, thanks for joining us. Michelle, thank you for that. An historic day indeeds. They were all the rage before the housing crash. Now it looks like interestonly loans are making a comeback. So is housing going back to its old ways . Plus three signs of a top in this recordhigh stock market. Mandy, real estates just one aspect of it but lets talk about all the other parts of the market that are doing pretty peakish right now. Well talk more about those after the break so keep it right here on power lunch. Understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. Here is a simple math problem. Two trains leave st. Louis for albuquerque at the same time. Same cargo, same size, same power. Which one arrives first . Hint its not the one on the left. The speedy guy on the right is part of an intelligent system that creates the optimal trip profile for all trains on the line. And the one on the left . Uh, looks like itll be counting cows for awhile. So maybe the same things arent quite the same. Ge software. Get connected. Get insights. Get optimized. I like your place. Oh, thank you, make yourself at home ill be right back. Hm. Shes got x1. Alright. Huh, hm, ohh. Monster . She seemed so nice at dinner. Im back ahh uhh. Whatcha doing . Ohh, just. Watchin law order. Awww, youre nervous. Thats so cute. Call and upgrade to get x1 today. Im courtney reagan. Here is your cnbc news update for this hour. Nato forces launching an air strike on an afghan army post near kabul today in an apparent friendly fire incident. An afghan official described the attack as an accident due to bad coordination. North Korean Leader kim jongun casting his vote for local government deputies. Still photos show kim putting ballot papers into a box and talking to one of the candidates. 99 of eligible voters participated in the elections. A marine biologist says surfer mick fanning may have saved his life by keeping his wits about him when a shark attacked him on live tv yesterday. He fought off the shark with his fists and kept the surfboard between himself around the shark. The ncaa is making changes to how it seeds its basketball teams for march madness. It will now have the flexibility to slide every team up or down the seed list including the last four atlarge teams. It will also have the option of moving the number five overall seed out of its natural Geographic Area to avoid putting it up against the number one overall seed. Thats the cnbc news update for this hour. For now, back to you. Thank you very much, court in i. Lets take a look at gold prices. Weve been focusing a lot on this precious metal today. It plunged as much as 4 earlier to the lowest in over five years. We talked about the chinese sale of dumping the precious metal late last night. Weve recovered a bit but still down by 2 . Palladium earlier hit its lowest since 2012. Platinum at a fresh 6 1 2year low. Lets go out to Rick Santelli tracking the action at the cme. Hi tyler. Everybodys paying extra attention to see if theres anything to garner a fed move. Were above the previous fridays range. But to the 30year, only up 1. You can see the difference in the twoday charts. Another way to handicap what Central Banks are doing is a look at the countrys respective currencies. To that end lets pair the euro against the pound. Euro getting slammed lowest levels since november of 07. Remember against the dollar lowest level since april. Lets hook in the yen, another currency with a variety of Economic Issues with abenomics and all the central banking issues. Euro against the yen is at the lowest level only since about may. These are all the indications traders are paying extra close attention to as we continue to try to handicap when and if rates are going up. Tyler . Back to you. Thank you very much mr. Santelli. Lets look at where the markets stand at this point. 31 minutes past the hour. The Dow Jones Industrials are up to 18,124. Nasdaq record territory at 5,227. The s p 500 up four points at 2,131. Lets zero in on the nasdaq. Record breaking index, kate rogers has been following the movers over there. Thats right. The nasdaq having yet another good day up about. 33 . Did hit a new intraday high and coming off its best week since october of 2014. But the big story of the day here today of course is paypal. Once again trading independently under the ticker pypl. Paypal was trading as high as 11 at the market open today. Its since fallen off a bit, up about 7 . We should note the company being valued at 52 billion as of todays open. Another mover here today is Facebook Trading higher by around 2 which is interesting because facebook doesnt really have any news of its own today. But its being pulled higher by of course google and netflix which had great Earnings Reports last week. But we should note those two stocks are also trading lower today here at the nasdaq. Also keeping an eye on apple for you which reports earnings tomorrow after the close. Up higher by around 1. 5 . Up by 5 this quarter. Back over to you. Bears getting restless pointing to signs we are poised for a pullback in the market but theyve been saying that for a while. Havent they . They have been saying that for quite some time. But we sit again just about a handful of points away from the record intraday high for the s p 500. Here are reasons why beyond the fact that stocks are near a record high again. First you talk about the signs of a top, a market peak. You talk about this idea that perhaps real estate is one of those reasons why. Weve heard some rumblings about maybe certain Interest Rate relate products coming back to the Real Estate Market. Diana olick keeps telling us there are very hot parts of the Real Estate Market on the coasts where bidding wars just keep on happening. Real estate perhaps showing some signs of that with limited supply of houses on the market. Jet. Com is this Online Discount retailer. A Membership Club where you pay a dollar amount then you get to access all those great deals low prices. Think of it as a costco but strictly online. Jet. Com a couple months ago had a 600 million valuation for a company that isnt even fully in operation yet. What you got here in biotech and pharmaceuticals, people have been talking about the valuations for quite some time now about whether these biotech stocks are a little bit bubblish in these areas. They keep going higher and there are some justifications for these rich valuations. Still these are just a handful of those reasons why. If you talk about the reasons, you kind of put them in broader context. Like you said weve been talking about many aspects of this type of behavior in the market over the course of the past six years since the market bottoms during the financial crisis. Yet we keep managing to grind higher and higher. As you talk about some of these aspects over here the s p 500, since 2006 be with you, weve had a number of times where you could say the markets done, peaked out. The bears are pressing their case right now but it isnt like they havent had a chance to do so in the past. And theyve been wrong. The question becomes whether or not people who are really trying to call a peak have ammunition right now. That includes that 50 some decline in the financial crisis. That shows you a level i guess the argument in part on biotechs or the question not the argument is are they. Markets version of the dotcom stocks. Because some of them dont have profits. Youre right, a lot of them dont. A lot are r d oriented so theyre still generating expenses. You are betting on the opportunity. Just like things were back in the dotcom era, for a lot of these dotcom thebiotech stocks a lot of them become acquisition products because of their pipelines. They may not have something that generates profits now but all of that research and Development Goes down to say maybe some of these bigger biotext like the research, we can do something bigger with it if it gets approved. All of a sudden m a becomes a bigger part of that story. We havent even talked about a lot of what we might call the mature pharmaceutical Companies Pfizer merck, johnson and johnson they might be in the market for some of these. Besides just the pharmas, talk about the big biotech stocks gilead amgen, biogen. Those types of stocks. Roches. Theyre the stocks seen driving a lot of the action. It might be that they have a pipeline, not just a lot of profits. We could see some of the pipeline results play out further down the line. Next hour on power lunch well take a look at some of the best performing small cap stocks out there. Guess what industry many of them are in . Biotech. There you go. Perfect way so seg to the next segment, guys. Our market guests mark you are very bullish on biotechs. Im sure you just heard that conversation about concerns about bubblish behavior. Do you want to push back on that . Weve been having this conversation for the last two or three years. While that two or three years has happened weve had a myriad of successes from the fda on new drugs. A myriad of m a activity. I dont see that changing. Very interesting fashion the acquire er acquirer, the stock is up 10 . The kind of drugs that are out there are the kind of shots on goal the biotechs are getting is that much better. Youve got four stocks in particular in this sector mark. Do you want to mention maybe just a couple of them and why you like them . Ill mention one of the most recent ipos. Axovant. Went public a couple weeks ago. Plays largely into an unmet market which sl alzheimers. They have a derisked asset, an aplus Management Team. You talk about a consumer that really wants a product. This is an area that really is quite tragic and the up side for them if they get what we think theyre going to get is substantial. I think investors play pga these binary events and winning. This is an aplus Management Team, a derisked asset and the up side is just tremendous. Jamie, bob pisani was making a good point with these markets at new highs, essentially the leadership is getting narrower and nay roerer. It all comes down to picking the right stocks. So far tech and financials have done very well. A number of them at new highs. Where do you see the most up side in sectors from here . There are two. I continue to like financials particularly in the Regional Bank space. If you looked at earnings last week of some of the Regional Banks you saw an interesting trend or two, one of which is fee revenue on the bank side. Fees are becoming a big part of earnings. Banks like fees. Theyre making a lot of money using them. A lot of these super regionals have become players in the Investment Banking space. No longer are they just focused on commercial banking in their region or Consumer Banking and housing, theyre now playing along with the big boys like bank of america an jpmorgan in investment making. Those are two Large Revenue streams for Regional Banks that make them very attractive. At whatever paint the Interest Rates rise and interest margin goes up thats going to super charge their earnings. M a activity seems to be pretty strong. I think thats a very good sector to play. Second is plastics chemical companies. Dow reports on thursday. I think thats going to be a good place. Basf if youre looking for a ive got to squeeze this in this light of whats happening with gold today. Youve hated gold right . All the way through the cycle. Do you still hate it now . Yeah. Ive never been a gold person largely because it doesnt fit with the type of clients we serve. But ive been right and wrong. I was wrong on the front end. I think ill be right on the end which matters the most but i dont like it because it is not a productive asset, it doesnt pay dividends, it doesnt work well with retirement portfolios. Thats our commodity in general for the client accounts we surface. Mark and jamie, thank you very much. For more go to powerlunch. Cnbc. Com right now. Powerlunch. Cnbc. Com. Ibm out with earnings after the bell today. The stock up more than 8 but investors have mixed feelings on the future of big blue. That is mildly ahead. Google lower right now but up for the week. Is the tech breakout a little suspect . A little too narrow . Would you buy or sell tech . Well talk about that in a few minutes. You focus on making great burgers, or building the best houses in town. Or becoming the next highlyunlikely dotcom superstar. And us, well be right there with you helping with the questions you need answered to get your brand new business started. Were legalzoom and weve already partnered with over a million new Business Owners to do just that. Check us out today to see how you can become one of them. Legalzoom. Legal help is here. Here at the Td Ameritrade trader group, they work all the time. Sup jj . Working hard . Working 24 7 on mobile trader, rated 1 trading app in the app store. It lets you trade stocks options, futures. Even advanced orders. And it offers more charts than a lot of the other competitors do in desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivative pricing model, honey . For all the confidence you need. Td ameritrade. You got this. If you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. Hurry, before this opportunity cools off. Share your summer moments in your mercedesbenz with us. Welcome back everybody. Wti oil is currently below 50 a barrel at 49. 98 moving down by 1. 8 . It is below 5050 50 for the first time in the session. When golf meets football and a feisty pain things can get painful. From the American Century championship in lake tahoe last week, nfl player a. J. Hawk took a break from the links asked if he could run a play and be tackled by limb. It is the second year in a row this feisty fan has done this and the second year in a row the hawk obliged. Boy, tackle he was. Look at that. Ouch. Folks, dont try this at home. Oh man. Ow. Well, hes up and moving. Thats good. Time to get another tattoo. I could never watch that enough times. Theyre become interestonly loans. I had one. They were all the rage during the housing boom. But the question is it different this time around . Diana olick taking a closer look. Its definitely different this time around but it is opening the door to risier loan products once again. Michiganbased United Wholesale mortgage, the secondlargest Mortgage Originator, through brokers, announced today it will start offering an interestonly loan product to anyone who qualifies. Interestonly was how lenders during the last housing boom got borrowers into homes they sometimes couldnt really afford. This time around there are far more safeguards. Take a look at them. Borrowers must put 20 down. So definitely skin in the game. They must have at least a 720 fico score which is above the National Median on credit. In more than a 42 debt to income ratio and after ten years they must start paying principle. But most important, borrowers must be deemed able to afford the payments that the loans will eventually be when they adjust higher. I think it is opening the door back to hopefully it is responsible lending giving people choices. I think a lot of rules have changed where people are scared sf lending in some respects and i dont really think thats the right way. I think this is bringing it back to the masses to Mortgage Brokers who can actually give borrowers options. Critics are concerned that these loans will be used for refinances, in which case the borrower wouldnt exactly have to pay the 20 down. They would just have to show they 420 20 equity in the home. With home prices depreciating due to such tight supply say you have the home now, prices fall back a bit very doubtful theyd fall 20 but there is always that concern. Big banks have been doing some interestonly but only on the very High Net Worth side and they hold those loans on their books. We all know history has a habit of repeating itself. Sometimes. Still ahead, the big bet on finding the cure. The worlds biggest alzheimers conference is kicking into high gear. The biostek stektech stocks you need to watch. And inside the city of the future where cars do not need drivers. Where is it . What does it look like . Stay with us to find out. \ s c n b 2 the answer is yes, it can. So, the question your customers are really asking is can your business deliver . Gold falling to a fiveyear low below 1,100 an ounce on concerns about demand from china, amongst other things including the u. S. Dollar climbing to a threemonth high. And interestonly loans making a comeback as the nations secondlargest Mortgage Originator through brokers, United Wholesale mortgage announces it will offer them. If you missed any of the big stories in the past hour go visit our site at p. M. Cnbc. Com. In the Yahoo Finance question of the day, between greece, china and a looming Interest Rate boost, is a Market Correction imminent. Heres what you say. 53 of you gloomy foox say yes, it is. No 18 . 29 say the market is strong enough. This video has everyone talking today. A professional surfer coming face to face or fin to fin with a sharp during a competition. It was captured on live television. Stick around to find out what happened next. Push your enterprise and you can move the world. But to get from the old way to the new youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Im melissa lee. Coming up in the second hour of power lunch, more on todays market. And names like google amazon and facebook are all solidly higher over the past month. Should you buy . Weve got it all ahead. The stocks to watch ahead of the worlds biggest alzheimers conference is about to get under way. First, back over to mandy and tyler. Check it out. An amazing escape by a surfer all caught on tape. Look at this. Whoa. Professional surfer mick fanning came face to face with a shark and got out of the water unharmed. This terrifying encounter all unfolded on live television. Surfer fighting back after the shark knocked him off his board. O fanning was attacked by two sharks, not just the one visible in the video. Needless to say, the surfers didnt get back in the water on that day. This was an aussie surfer but this took place off the coast of south africa. There are certain waters including certain waters off australia, i absolutely would not swim in because it is known for shark attacks. It does seem like there are more and more. I was waiting for it to come at me as i was swimming. Did you get a couple punches in . I punched it in the back. That was articulate there especially where he went yeah but why not . Im sure he had much more colorful language than just ah that is great. Thank goodness he was okay. Lets get back to whats happening in the markets. Investors are always swimming with the sharks. Right . Lets turn back to the numbers here behind us. These are the sectors that are driving trading at this hour. As we mentioned, energy is the lagging sector today with wti below 50 a barrel. Technology and financials moving higher. As bob pisani was saying earlier today. Seems the leadership is getting narrower and narrower with a number of new highs in those two sectors. But maybe it is a bit of a warning sign. Used to have the old four horsemen of the nasdaq intel, microsoft, cisco and i forget what the other one was. Now may have a new four horsemen google apple, facebook and pick your fourth netflix, i suppose. Google was one of the reasons we saw the nasdaq move to that record close on friday after googles strong earnings. This week weve got a lot of big heavy hitting tech names like ibm after the bell also microsoft and apple this week. That will be one of the things. 64 billion in asset value added to google on friday. Thats a good day for sergei and larry. Not bad. Not bad. Thats it for the very first hour of power lunch. But lots more to come. Thanks very much. Ill be joined now by melissa lee. Hey, guys. 2 00 p. M. On wall street 11 00 a. M. In seattle. You are watching the second hour of power lunch. Im melissa lee. We begin with the big breakout in tech land. Google trading lower right now but the stock is up nearly 20 over the last week followinging blow out earnings last week. Apple has gained 4 in the last month. Amazon, new high in todays session. Facebook big standout up nearly 25 this year also a new high today. Bob, you put out a trader talk note saying this breakout in tech a little suspect. Why . Because the leadership is so remarkably narrow that when this usually happens, it usually indicates trouble for the overall market. Just take a look here at the nasdaq 100. Up 6 so far this month. Thats a huge move for an index thats this big. But theres really only four that matter. Thats my key point about today. The four that matter are google which is up 29 in july. Thats not a typo. Amazon facebook and even apples up 3 . Why does it matter . Because the market caps of these companies are so big theyre distorting some of the major indices, particularly the nasdaq 100. Apple, 700 billion. Google 400 billion mr. Facebook almost 300 billion. When you put it all together, 1. 7 trillion. Thats 31 of the market cap of the nasdaq 100. Four stocks are 31 of the nasdaq 100 right now. Heres the important thing. Theyre all over the place in terms of market in terms of pe ratios. Different levels different valuations but amazon is about 1,000 times forward earnings. Thats because of the 500 stock. But next year that is supposed to dramatically change. Facebook is okay at 48 times. That will drop rather dramatically next year into the 30s. Google and apple are also relatively fairly valued given their enormous valuation. It is not theyre overvalued necessarily perhaps with the exception of amazon it is just they are so big now, theyre moving things around. Show you how distorted things are. Those three, 3 of the 4 internet based, the internet etf, fdn, up almost 9 this month. Semiconductor index down almost 6 . Theres 122 new lows on the nasdaq and only 100 new highs. Thats a little weird when you have a new historic high on an index. Noted. Bob pisani. Thank you. Should you buy or sell big cap tech names . Guys, great to have you with us. Jerry, start with you. Should we feel better that the market is in the hands essentially of these four stocks and as bob points out, at least two of them could be argued to be fairly valued or undervalued at this point. Yeah. I think when you worry, you worry when things are significantly overvalued. The reality is were at the phase in the market cycle itself where youre leaving the defensive sectors, youre leaving the names of people who were fearful of some type of it macro event happening in trying to hide in. Now we are moving to the phase where people are looking at growth and the most important aspect of these four leaders is theyre all Strong Growth Companies at various stages of their own product cycles but theyre in our opinion going to lead a significant move throughout the entire market into the other subsectors within technology. If you look at those subsectors theres a lot of interesting stories and lot of interesting plays here that should help all Growth Investors in general drive their return. We really think this is still a very early and very important transition in the overall market. David, it is interesting, because jerrys got in his portfolio names like facebook apple and google. Those three of the stocks bob had mentioned. In your portfolio you like the Old Technology stocks. Why should we bet on the laggards at this point . When even the nasdaq is hitting a new intraday record why not go with the stocks with the wind at their backs . If you go back to 1999 this was the exact same discussion. The hyperhot internet and technology companies, and then there were a lot of Old Technology, old businesses that people absolutely didnt want to buy at 12 to 14 times earnings. What subsequently happened is that the 100plus pe ezs of the ciscos and microsofts back then crashed and burned and the older economy did very well. Today wed say some of the new hotter technology and new Media Companies are selling at 150 times earnings were a little bit wary about those. The flip side if youre a cisco or microsoft or hewlettpackard, today you are not received as being on the cutting edge and a result you are getting a lot of these business theat 12 to 14 times earnings. We think thats a much lower risk way to be involved in the market and in technology. I want to dove into some of this have not idea. David, in terms of microsoft, they report earnings tomorrow. What are you expecting . What do they not have . What do you think they have that the street doesnt think they have. We think microsoft has made a heroic transition into the cloud and the new space. In terms of tomorrows earnings we think theyll do fine. In terms of the bottom line. Were a little more cautious on the top line. We think a 6 to 12month time horizon, microsoft has really remade the company and the stock doesnt reflect that yet. Most new startups are speaking with microsoft to try to get in bed with them in terms of partnerships. Thats a far cry from two or three years ago. You are getting it at a great price with a very good yield, to boot. Jerry, in terms of portfolio management, you and your portfolio have three stocks at or near alltime highs facebook, google and palo alto networks. Do you sell into strength at this point or just hold on to your position . No. Again, if you look at things that would underlie any type of weakness in these names it would be more some time of macro event. Possibly an increase in Interest Rates at the end of the year. But the reality is these are companies that are going to lead the economy over the next five years and those are the names the fact that they are breaking out suggests to us that the investment communities a just beginning to acknowledge this and see how far the Cloud Computing and some of these other really powerful Growth Drivers are going to push these names. Thats why really look at it as a sector move and the best companies are on the front of that lead and thats what we like about them. Guys appreciate it. Jerry and david. Lets turn from big cap tech to small cap shares. The russell 2000 far outpacing the Broader Market this year. There you see it up about 4. 66 . Dominic chu has standout small caps. About 1 1. 5 separate these two indices. Three of the leading stocks so far that have at least 1 billion worth of market cap remember, the russell 2000 tracks smaller capitalization stocks. Check out some of these names. First you have one thats a refining type name. Wnr, western refining. We all know about the story with these Refining Companies as these oil surprises start to fluctuate, Refining Companies have been some of the beneficiaries. Western refining one of the bigger independent ones out there. Those shares year to date up 27 , a real gainer for the russell. You look at some of these other ones here take this one here conns. A Specialty Appliance retailer. This stock has taken a beating over the course of the past yearandahalf, two years. But since then the stock has pretty much doubled over the course of just this year to date period so perhaps some bottom picking there in conns. We were speaking so much about biotechnology and farm sootpharmaceutical companies, this anacor has a lot of treatments for psoriasis, skin diseases. This is up this much year to date. Thats helping drive things in the small cap russell 2000 index. Eric marshall manager of the fivestar rated hojsdges small cap fund. Do you stick with whats working . Were finding opportunities. As we get into earnings season we think earnings for a lot of small caps will hold up relatively well. We do have some areas within specialty pharma that we have found opportunities in. But also Home Building auto restaurants, consumer goods, and even some of the financials. We think now is the time to be stock picking in these areas. Lets get into some of your picks. One stood out to me and it is because it really hasnt done nick this year. In a field where there are so many doubledigit winners and small caps eagle materials, exp, it is pretty much flat. Why do you like this one . Are you waiting for it to catch up . Yeah. This is a stock thats actually a top hold in the hodges fund. Then are a leading manufacturers of cement and wall board. They are recovering from the decline in housing. They have a small part of the business that has exposure it toll selling frac sand to the gas and oil industry so thats really created and opportunity here in the stock. It is down from 100 down into the mid 70s here. We view this as a buying tune inging inging opportunity and weve added it to our position this year. Some of your other picks seem to be consumer discretionary. Eagle is levered to Home Building. Group one and American Eagle are as well. Is that a call on the consumer we see the consumer doing a lot better but we think now is really the time to be looking at businesses from a bottomsup perspective. Like in the case of group 1 this is a company that yes, they are benefiting from the macro trend of auto retailing really picking up. Stock trades at a very reasonable multiple relative to its peers. We like the Management Team and we see Good Opportunity in that business. In case of American Eagle outfitters, this is a turnaround story in a very, very difficult area of retail. The company has a couple dollars of cash no debt. And we think theyre going to emerge as one of the winners in a very difficult area of retail. Thats a stock that weve bought here as kind of a contrarian play in our fund. You are a stock picker but if you look at small caps in general a lot of people were invested through etfs that are tracking the russell 2000 do you foresee these gains outpacing the large cap stocks will continue for the rest of the year . I think you have to really look at it on a case by case basis. One thing about small caps you do have less exposure to international markets. The m a activity that you guys have been talking about on your program earlier as that continues, thats going to help buoy the multiples for a lot of small cap companies. So we think you can still find opportunities but this is really the time to really be very selective in what you own in the small cap space. I think going out and just broadly buying an etf wont be as effective Going Forward as owning an actively managed fund. The easy gains are over. I think you have to work harder at it. Eric great. Thank you. Gold meantime trading at a fiveyear low right now. Whats this mean for gold mining stocks . John bridges is executive director around Senior Analyst at jpmorgan. John, great to have you with us. I notice in your covered universe youve got a number of overweights which seem surprising in a sector thats been so beaten down. How much can these stocks go away from the fiveyear low in gold and actually perform to the up side . Its going to be difficult in this environment. It isnt overweight and it is not a buy. Its within our coverage space. In this environment when the dollar is so strong theres going to be really difficult for gold to perform. I want to make clear for all the viewers, because when youre overweight you think thats a positive rating but youre not saying to actually buy these stocks. At the end of the day you do need these commodities to trade higher. Right . Thats the bottom line . Absolutely. In terms of where to be careful, you say there are some miners out there, you may think theyre gold miners but theyve also got silver and copper in their streams as well. Be careful of those. Which one should we be aware of . One thats been particularly effective recently is nugold. They have a copper mine with a gold mine credit and that revenue has been used to help build another project called rainy river. They have made some fixes this morning. Theyve sold a revenue stream from that to help them get through their funding of the new mine. But it is something to watch, particularly with Something Like new gold. If somebody out there who wants to try and get in on a miner because they see some up side ahead, john whats your favorite in the space . One interesting one this morning is eldorado gold. That company has benefited from the Cabinet Reshuffle in greece over the weekend. They have been working on building new mines in greece. They have other operations in turkey and china but theyre busy with this project and the reshuffle in the cabinet there looks as if it is going to make the government more friendly towards development. Heres what to watch for the refrt of this hour. The stocks to watch as the worlds biggest alzheimers conference kicks into high gear. Also ahead, a big blue preview. Ibms Earnings Report is due out after the bell. And later, inside the city of the future where Driverless Cars are the kings of the road. Stay with us, power lunch returns after this. Youre driving along, having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Boeing out with a big and maybe surprise region warning to air carriers. The. Jetmaker flying against fly too long bulk shipments of lithium batteries in its passenger jets citing potential fire hazards. Paypal moving higher. The payment Services Company began trading today as a separate publicly traded outfit following its separation from ebay. And the solar company, sun edison edison, plan to buy vivint in a 2. 2 billion deal as sunedison expands into the residential and commercial solar power business. Up next stopping the next big hack attack. Intel intels stop security person has three things we can do right now to protect ourselves. Also ahead, well go inside the city of the future. Stay with us. By the time Police Arrive on a crime scene they could have little to go on. A vague description. A single piece of evidence. A partial plate number. With an app from ibm officers can now access over a billion police documents to find hidden connections and identify potential suspects. Ibm analytics helps one hundred thousand officers work smarter every day. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . The worlds biggest alzheimers conference under way right now in washington. Meg terrell is back now with some of the stocks to watch. First a look at Drug Development in alzheimers has really been a tough space. Between 1998 and 2014 there were 123 attempts to develop drugs that failed. Only four that were approved. But there is reason to be optimistic now. There are 59 drugs currently in the pipeline and at this conference conference going on in washington, d. C. Now well get more data on a lot of those drugs. Two are from biogen and eli lilly and they could be the first if theyre successful to slow the cognitive declines so muched with alzheimers. The stock could move 50 up or down based on whether the data are bad or good. We saw three today earlier in year on three doses and this is the data from the final fourth dose of this phase one study. Very important for biogen potential, 20 billion drug if it is successful. For lilly, well see dayta on a similar drug that targets the lpga. This will not be the key phase three data. Thats expected next year. But it should give us a better glimpse of how the drug appears to be working. The third one is a Smaller Company called axovant that works on the symptoms. But it is a relatively new company and theyre going to be talking more to the street on wednesday with an investor meeting and more data on their drug. Those are they big potential stock movers. Meg, thank you very much. Weve all seen Autonomous Vehicles cutting it up in wideopen parking lots but how would the cars do in a city . Now we can find out. Phil lebeau is in m city at the university of michigan. Hi phil. Hey, tyler. It is not a true city. It is a makebelieve city. But it is one that the Auto Industry is hoping the automakers, Tech Companies get a better sense of what happens for autonomous drive vehicles when they are in certain situations. Mcity is basically a closed area. You are looking at four miles of roads with different track scenarios, different track situations. Some highway, some urban. Theres even a rural setting. Railroad crossing. A number of different ways that they can test the latest technology when it comes to autonomous drive vehicles. Youve got about 14 different automakers, component suppliers, tech firms that are part of the initial push here at mcity. Up until now most of the research thats been done with autonomous drive vehicles has either been done in closed tracks that are owned by automakers, or increasingly we are seeing it done out on open roads in california. In fact Silicon Valley is a hotbed of research when it comes to autonomous drive vehicles. But folks here at mcity are hoping this facility helps southeastern michigan make a better statement or a bigger statement when it comes to research into autonomous drive vehicles. Sill sonicon valley kind of gave automakers a wakeup call. They said were going to go there if you dont decide to go there. The automakers have such rich data in terms of how drivers react, how cars interact with each other. Reporter nothing speaks to the difference between new tech and old tech when it comes to the Auto Industry than comparing mobile eye which makes a number of the cameras and Software Systems that go into autonomous drive vehicles and those vehicles that are coming out and comparing that with delphi which is also doing the same type of research developing the same types of systems. But you look at those two stocks in the last year theres no comparison at all, guys. Speaks to what were seeing overall for the Auto Industry, new technology is where most investors are most interested right now. Phil is there a driver in that car that just backed up behind you . Oh. No, theres not no there is a person in the car driving behind me. Its not like these guys theres not just Driverless Cars going all over the place willynilly. Yes, there was a driver in that car. Phil lebeau thank you. The hack attacks just keep on coming. Today the adultery site Ashley Madison said hackers stole and leaked personal data of as many as 37 million users. This is just the latest in a string of hack attacks. Last week ucla health had a breach impacting 4. 5 Million People. In may there was a hack attack on the u. S. Office of Personnel Management that affected 21. 5 Million People. And in february as many as 80 million customers of the nations secondlargest health Insurance Company, anthem had their account information stolen. So what can we doe to protect ourselves . Here for a power lunch exclusive, chris young, executive v p g m of intel security which is a division of intel. Th you coming here you want to go to the Aspen Institute and reveal the results of a survey. I thought the survey was really interesting. User error is still the number one issue here. For all of these hack attacks, does it seem like perhaps there can still be a lot done internally by the company to protect itself . Theres a lot that can be done. It is not just about technology. It is about training users to spot some of these attacks. It is about the processes that companies are using. And it is about investing in technologies and new ways of delivering Cyber Security. We have to do some things differently than weve been doing if were going to get ourselves beyond some of the attacks that were seeing. I did a Cyber Security documentary about five years ago or so. Argument made by the private sector, it is hard to spend on something and the result is a negative. The result is that there are no hack attacks. Right . So its a hard thing to argue to a board. Has that conversation changed in the board rooms across america . That conversation is completely changed. In fact we used to be i. T. Security used to be a bit of a backoffice function but its now become front and center in every boardroom and even on yously in the oval office as well. People are spending money. Theyre working on this but there is a big debt that we had to pay where we werent spending money in the past. We have to spend money now and put the systems and our processes and tools to where they need to be. Seems like a lot of people are onboard some kind of Public Private partnership. 86 of respond antsents believe there should be koobcollaboration. I just walked through some of the big hack attacks and one of the biggest ones was on the office of u. S. Government and Personnel Management . I think we have to separate governments role with protecting information and governments role in enforcing and enabling organizations to share the right threat intelligence. We have to hold the people who are stealing information accountable for what theyve done and i think thats really really important. You saw the fbi took down dark code last week. Youre seeing more collaboration between Companies Like ourselves and our companies in the Cyber Security space to try to enable ourselves to move more quickly to stop a lot of these attacks on behalf of our customers. Thats the kind of responsibility that both Public Sector and private sector organizations definitely share. Chris, great to speak with you. Im sure this will be an ongoing conversation. Indeed. Thank you. Oil doing something it has not done since april as the final trades cross for day. Lets get to Jackie Deangelis at the nymex to set us up for that close. Thats right. We saw oil break 50 and thats what traders have been watching for but the key question as we head into the close here is are we going to close under 50. A settle there could take us lower. We have the story whl power lunch comes back. Soccer. Top chef. Soccer. Top chef. [whistles] soccer top chef [shouting] disco [singing] say it and see it. The x1 voice remote, only from xfinity. Im courtney reagan. Here is your cnbc news update at this hour. President obama meet being with the nigerian president at the white house. Commenting on the u. N. Security Council Endorsement of the iran nuclear deal. By far, our strongest approach to ensuring that iran does not get a nuclear weapon. There is Broad International consensus around this issue and my working assumption is that congress will Pay Attention to that broadbased consensus. Four u. S. Made f16 fighter jets arrived in iraq today for the iraqi air force. The four jets make up a squadron of 36 fighter jets purchased by the iraqi government. A former lottery security official has been found guilty of fraud for rigging a hot lotto game so that he could win 14 million as the jackpot. Eddie tip ton facedton faced up to five years in prison on each of the counts when sentenced in september. His lawyer says hell appeal. Mpl the the famous football in the deflategate game was sold at auction. Back to you. Thats a lot of dough for a ball that isnt even inflated right. Thats right. Thanks courtney. Lets get to Jackie Deangelis at the nymex for the oil close. Well we just hit close and were waiting for the settling price. Though it looks like the settle is probably going to be just over 50 a barrel. We did dip under that level for the First Time Since april 6. 507 50. 15 is where we settled. The dollar index over 98 is one of the problems. August futures expire tomorrow adding some pressure to the downside. Still digesting that iran deal traders are worried about what thats going to do to the supply demand equation. They are saying when we do break 50, when we close under 50, well see more pressure from there. Time for street talk, the latest Analyst Recommendations on the stocks you need to know about. Im ready. First stock, micron technology. Even after a 42 decline so far this year micron has found a defender. Credit suisse saying it is likely the stock has found a bottom. It does not think the bid will go anywhere because of security concerns but the analyst says samsung will likely be more careful on dram buildout because it is too aggressive which would strengthen apple and intel, key samsung competitors. Our second stock is about as far as way from micron as you can get. Dunkin brands. Chips to doughnuts. Clsa downgrading that citing valuation. The target remains 56. Or all the doughnuts you can eat. Next up barclays. It is raising the alarm on the small mid Cap International net sector saying its been volatile slowing traffic and increasing competition. Yelp downgraded to an equal weight zillow to underweight. Barclays says the competition is heating up and that a local favorable vc funding environment has supported an atypical level of competition. Thats a fancy phrase right there, an atypical level of competition. Shares of paypal are jumping in their highly anticipated return to nasdaq. Cantor fitzgerald initiating coverage with a buy and a 45 price target which implies about a 20 up side. Paypal also initiated at overweight at jpmorgan. The target there, 48. Ebay is hitting its own new high today. Finally, our last stock schlumberger raising earnings estimates to reflect better than margins in q2. Analyst believes q3 will be the low point for the sishgle. A lot of investors hope thats true. Over the weekend surfer mike fanning managed to fight off a shark that attacked him in the middle of a competition in south africa. With the huge slate of earnings coming up which stocks could end up attacking your portfolio. Lets ask is the trading nation. Erin gibbs, hubert ross. Erin what attacks are you protecting yourself from . The one that im worried about, the shark attack this week is mcdonalds. It had two years of lagging sales. Theyve implemented a lot of new strategies. Nothing has been really able to gain foot and turn around sales. On top of it there was a quarterly poll released today of 29 franchisees that released one of the lowest outlooks for the business ever from this poll and one of the lowest ratings of franchisees with their relationship with mcdonalds. Even though it is a very small percentage of the franchisees, i think it really gives a good indication for what we might see during the Earnings Report. Rich . If you own caterpillar youre going to need a bigger boat. This stock takes its cues from three things the emerging markets, energy metals. Thats not a good three things to take your cues from. In fact we have the metmetals the mining etf down 8. 6 . Thats pa tret with those mining shares slumping you know you dont want to be in caterpillar. Looking at the shortterm chart, you see a lot of similarities with crude. This is what im focused on that 78, 80 level. Youve been moving sideways for four years. If you take out that critical support once again, 78, 80, lot of downside here in this name. This is a flame to avoid. Watch metals watch energy. That has has negative readthrough for caterpillar. Watching mcdonalds and cat. For more trading nation, head to tradingnation. Cnbc. Com. A heckler making it rain at a big fifa meeting today. Look at that. Those details are ahead. Plus im shannon icen the Vice President of yelp. Im excited to show you what makes this an awesome place to work in new york city. Thats coming up on power lunch announcer and now, the latest from tradingnation. Cnbc. Com and a word from our sponsor. You focus on making great burgers, or building the best houses in town. Or becoming the next highlyunlikely dotcom superstar. And us, well be right there with you helping with the questions you need answered to get your brand new business started. Were legalzoom and weve already partnered with over a million new Business Owners to do just that. Check us out today to see how you can become one of them. Legalzoom. Legal help is here. No fifth graders ever sat at the cool table. But your jansport backpack is permission to park it wherever you please. Hey. Thats that new gear feeling. Now get a swiss gear backpack for only 10. Office depot officemax. Gear up for school. Gear up for great. Are you moving forward fast enough . Everywhere you look, it strategy is now business strategy. And a partnership with hp can help you accelerate down a path created by people, technology and ideas. To move your company from what it is now. To what it needs to become. A british comedian named Simon Broadkin interrupted this press conference. Thats the fifa president. He claimed to represent the north korean 2026 world cup bid. He threw a handful of dollar bills in the air over the fifa executive. He was removed from security. Blatter was removed from the area until it was cleaned. Breaking news. Secretary of state john kerry accompanied by bruno rodriguez, the new ambassador to cuba for the United States by a Cuban Foreign minister since 1958 and today marks as well the resumption of normal diplomatic ties between our countries and the reopening of our embassies after a rupture that has lasted 54 years. So it is an historic day, a day for removing barriers. [ speaking spanish ] secretary kerry speaking there. Insaid i said it was the ambassador rodriguez. It was the foreign minister who is joining secretary kerry there. Well watch if there are any developments newsworthy. Lets take another look at yelp trading lower right now. We just mentioned a big downgrade on the stock from barclays. You see it down but really minimally there. Just eight cents. But beyond the stock, it is a different story inside yelps new york offices. Today we launch a new series on power lunch that might give you office envy. Were going to take you inside some of the most innovative work spaces in this new era of doing business. And we kick it off the a yelp. Hi. Im shannon eis, Vice President Rf Communications for yelp. Were going to give you a sneak peek of our new york city city. It is in midtown. We have about 500 employees in this office an were growing fast. Hey nobody has offices. This is a very important part of our culture from the ceo and all levels across. What you see is the last day of mornt activity. Theyre all pressing hard. This is a great chillout space for our yelp employees after theyve had a long day around are retdy for a little relaxing we have a great Beer Selection here. Woo you just saw a deal closing. Each team has their own teams cheer. As you can see, it is a huge camaraderie environment. These are their scooters. Im going to hijack one. One office full of grownups doesnt deserve a swing. This is a hotspot for our teams at any time of the day. It has some of the best views in the building. In the kitchen, Endless Supply of healthy snacks and it is definitely where we come power up. One thing we believe at yelp is we should support Small Businesses. We dont cater lunch. We want to encourage employees to support their local businesses. You are a he our guest. We should make this say cnbc. Our employees are taking a trip to cancun. If you dont have an office dont worry. Neither do we. Yelp says it plans to expand its new york office. She says theyre hiring more than by the end of the year. I like that swing, tyler. Kate kelly has a news alert on puerto rico. Thanks so much melissa. Just out from Standard Poors saying it is a virtual centerty that a notable puerto rican bond issuer the Public Finance corporation which is a unit of the somewhat financially troubled Government Development bank is very likely to miss a Debt Service Payment due on august 1st as a result of a transferred payment from one Government Entity to the pfc that was not made on the usual timetable in july and therefore it does not appear that the funds are available. Standard poors also downgrading all puerto rican debt alongside this particular set of bonds saying that it is a new precedent for the island not to make arrangements for these payments to be made in a timely way and it is obviously a negative harbinger of what may be to come. Another bit of evidence of the trouble here in managing the islands 72 billion debt load. Kate kelly, thanks for the update. The volatility index has plunged again. Since july 10 the vix is down 10 . Just before that date we were seeing markets drop on greece and china. Now that everything is stabilized, the vix is trading in the 11 range. Historic lows. What does that mean for the days, weeks and months ahead . Brian, great to see you again. On options action on friday in case people didnt get a chance to tune in at 5 30 p. M. Eastern time you walk through what drops in the vix have typically meant. In general it is positive three months after the drop. Correct . Thats right, melissa. When weve seen the vix plunge by 30 or more in a fiveday period, which we saw on thursdays close in the vix, that actually is very bullish for people. It is an indication that even after volatility has come out, after all that fear pressure has been let out of the market we still get the market to rally three, six months down the road. But the vix is sort of like goldilocks because below 12 or 11, it doesnt necessarily see that bounce. Does it . Right. Because at some point people get a little bit too complacent. When weve seen the vix close below 12, its actually pretty bearish over the next 30 days. If youre an investor looking to get in that market, you have to be very cautious. Id also recommend owning calls or some sort of hedge equity position. Because 30 days from now weve typically seen on average a 3 to 6 drop in the market. Is that the way you are interpreting it . It sort of falls into that inbetween category where we did see that drop of 30 or more in five days but at the same time were trading at about 12. Breaking below 12 for the session. Do you think well be up three to six months out or well see that 3 to 6 decline . I think if you are looking to get in this market i dont think you have to jump in right away. Statistics show we have some sort of quick selloff in the market. If youre looking to get in id use that opportunity on a pullback to buy the market because three or six months from now the markets should be higher. Whether you want to use calls right now instead to use protection or just wait on your position and buy on any kind of debt. But id buy any pullback and play at up side. When you say buy calls on the s p 500, essentially youre saying dont be long the underlying equity. Use it in a more limited fashion, limit your risks, spend less money to be long this market. Thats a great point, melissa. Id rather have some sort of protection when im buying stocks. Were at record highs here. It is tough for to you say as an advisor, im going to buy the market at alltime highs, im going to buy growth stocks. So whether i use some form of vix futures, or whatever a call option to the right to purchase stock, you dont have to purchase it. Only if it goes higher are you compelled to buy the stock. You buy a call that gives you upside potential, then you are just limited to the cost of the call rather than the full stock position. Brian, great to see you again. Flash floods slamming the southwest this past weekend. Well bring you more stunning footage when power lunch returns. So youre a Small Business expert from at t . Yeah, give me a problem and ive got the solution. Well, we have 30 years of customer records. Our cloud can keep them safe and accessible anywhere. My drivers dont have time to fill out forms. Tablets. Keep them all digital. Were looking to double our deliveries. Our fleet apps will find the fastest route. Oh, and your boysenberyy apple scones smell about done. Ahh, youre good. I like to bake. With at t get up to 400 dollars in total savings on tools to manage your business. Check out these images from outside phoenix. Heaven rain saturday forcing floodwaters to wipe away fields. Arizona state apolice say more than 1,000 people are without in no place has it had more of an impact than on the derivatives market, one area blamed for the financial crisis. Kate kelly has more how dodd frank changed the way we do business. Five years tomorrow since dodd frank officially mandated the Worlds Largest marketplace get better supervision. Today a 400 trillion slice is finally under regulatory scrutiny. Title 7 of the law subscribed they oversee futures, swaps and commodity training tackle centralized clearing and execution platforms for swaps. Swaps are tailored cruel trade agreements struck between two parties that can exchange one duration for another in exchange for various payments over time. That existed before the financial crisis where billions owed by American International group and other entities to holders of credit default swaps and other instruments resulted in market chaos. These days there is much more light on the subject with 75 of Interest Rate and credit default swaps centrally cleared today as opposed to 15 in 2007. The tfct registered major participants to keep an eye on them and all swap transactions must be reported to the agency. Still a ways to go. In terms of this market which measures more than 600 trillion its significant strides. What caught my attention was public reporting of significant trades. I dont think we know melissa lee bought a huge position in cvs on a certain credit. Just joking. I dont think we have that granular detail. Perhaps not as granular but maybe liken it to the commitment of traders reporting commodities. You can get a feel for the directional thinking and more importantly what exposure is out there. That was the concern about warding off future crisis. Thank you. Take a look at the chart of ibm, the onetime dow loser up 8 . Investor sentiment mixed about big blue. Is the Company Built for longterm growth . Graders ever sat at the cool table. But your jansport backpack is permission to park it wherever you please. Hey. Thats that new gear feeling. Now get a swiss gear backpack for only 10. Office depot officemax. Gear up for school. Gear up for great. It took Tim Morehouse years to master the perfect lunge. But only one attempt to master depositing checks at chase atms. Technology designed for you. So you can easily master the way you bank. So this beauty can be yours with a down payment and 10 financing. Oh larry, lawrence. Thanks to the tools and help at experian. Com, i know i have a 798 fico score. [score alert text sound] [score alert text sound] oh. Thats the sound of my Interest Rate going down. According to this score alert, my fico score just went up to 816. 816. 816 816 fico scores are used in 90 of credit decisions. So get your credit swagger on. Go to experian. Com become a member of experian credit tracker and take charge of your score. Lets bring in tim see more. Lou, you like ibm. Its an outperform. Most of you guys on the street are expecting 13th straight quarter of contraction on the top line. The exact same time virginia has been on the job. We are waiting for all the investments they made in multiple different areas to take over and drive the revenue growth. 2014 strategic comparatives actually grew 16 to 20 . Was 27 total revenue. That continued the first quarter. We expect that is going to hopefully drive things higher. How are you feeling about ibm these days . It is up 8 this year. Its up into the quarter. How does that set up . Talking about transition at the company which continues to go on and on. Its not that the bar is very low and bulls will say expectations are very loi. If you look at the trading range, bottom end 150. The top of that range a few years was 185. Risk reward says its going to be difficult for a company who is reiterating guidance in april to go past that. When you look at the software space, other guys before them have talked about the head winds, oracle being one. We know its cheap. This is what people have been saying a long time. You have to be cautious. What do we need to hear this evening and when you parse through earnings release, are you going to look at strategic comparative lines . What is the most important line item . At end of the day, they have to get back some real growth. If you look at last quarter, they were up to flat. You have to take out fx and the divestitures. They had four years of fx against them right now. I think as we get into next year, that will be behind us. This quarter, i would like to see them show a tiny bit of growth. Then investors will get excited again. Tim, are you in ibm . Im not. I think the negative case has been alleviating. Especially when you get to the place many think they may bottom in terms of numbers here. Relative to s p, its very cheap. Its still showing the transition, while not unique to them is something that goes on and on. I dont think you can bet on it changing this afternoon. You say 2015 will be a transition year. Will we go through this quarter and say that was the trough quarter in 2015 in this turnaround . I think there is a chance as we get to that. We are going to have another good quarter from the hardware business with mainframe. They should have a good back half of the year. Over 18 billion of Services Business in the fourth quarter. If we can start to focus on a strange half driven more by software and services and get back to some growth we could be turning around here. Thanks guys for your time. Tim, see you later. Lou, outperform rating, 185 price target. Appreciate it. Youve been a busy woman today. Oh hello tyler. I snuck up on you. Dennis gartman says there is more pain to come from this gold chart. Those Gold Mining Companies really hit. 80 from the peak in 2011. Why dont we wrap it up here . See you tomorrow. Closing bell starts right now. Welcome to the closing bell. Im sara eisen in for kelly evans. Im bill griffeth. The gold is at a fiveyear low. Miners down. Whats behind the move and whether investored should like for a new safe haven. Weve got someone who said the banks in europe are a better buy than banks here in the United States. Also a major alzheimers conference is under way right now