Transcripts For CNBC Power Lunch 20150521

Futures are up 10 , consumer stap ems flattening out. And two of chinas richest men lost billions in just a few hours. Well tell you who they are and how they did it. But we start with a very rough trip for mcdonalds. Protesters have hit the street outside of the companys Shareholder Meeting. Theyre protesting low wages. Kate rodgers has been monitoring that meeting. The protests and the stock, which as we mentioned is trading down by about 0. 8 of a percent today. Kate. Well today was ceo Steve Easterbrooks first Shareholder Meeting in oakbrook illinois where he acknowledged mcdonalds challenges and touted his turnarounds. The biggest takeaway was a clear win for shareholders. One of the measures passed was a proxy access by law. Those who have held 3 of mcdonalds stock for three years to propose director candidates on proxy materials. This was a shareholder proposal that mcdonalds did not want to pass but it passed with 61 of shares voted. This is a way to make the board more accountable to shareholders. Meanwhile outside of the Shareholder Meeting, wage advocates for the fast Food Industry spent their second day protesting. Yesterdays crowd drew about 1,000 people and today there are several hundred people in the crowd. The demonstration was organized with the Service Employees international union. Theyre pushing for higher wages in the fast Food Industry and are making a visible plea for the company to invest in its workers. Mcdonalds did announce in april it would be raising wages to an average of 10 an hour by 2016 at its corporateowned locations but the move does not impact its franchise locations, which are the majority of its stores nationwide. Easterbrook did defend that move in todays meeting saying mcdonalds raised wages at Company Controlled stores because thats what they can control. Independent owneroperators will make their own decisions about pay. Back over to you. Thank you very much. Some upgrades and downgrades to tell you about. Pfizer getting a boost. Jeffreys tapping the drug maker as its top global pharmaceutical pick based on a positive outlook for its drug pipeline as well as other factors. Pfizer stock up 10 so far this year. Jeffreys also beginning coverage on nike its cutting its Business Outlook as well as the potential for shareholder touting the Business Outlook as well as the potential for shareholder friendly moves. Nike up 8 so far this year. Ali baba getting a nice job. Theres a High Conviction outperform rating saying the street is underestimating the companys growth potential. Despite todays big move ali baba talk is down. The dow is up for the fifth time in six days. The s p 500 is up for the first time in three sessions. Both, though on pace for a Third Straight week of gains for the very First Time Since february. Bob is on the floor of the nyc, Bertha Coombs at the nasdaq. Bob, you first. Theyre singing the starspangled banner. 2131, so were essentially in record high territory once again. We still dont have a lot of volume behind it but listen were in record high territory and thats all that matters. Airlines have settled down after a lot of damage done yesterday. The transport still down more than 6 on the year but most of them are fractionally to the upside. You can see how were moving today. The important thing is not much volatility in that particular group. Did you look at the vics today . This is the new low for the year essentially. Not a lot of worries. People arent trying to buy a lot of protection right now. Best buy had very good earnings on the top line but there was a lot of problems if you look underneath the hood a little bit, its up 5 . Look where the sales were great numbers in appliances and consumer electronics. Thats the tvs and the phones were really good overall, but entertainment was down 11 led by gaming and services were down 10 as well. Also shopify, they went public at 17 and opened at 28. You can see trading here at 25 and change. Mandy, back to you. Nice 50 pop there. Thank you very much, bob. Lets head over to the nasdaq a little further uptown. Bertha coombs following the big movers there. Hi, maengdndy. The nasdaq composite about three points shy of a record high. Apple a big reason why today. Apple at the highest level since back on april 29th and the stock today getting a boost over at Morgan Stanley. Google uses search to look at whether people are looking for flu information to see how flu moves across the world. Morgan stanley is looking and they say theres a lot more search for phones and for watches and so theyre raising their estimates there. Apple getting a boost on that. Also alibaba getting coverage over at bernstein. That is boosting yahoo a little halo effect and amazon has its price target to 520 over at morgue appearan stanley. You can now have groceries delivered in an hour from amazon in manhattan. Finally were seeing the halo effect from that big deal cvs buying omni care. A lot of the pharmacy stocks are moving up as that pbm value continues to get underscored by these values. Thanks very much bertha. A convoy of prison vans today bringing eight men to court who are suspects in the easter become jewelry heist in london that netted hundreds of millions of dollars in stolen goods. Some of those arrested were Senior Citizens all charged with conspiracy. When police made the arrests, they said they found significant amounts of highly valued property they believe was stolen during the burglary. Thieves used heavy cutting equipment to empty hundreds of safety deposit boxes from an underground vault. Lets go to dominic chu for a market flash. Its like oceans eleven. Financial engines, an online Advisory Service for Financial Products spiking on a report that wells fargo will plan to offer financial Engine Services to its retirement platform. The move would make Financial Engines Online Service available to 3. 8 million wells fargo 401 k participants. If youre looking for those auto rebalance products in those defined contribution plans, thats what Financial Engines does. Back over to you. Thank you very much. Hewlettpackard selling off assets in china, so its kind of got us thinking just how difficult is it for u. S. Tech companies to break into and or even stay and succeed in that market right now . Remember, many u. S. Tech giants are black balled in china. Plus billionaire blues. Not a problem ill have to face but how do you lose billions of dollars just in minutes . Robert frank has the full story. Well chinas richest man lost half of his fortune in under a half hour. A hong kong billionaire lost 11 billion the next day. Sudden wealth loss hits china, coming up right after the break. The Technology Changes the design evolves the engineering advances. But the passion to drive a mercedesbenz is something that is common. To every generation of enthusiast. The 2015 dream machines, from mercedesbenz. Todays icons. Tomorrows legends. Visit the dream machine event today for up to 3,500 towards purchase. Bring us your aching. And sleep deprived. Bring us those who want to feel well rested and ready to enjoy the morning ahead. Aleve pm. The first to combine a sleep aid. Plus the 12 hour pain relieving strength of aleve. For pain relief that can last until the am. So you. You. And you, can be a morning person again. Aleve pm, for a better am. There is an ancient rhythm. [ ] that flows through all things. Through rocky spires. [ ] and oceans swell. [ ] the endless. Stillness of green. [ ] and in the restless depths of human hearts. [ ] the voice of the wild within. Shares of halliburton and transocean both higher today. Both companies settling claims related to the 2010 Gulf Oil Spill with bp. Bp will pay transocean 125 million and transocean will then pay about 212 million to some claims related to the spill. Halliburton did not disclose the details of its deal with bp. Deutsche telecom ceo said he would consider a partnership to improve the performance of tmobile u. S. Of which it owns 66 . There you see tmobile shares up about 3 today at 36. 25. And shake shack is considering adding chicken to its menu in some way. According to a recent trademark filing shares of shake shack up 8 today alone. Its a hot one, mandy. It is a hot one. I love shake shack. Okay how do you lose 15 billion in 24 minutes . One wealthy Chinese Business tycoon found out the hard way. Robert frank is here with the story. Hey there, robert. This could be the biggest sudden wealth loss in all of history. Chinas richest man lost 15 billion in wealth in just 30 minutes. Li is the chairman and biggest shareholder of hanergy and shares fell by nearly half after li failed to show up for the annual meeting. The company is under investigation by securities regulators in hong kong for stock manipulation. The Company Shares are up more than five fold since september and that helped li surpass jack mah as chinas richest man no longer, of course. In a similar crash in hopping kong, shares of golden financial and golden property fell by nearly half. That shaved 11 billion in wealth from its chairman. Pan was the second richest man and hes known for his love of the finer things in life. He hangs out with Prince William at polo matches and owns vineyards around the world including three in france. In 2011 he bought a vineyard in napa valley for 40 million. In both of these cases you have huge runups in shares that are very thinly traded and owned by a handful of owners so you have to wonder why these shares and how these shares went so far so fast, and why they came down so fast. The speed at which it came up should have been a little bit of a warning sign right . Tyler, over to you. Great story, thank you. Sticking with whats going on in china, shares of hewlettpackard are higher today after the company said its selling a majority stake in server and Storage Company singwa. This is part of hps plan to restructure business there after the Chinese Government started encouraging the use of products from local Tech Companies rather than international ones. Should investors still invest in big u. S. Tech firms specifically if they are getting ousted in china. Joining us is the president of oberweis funds. Jim, are these companies being ousted or has the Chinese Government out of its concern that american infrastructure i. T. Infrastructure companies were being used by our government to collect sensitive information, are they being ousted or are they just making it very difficult for them to do business there . I think theyre certainly making it more difficult. I think its a combination, by the way, of sensitivity to technology but also in terms of trying to kind of level the competitive Playing Field for some of the upstart Chinese Companies. So combination, of course is always being packaged as a security sensitivity, though. So a lot of big, big, big u. S. Companies in the tech field point to growth from china as one of the key drivers of their businesses. So if this is happening and may well expand for whatever reasons the chinese cite which how big a threat is it to these companies and which American Companies are most vulnerable . Yeah sure. So lets look at kid of the ingredients that we would look for in a u. S. Company thats investing in china. First of all i look for nongovernment customers. So anybody who has a really diversified mix of nongovernment customers, i think thats a really good starting point because its just harder to regulate but thats not enough. You also have to Pay Attention to the policy trends. In other words, are you in an industry like cisco where its really sensitive and you know the government is likely to go after kind of the poster child. Third, are you a dominant employer in your field . Id much rather look at Small Cap Companies where theyre just kind of around in there and its not a big deal for the government. Those make lousy poster children. So that would be the way id look at it. Lastly, where does the Market Expectations lie . If investors are already expecting the government to come in and attack that area it may not be such a big deal. On the flip side jim, i know youve identified two u. S. Companies that do actually have a lot of their growth driven by china but which do not face such regulatory scrutiny or problems. Yeah, thats right. We look at Companies Like imax and synaptics. Imax is growing a little bit in the u. S. But exploding in china where they have about 220 theaters right now. Theyre building another 220. But theyre still only like 1. 5 of the box office in china. So its an insignificant share of the market. But theyre certainly benefitting from the overall growth and the end customers are diversified and not government owned. My other pick is synaptics which makes interfaces for computers and cell phones. I like them because they cell both for the local chinese upstarts as well as the majors like samsung and apple. They have a diversified mix and the end customers are likely to buy them no matter which Way Technology shifts. You just have to look company by company, right . Thank you very much. Well the buyer of the worlds most expensive painting is apparently still a large. A week and a half ago at christies this sold for for 179 million to an anonymous phone bidder. Sources say remember there are only a handful of collectors and institutions who can pay such staggering amounts. Billionaires leon black or steve wynn come to mind. Christies had no comment on who the real buyer is. Lets get to Courtney Reagan for a quick market flash. Shoes of lululemon on the move trading lower at about twice the normal 30day average volume. Womens wear daily is reporting the evp of global ecommerce is taking a new job at sock maker stance. Earlier this month lululemon did announce the resignation of 13year Company Veteran delany swietser. That is effective may 29th. This could be the second departure in just a number of weeks. Yum brands ebay val yangtiant pharma some of investors are in. The question is should you get in after the big guys have already disclosed their position . Dom chu taking a look. Youd think not but theres a new study that says you may be better off investing after these guys have already disclosed. Well have the results of that coming up next after the break so keep it right here on power lunch. When youre not confident your companys data is secure the possibility of a breach can quickly become the only thing you think about. Thats where at t can help. We monitor Network Traffic worldwide, so we can see things others cant. Mitigating risks across your business. Leaving you free to focus on what matters most. At chase, we celebrate Small Businesses every day through programs like mission main street grants. Last years grant recipients are achieving Amazing Things. Carving a name for myself and creating local jobs. Creating more programs for these little bookworms. Bringing a taste of louisiana to the world. At chase, were proud to support our grant recipients and Small Businesses like yours. So you can take the next big step. Welcome back to power lunch. Police in london are warning people of the health risks are using fake beauty products, including makeup and perfume. Tests have shown poisonous chemicals including arsenic, human urine and rat droppings in counterfeit products. They have suspended 5500 websites selling fake luxury goods and seized more than 5 million of fake goods in the past 18 months. Tyler. Heres terror of a different kind. I guess you do need makeup so you do need to worry after all. This is terror of a different kind. The newest ride at six flags magic mountain. It is a hybrid wood and steel roller coaster called the twisted colossus. It features two inversions. Look at that. Man, that looks cool. It is the longest hybrid coaster in the world, folks. Four minutes of sheer terror or joy, depending on your stomach. I actually hated, mandy, roller coasters most of my life. Now i love them. What happened . I dont know. I dont know. Youre supposed to become more fearful as you become older. I think the fact that youre harnessed in makes all the difference in the world. They were very rickety when we were young. Lets go to dom neck now. One of the big dilemmas for investors is should you get into a stock after activists have disclosed their position or is it too late, has all the money already been made. Youve crunched some numbers. The conventional wisdom is why get in because they have already disclosed these positions. They have already gotten in and gotten hypothetically more attractive prices and whatnot. Its interesting because the folks over at s p capital iq put out this study of the authors of the study actually looked at whether or not it does outperform the market overall if you invest right after these guys file. So they make their filings and you go alongside them and you know that they bought them. Those filings come out six weeks with a lag. The 13 fs do. 13 bs may be a little more timely. Ds and fs, i was very familiar with those letters in college. High school and college in some cases. Heres what they did. They looked at some of these firms and their study. They looked at investing in these firms right after they filed activist disclosures. We are taking a stake in the company and going to become activists. They then looked at the performance up to two years and they found there is outperformance in these stocks that activists have taken a stake in up to two years after investment, both against the overall market and against a certain control group that theyre looking at. Im not going to bore you with the details there. But the returns do start to dwindle after two years, assuming that the activists have taken their stake and done their thing. Heres some of the companies, though. The folks over at symmetric io they track performance and research them and take a look at all of the Hedge Fund Universe and found some of the stocks hedge funds like the most right now, the most involvement, mondelez has two activists. Yum brands valeant with four activists. So these are the most popular because multiple ones are in there. Still, its interesting only because whether or not these stocks will outperform over time history as shown that they have. How big is the universe of stocks that they looked at did you say . Again and how far back . They looked over i think the past maybe ten years or so. Now, whats interesting about this is in that same study, s p capital iq said Technology Stocks and consumer staple stocks appear to be some of the most popular and have been for years among these activist targets. So its an interesting story. And we can get the full story, boy the way, on the cnbc. Com cnbcpro. Com. Head over if you want to learn more about this. Okay. To the bond market Rick Santelli tracking all the action there. Rick, how are things going . Well mandy, if you look at the twoday chart theres a drift lower in yields. She sit right around 218. This would be the lowest trade since may 19th and the lowest close since fridays close at 214. It really underscores some of the big things going on underneath. Look at the pound today versus the dollar its running high. Its doing the same thing against the euro. If you look at the next chart, we were talking about how compressed it is look at this since march. Breakout city. Were solidly above 1. 20 flirting with trades above 121. This is a trade you want to pay close attention to. Rick if youre a savvywatcher and im sure many of you are, you probably know the dow transports underperform the dow industrials and thats raising red flags for the overall market. Is this a real fear or is it a head fake . Well debate that next. Plus todays powerhouse is home to the nations largest airport by area. It was host to the dnc two times. And it is the only city to have turned down the olympics. Can you name that city . Hello, everyone im sue herera heres your cnbc news update for this hour. The s. E. C. Announcing fraud charges against an atlantabased Investment Advisory firm and two of its executives for their handling of the citys pension funds. It accuses gray financial group, its founder, Lawrence Gray and coceo Robert Hubbard of steering Public Pension Fund clients into an Investment Fund that did not comply with state laws. A British Court awarded more than 1. 5 million in damages to eight people whose phones were hacked by mirror group reporters doing stories on celebrities. The highest payout went to the actress sadie frost who won more than 400,000. A falling hazard has prompted the recall of more than 25,000 booster seats made by oko. The stitching on the restraint straps can loosen which allows the straps to separate from the seat. No injuries have been reported. Japanese Technology Company fujitsu has the first Iris Recognition smartphone. It will be sold by mobile carrier ntt dokimo and allows them to unlock the phone by simply looking at the screen. Thats your cnbc news update. Back to you guys. Lets take a look at gold prices which are closing right now. Flip over the board, its moving to the downside at 1204 down by 0. 3 of a percent. Lets look at silver copper pauladium and platinum. All moving higher except for platinum. As for stocks the dow is up for the fifth time in six days. The s p 500 is up for the first time in three sessions. Theyre both on pace for a Third Straight week of gains for the First Time Since february. The nasdaq coming in as the top performer after gains by apple and amazon. Tyler. Mandy, thank you. Theres a long standing theory that if the dow industrials and the dow transports are both on the upswing, its one possible indicator of a healthy economy and a healthy market. Conversely, if one is close to a new high while the other is near new lows, trouble might be in the cards. Nin insana said this could be more of an underperformance. How explain the fact that the industrials are up so high and the transports are so low. Jim cramer has referenced this many times. As oil prices plunged, the transport soared because thats the biggest cost they had, whether its a railroad airline, what have you, so they outperformed madly on the upside. Since they have rolled over with oil bouncing up more than 50 from its lows they have started to head south even as the dow has headed north. Typically, tyler, there are three parts to the theory. Theres a move to new highs together theres a correction together and a move to a new high in one and new low in the other. Right now if we look at the transports over the last six months, it kind of looks like that. If you look at it over a longer period of time thats not as pronounced divergence. Theyre moving up pretty much in tandem except for very recently. Now if the transports were to trade through a new low and the dow industrials surged to a new high you would get a dow theory cell signal in which case people who follow this a long time would call that the beginning of a bear market. So the sell signal break it apart for me. Its because it suggests that if Transportation Companies truckers rails, shippers and so forth arent carrying as much stuff while industrials are producing stuff, that sometime that has to correct. If you go back to charles dow, the cofounder of the do you industrial average and the dow rail average for that very reason. If youre producing too much stuff an oversupply of goods. The industrials could be soaring because theyre making stuff. But if the shipper stops shipping because ends user demand is falling off, you get that divergence and supply and demand have to right themselves at some juncture. So whether it was the industrials and the rails or how the industrials and the transports diverge, it could be worrisome. Right now id say its yellow not red. Yesterday the airlines all went down rather dramatically, not because of anything other than that one Research Firm said that its possible that delta may add capacity. Right. Which would reduce the revenue and have a record summer season. Add capacity which would reduce average revenue per seat mile and all the airlines sold off. I would worry less about the cost issue, more about the final demand issue. If we start hearing from Transportation Companies, including airlines that business is slowing down then you really start to worry. Ron, thanks very much. Mandy, over to you. No matter what the theory the markets are moving slightly higher on the day. What is the best strategy for you and your portfolio. Lets bring in lori heinel and mark tipper. Lori, weve just been talking about dow theory. Does the fact that the transports are not confirming the new highs in the dow industrials, does that bother you . It actually doesnt bother us necessarily. We look at a number of indicators to adecember whether we think the markets are likely to move higher from here. One of them that we do look at is something we call the market regime indicator which has recently moved back into normal territory after being at high risk. What that is signaling is that we want to take on a bit more risk in our portfolios right now. What does that mean taking on a bit more risk . It means we are still favoring equities and still like credit. In fact were starting to move selectively to increase our overwaste to things like european stocks, for example, and to reduce the underweight weve had most recently in emerging markets. Mark, what about you . Does the dow theory at all give you concern at all, whether it be yellow or red . No it really doesnt give us any concern. Were focused on sector rotation at this point. We think that the highly acalm dafb Monetary Policy will act as a tail wind for the stock markets for at least another year. With the fed Interest Rate hikes looming, we do think that there are going to be clear winners and losers and we think that it really justifies some sector rotation moving from Consumer Discretionary into financials. Are there any particular financials that you like some more than others, mark . Yes, absolutely. So we are very fond of both key bank and jpmorgan. Key bank particularly is probably our favorite in the group. They a few years ago really got back to the basics with regards to their Business Strategy. So they really started to focus again back on loaning out money to local businesses. So being that they have a pretty big presence in northeast ohio ive been able to track them over the last few years and maybe four or five years ago they were doing relatively nothing in the sba market and now they are the leader in this region. So they have done a very good job of executing on that Business Strategy and they have a ceo whos really looking at taking care of expenses as well. Were going to leave it there. Thank you both very much for your commentary. For more on mark teppers favorite picks, go to powerlunch. Cnbc. Com and find all kinds of goodies on that page. Take a look at one month of crude energy climbing out of the oil. Could this be the end of the energy slump . If it is what does it mean for the power of the Great American consumer . Plus the city in todays powerhouse is home of chipotles headquarters. This city brews the most beer in the nation. And it was named number four in forbes best cities for job seekers. Can you name that city . 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Insurance coverage has expanded nationally and you may now be covered. Contact your health plan for the latest information. Why do we do it . Why do we spend every waking moment, thinking about people . Why are we so committed to keeping you connected . Why combine performance with a conscience . Why innovate for a future without accidents . Why do any of it . Why do all of it . Because if it matters to you its everything to us. The xc60 crossover. From volvo. Lease the well equiped volvo xc60 today. Visit your local volvo showroom for details. Biotech company Sage Therapeutics they raised to 85 on optimism of an upcoming drug trial. Shares are up 85 so far this year. The Housing Market is heating up out west and for once were not just talking about San Francisco. Diana joins us to give us the lowdown on the mile high city. Diana. Well, mandy, there is an awful lot driving housing in denver. Apple and google are bringing jobs here. Home construction is still pretty weak. Millennials love this market and the ceo of redfin wrote on cnbc that people are fleeing the high home prices in Silicon Valley and moving here. The result is that listings are down 15 year over year. Home prices are up over 11 . Days on the market are down over 30 . So what does that mean . It means that bidding wars are the new normal. Christopher simmons has been shopping for a home for six months. He lost eight houses because they all went in one weekend each and he lost two bidding wars. One of those had 18 bidders. Now hes finally under contract. He had to write a letter to the sellers about how he grew up in the neighborhood pleading his case and then he used a risky strategy, but thats how he beat out five other offers. I waived an inspection and the appraisal contingencies on all of the offers i made and on this one as well. Reporter now thats something you dont normally wanting to do when youre putting an offer in on a house, but you have to ask where are the home builders. Right now land prices are at an alltime high in this area. Theres not a lot of land to be had. All of it is out in the airport area, not exactly where folks want to live and the builders are seeing their margins stretch. So Going Forward you have to wonder whats going to happen with construction. Well, take a look right here. These are not condos, theyre rentals rentals. We have a severe lack of condos here. Well tell you why coming up in the next hour on power lunch. Time now to move to our powerhouse. It is the home of chipotles headquarters. One of the mannings plays there. Were talking about denver. With us once again, the guy whose name just says real estate to me larry hots of the kenwood company. Its always a hots market. Welcome back. Lets check out some denver market stats. The median sale price in denver about 283,000 with inventory of about 4,000 homes. Market time average of 62 days folks. Our first listing, larry, 752 hughes way. 559,000 taxes of a sickeningly low 3200, five bedrooms four baths, 2700 square feet of living space. Tell me about this one, larry. This one is in the near south suburb of Highlands Ranch, tyler. Its listed by rob goldhammer of our kentwood office. Highlands ranch is the most popular relocation suburb when folks are moving here. It was developed by Mission Viejo and it looks and feels very much like that Southern California community. Theres four free indoor tennis sports clubs, lots of open space and trails and excellent schools. The remodeled kitchen and bathroom stand out in this home. So does the formal dining room. It backs to open space and has views of the mountains. All right, the second listing is 9721 sunset hill place. 800,000. Again, a truly astonishing 6,000 in property taxes. Three beds three baths, 3200 square feet of living space. And this home is right next door to Highlands Ranch in lone tree colorado. Its listed by Mary Jane Ogle of remax alliance. Its conveniently located just off the i25 corridor as you go south from denver. Look at that. That looks nice. I love that. Its in a debated community of Heritage Hills. You can walk to the nearby Elementary School and the light rail station if you want to go downtown for dinner. Boy thats a nice one. Keep talking, larry, im sorry. Well its distinctive turret enters the home and it has a main floor master bedroom so the kids rooms are upstairs. Thats fantastic. Lets go to our powerhouse of the week. 9497 vista hill lane cue the music, ladies and gentlemen. Just over a million here taxes of 10 grand. Five beds five baths, 4700 square feet of living space. Look at that one, wow. That looks like it could be up at beaver creek, larry. Well, you know its in Heritage Hills also. And its in the more custom section. This tuscan beauty was built just a couple of years ago. It has an extremely open floor plan. Even the dining room is open to the kitchen, the sun room area. Theres a full finished basement for the kids. Mountain views from the oversized yard and covered patio. Its located just across the street from the Community Pool and tennis courts. It has five bedrooms five baths and a threecar side load garage tyler. That sounds really nice. Lets talk a little bit about dianas segment and whats going on in the denver area these days from where you sit. Yes. Well, we have this year has gotten progressively more competitive for buyers and im sorry to say the story that was told is fairly common especially for homes priced below 300,000. Thats why we dont have any on this segment because the homes below 300,000 dont even get photos in the mls before they sell. They sell that quickly and multiple offers i assume . Multiple offers one weekend and theyre gone. Wow. Larry, great as always to see you. Good to see you, tyler. Larry hots in denver. Mandy. As to the celebrity powerhouse for the day this is sean penns malibu beach house listed for sale at 6. 5 million. Its got three bedrooms three bathrooms and located on 1. 4 acres of private property with access to riviera beach. It includes a courtyard, a pool a detached guest house. As you would expect with mr. Penn, maid quarters as well. It looks very nice. It looks lovely. A man was tasered at Los Angeles International airport yesterday after broacheaching security and resisting arrest. Well bring you that footage and you warrantont believe who shot it. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. An unsettling incident at Los Angeles International airport on wednesday morning when a man broke through a security checkpoint. When security tried to stop the man, he resisted arrest and then continued to push forward into the departure area. Stop stop get on the ground get over here now. Get on the ground, sir. Taser, taser. Taser, taser. Stop, sir. Stop, sir. You need to stop now and he was tased finally. Thats when he was stopped. They subdued him in that manner. You can hear the officer saying taser, taser, im going to tase you. You may remember the man who actually shot this footage. The actor as mini me from the austin powers movie. He saw security following the man and caught the whole thing on his smartphone, mandy. Amazing, interesting. Okay here are this hours pourpt powerpoints. We learned denvers Housing Market is red, red hot. The supply is down and prices are up. Bidding wars are the new normal. We also learned that piggybacking on activists can pay off. They outperformed the market by 8. 16 over 24 months. And jeffreys tapping pfizer as its top pharmaceutical pick and giving nike a giant buy, giving alibaba a High Conviction outperform. And if you missed any of the big stories in the past hour go visit the site of powerlunch. Cnbc. Com, we make sure you miss nothing. Nothing absolutely nothing. Yahoo finance question of the day. While u. S. Markets have surged the economy is creating more low skill, low wage jobs. Have the markets gotten ahead of the economy . 58 of you say yes, 20 say no 22 say we wont know until the fed raises Interest Rates. Meanwhile, best buy surging after beating revenue and earnings forecasts, but can it maintain the momentum . Best buy or best short, well debate that coming up. Plus the latest on the oil spill in santa barbara, california. Governor jerry brown declares a state of emergency. Well tell you about the scope of the damage. All that and more when power lunch returns. The design evolves the engineering advances. 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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. Welcome back. Our very own steve liesman, the birthday boy has been looking into issues with how the government calculates gdp data especially in the First Quarter which can be a little bit iffy. You join us with more. I wish i could calculate my age the way the government does the gdp. Its really not a laughing matter, folks. The Government Agency is acknowledging problems with its numbers and saying that it will bow a series of fixes over the next several months. In a statement to cnbc yesterday, the bureau of Economic Analysis saying its quote, aware of issues in its Gross Domestic Product data and developing methods to address what it has found. The statement comes after cnbc in a detailed report in april shows First Quarter gdp data has been meaningful weaker than the other three quarters for the past three decades. Several economists and many wall street economists have since confirmed cnbcs findings. Barclays estimating First Quarter growth could really be as high as 1. 8 if you seasonally adjust it correctly. Nicole chief of the beas National Income and Wealth Division put together the gdp report. She said in the statement the agency has identified several sources of trouble in the data including federal Defense Service spending and other areas as well. Theyre going to come out with a first round of changes for the july 30th benchmark revisions and continue to study it over time. Initially theyre going back only three years to 2012. Why does this matter to anybody but wonks . Well thats a good question. I say it flippantly. Lets say youre the Federal Reserve and wondering whether or not to raise rates and the government reports a negative number but in fact the economy is more positive or the reverse, lets say youre a policy maker and you think everything is okay and you dont notice that the economy is actually weaker than you thought, it shouldnt matter a lot to investors if they take a step back and look at the big picture and dont make decisions based on a single piece of data. But the way people are today, tyler, as you know these High Frequency traders, the way everybody jumps on everything and changes their mind about something, they need to the data needs to be more correct and it can be. Stick around birthday boy, well keep the conversation going. Is the u. S. Economy on better footing than we think . With us now is cnbc contributor joe lavornia and jeffrey cleveland, chief economists with paden and reigel. Joe, let me turn to you. Do you think the economy is better than the data portray it to be . Yes, tyler. Steve, knows this already but the economy to me is better. Keep in mind while growth will certainly slow year on year this quarter, were still running 3 year over year in q1 from the previous four quarters. Thats one of the best growth rates weve had in ten years. Joe, i want to give people an idea of the math. When you do the yearoveryear comparison you get rid of the problem were talking about. Thats correct. I just wanted to underscore that joe. Yes. Thank you, steve, thats right. So when you compare apples to apples you effectively are seasonally adjusting away any First Quarter problems so the yearover hef yearoveryear number looks pretty good. I do believe things are getting better. What do you think, jeffrey, and what does it have in terms of implications for Monetary Policy. First of all, i want to say happy birthday to steve. Happy birthday. I actually wanting to go a little further than joe. I think the economy is fine. I think its on really solid footing. What weve been telling investors is to deal with the gdp volatility and the noise is to ignore it. Look at payroll growth. Payroll growth on a year on year basis is over 2 its been there quite some time. Its telling us that the economy is fine. For my money if the payroll situation holds up then the economy is great. We dont need to look at the gdp volatility. As i look at i just want to point out that Justin Wolfers did a study of payroll numbers an found seasonality does not exist there. So if youre looking for a coincidental indicator as to whats going on the jobs market may not be the worst place to look. Look at the claims numbers. Im sure you guys would agree, the claims numbers match effectively a 42year low. If you look at the last four weeks. So that clearly is telling you that the job market cant be that bad. Its got to be pretty good. But i dont want nebraska my personal view is i wouldnt give the u. S. Economy a clean bill of health. I see more problems out there than maybe jeff or joe. Im concerned about the effect of the dollar on u. S. Earnings as well as exports. How the Lower Oil Prices filter through the economy is very interesting to me. There seems to be an initial frontend pain that comes with firings or lack of investment in the oil field. I think those are questions that still need to be worked through. I think what the Research Shows is that its probably not as bad as weve been showing. Let me just let me just fire a final question here to both of you and really make it as yes or no as you can. Do you, joe, trust the gdp numbers now . Do you trust them less than you did . I never really trusted them. Thats why i look at tax receipts. Tax receipts are running at a 5. 5 year on year rate. Thats pretty darn straight. How about you, jeff . Dont trust the gdp, look at the jobs. Close to 250,000. Less than 25 of the time since the turn of the century, since 2000 2000, have we seen monthly job numbers growth like that. Its very important to be complacent. Lets not forget the fed is as well. It sounds like weve just learned youre sort of lays potato chip. If i can have just one it would be the tax receipts number or the payroll number. Theyre smart guys tyler, its going to change for them depending on what theyre trying to figure out at the time. Jeff and joe, thank you very much. And that is the first hour. And that is unbelievable hour. Now we get to go eat lunch. Yes. And Brian Sullivan still has one hour to go before he eats lunch because hes got a whole hour coming right up. We do. Thank you very much. All right, 2 00 on wall street noon in bozeman, montana. The bough down a melissa lee is at the nasdaq. Welcome. We begin with oil or more specifically gasoline prices. Because the economy never really saw the expected boom from lower gas prices. But now gas costs are back up. In fact gasoline is up nearly 40 this year. So will that hurt the economy as prices climb . Lets bring in jab ack ablin. Things are like things are going to boom because of low gas prices. We did not see that but as gas prices have gone back up, is that going to be necessarily a net negative or could it actually be a net positive in some ways. Yeah i would say maybe not as big a positive but certainly not a negative. I think the fact that this gasoline dividend did not find its way to American Cash registers means that theres really nothing to give up necessarily. Now, we are starting to see confidence pull back a little bit. I do think thats in response to some of the higher pump prices. But like i said we didnt see the boost from the lower gas prices, so we shouldnt necessarily see a pullback if they do retrace. And youve got a really interesting take, jack, which is why we love having you on the show that compares oil to Interest Rates. Please explain. Sure. You know remarkably over the last year oil and Interest Rates have been really closely aligned, largely because of the fact that oil price is probably a good barometer of Global Growth and so as weve seen oil prices come down over the previous nine months or so that has brought Interest Rates with it. Now that oil is rebounding a little bit, Interest Rates are rising. So my bottom line is you cant be bearish on Interest Rates if youre bearish on oil. So i think there you know its something you really have to at least take into account as youre considering one or the other. You know, kyle we always talk about oil prices on this show. I guess shame on us because most of our viewers are not buying barrels of crude oil. Theyre going to the gas station and filling up their vehicle. Wholesale gas futures up 40 year to date. Are you surprised by the magnitude and the turn higher in the price of gasoline . Certainly, yeah to a certain extent. Keep in mind also from a relative basis in which your other guest is talking about in terms of dollars, we bought them just above 2 in late january. At that time it was about 1. 25 lower than last year. We have risen almost 40 at the pump as well and are now about 2. 75. But thats still 92 cents lower than last year. Gasoline prices normally rise into the summer season. So while its certainly shortterm memory type thing and people were just thinking oh we were just paying just above 2 and now paying 2. 75, theyre still paying a lot less than last year so i think thats an overall net benefit. They still have more money in their pockets at this time of the year than they did last year visavis just gasoline prices. At the same time jack is it possible is it possible that the consumer has actually learned and learned to like saving and paying down debt and so therefore, when we see this rise in gas prices even though it may be for right now and for the Summer Travel season, they will actually cut back on retail purchases because they have gotten used to putting some of that money away . Yeah i think thats a great point. In fact one of the things thats really undermining this fed policy that began in the mid1980s is the fact that despite all of this Federal Reserve arm flapping consumers arent taking on debt. And in fact they have reversed course. If you look at the total amount of mortgage balances outstanding, were down about 1. 1 trillion from the financial crisis. Credit card debt around more than 600 billion lower. So i think that consumers either because of the uncertainty, you know we saw an article in the wall street journal yesterday about the variability of income perhaps creating some uncertainties in american households. Theyre really just trying to ratchet down perhaps some of their spending and maybe push down their debt loads. But if they are accustomed to the saving rate you know there is a line of reasoning that could suggest that maybe higher pump prices could come from retail. I suspect it probably comes from both. Kyle, i know youre not a stock analyst so im not going to put you on the spot from a stock perspective, but as gas prices fell the big refinery stocks valero to others they soared. Gas prices are back up. Is that necessarily then a negative situation for the refiners . No to kyle im sorry. Obviously the pump price minus their input costs. Actually gasoline margins are still pretty healthy, so you know, the refiner is in a unique situation. They spent billions of dollars years ago to upgrade their units and have a number of specialized units that can do a great job of putting that gasoline in the stuff they really sell. At the same time because of the low Natural Gas Prices and resulting low electricity prices they have a very distinct advantage over the rest of the globe. Were actually now exporting over 400 Million Barrels a day of gasoline so as long as its a Global Market and theres not a restriction on Refined Products like there is on crude, you know, the u. S. Refiner is in pretty good shape because they have lower costs and great equipment. Great conversation. Thanks so much jack and kyle. Keeping with oil here plains all american pipeline lower right now. The company under pressure after one of its pipelines in Southern California ruptured leaking tens of thousands of gallons of oil into the ocean. Scott is at the scene and joins us with more. Scott. Reporter hi, melissa. You can see from the activity on the beach behind me why this is such a slow tedious and big job to clean up this oil. We just heard from plains all american pipeline that they have recovered about a container full of that beach material and a few more containers of contaminated soil inland from where the pipeline broke earlier this week. And about 7700 gallons of what they say is oil and water mixture. So thats only a portion of that obviously is oil that leaked which means they have only gotten to a fraction of the at least 21,000 gallons that have leaked into the ocean. They do say that the recovery will accelerate dramatically today and they also point out that contrary to earlier reports, that pipeline was not running at full capacity when the rupture occurred sometime on tuesday. Nonetheless, it is a big mess here. Poorly timed for sure because its the memorial day weekend and a couple of very popular state beempzaches and campgrounds are closed so it hits the Tourism Industry and a cleanup thats going to take a while, but the company is saying theyre here to stay and committed to making this the way it was before. Well see how that goes. More bad pr for the pipeline business, scott, but lets switch gears for a second. I want to highlight a different story youve been working on for months. Lumber liquidators, the ceo unexpectedly quitting. That stock is down nearly 14 right now. What more do we know about this story, scott . We dont know a whole lot about why robert lynch unexpectedly, and thats the companys term unexpectedly resigned, but we do know what has been going on events accelerating around this company and none of them good if youre a Lumber Liquidators stockholder for certain. The criminal investigation by the Justice Department that the company disclosed in april saying that criminal charges are expected, were getting indications that is moving forward. We dont know if thats directly tied to robert lynchs resignation. We also know that state investigations and other federal investigations are continuing about this whole issue of formaldehyde in the chinese laminate flooring that the company has discontinued selling. The company has its own Board Committee looking at all of this. As we reported a couple of weeks ago, the companys insurers say they will not pay for the cost of defending more than 100 lawsuits and the company is fighting that in a state court in wisconsin. So tom sullivan the chairman of Lumber Liquidators, now takes over as acting ceo as they undertake what they say is a national search. Meantime whitney tillson, who brought a lot of the original concerns to 60 minutes saying today that while he is now not increasing his short position in the stock, he is not covering it either. He Still Believes that this company has some downside to it. And the events now are starting to suggest that may be the case. It was a 69 stock when that 60 minutes report came out. It is now sub 22. It has been an absolute collapse for Lumber Liquidators. Scott, thank you very much. This weekend traditionally a big one at the car lot, many dealers offering memorial day incentives. Phil lebeau joinings us now. The weekend aside, lets talk about may. Youve got documents to suggest this could be a monster month for car sales. It looks like its already in the process of becoming one of the largest months weve seen in some time. Within the last hour jd power released its forecasts who what it may sales to be. They expect the sales rate for the month to come in at 17. 3 million vehicles. That would be the highest Monthly Sales rate since last august when it was 17. 44. And heres whats interesting. Jd power says retail sales every day, 50,000 vehicles. That is the estimate from jd power. The best daily sales rate for the month of may since 2004. As you look at shares of the big three, keep in mind we still have a very big memorial day weekend, which is huge for the auto industry, and then we continue into june. So we have the potential here brian, to see the largest may in a long time potentially since 2005, 2004 and its clear people are spending because the transaction price, over 30,000 right now. Weve got to go to melissa. Phil, this is a point we have made many times in this program. Weve had weaker retail sales data walmart, macys and everybody is point here we go the economy is rolling over. When this many people are buying cars at this kind of price tag and maybe putting down 5 or even less theyre eating cash right . This is a big part of the consumer economy. Thats why theyre not going to macys. Absolutely. And its not slowing down. Thats the key here its not slowing down. Phil thank you. Cvs going after the senior Care Medicine market. The drugstore chain striking a 12. 7 billion deal with omni care. It boosts access to the growing number of Senior Citizens living in assisted living and longterm care facilities. It is subject to Regulatory Approval and expected to close near the edged of this year. Cvs stock is trading higher by 2. 6 on this news. Bri. Here is your power menu for the remainder of this fine hour. One apple supplier has been rocking it over the past year and we have the exclusive interview with the ceo ahead. Plus how is californias water crisis giving new meaning to the term sour grapes. Jane wells never missing an opportunity to go to napa. Shell join us. And from one wine to another. This one scott wine the ceo of polar polaris. He is here with big toys to play with. Well talk about that motorcycles, a crazy sling shot. Its a big interview coming up. Stick around. My name is peter tran. Im a gas service representative. Ive been with pg e nine years. As an employee of pg e you always put your best foot forward to provide reliable and safe service and be able to help the community. We always have the safety of our customers and the community in mind. My family is in oakland, my wifes family is in oakland so this is home to us. Being able to work in the community that i grew up in, customers feel like friends, neighbors and it makes it a little bit more special. Together, were building a better california. Bulldog mattress discounters Memorial Day Sale ends monday . Oh boy a queen size serta mattress and box spring set for just 397. Mattress discounters has the Largest Selection of memory Foam Mattresses under one roof well ill be. Up to 300 off tempurpedic breeze. And wow get up to four years interestfree financing on the entire tempurpedic cloud collection better hurry the Memorial Day Sale ends monday. Mattress discounters if youre the owner of this yacht, surely you can think of a better place to anchor than just outside of youngstown ohio. The trailer hitch became unhitched. The yacht found a spot right there on i680 in ohio. Whoever owns the boat good luck. Jimmy buffet sang about one particular harbor and i dont think thats what he meant. Probably not. Good luck to the owner there. Now lets get to a sector thats had a strong year and outperformed the s p 500. The Semi Conductor is up over 20 . Nxp up 70 . They have chips in things we use every day. With me now is the ceo of nxp semi. Always nice to see you. Nice to see you. Every analyst on the street says youre an apple supplier. Thats not something you specifically talk about. But today its Morgan Stanley raising estimates for apple iphones, apple watches. Should we get more excited about the nxp story . From an nxp viewpoint were focused on the wallet. We have multiple design forms in multiple platforms. But the mobile wallet is where we bring a unique proposition. Kind of based on the technology that we have with the bank cards that provides the fundamental key Security Associated with that, so we want to be able to supply that across the world with all of the leading Smartphone Companies to really make life easier and more secure. So whenever a customer does sell more phones or smart watches with the ability to pay, thats good for you . Absolutely. And same thing with the credit cards. Were also you know in china, they have implemented dual interface which is tap and go to be able to speed up commerce. The chinese are very focused on how they make commerce faster and weve given them the technology thats just like apple pay on a bank card where you can just tap and go. And you have a lock on that market in terms of the which i need card issuers . We have a very leading market share. We wont keep that forever. Our Worldwide Market share is 60 or 70 so we expect it to come down to that level at some point in the future. Lets talk about china because thats a huge engine of growth for you guys. I know you have many lines of business, but in the smartphone business, people think of apple and samsung as the Major Players but the major area of growth is the chinese manufacturers. Should that be surprising . And where will that be in your pie in say, five years . Thats a significant part of our growth. What we are focusing on is being sure that we can provide the same fundamental capability for a mobile wallet for them that exists today. And interestingly enough we have an audio product thats really widely accepted with the china inc. Smartphone guys where our found quality actually is enhanced. They used to call it the beats solution with htc. They went away but we still had the same sound quality and we provide that to all of the highend smartphone guys. Youve developed a partnership with qualcomm to include nfc, your field communication radios within the snap dragon chip. How important is that partnership . Today in the news there is news about hewlettpackard reorganizing their China Business because of the scrutiny u. S. Tech companies have had. There is a black list of companies, which include some of your customers like apple as well as qualcomm. Does that impact you . How does that impact you and does that impact the way you do business in china . I think you have to be flexible and figure out how to do things differently. We have a couple of joint ventures we have done. Were in the process of finalizing another joint venture. We want to be sure that were very open to doing things differently in china so long as we maintain the same cash flow, were not so concerned on what happens to the revenue associated with it. Really our focus is how to provide the technology and capability for the chinese market. Its not going to just be shipping Semi Conductors in like it has been in the past. Were going to have to figure out different ways to do it with joint ventures and license income and other ways to maintain the cash flow growth that we see in china. Specifically joint ventures with Chinese Companies. Does that benefit you to partner up with domestic Chinese Companies and is it a benefit that youre a Dutch Company and not a u. S. Technology company . Its a true benefit because of the relationship between the u. S. Government and Chinese Government. Being a Dutch Company were perceived as european. One of our heads of one of our businesses is actually on merkels asia council so hes very involved in the political situation. From a european basis, a german basis with china, so that gives us an advantage being a European Company and not being a u. S. Company. But really its about having the core technology. Our leadership position while it really is in security has positioned us well in china. Rick, always great to speak with you. Well get to you another time. Brian, over to you. Up next good oldfashioned stock brawl. The company, best buy. The contestants, urio and kill brook. Theyre going head to head next. Plus im jane kennedy and i get paid for this. What it takes to be a zoo keeper coming up on power lunch. Ght here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a redesigned cabin of unrivaled style and comfort. The 2015 cclass. At the very touchpoint of performance and innovation. Over 20 million kids everyday in our country lack access to healthy food. For the first time American Kids are slated to live a shorter life span than their parents. Its a problem that we can turn around and change. 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Were helping organizations transform the way they work so they can transform the lives of the people they serve. Best buy shares are on the rise right now. In the last year in fact the stock is up a whopping 40 . Earnings and revenue did top estimates. There was big demand for things like big screen tvs, smartphones and appliances. But jim says youve got to short this stock. Jeff kilberg disagrees. Jim, im going to let you start, the stock has been hot so if youve been short, youve been wrong. But youre saying stocks good, short it. Tell us why. I didnt say everybody should short stock. It wasnt as aggressive as you put it. I dont like the earnings. I think that they are watered down earnings they are a low ball. At the end of the day they sell the same stuff that everybody else sells so wheres theres no Margin Expansion anywhere in the future. The problem is they made a ton of money, a disproportionate amount of money on extended warranties. As Technology Gets cheaper and the lifetime of that particular Technology Goes down people will buy less of those warranties. At the end of the day they want to increase their online footprint but are still paying catchup to everybody else. The fact that it was after that 6. 5 rally means people arent ready to put this in their portfolio. I think its short with a target of 33. 5. Worst buy there from jimmy. Jeff, why is your good friend wrong . Well, he is wrong. I want to put him in a full nelson but i cant do that on tv. Im going to push back. 2012 it was a volatile stock. We saw a 50 drop. Richard schultz tried to buy it back but lets remember jimmy, just two months ago we were trading 42 so it did see a big drop 10 drop off recent store closures. Right now technically its about to regain its average. People are buying big screen tvs. At the same time the overall stock market was grinding higher. Its gone against the tape for two months three months. People are not buying new cars. Theyre not taking big vacations, but theyre buying big screen tvs. Im guilty. Phil lebeau just reported 17. 4 million annualized pace for new car sales, the highest pace since 2004. No doubt. They have to buy them directly from the dealer. With electronics, you go to best buy to shop around and then it online. We just did this i was just there. I matched the price on amazon. Best buy hit the price, i bautought it at best buy. Weve got to go j. J. Thats your permanent name now from here on out. Its j j, like m m without the vocal skills. As long as im the first j. Do it killberg. Theyre both on twitter, as am i, let us know. Time for our weekly series where we feature people with cool jobs. Do you think your office can be kind of a zoo . Meet a woman whose office literally is. Im jane kennedy and i get paid to be a zoo keeper. My office is the most beautiful office in the world. I have 359 animals that im responsible for every day, so i have to find every single one of them every single day. Every morning we come in and we load our feed trucks up. The first thing we do is we make a cursory check through the whole exhibit to see if theres anybody thats been born or maybe somebody thats hurt. A triumph story is the success of rhinoceros breeding. The safari park that i work at is the most successful Breeding Program in the world for captive rhinoceros. Weve had 176 rhinos born there. Ive been able to see 12 rhinos born all different kinds over my career and thats something im really proud of. One of the things we would do for rhinos because theyre susceptible for sun burn is rub lanolin and mud on their skin so when they go out in the sun they would be protected. When i ending my day, i can look at all the animals i took care of that day and i know ive made a difference. All right. Another thing kennedy enjoys is feeding baby giraffes. Who doesnt enjoy that . She uses a giraffe print towel to get the calf to come over. She steps on a ladder and bottle feeds it. She has to sit on a higher ladder as the giraffe outgrows the bottle. Thats cute. To find out more about kennedys cool job, go to powerlunch. Cnbc. Com. We are counting you down to the oil close. Were going live to the nimex when power lunch rurnltseturns. By the way, weve got really cool motorcycles coming up. Dont you go anywhere, america, and the world. Dont just visit new york. Visit tripadvisor new york. With millions of reviews and the best hotel prices. Book your next trip at tripadvisor. Com today. Just because im away from my desk doesnt mean im not working. Comcast business understands that. Their wifi isnt just fast near the router. Its fast in the break room. Fast in the conference room. Fast in toms office. Fast in other toms office. Fast in the foyer [pronounced foyyer] or is it foyer [pronounced foyyay] . Fast in the hallway. I feel like ive been here before. Switch now and get the fastest wifi everywhere. Comcast business. Built for business. Hi everyone im sue herera. Heres your cnbc news update at this hour. President obama says he plans to designate tunisia as a major nonnato ally of the United States after meeting with tunisias president at the white house. He said the u. S. Will provide shortterm aid to the country so it can complete economic reforms. The National President of the boy scouts robert gates, says the organizations longterm ban on gay adults is no longer sustainable and is urging change in order to avert costly legal battles. He made those remarks at the Scouts National meeting in atlanta. The navy releasing video of one of its surveillance planes flying over disputed islands in the south china sea. During the flight it was purportedly warned by a chinese Radio Operator to leave. China is trying to enforce a military exclusion zone around those islands. The spacex cargo craft departing the International Space station with 3,000 pounds of experiments and equipment. It arrived at the space station last month and is expected to splash down off the Southern California coast tomorrow. Thats your cnbc news update at this hour. Back to you, brian. Thank you very much. Oil bouncing back a bit today. It is back above 60 a barrel. Lets get to Jackie Deangelis at the nimex. Yeah 60. A key level, weve broken through that and a slightly weaker dollar is supportive but the market is digesting those inventory numbers yesterday but traders are saying 65 is probably the upper limit for crude oil this summer. I do want to mention if youre hitting the road early tonight, as some people are, 2. 73 is the National Average for a gallon of regular, according to aaa. The good news thats still 91 cents less than it was last year. Maybe people will take that money and spend it elsewhere. Back to you. All right jackie thank you very much. It is time now for trading nation. Were going to flip the order of trading nation and street talk because were talking oil and energy stocks, so it sayingegues nice. Pavel, you cover a bunch of these companies. Weve seen a comeback in oil and in some of these companies. You have told us many times on this program that the equities will lead the commodities. Based on that what are you seeing . Yeah. That indeed is whats happening. If you look at the average oil stock today, its discounting 70, maybe 75 oil long term. Todays price is obviously a lot less, its in the 60s, as you mentioned. But the futures curve for oil, you go out to 2017 18 and beyond is in the 70s so the equities are pretty fairly discounting where the futures curve is heading the next three to five years. Boris, ill say this good goldman sachs. They have been out there with that lower oil call. Theyre at 45. They wasnt waivered. If anything they may have doubled down. They seem to be hanging out there by themselves on these much Lower Oil Prices by the end of the year. Are they going to be right or spectacularly wrong . Right now theyre looking spectacularly wrong. Its only may. They said the year. Its possible but it looks like its coming to be a supply problem rather than a demand issue. Its clear that the geopolitical tensions in the middle east some of the supply taken off the market and the fact that we were so extreme to the other side were just having a natural readjustment in the oil market right now. So it seems like this 50 60 is much more of an Equilibrium Trade right now. I dont see it going down to 45 again because it was a ridiculously sentiment driven market. In fact i remember when we were at 45 joe from squawk box was basically saying im willing to sell anybody puts on this trade and nobody was willing to take it because they were so fearful it was going down further. Pavel, are the companies you cover still good bets even though many of them have recovered off their lows . The stocks that have not bounced as much are generally the more defensive oil stocks so some good names that are really not off their highs as much as you might think would be large caps chevron, oxy, hes, apache anadarko. They have not rallied from the junk rally in microcaps and small caps. And valuations, boy and large, while not cheap obviously, certainly not at todays prices we think there is value in some of those larger more liquid names. Pavel, boris, thank you very much. A reminder when youre in front of a computer check out tradingnation. Cnbc. Com. We do two extra segments every day. It is now time for street talk. Every day were digging out analysts recommendations. Melissa, are you ready . Always ready. First stock, nike. Jeffries begins coverage with a buy. They view this as a solid longterm play for investors seeking large cap growth. They note melissa, and this is interesting, that despite under armour and adidas coming up nike is still dominant. 47 say their favorite athletic brand is still nike. They have 120 target on the price. That implies about 14 upside. This is one area brian, that consumers seem to be spending on, home as well as athletic wear. Take a look at foot locker fl. Thats hitting a 52week high. Second stock here there was an underrate rating on the stock lowering the price to 32. Profits were down 24 . Gross margin the lowest in three years. On top of that the analyst says competitive threats will increase this summer. Thats a 43 decline in cash flow. Maybe thats why the stock is down 25 year to date. Everybody out there note the analysts price target is now 5 above the current price. Stock number three, mastec. Its down 30 this year about 50 over the past 12 months. Stevens resuming coverage and theyre optimistic. They have a 23 target. 25 upside from here. I understand that wont get you back to where you were a year ago. You fall 25 youve got to grow 50 to get back there but theyre saying maybe the stock has bottomed out. Option monster on its blog is point out theres bullish activity today and also bullish activity yesterday in terms of the calls. Yesterdays Overall Option activity nine times the average daily volume of calls on number of puts bullish boy a 351 ratio yesterday. So something is going on here. Williamssonoma, raised the price target to 80 from 75 but we should note thats about where the stock is trading right now. The analyst is point out the results were strong. There are good signs from q2 but they did lower its outlook back in march. The analyst is optimistic about the second half of the year. Who doesnt need a 500 vitamix blender. You can make smoothies. Janey calls this a good company but an expensive stock. Todays under the radar name, Sage Therapeutics. The ticker, sage. Its a biotech based in cambridge, mass. Boosting their target to 85 from 58. The stock had gone through 58 so they had to do something. Theres a higher probability for success for sage 547. Its a treatment for seizures. Yes. And this company specializes in Rare Diseases that affect the Central Nervous system so its a specialized biotech. Based up at your old stomping grounds at harvard. On deck what shake shack did that may just have that stock soaring today or it could be something totally different. And from burgers to bikes. The ceo of polaris is here and he brought some hardware. Some very cool motorcycles. There you see them live. Well talk about that a wicked slingshot, his business and why painting is a problem. Stick around. And now your trading nation stats of the day and a word from our sponsor. Net net a strong dollar is good for the economy but that doesnt mean all companies will benefit equally. 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Scott, thank you for joining us. Youve got a paint problem but its a good problem to have because sales of motorcycles have been so good that youre actually struggling to meet production. Explain whats going on. What we did, brian, we recognized that demand was going to be high so we built a new paint system that had better capacity, quality and lower cost. Its taken us a little longer to ramp that up. So we have got a Phenomenal Team working on it. Were outsourcing some of the bikes now but were several thousand bikes in backlog. Is it a problem thats going to impact investors or literally just a slow delay lag on getting new bikes out . No its not a big problem for investors because the demand is going to be there but we really want to satisfy the customer demand, which is just extremely high for all of our motorcycle brands right now. Why are you so bullish on motorcycles . Youve been right but what are you seeing that leads you to believe that this bike here, that this is going to sell . This is the price of a car. Well what weve been able to do for a long for the 61 years of the company is drive performance and innovation. And what we figured out in motorcycles, if you drive performance and innovation with a phenomenal brand and great styling, its a formula that works. Im going to give you credit scott, youve come out with cool stuff. The slingshot, threewheel thing. I would like to do that. Talk about that. Youve also got an atv, really an atv with a roll cage you call it the ace. Its kind of a different experience. Are you worried about bastardizing your own business in a way . If we dont cannabalize ourselves, somebody else will do it. We talk about an armata of offroad vehicles. And the ace, the single seat vehicle you talked about, the mixture of an atv and sidebyside its for that customer that wants a little more comfort and safety with a Steering Wheel but yet still have the individual experience. The slingshot got a lot of attention. Car magazines are talking about it and test driving it as well. Its classified as a motorcycle in some states in other states an auto cycle or a car. Its gotten the buzz but does anybody buy it . It is one of the most desired products from the launch weve ever had. Desired is one thing. Were talking about people that placed deposits and make orders. So theyre buying it theyre not just looking at it. Theyre getting it. Literally thousands of orders on backlog. In fact the dealer the rolling fast guys that brought these bikes over today whispered in my ear, can you hurry up and get us our slingshots. Whats nice about it is the broad demographic. Weve got 65yearold men who dont want to hurt their back on their old bikes anymore. Young people women, it is just a fantastic success. And before we go ive got to Say Something thats kind of cool. You are also from the Shenandoah Valley of virginia. I am. Im going back to speak at my high school graduation. What high school was it . Turner ashby. Did you ever play james wood in football . We never made it that far. James wood was a good football team. He was a graduate of the naval academy. Youre a midshipman. Congratulations. Thank you for serving the country. Go, navy. Thanks brian. Thank you very much. Well an influx of tech jobs has made denver one of the hottest Housing Markets in america. The only problem, its getting hard to find a house to buy. Maybe the only market hotter than denver right now is San Francisco. After the break, were going to bring you our latest installment of the series were calling are we getting stupid again in real estate . I came up with that name. Were back after this. The cnbc realtime Exchange Market snapshot is sponsored by interactive brokers. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. Ideas come into this world ugly and messy. They are the natural born enemy of the way things are. Yes, ideas are scary and messy and fragile. But under the proper care, they become something beautiful. If you want to succeed in business, mistakes are a luxury you cant afford. Thats why i recommend fast reliable comcast Business Internet. They know what businesses need. And theres a nomistake guarantee. If you dont like it, you have thirty days to call and get your money back. With comcast Business Internet you literally cant mook a mistick. I meant to say that. Switch today and get the no mistake guarantee. Comcast business. Built for business. Shares of shake shack soaring today. The only news on the stock, the company filed a trademark for chicken shack, meaning it could be adding chicken to the menu. But is that enough to second the stock higher by 7 . This is a new high, by the way, on the stock. It isway, on the stock. It has more than quadrupled. A lot of the other recent restaurant ipos are doing quite well. Habit, loco. There is a restaurant called the chicken shack in astoria queens, new york. Its called chicken shack. Just note to shake shacks attorneys. Here on power lunch, we have created something that we call the power city index thats exclusive to this fine program. We took 30 groups of stocks from the 30 biggest metro areas in america, got stocks in each index. Its a great way to see what areas of america are doing well in the stock market so to speak. And though san diego still leads all the indexes this year with an average stock return of 17 , most of those gains are coming from just a couple of red hot biotechs, but hot on san diegos heels lately denver. Its 12 biggest stocks have an average return of nearly 11 this year. Those hot stocks include new mont mining western union, cimarex energy. Only two of the 12 biggest stocks in the denver area are down this year. Those two are dish network and chipotle. So, speaking of denver, it has also become a hot Housing Market. Maybe those two things are related. As more Tech Companies like google and apple are also bringing jobs to colorado. The problem is very simple. There simply arent enough homes to buy. Diana olick live in denver for us. Reporter its particularly acute here in denver. Listings are down 15 from a year ago and thats pushing prices up by the double digits. Of course, there is plenty of construction going on but its all rental. Not condos to buy. In fact, just 2 of multifamily construction in the city right now is condos. Now, some say its just weak demand left over from the recession, but the bigger issue may be a colorado law passed in 2010 that gives homeowners associations greater leeway in suing developers for even the tiniest defect in the product. That is keeping Developers Like chris wagget from building condos. Instead, hes all in rentals where demands are soaring and so are rents, but that all comes with a catch. For investors, its a fantastic market. But i dont think incomes have been rising at that pace. I think we all know what happened in 20082009 where we got an imbalance between incomes and value of property. In this case rent. So, those are serious issues. Now, the only developers who are doing condos are doing it on the very high end, in the multimilliondollar range. Thats because thats the only way that they can afford to get litigation insurance and also to do overthetop testing on these buildings. In order to ensure that these lawsuits wont go all the way through. If you want to see some of the overthetop things theyre doing, post it online realtycheck. Cnbc. Com. All right diana, thank you much. This is either the worlds worst real estate pricing job, or a big scary sign of the times. The San Francisco house youre looking at just sold for more than double the asking price. It looks all right from the outside, but the inside, its pretty much dilapidated. You dont like green carpet, brian . Well actually, that carpet it looks like astroturf. There are rooms that have holes in the floor. It went on the market in the Mission District last month at a price tag of 1 million. Now the price told for 2. 3 million. So melissa, is this 2005 again . Are we getting stupid again . Where it was just the worst real estate pricing job of all time . As you know the Mission District is an up and coming place. I wouldnt be surprised if somebodys just buying this thing for the land, tear that thing down and put up something that could be two stories, two separate units, that could be sold each for 2 million. But a realtor should take that into consideration and put that into his or her pricing on said property right . So youre saying that its not priced high enough . If it sells at 2. 3, who cares what it was listed at . All i know is this. The average home in san jose california, is now selling for 11 times the average income. Wow. Kind of been there before. Quite a market. Well have to watch this. Dear congress, Pay Attention now. Some businesses in california speaking of california, are taking extreme measures to cope with the drought. Jane wells is live at one winery takeing an unusual step jane. Are you sober . We got a lovely rosay, a sparkling wine. Theyre turning wastewater into wine, and not just any wine. Napa wine. Were going to check it out after the break. More and more, data is visual. In fact, the number of mris has increased by ten percent a year. And a radiologist might view a thousand images to find one tiny abnormality in shape, contrast or movement. Because its so challenging a Research Project is teaching ibm watson to see. In the future, it could help clinicians spot key patterns quickly and precisely. Ibm watson is working to make healthcare smarter every day. A winery in california is dealing with the drought by using wastewater. Its not as bad as it sounds we hope. Jane wells is here now to explain. Brian, it gives new meaning to pinot noir. The technology has come so far that its being used to irrigate in the most prestigious wine region in the country. Talk about affluent for the affluent. Yes, i could go on and on. Hes really been on the cutting edge of using water efficiently. Were going to come back to a point in the next five to ten years where im sure all the recycled water will be efficiently used instead of just dumped into the river to dilute into the bay. How come more farmers arent using recycled water . Theres still a negative perception about it. This is the chlorine contact basin. Reporter the water comes from the facility which uses a filtration system to vacuum out and clean the water. Its spending 3 million to upgrade. Including buying a recycled holding tank to hold more recycled water as demand increases, because fresh Water Supplies are being cut. We have customers that make concrete products landscape areas, garbage facilities that use potable water. All of these could be recycled water. We dont have our own reservoir, so when the state says youre going to cut, were going to cut. Oh hey there. Well, it tastes fine to me. And the grapes that went into this sparkling wine came from this vineyard or part of them did. Back to you. The real apples to apples comparison, though jane would be if you had a bottle of that that was fueled by or fed by recycled water versus nonrecycled water. They have. Theyve done it. Side by side . In napa valley you do not mess around with the cash cow. If it had a different taste, they wouldnt buy the grapes. I just want to say, jane, you upped the ante with the peeno noir. I dont know what my number two is. Its from daniel in the assignment desk. These young people theyre so clever. Melissa lee. Whats on fast money tonight . Thank you, jane. The ceo of shazam. We have got him tonight. Thats cool. Ill know what hes saying. Thank you very much. Closing bell starts right now. Hi and welcome to the closing bell, everybody. Im kelly evans. And im bill griffeth. Stocks modestly higher but only modestly. The s p is on track to close at a new alltime high. That would break a twoday losing streak. As for the dow, its higher for the fifth time in six trading sessions, although were still a few points away from a record close for that one. The nasdaq is finally in the water, trying to end at a new high as well. Thats something we havent seen from that index in nearly a month. Coming up over this next hour at least, much mor