Transcripts For CNBC Power Lunch 20240713

Exclusive interview with jay clayton. Power lunch starts right now weve got the market flat on this day but its been a whip saw getting there. This chart shows the swings weve had on one trade headline after another early this morning. Right now the major indices remain mixed were seeing green here and there but mostly flat. Shares of netflix, the stock down 2 after needham says its sale as the streaming wars heat up well have more on that move just a little bit later. Tyler. Markets not getting a boost from the seemingly positive trade headlines today. A deal on the usmca and more time for a deal with china we have the latest House Democrats announcing they reached a deal op a new nafta. Regular compliance and removing certain protections for brand name drugs against generics. The deal will have out sized impact on the auto and pharmaceutical industries. If you look at jobs and nashlg Safe National safety, its time to vote for the bill. The u. S. Able to show progress on this bodes well for china talks. The u. S. And china are considering delaying this weekends tariffs on consumer goods. U. S. Officials have not been willing to say that decision is final. They keep saying that talks are moving in the right direction and they are close all right thank you. Well get more on the expectation for the fed in a minute steve joins us with his latest fed survey we asked the time around about the coming holiday season. Its important for the Monetary Policy out look. It looks like a pretty green christmas according to our responden respondents. 67 say the Holiday Spending season will be above average 30 say it will be average well take either one of those two. The reason is because weve had pretty strong consumer 21 say the consumer will strengthen from here and 35 say they will stay the same. They being word of the year. Thats good news in part because the consumer has remained strong as for the overall growth, not so wild. Depends on your outlook. That is precisely what our forecasters expect into a very long time into the future here good news. The chance of recession has fallen has been elevated for while. Its still up relative to the average. This is the probability of recession as gauged by respon de dd respondents. Lets look at what they expect 100 not 99. 9 this is better than expected to remain on hold when it puts its statement out tomorrow the fed about to go into what were calling hyper nation, policy hyibernation if the people are so sure they know what the fed decision will be. What we dont know is what Jerome Powell and what the fed will say what are you listening for we kind of do know because hes been like a broken record on this. Theres a clinical thing that will be in the statement they used to say act as appropriate. That was a wink and a nod they would cut rates and now assesses as appropriate is being on hold. As the year began both economy and Monetary Policy were in a good place. We believe its in a good place to achieve the outcomes. I think policy is in a good place. Whats interesting to me is isnt that an nbc show, the good place i believe it is its like this Monetary Policy expert a lot of these guys are like these walking the good place has become Economic Policy assesses as appropriate, isnt it always appropriate to assess. Yes, absolutely you can say that or you can say were in a good place. I like it thank you very much its been a whip saw. Lets bring in Quincy Crosby chief market strategist. He looks forward in 2020 to a kind of stasis what do you think of that forecast and what would it mean for the economy and the markets . Im not a strategist. Im a portfolio manager. I look at the impact on the market i dont think well go a long way into next year with no trade deal could will be steps along be way. What is the impact on the market i think if there was no trade deal, the market is up a lot this quarter, up a lot this year we could have a market pull back i dont see a substantial decline because too many people want the market to be invested i think the point is there could be steps along the way a china trade deal and that will be enough for investors to get invested in the market quincy, what are your thoughts here . If the existing tariffs are in place but no new tariffs are put in place and theres some kind of skinny deal that looks nice on paper and means we sell more soybeans, is this going to be driver for stocks in 2020 i dont think it will hurt stocks i dont think you go into the market just for that it would provide a calm under the market what the market doesnt need are these zigs and zags of attacks from the administration and then the chinese side coming back the market doesnt need that whos the market the president has gone out of his way to say recently. Hes gone out of his way to say that he and xi have a great relationship it has come to that but there was a point that xi was the enny enemy. That wasnt helpful. Not the first nithing hes called the enemy right Jerome Powell was the enemy. Youre bringing up the attacks. You expect more volatility coming from the political sphere tell me why. Because the kpanl campaign i heetsing up. Youre going flu an impeachment. The market is fine does that make sense that everything is fine yes were looking at the market. The market is saying who is the candidate. You say youre getting ready for first inning of the copitulation trade i mean in the pattern of this year is very consistent with the past when you have a big nasty draw down like last year, it sets up for the the market to do pretty well investors because they look backwards liquidate. They liquidated in 2016 nasty drawn down and they liquidated this year after the nasty draw down of 2018 after about a year of liquidating investors say i made a mistake. I better get back in thats what happened in 2013 and 2017 the volatile till comment, if you look back on 2013, 2017, theres very little volatility because every pull back was an opportunity to actually get invested we had three down days around thanksgiving and then the market reversed i think its because the pull back give investors the opportunity to get in. An interesting fact is in the last 35 years, every year where theres been net out flows from equities, the next year the market is up because people copitulation the copitulation is copitulation and getting back in. Got it. All right we got to leave it there, folks. Coming up, rare look inside the sec and how it enforces the rules. Well talk to the commissioner jay clayton after this were watching shares of boeing a day before a whistleblower who says he warned boeing about problems with the 737 max is going to testify in congress those stories and more coming up on power lunch we call it the mother standard of care. Its how we care for our patients like job. His team at ctca treated his cancer and side effects. So job can stay strong for his family. Cancer Treatment Centers of america. Appointments available now. But at fidelity, value is more than just talk. We offer commissionfree online u. S. Stock and etf trades. And, when you open a new Fidelity Brokerage account, your cash is automatically invested at a great rate thats 21 times more than schwabs. Plus, fidelitys leading price improvement on trades saved investors hundreds of millions of dollars last year. Thats why fidelity continues to lead the industry in value while our competition continues to talk. Talk fidelity. Cnbc get a rare look at the secs enforcement. Bob got to go inside the room where the commission investigates frauds and Insider Trading and more bob joins us along with the head of the sec jay clayton hi, bob. Were here right in the division of enforcement. This is where they actually do investigations jay clayton is here. Weve been talking about this for a couple ofyears you made protecting the retail i veste investors, whole lynch men of your time here. Tell us about what youre doing to protect the average investor now. Its the men and women of the sec doing that our markets have bad actors. They have for a long time. We are really focused on identifying them, particularly those who prey on the most vulnerable and trying to get them back. When people entrust their money to our markets and someone rips them off, we should be focusing in those areas in particular right now were focused on teachers, people in the military and our elderly our most vulnerable. You just testified a couple of hours ago and you were asked about foreign actors the question was very interesting. Are foreign actors having an influence on our markets that we dont know about what did you tell them it was a very good question do they have interest in our Public Companies and are foreign actors able to act inappropriately in our markets in a way that a domestic actor could not act. Very good question we are making sure that our ability to detect bad behavior from outside the United States is what it is inside the United States thats a challenge its something thats ever evolving but its something were focused on you brought action against several chinese traders alleging they were trying to ma nip lnipe 3,000 stocks these are realtime examples. We have globally interconnecting markets. We have largely Domestic Authority and we try to use that Domestic Authority as intelligently add we can to prevent bad actors from coming in outside the United States ive spent the whole morning, what impresses me is the depth of the knowledge and the sophistication of the computer monitoring system. They said to me five years ago, a lot of these investigations could not be done the way they caught the chinese scheme was monitoring the trading activity and messaging traffic that did not appear equitied that using advanced technology they were able show is connected how important is it . Extremely important it would be impossible to detect with the naked eye disconnected data sets that you can bring together is a new enforcement ool. Im glad we have it. As always, bad actors are getting more and more sophisticated. Were keeping up with them i know every one is worried about Cyber Security were worried about someone who can hack into nasdaq and shut the Trading Operations down. We need to make sure they are secure even here youre going after organizations that are important part of the trading system in the United States. Our Critical Infrastructure needs to have strong Cyber Security they also need something else. I dont believe were going to be hack free its not going to happen were going to have a problem. They also need to be resilient we got to let you go but i want a quick question on buy backs. A lot of people are wondering about whether or not some corporation should be required to direct theyre spending in other areas like Capital Spending does the sec have any position on this at all is sec does not decide to tell people to buy back stock. We tell people to the extent you make these decisions tell your investors in fair and transparent way. If youre buying back stock, do it in way youre not manipulating the price and doing it for the benefit of all sha shareholde shareholders we are going to go down to one or two floors below us to the forensiclab. This is the most secure part of the sec. Its a cooper lined room designed to prevent any Electronic Communications in or out of the room. This is the room where they hack into the cell phones and the Computer Systems that the sec has seized as part of their investigation. Jay will give us an exclusive tour ive seen it and im not handing my cell phone over to you ever again. Youll be amazed with what they are able to take a look at back to you. Thank you very much. Shares of netflix falling today. A to analyst predicts millions of subscribers losses. For 50 years the golfer Jack Nicholas has worn the same gold rolex. Now he is auctioning it off for charity. Well tell y h mh s peedo go forit machin so what are you working on . Im searching for info on options trading, and look, it feels like im just wasting time. Wasted time is wasted opportunity. Exactly. Thats why Td Ameritrade designed a firstofitskind, personalized education center. See, you just oh, this is easy. 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Appointments available now. Welcome back netflix shares hitting pause after a downgrade from heedham the firm saying it expects the streaming giant to lose as many as four million u. S. Subscribers in 2020. After a rough 2019 could things get even worse for netflix this is a stock that has been contending with a lot of these issues about competition for a while. Its traded above 400 and traded as low as 230. Here we are just under 300 what is the chart suggesting to you right now. Even though it has a nice 24 rally in september and october, the stock already rolling over before needham downgraded the stock today. My concern is it will retest the trend line going back to the september lows of 290 a break below that level would raise a yellow warning flag on the stock. It if the change a flag from a yellow one to a red one. That does bring home what a huge ramp it has where do you stand on the company. This is not a zero sum game. Im not sure i agree with the rational my concern is the valuation and i think that investors are waking up to the fact that this company is not really going to grow as fast as the earnings are projected youre paying 50 times earnings for a company that now is leveraging up their Balance Sheet to pay for content its going to come home to roost. I think investors will not be willing to pay for growth. Plenty of award nomination. Thanks a lot for joining me. Laura martin, the analyst behind the call will join us on closing bell today at 4 00 p. M. Eastern. For more trading nation, head to our website or follow us on twitter add trading nation thank you very much for that ahead, boeing on track to have its fewest deliveries. This is a former boeing manager blowing the whistle on Company Safety issues. The famous gold rolex will become the most valuable ever sold at auction. Well known carson block setting his sights on a Litigation Finance firm says the company is the next enron. He joins us to respond all this when power lunch returns. Welcome back, everybody. Here is your cnbc news update at this hour. Vice president pence is touting the trump administrations win following House Speaker pelosis announcement that a modified agreement on the north american trade pact has been reached. The president has been fighting every day to keep the promises he made to our veterans have an america standing tall in the world again and then you have these do nothing democras. C chile says one of its cargo planes has crashed after going missing between south america and the antarctic. The aircraft took off at about 5 00 p. M. On monday. Its lost contact about an hour later. Officials are not optimistic about finding survivors. U. S. Airlines are adding 88,000 seats per day for people increasing travel this month the is about 84 more flights per day. 87 and a half million passengers are expected to fly. 3 over a year ago that is the news update this hour back to you. Thank you for that its time for todays power movers starting with auto zone the stock soaring today at a new all time high. Age i bit fit lost more than money than expected. Several analysts raising their price target on stitch fix we end with life lock. The Cyber Security company joined take a over interest. Thats according to reports. Rj meantime the market closing for the day. We have the numbers. Worries at the trade war will hurt demand are front and center again after last weeks meeting. That said prices are still trading under three month high around 59. 21 are a barrel. It reaches three month highs on friday today settling closer to 64. 28 up a fraction. Ahead its a busy week for data and also the api weekly data followed by the doe we can lie figured. Also looking ahead to reports tomorrow from the fed chair. Back to you. Boeing reports order numbers for november but a bigger day may be coming up tomorrow. We are tracking this well talk about the whistleblowers testimony in a minute but first let go to november orders. A significance here, 737 max they have not had sizable orders since the grounding in march they did report 30 planes were ordered. Two orders that bought in november the total for 2019 is still negative negative 84. Negative 84 for the year now to the story regarding the whistleblower tomorrow he will be on capitol hill it will feature the head of the faa. The mana well talk about why he believes the plant is dangerous as they ramp up production what words would youctory att point in. Dangerous unnecessary. Taking unnecessary risks chaotic. Disarray they tiook his concerns seriously. Also, tomorrow when this hearing takes place it will be a huge day on capitol hill not only for bogeye as well as for the faa. Theyll be asked about the max before the hearing you do not want to miss this hearing. An basic collusive well sit down head of the faa well talk to him not only about the whistleblowers complaints but also about where they stand with the max remember boeing has said for some time we expect to be certified in december. Well ask him about whether or not that expectation is a valid one or whether or not boeing needs to it. As the fall out from boeing goes from bad to worse, how soon can it get the 737 max back in the air . That among the many toings to discuss be Safety Consultant alan biel. Hes joined by carter copeland, a Founding Partner welcome to both of you let me begin with you if i might. The whistleblower who is going to speak tomorrow seems from my notes is mostly going to discuss the speed with which workers are being asked to work. The five quo ttas to produce aircraft he doesnt seem to be speaking directly to the problem that brought down the two 737 max aircrafts. Is he pointing to a cultural problem at boeing that is deeper than just a Software Problem on a single aircraft . I think so. We all know if you ncrease the work schedule in the pace the probability or possibility of human error on the production line increases youre right right now theres no evidence this contributed to the two crashes of lion air and ooet yo oo Ethiopian Airlines to my mind i think boeing will do a lot many things to correct these problems they need to do a couple more things and we can talk about that some time do you have an estimate as to when this aircraft might be certified by the faa and back in service globally i think the claims it will be certified by january and back in the year by early march may be a little optimistic because we got to remember even though the faa controls the certification in this country, they really do want buy in from our countrieser parts around the world the canadians and europeans and so on and from the other stake holders, the unions, airlines and the flying public. I think it may be a little optimistic to think youll be able to buy a ticket and fly on a max by early march well have to wait and see ive said i would hope they would look at own regulations that require emergency you have a buy on this stock with a 521 price target does a debate over the world culture rand pressure that may erupt around this whistleblowers testimony tomorrow on capitol hill, does that change at all your assess m of where the stock will go 100 . Look you got to kind of separate the short and long term here and say whats the immediate thing the stock market wants to see. They want to see the plane return to the sky. Return to service is one piece to start moving forward in an evaluation of what the stock is worth. Then you have to jours whats the Company Going to earn in a postrecovery scenario the last question to ask is what do you want to pay for it in if the company is deemed to be taking unnecessary levels amounts of risk on then you would expect that to be reflected in the multiple. The question on whats hard here is its not a binary evaluation. Thats been pretty common across the entire landscape its tough to say how much the market will incorporate into there but of course it matters this whistleblower is testifying about the production from 2018 to spring of 2019 and yet we have seen the orders and the deliveries decline here. What does that tell you about what the whistleblower is saying theres a lot of people who work at boeing. Insiders have told me theres level on level of redundancy when it comes to safety checks and mandated days off, days of rest, 12 hours in between shifts and things like that would you expect to see more whistleblowers coming to the table with claims about boeing work circumstances, carter its possible the period of time were talking about is late 2017, 2018 since that time boeing because of the max situation has slowed production and caught back up. What we see at boeing and air bus and their supply chains that sort of grieving room had helped alleviate some of thoeds pressures. Whether or not there will be other folks that come forward to say it was a very tough Work Environment two years ago is kind of up in the air. I said that before. This is really managements responsibility as carter pointed out theres a problem with the aircrafts i looked at the statistics for the late model boeing versus the late model air buses roughly they are comparable. Boeing is slightly safer than the air bus if you look at the number of fatal hours per million hours. The other thing Everybody Needs o keep in mind is the faa said they will inspect every aircraft which is very unusual before that plane is allowed to return to service they will be getting the airplane back in the air and i hope they look at some of the design to make sure the Failure Modes are such they will provide the pilots better information than they are getting now. Thanks to both of you we appreciate your time. To the bond market now rick is tracking the action at the cme. Hi, rick hi. Theres been a lot of data points that i find important today we had productivity. The mid must remembers were down its officially the First Quarter and negative territory since the end of december. However, when you go to the National Federation of independent business and their optimum index it was much better thats the biggest month over month increase since may of 2018 we all remember the end of 2016 how businesses shot up in confidence when the administration was put in office this is zoo economic index a Business Sentiment index even though the headline number was down 19. 9 on current situation, future expectations moved up to 10. 7 all the way back to may of 2018. One final thought we all talk about soybeans, its not happy day. The crop of soybeans that comes in early 2020, about a million tons which will be 25 bigger than u. S. Crop at 96. 9 million tons first time its ever happened back to you. Thank you coming up, the golden bears golden watch could be the most expensive ever sold at auction. Well give you more details, ahead. Each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Cme group were committed to making college more affordable. , thats why were keeping our tuition the same through the year 2021. [woman] i knew snhu was the place for me when i saw how affordable it was. [narrator] find your degree at snhu. Edu. A gold watch going up ff auction could break the record for the most expensive time is money Jack Nicholas gold watch heading up for auction it could surpass the 17. 8 million that paul newmans watch set in 2018. This is the only watch he wore for more than 50 years it was on his wrist for 12 of his major championship presentations. He told us the watch can do more good now at auction since the proceeds will go to his favorite charity. To me i miss this one i know its going to do a lot more good than being on my wrist. This is worth a lot more than i am the collectible is expected to top 16 billion this year as the auction online mark place. A new breed of younger collectors will be Marlon Brandos watch he etched his name on the back and being sold by his daughter proceeds for that going to charity. It starts in the six figures you can bid for both online. When he says you can bid on it, he means you sure. Thanks. Coming up, courtroom capitalism well talk to the ceo of a company that makes its money bankrolling lawsuits and what his business can tell us about the economy, next on power lunch. Welcome back to power lunch. You can call it capitalism in the courtroom, Litigation Finances when a Third Party Firm provides funding for a lawsuit in exchange for a cut of the potential settlement wilfred capital is the largest firm of its kind in the world. Its shares are listed in london, ran up 500 in the past five years, but the stock has been sinking this year after muddy waters carson block shorted the stock and accused burrford of shoddy capital expenses. Joining us now is the cofounder and ceo of burrford capital, chris bogart for af lot of our viewers, Litigation Finance might be a new field. Litigation finance is nothing more complicated than treating litigation claims as financeable assets you have lots of things, lots of kinds of assets that can be financed, receivables, for example. Litigation is a special kind of a receivable when im suing you, its an effort to get money to move from you to me. Theres risk and theres contingency associated with that, but fundamentally, its no different than me trying to get money from you in another form how much does the plaintiff walk away from percentage wise, when a venture when a Litigation Finance firm comes in totally depends on the underlying risk of the litigation, as you would expect. These are assets that are market priced, just like any other riskbased asset well, is it 55 , 25 , you know, give me a range here as you probably know, standard u. S. Contingency fees tend to run in the 25 to 33 range, sometimes as high as 40 . Many of our returns, if were starting a case at the very beginning are in that similar range, but this is corporate finance. The business that were doing is large dollar, large corporate activity and so these are individually negotiated deals with large clients that depend on the risk. So muddy water goes in, and they say that its not that theres so many opportunities and thats not why youre getting such a big runup, but because of the way that youre pricing your assets, for instance, it says burford has sold 10 of this particular claim in argentina called peterson, 10 of this claim for 40 million in december of 2016. By this year, this summer, 10 of that claim went for 100 million, which implies a value of 1 billion. How do you get on the same case from 400 million to 1 billion valuation . Fundamentally, you get a big change in what has happened in the underlying case. And in that particular case, the Supreme Court of the United States came out and agreed with the position that we were taking and that, obviously has an enormous amount of weight, and changes the valuation that sophisticated Institutional Investors are prepared to put on an asset like that why is this company saying all of these nasty things about you . I dont have a lot of time to deal with carson block and his new sidekick, Stormy Daniels i think the reality is he makes his money by coming in very rapidly, running a short attack on a business and coming out again. He closed his short on burford months ago, the day he started making all of these allegations and i think weve comprehensively debunked and our investors agree, all of these allegations. What youre seeing now in the shares is some postattack volatility in both directions, up and down. But what i think you have today is actually a pretty good value opportunity. We did 25 eps growth last year, and you can buy and higher before that. You can buy that level of eps growth today at six times trailing p\e. Thats a pretty good value for longterm growth but you have said that this peterson case is represents a large share of your bottom line. And right now youre arguing in u. S. Court that it should not be moved to argentina, you dont think you can get a fair hearing in argentina for this particular case its very risky. So tell investors, if youve got short sellers on your tail, if youve got Court Hearings going on, what justifies the risk . Whats the return . Our business is not about one single case, its about a large portfolio of cases and at any given time, we have any number of large cases that are moving through the courts. Some of them will be terrific successes, some of them wont make any money, and a large number of them, the majority of them, are going to settle. And thats what litigation is all about. Most litigation settles without going to court and thats where the middle of the road in Litigation Finance exists, and thats how we make a good deal of our money how do you pick the cases that youre going to invest in so we Work Together and our client base tends to be Large Companies and the large global offerings. We Work Together with our clients and the law firms to identify opportunities that are both financeable for the underlying client, where a cfo is saying, i would like to take some capital in against this litigation asset that i have today and that isnt doing anything good for me so we Work Together with clients and law firms to find cases that both are meritorious and also have sufficient economics that everybody is going to end up happy. The client, the lawyers, and bured f burford and its shareholders hasvery much for coming in and talking to us thanks, chris. And check, please is next. We make ideas grow. From an everyday solution. To one that can take on a bigger challenge. We are solving problems that improve lives. Nice rock. To one that can take on a bigger challenge. Its time to drop gold. Go digital. Go grayscale. The apple card will give customers a 6 discount on products bought in the apple store. Thats a very rare discount on products and the card holders can now pay for an iphone with 24 monthly sblau installments, with no interest one, do you think thats enough to get people to sign up for this apple card. Remember, this is the new product that theyre offering alongside goldman sachs. At the margins, it will do well and i think it has done well since the card has come out earlier this year. I have one, its very convenient you can pay it right on the phone. Its pretty cool yeah w, i mean, i think if i gives you a break, why not thanks for watching power lunch. And closing bell starts right now. Welcome to the closing be bell. Im Morgan Brennan in for sara eisen at the auto zone post. Take a look at that stock. Its up 7 right now its leading the s p on a strong earnings and sales the broader market, meantime, treading water with 59 minutes left to go in this trading session. And im brian sullivan. Wi wilfred frost will be along shortly. First off, youve got the u. S. , mexico, and canada agreeing to a new trade deal the usmc