Transcripts For CNBC Power Lunch 20150921

The question is sort of the Yellen Dudley more dovish wing of the fomc as to whether or not theyre adamantly opposed here, but the other guys, i think it was about letting the markets settle down and waiting to see if there was anything more serious that the markets were telling us from the recent volatility. But if things have passed and they seem to be quite a bit calmer than they were previously, then i think that group of people we were just talking about are quite comfortable hiking rates. Steve, thanks so much. The markets were already moving lower throughout the last 45 minutes or so because of whats been going on in health care. Theyre going to react to this more in the minutes ahead. Steve weiss, it brings up the question again, if the fed acts in the next month, stocks are going to blow that off . Look, i dont know market can go up if the fed hikes rates . I believe that if we get Everything Else sort of more comfortable, the markets trade up. I just dont think the fed is the principal issue and i do think theyve now nobody was prepared for a hike before, very few were in terms of fed funds rates and so forth, treasury rates, futures. Now i think the market is prepared and they will go in year. Lets not forget that 13 of 17 fed members thought rates were going to go up this year. You listed the number of individuals that have already said they favor. Youre going to hear more about that because, again, the vast majority of these guys still think rates are going up this year. To some degree this shouldnt be news. You got fed chair yellen speaking later this week. Put it all into context where the market is today and where it could move and not only in the hours ahead but certainly in the days and weeks, and power lunch picks up that stoush right now. Scott, thank you very much. Welcome, everybody, to power lunch. Along with mandy drury, im tyler mathisen. Watching the markets turn a little sour at this hour. The nasdaq and the s p 500 both in the red. The dow clinging to about a 20point gain. You know, those fed voting members all saying, so many of them saying by the year end, they expect a rate hike, and that would mean either october, mandy, or december. We also begin this hour with the biotechs because theyre getting slammed following comments by president ial candidate Hillary Clinton. The ibb nasdaq buyer tape index right now down by over 5 . In a tweet responding to a New York Times article highlighting the soaring cost of Specialty Drugs, clinton says, quote, price gouging like this in the market is outrageous. She goes on to say she will lay out a plan to take it on tomorrow. So the biotech is dragging down the nasdaq this hour. Bertha coombs is there and shes tracking the big movingers. Hi, bertha. Hi, mandy. This is not a new complaint were hearing when it comes to biotech prices, but the move in biotechs has sent the nasdaq into negative territory. The big caps, small caps are down. Its actually the smaller cap by yes tech index at the nasdaq thats off the most. Prices on Specialty Drugs have raised concerns among doctors and payers alike. In this case secretary clintons complaint is about a 60yearold drug to treat parasitic infections where the price was increased from 13. 50 a pill to 750 a tablet after it was acquired. Hot drugs like hepatitis c treatments have led to outcries. New cholesterol drugs on the horizon have already galvanized payers to take action. Clinton is going to outline a remedy tomorrow. Investors are clearly worried the stakes are rising for perhaps regulatory action no matter who wins the election. Mandy . Okay. And a major exclusive in the next hour, bertha, because we have the ceo of one of the by yes techs highlighted for soaring drug prices. Stocks overall giving up their big gains. Lets look at the numbers. The dow is currently only up by 31 points. The s p up by less than 1 point, and the nasdaq is currently sitting to the downside. Bob pisani joins us from the nyse floor. Not just whats happening with biotechs but a plethora of fed speak to digest here for the market, largely hawkish as well. And i think that is impacting as well. Lets take a look at the s p 500. 3 to 2 advancing to declining stocks at the New York Stock Exchange but it was a lot bet irthan that earlier. The volume is on the moderate side after fridays titanic volume, second biggest volume day of the year. Put up the s p 500. We started turning south a bit right around the european close around 11 30 but i think 3457ndy has it right. All that talk from fed officials about maybe raising rates combined with Hillary Clintons comments weakened the market a bit. If you look at the sectors, energy has held up pretty well as we had oil up about 3 . Theres always a big mover. Financials doing better after getting clocked a little bit last week. Consumer staples strong, but there you see health care down noticeably, and while bertha highlighted the biotechs rightly so, its not just that. Its the big Cap Health Care names. I mean big pharma names. Bristolmyers, merck is a dow component, down 2 . Thats whats weighing on the dow right now. Pfizer as well, down 1. 7 . So the Dow Jones Industrial average is actually underperforming the s p 500 because of the stronger somewhat stronger big pharma component in there. Elsewhere if you take a look, we had strong whenever oil is up it tends to help the dow because you have chevron and exxon on the upside. Theyre fairly highpriced stocks. Ibm turning around a little bit. Tough week last week and the financials doing better. Goldman is a very high priced stock. Thats moving things and, tyler, ge and some of the global industrials that had a terrible time loost wake alast week also little bit catch up. Thank you very much. Fed lines well call them. Steve, recap what we just heard. We had Dennis Lockhart, the atlanta fed president , basically making a case for rate hikes defending the idea of a pause saying, you know what, weve made it on the labor test or the labor market improvement test for hiking rates and hes confident enough in the Inflation Numbers to go ahead and hike. He sees marketbased measures of inflation are pretty stable. The economy is growing. He says performing solidly was the term he used, and plus he sees wage pressure a little bit more widespread than we heard any other fed president say. So all of this combines to say, you know what, hes ready to hike rates. He used that phrase, the idea of im confident that the muchused phrase, quote, unquote, later this year is still operative. Theres not much of the year left s there . No. You have these comments from williams, the u. S. Economy is on a solid footing, and then just now lockhart saying the u. S. Economy is performing well. It begs the question why are we at an emergency level of Interest Rates, right . Thats what jim bullard talked about this morning. He said its hard to make the case for emergency levels of Interest Rates and made a strong case for hiking rates saying dont tell me when we raise by a quarter point were still not accommodati accommodative. Theres an enormous amount of accommodation in the system even after the First Quarter point hike, the fed will still be accommodative. Michael farr was mentioning on fed day that dont mistake a change in the number for a change in policy particularly because its still going to be very accommodating. The outlook is for the fed to be accommodating for as long as three years even when they get to the place, the final place, or the terminal rate, its still going to be well below where theyve even started other rate hikes at previous times. So the current outlook is 3. 5 . Our cnbc fed survey is even lower than that at 2. 9 for where the terminal rate is. Thats a debate between markets and the fed, but in either case its very, very low, and so theres not really a concern that ultimately the will be tightening it. Last week you were right on the money. I asked what you they were going to do and you were right on the money. It was easy. I flipped a coin and took the other side. Next fed meet something on october 28th. Thats the night of cnbcs republican president ial candidate debate. The candidates will have a lot to talk about from the fed and a big day and night, october 28th, right here on cnbc. As weve been mentioning, the biotechs have been taking a hit. Small of caps out of correction territory. So where are the opportunities in this market . The feds decision to hold rates may have just made this sector a big bargain. Which sector are we talking about, dom . Perhaps a bargain. Were talking about the financials. One of those sectors thats extremely levered to what happens with fed Interest Rate policy. Those financials have been a big focus for a lot of investors because they may represent an opportunity. Remember, financials the second biggest sector in the s p 500. If you take a look since those august 25th crisis lows, the recent market in turmoil lows that we had, equinix, Iron Mountain at this, and s. L. Green realty have been some of the financials, i say this loosely, financials that have outperformed the broader market. I stha because these are each Real Estate Investment trusts. Thats the reason why theyre important because theyre those Interest Rate plays. If you take a look at some of the ones that have been lagging behind, amg, franklin templeton, legg mason. They have been relative laggards. Theyre not bad. They just havent participated as much. One other place we want to look at, some of the big Investment Bank broker dealer type. You look at Morgan Stanley in focus, right . You see here that some call it a death cross, maybe some momentum lagging behind here and then, of course, the reason why its important, the last time that we did see this kind of a downward move was back in 2011 and it took a little while for the markets to bottom out. So thats why some traders are a little bit skeptical right now. The last time we saw a cross like this, guys, it took a while for the markets to reach a bottom. Thats why some traders are a little bit cautious about the current market action. Back over to you. Dom, thank you very much. Lets get some Market Insight from an investing legend. Jack bogle is the founder of the vanguard group. Jack, a legend. You have become a legend in your own time. How do you like that . A legend in my own mind might be more like it, tyler. Lets talk a little bit about Interest Rates and whether you think a slight rise in Interest Rates is, one, appropriate, two, any occasion to change your fundamental investing practices. No, i dont think its going to be big enough. The stage is set for very cautious policy for a long time to come, whether its up a quarter of a point or a half a point, who knows and who knows when. Tyler, i thought for one, i thought that the feds decision to put off any rate increase at the meeting last week, i uttered a quick bravo to the one of the interviewers. Because . Because i think caution should be the watch word of the day. The fed should be watching out for an economy that, you know, i dont know if its really vibrant. I dont think ts vibrant. Its adequately strong, but im not sure thats good enough. I mean, we know that wages are still under pressure. We know that the workforce, the size of the workforce, is not growing much, and we know there are plenty of challenges ahead for our economy as the whole World Economy gets into this messy state its in. So i think the fed is doing just the right thing under the old hippocratic oath, tyler, first do no harm. Right. Lets move on, i just did a radio piece an hour or so ago on dollar cost averaging, jack, and it seems to me that in a market like the current one, equity market is what im really talking about here, where there is volatility, that it makes a perfect argument for why dollar cost averaging is the smart way to go for most investors. Im not asking you to agree with me but maybe you do. What do you think . Well, certainly for anybody with a Retirement Plan or trying to invest for their childrens college education, those are some of the main needs of investors, but take the simple one, the Retirement Plan. There is no other way to do it. You want to Start Building early, as early as you possibly can because that slope gets steeper and steeper. The more money you have to put in per month the closer you get to retirement, you almost cant get up that hill later on. So start now, keep investing. When the prices go down, be happy. People dont seem to understand that when the markets are at highs, its great for sellers and bad for buyers. When the markets go way down its great for buyers and bad for sellers. These are the markets. This is the great casino out there, tyler, so just ignore all the noise. Ignore all the noise and keep your eyes off the headlines. Good to see you. I want to ask you about Goldman Sachs making a play for mom and pop investors with a new line of low cost etfs and i believe reportedly some are even cheaper than some of those from vanguard. Do you see this as competition for you . Well, i never thought wed be in competition with Goldman Sachs for anything, but you have to understand that etfs today are a very unusual kind of index fund. Theyre largely created for speculators rather than for longterm investors, and this year the numbers are Something Like this, that the trading in etfs for the year is going to be Something Like 1. 4 trillion im sorry, 14 trillion and trading in the hundred largest stocks is going to be about 16 trillion, and yet etfs have this tiny, tiny asset base compared to the market. So etfs are turning over at around 950 per year and common stocks, the old way of speculating, are turning around at about 120 . So if Goldman Sachs wants to get into the game of speculation, i salute them. And if they want to beat our prices at vanguard, i dont know how durable that will be, but their record as Mutual Fund Managers has been been, if i may say so, rather distinctly poor. Now theyve moved to indexing and thats possibly a good thing, a good sign for the strength of the index. Let me get your thoughts, you have taught me a lot over the years about the constituents of total return for equities. As you look at where stocks are priced today and the level of corporate profit growth, the differ dend payouts, what do you think over the next five years or so will be an average annual rate of return if i were to invest in a broad s p 500 index fu fund . Its Pretty Simple for me although i use ten years rather than five. The longer out you go within reason, the more predictable things are, but the dividend yield is 2 . I think we would be fortunate to have 6 earnings growth. That would be an 8 return, investment return. Those are the components that make the return. But with pes up around 20, price earnings multiples up around 20, they could easily drop to 15 or 16, and that would slice two or three Percentage Points off that eight. Now, thats not great obviously, and it comes before fund costs. You knew i was going to mention that. So in an actively managed fund you get five less, too, which is 3 which isnt good at all, but when you think of bonds being available, descend bonds, decent maturities at around 3 , that 5 would be a 2 equity premium and i think thats all you can hope for. All right. Jack bogle. On that note we leave it. Appreciate your being with us. Always good to be with you both. Likewise. Mandy. Thank you. Home sales plunging. What is causing that . We have the real read on the American Housing market right now and as we were saying, Goldman Sachs is getting into that 3 trillion etf market launching the first in a series of lowcost funds. But the question is will it be able to compete with the likes of vanguard . We were just talking about that, blockrock, and state street. Well try to find out. Ckrock, a. Well try to find out. Ackrock,. Well try to find out. Care of my heart. Thats why i take meta. Meta is clinically proven to help lower cholesterol. Try meta today. And for a tasty heart healthy snack, try a meta health bar. Blackrock, and state street. Go pro taking a hit today. Its currently sitting at 32 and change because of competition from apple and sony. Go pro stock is down 50 so far this year and down 8 just today. Starwood way point which owns thousands of singlefamily rentals is buying rival colony American Homes for 1. 5 billion in stock. And lennar is moving higher actually moving lower right now, down by 1 . The number two home builder beating earnings estimate selling more homes at higher prices. The stock is up almost 20 this year. But right now its moved to the downside. Tyler . Sticking with housing, new data out showing home sales dropping more than expected. Whats behind this little dip . Diana olick joins us from washington. Hi, di. Hi, ty. It was actually bigger than usual dip. August sales dipped well below expectations and even below the normal monthly moves. Total sales down 4. 8 month to month led by much steeper drops in the south and west. Those are the regions where home prices have jumped the most. The median sale price nationally was up 4. 7 from a year ago but it was up 6 in the south and over 7 in the west. Now, realtors point to very weak demand among firsttime home buyers who have a harder time saving for down payments and meeting credit score requirements. Fha is usually their loan of choice with a low down payment but the nations big banks have all but gotten out of the business because they keep getting sued by fha. Chase mortgage which is the nations second largest Mortgage Lender is not even in the top 100 anymore of new fha originations. I sat down with its ceo this morning to talk about why. When we look at fha really its the servicing that were concerned about. And so and when i talk about servicing, you have to remember in the last couple years, theres been about 13,000 pages of new regulation. So you were to stack that up, thats 5 1 2 feet high of new regulations that come in. All primarily focus on default servicing. Do you even want fha loans anymore. Fha requirements are down to a 520 fico and you only have to put 3. 5 down. Thats subprime lending and were not not subprime lending business. Chase says they will do fha loans but with higher fico scores and at higher cost to the borrower for that added risk. They are selling off much of the servicing portfolio while growing jumbo loan originations. Not so much risk of litigation from the government. Thank you very much. Lets go to josh lip to be in San Francisco with a news alert on apple. Josh . Yeah. Mandy, some news from apple. Apple saying its releasing this Software Update for its watch. Remember, last week apple had delayed this release because the company detected a software flaw, but now the Software Update rolling out. Consumers can download it. Features of the new operating system here, new watch faces, developers can write native apps. So more powerful, faster apps. Apple, of course, doesnt break out units or shipments for the watch but idc remember says in q2 apple shipped 3. 6 million watches. That put it right behind Market Leader fitbit. Back to you. Thank you very much, josh. Apple has a lot on its plate. Also having to deal with Malicious Software x code ghost but they say theyre cleaning it up. Tech is among the best performing s p secretariors today, its up by half a percent. And your ri milner will be joining us exclusively. Who is he . He was one of the biggest investors of alibaba, facebook, and twitter. Well talk to him about what is his next big bet in tech. Thats coming up. Nt, we believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. Welcome back to power lunch. Shares of ralph lauren in the green today off their best levels of the day as the markets have turned at least a little bit to the momentum side negatively, but we still have more than a 1 gain here. This comes on the heels of a barrons article saying the stock represents a possible buying opportunity after a 40 drop so far this year. The newspaper also says its likely due in part to currency challenges and investments in new technology which should boost profits over time. They say the shares could hit about 135 over the course of the next year, so thats helping to give a boost, tyler, to ralph lauren. Back over to you. Lets get a check on the bond market on the back of those comments from the atlanta fed president william lockhart. Rick santelli is tracking the action. Hi, rick. High, tyler. Looking at the dollar index i see the currencies, the yen, the mexican peso, canadian dollar, the swiss franc are lower against the greenback. Look at the dollar index intraday. We have a half a cent higher than fridays high. Lets look at the yield curve. 66. 5 was the high on friday. Were currently trading 71, a handful higher. Were trading 150, 148 was the high on 5s on friday. 10s, a whisker below 220 was the high on friday. Were over that challenging 221 and 302 in 30s versus 301. It isnt a lot but weve come a long way off the low yields on friday as we get close to that significant area, the 55day moving average in 10s around 222. Back to you. Thank you very much. Markets rallying just a bit at this hour. October usually a scary time for investors. There you see the nasdaq off a little bit, but the s p has tilted back into positive territory and the industrials have picked up a little momentum in just the past 20 minutes or so. Theres a lot of uncertainty over future fed rate hikes and thats been fueling whatever fears there may be about october phobia, but this may actually be a month to buy stocks. Why you shouldnt fear october. That when we return. Hello. Im sue hererahere is your cnbc news update. A 6. 3 magnitude earthquake hill ch chile this morning. It follows last weeks massive 8. 3 magnitude quake. The government is providing some Financial Relief to help people rebuild. 21 arrests were made in florida bringing an end to a twoyear investigation into an extensive Human Trafficking and heroin operation. The Florida Attorney general and leaders of the police force revealed the details of their investigation this morning in orlando. 20 Human Trafficking victims were rescued, including one juvenile. Florida typically ranks third in the nation for the most trafficking cases. Researchers in germany found no evidence sex increases the risk of heart attacks even for Heart Disease patients who have already had an attack. But experts suggest Heart Patients consult their cardiologiey cardiologyologi cardiologyologi cardiologyologists before resuming sexual activity. And a store is selling pinatas in the imge imagine of donald rump. T thats the cnbc news update at this hour. Perhaps no surprise about that, right, mandy . It looks like they need to get new stock in. Thank you very much. I have a feeling theres going to be a Halloween Costume as well. Gold prices are closing to the downside. Gold sitting at 1,133. Silver, copper, palladium, and platinum are mixed right now. Platinum is lower. Ty, over to you. Thanks very much. Stocks, the s p, and dow, moving a little higher. Lets check in with bob pi sanaa at the nyse, Bertha Coombs is up at the nasdaq. The important things, take a look at the s p, we were down fine up until about 11 30, we started drooping lower. Hillary clintons comments may have had some impact. Look at the markets midday. A good start and we drooped down. Energy has been doing great, health care has been fading. Volume is on the moderate side. If you look at some of the big pharma names, thats moving the dow. Want to update you on pandora. Halted twice this morning. A legal opinion might have gone in its favor apparently. They pay out royalty fees and people want more money. Next year theyre negotiating the rates and this ruling today may help them negotiate lower fees. Do you know how much they pay . 0. 0015 dollars per stream. A seventh of a cent per stream. Thats astounding. They want more money. Not they the artists. The artists want more money, yeah. Bob, thank you very much. Lets go to bertha at the nasdaq. Nasdaq is in the red. Is it biotechs, bertha, or what . It has been the biotechs. Tumbling on the back of twitter comments of Hillary Clinton citing New York Times article on prices being jacked up for 16 drugs. Thats having the biggest downside impact. On the outside we have tesla. Tesla sending out invitations to view the new model x starting a week from tomorrow. And then theres apple which is also higher today saying that its had 50 adoption of ios 9 but if youre in new york or philly, your phone could be delayed, your new one, at the end of the week because of the popes visit. Thank you very much. Lets have a chat with art hogan and craig columbus. Gentlemen, thank you for joining us. Craig, i know youre not a fan of the fed. How is their credibility standing in so far as instilling investor confidence. The big news is theres a shift going on in the market where we are now prioritizing growth over liquidity. When you get a bad assessment or a dovish assessment or bad data, its no longer viewed as good. Liquidity can put a floor under risk. I think were stuck in a trading range. What are we waiting for specifically, craig . Well, were going to have lots of data coming up here so payrolls, gdp, china export data, those are the heavyweights in the next couple weeks. Who knows if it will be enough to have it resolved by the october fed meeting. Art, are we more or less confused . Last week was like a doves home run. Today and over the weekend it feels like the hawks are coming out to play. Are we confused . I think were less confused. The pinnacle of confusion came out in the q a because you had broad Market Expectations that at the very worst the fed was 50 50 to make a move. If you listen to the Conference Call or listen to the q a, it sounded like nobody was talking about raising rates in the last meeting. I know the Feds Fund Rate only put a 20 chance for that happening. We were looking for september, one and done, and then to dound dovish after that. It confused a lot. Over the weekend we had a trio of speakers that really nuanced the message a lot better. We will hear more from fed speakers throughout the course of the day. The markets confusion so, art do, we do what jack bogle says and ignore the headlines and keep investing for the longterm . I think jack is absolutely correct. You ignore the headlines surrounding the fed. Just know theyre going to raise rates whether it happens this year or the first part of next year and then theyll take a good amount of time before they have to do it again. It should have nothing to do with your investment process right now. What you should be looking at is what are the companies you want to invest in and what multiple are you willing to pay for that. Unfortunately, when the fed is the story, its impossible to get that kind of focus for investors. I want you to say is the s p going to earn 130 next year and what is that worth . You like smith wesson and vista outdoor. Thank you very much for joining us today. Thank you. You can go to powerlunch. Cnbc. Com to see some additional stock picks from art. That is powerlunch. Cnbc. Com. Ty . Thank you, mandy. As weve been reporting, the biotech index sinking after Hillary Clinton said shes going to go after the Pharma Industry after one drug used to fight a particular infectious disease, so a massive price hike from 13 a dose to 750. Through twitter mrs. Clinton said, quote, price gouging like this in the Specialty Drug market is outrageous. Tomorrow ill lay out a plan to take it on. Steve case is the chairman and ceo of revolution. Steve, welcome back. Good to see you once again. You run a business incubator. You have invested in Health Care Companies from time to time and before we go on to topics ranging from immigration to others, what is your take on this drug story and the fact that so many drugs are being priced at such high levels . I dont know the details on this particular one, but i think in general the cost of developing and commercializing drugs has gone up dramatically. A lot of development is moving offshore. Were at risk of losing our lead in terms of innovation in the space. We need to look at a fresh look at what is the right regulatory process to keep people safe but expedite drugs. Thats a great way to keep the cost down. More entrepreneurs are doing more innovative things and the dris rupters are putting pressure on the incumbents. Im not a deep student of drug pricing but my sense is that you can often buy a similar drug or the exact same drug in countries outside the United States for a fraction of the what you pay here. That suggests we, the taxpayers and Health Care Consumers in this country, are carrying maybe an undue burden of the cost of developing those drugs. Again, i think it varies depending on the company and the particular drug. Im no expert in pharma or biotech, but i think ts veit is expensive. The question is how do you get that capital back and what markets do you go after. If we can figure out a way to lower the cost of development and expedite the process of getting these things from the labs into the marketplace, i think that will result in better products, Better Services for more people, better drugs at lower cost. In our 2 00 p. M. Hour, well have one of the ceos, a drug company who was in the spotlight in the New York Times article. Well hear from him and hell describe some of the things yaur talking about. Lets transition to a cause i know is dear to you and that is immigration. In an editorial page or an oped piece you wrote for the Washington Post ten days ago, you take on donald trump pointedly, but you also broaden it out to say that you think were just missing the ball here in our National Policy on immigration. How do you respond to todays news that by 2018 well begin to admit 100,000 immigrants a year so says secretary kerry. Is that enough in your view . What do we need to do . I think we need to take a fresh look at our immigration policy in general. We havent updated it in a couple decades. The world has changed a lot in that time frame and the real focus, the particular focus is to make sure we do what we can to win whats now a global battle for talent so we can remain the most innovative entrepreneurial nation. Obviously immigration has many facets to it in terms of securing the borders and enforcing laws, things like that, but we need to make sure we win whats that global battle for talent. I hear stories of people who come to this country maybe to get a degree and want to stay and Start Companies here but are forced to leave because of visa issues and end up taking that idea, taking that company elsewhere. One in particular a what arton graduate wanted to stay. He was kicked out of the company and he went to india and started snap deal. Thats one discussion we need to have. We have to get to a news break here, steve, but a quick thought, why do you think in the face of the argument that you just made that donald trump has gained such traction on this issue with language that you describe as dangerously caustic . Why do you think hes broken there . The issue of immigration is sensitive, emotional, and very complicated. I understand the sensitivities but i think his language has been too strong, a little too caustic. Last week at the debate he softened it a little bit. I think the discussion needs to be on the details of his immigration plan not just the generalities of it. But immigration is a critical issue. Its worth remembering we are an immigrant nation. 250 years ago america was a startup. We weve grown our economy on the back of great ideas from a lot of great innovators, a lot of whom were immigrants. We want to continue to be a magnet for those bright minds. Steve, always good to hear from you. We appreciate your time today. Steve case, cofounder of America Online and revolution chairman and ceo. Josh lipton now with that news alert on apple. Josh . Well, tyler, its one of the most talked about rumors here in silicon valley. Of course, apples interest in pursuing this electric car now just getting some headlines from the wall street journal. The journal is reporting that apple is accelerating efforts to build an electric car and setting a target ship date for 2019. The journal citing sources there. Journal also saying leaders of the project code named titan have been given permission to triple the 600person team. Its not clear whether apple has a manufacturing partner. 2019 target a pretty ambitious one. Its much talked about here in silicon valley. This is according to analyst a trillion dollar market. Apple has never shied afwra entering established markets where it thinks it can have a big impact and big Innovative Products that the world wants. Read through the headlines. Also reached out to apple and ill get back to you with more. Ill pick it up from there. Thank you very much. Well see what teslas stock is doing as well since obviously that would be competition for them, wouldnt it . There we go. Tesla is doing absolutely nothing. Just slightly going negative as were speaking. Sitting there at 260 bucks. Okay. He was one of the biggest investors in alibaba, facebook, and twitter. What is next on yuri milners radar . Well be talking to him exclusively in two minutes time. Anything worth pursuing requires knowledge, hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. You totalled your brand new car. 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No one way of driving on each and every road. But there is one car that can conquer them all. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Welcome back to power lunch. Check out shares of danbury resources up 5 to 6 on the day just off their best levels so far. The oil and gas Company Announced its suspending its Dividend Payments starting with the Fourth Quarter this year in an effort to save some cash. This as its entire oil business works to battle the effects of slumping crude prices. Denbury expects the move will save 90 million. Still down 60 for the year. Well talk more about the Energy Sector later on with our sector guide. But he was one of the biggest investors in alibaba, facebook, and twitter, so what is next on yuri milners radar. Julia boorstin joins us live with mr. Milner. Thanks so much. And yuri milner, thank you for joining us. We were just sitting here listening to our josh lipton talk about how apple is accelerating its plans to build an electric car. What do you think as an investor in the tech space . Well, apple is an Innovative Company and electric car is really the next frontier, so i dont think anyone should be surprised that apple is doing this and even accelerating the project. I think also apple is a company that is so big that it can only look for big opportunities. Obviously the car market is very significant and its not unusual for a company like google to look at next big thing. So google, does that mean google, apple, everyone you think is going to get involved . I dont know. But i think its a big market for any Innovative Company to ignore it. Looking more at the internet space right now, do you think were in a tech bubble, especially with private market valuations . Well, its an interesting question. I think that Public Markets have definitely corrected recently and especially the Large Internet Companies are fairly priced, i believe. Like facebook, google, alibaba and so on. I think that the small caps can be more volatile in technology as we have seen in the last few months. But on the private side, you know, we usually observe that the private side is usually following the public side. You have not seen the full extent of that yet, but i think that there is always room for a very Disruptive Company to not be affected by any volatility because if you find an amazing opportunity driven by incredible founder, then this type of businesses will always be able to raise money. But with the nasdaq down 7 over the past two weeks, what does that do for ipos . And does that mean that your investments will have a harder time exiting . Does that put pressure on them to sell . Well, probably whats going to happen is that the ipo will be delayed, and then the private markets in this case will play a more significant role in continuing funding those companies that cannot access Public Markets. You are a big investor in a number of chinese company. Are you concerned about the Chinese Government pressuring tech firms to hand over a lot of user data . How big of a risk is that . Well, thats not a new phenomena in china. You know, the chinese wall existed for many, many years, and their approach to data is well known and documented. It prevented some of the companies entering Chinese Markets from outside. As far as Chinese Companies themselves, they obviously are playing by the rules, and i think our Investment Strategy is just based on those companies accepting those rules. Very well. We have so much more to talk about you, we hope youll come back very soon. Youri milner, thank you for joining us. Back over to you. Vws big emissions scandal. The company lying over environmental standards. What automakers can you really trust . Well explore that on power lunch. [ radio chatter ] [ male announcer ] andrew. Rita. Sandy. Meet chris jackie joe. Minor damage, or major disaster, when you need us most, were there. State farm. Were a force of nature, too. Were a force of nature, too. Dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is, can your business deliver . The dow was up nearly 200 points at its high of the day. Biotech slammed. Hillary clinton tweeting she will take on price gouging in pharmaceuticals and Dennis Lockhart makes the case for a fed rate hike this year saying he is comfortable enough with inflation. Power lunch is back in two. Dont go away. We thought wed be ready. But demand for our cocktail bitters was huge. I could feel our deadlines racing towards us. We didnt need a loan. We needed shortterm funding. Fast. Our amex helped us fill the orders. Just like that. You cant predict it, but you can be ready. Another step on the journey. Will you be ready when growth presents itself. Realize your buying power at open. Com. Selling 18 homes . Easy. Building them all in four and a half months . Now that was a leap. I was calling in every favor i could, to track down enough lumber to get the job done. And i knew i could rely on American Express to help me buy those building materials. There are always going to be unknowns. You just have to be ready for them. Another step on the journey. Will you be ready when growth presents itself . Realize your buying power at open. Com awe believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. On deck this monday, gms ignition issue, toyota aets unintended acceleration and volkswagens emission scandal. What automakers can you trust . Plus, why one drug went from 14 bucks a pill to 750 literally overnight and the guy that runs the company taking a lot of heat. He is here. And watch out vanguard and blackrock, Goldman Sachs wants a piece of your business and theyre coming. Well talk to the man hoping goldman can grab a piece of the pi pie. The recent market volatility creating some opportunities in some beaten down sectors. When i think beaten down, i think energy and i know youve been buying this sector or certain names in the sector for your clients. Are you worried about what people are calling the financial day of reckoning when banks might have to reevaluate some oil and Gas Properties because of plum netting prices . If youre a longterm investor and youre trying to look for value, you have to take advantage of the circumstances. If you go higher in quality and you buy the names that will survive and have the best balance sheets, i think youre going to be fine. At the end of the day this is a cycle. Where do you find those Higher Quality names . There are obviously lots of subsectors within the energy you can call utilities energy. You can call drillers, you can call the multinationals the way we look at it is lets find the names that are going to be impacted when oil prices go back up. It is always history. When oil prices go down, production slows, more usage comes back, prices go back up. We want to take advantage of that when it happens, and if youre a longterm investor and youre patient, i think you can get that ride back up. What about commodities . I think commodities over time are going to work. Its been four or five years since commodities have had any real meaningful return. We have to get through this turmoil here in china. We have to get to the other side of it, but at the end of the day cheap oil prices helps the sectors that eventually lead to commodity price increases. Its early and volatile is going to be around. Consumer discretionary is also an interest of yours. Thats a broad, broad area. What are we talking about here and why . I think the United States economy is doing fine. Were seeing wage growth acceleration continue, gdp grow. It looks okay to us. We want the early stage cyclicals. This market has moved back to the defensive sectors and yet the economy continues to grow. We think the rebound is on some of the early cyclical names and in the Consumer Discretionary area i think we can pull that okay. Thank you for joining us. A busy second hour ahead. Brian, were going to hand it over to you. Do us proud. Mandy and tyler, thank you very much. Now 2 00 on wall street. Noon in bozeman, montana. The dow up 70. Oil up higher, up 3 . The big story right now is in biotech. The idb down more than 5 . Really one guy sparking a tweet, one tweet, that sent biotechs tumbling. Hes going to join us later on in the show. Plus more on vws big scandal and their potentially 18 billion problem. Hi, everybody. Im brian sullivan. Melissa lee joining us momentarily from the nasdaq. We begin today with Goldman Sachs. That bank making a big move into the multitrillion dollar etf market. Today launching the first in a series of socalled active beta funds. Michael is global head of etf strategy for goldman and he joins us now. 2. 2 trillion pie but three firms control 80 of those. You are not one of them. You would like to be. How are you going to do it . Sure. Brian, first of all, thrilled to be here on the first day of our launch. So, yes, its a very large market. The larger players control the lions share of the market but you see a lot of growth outside of there. We at Goldman Sachs think our active beta etfs are part of the next generation. Were offering outperformance. We think etfs can do more than just track the markets. We want to offer an opportunity to outperform. What does active beta mean . Active beta is our trademark name. Its our first entry into whats considered the smart beta space. We start with a market cap weighted universe of stocks. We look at common attributes or common factors proven to outperform over time. We tilt the index to get exposure to the stocks that have those attributes and combine a well diversified index and offer that to clients in our etf. Here is the thing, the etf market i think is probably bigger than the stock market in terms of the number of choices that the average investor has. Theres so many etf options out there that maybe their head is spinning. What exactly do these products give our viewers, not the financial professionals, but the doctor in des moines, what does it give them thats not already out there . So we at Goldman Sachs thing the active beta etfs offer the average investor the opportunity to outperform the equivalent market cap weighted product at a very low cost. For example, our active beta large cap etf that started trading today is priced at nine basis points annualized. Thats in line with the s. P. Y. , the largest etf in the world that tracks the s p 500. If im hearing you right looking at your holdings, youre not mirroring the s p 500 but youre taking a lot of the same names, youre just putting them in a different weight that would provide according to your data, a better return than the overall market and offering that for the same price. Thats correct. Were offering the ability the opportunity to outperform at the equivalent price. Weve really taken price out of the equation. We want investors to really focus on the strategy. Okay. So whats next . Youre launching some today. Whats the bigger strategy . Whats the broader strategy for Goldman Sachs and really is it fair to say your first foray into a retailtype business . So this is our first launch today. Were looking at a broad diversified offering over time. Weve currently filed for 11 different products so were planning on rounding out the active beta suite of products with five additional launches and then well be focusing on liquid alternatives. It will give investors the opportunity to track returns in the hedge fund universe. The headline to the vanguards and blackrocks is watch out, Goldman Sachs is coming. We are coming. Good luck with the products. Thank you. Thanks, brian. Check out shares of tesla falling on reports that apple is stepping up evident to build an electric car. At one point in the session tesla was up by as much as 2. 7 . Its now down by almost a percent. Lets bring in josh lipton with more. Melissa, 2019, keep that date in mind because the wall street journal is now saying that apple is accelerating its efforts to build an electric car and setting a target ship date of that year. Leaders of the project code named titan have been given permission to triple the 600person team according to the paper and its still uncolor whether apple has a manufacturing partner. Theres been reports about tim cooks interest in the technology. Apples lawyers meeting with californias dmv. The Auto Industry represents a 1 trillion market opportunity. In other apple news, there was a hack attack on the app store. The targets included messaging app we chat. Apple provides developers with a set of hackers were able to modify this counterfeit version, plant malicious codes onto the apps, and once they were downloaded, these compromised apps could prompt fake alerts and exploit vulnerabilities. Importantly, that he is no evidence right now that any user data was stolen. Investors taking the news in stride. Apple stock edging higher in todays trade. Apple has removed the apps known to be created with that Counterfeit Software and its working with developers to make sure theyre using the proper version of x code. Josh lipton, thank you very much. Still ahead, volkswagen shares hitting the skids following the big emissions scandal. It is the topic of todays cnbc vote. We are asking, would a possible 18 million fine be too harsh of a penalty for volkswagen . You can head to cnbc. Com vote to weigh in. Also, the cost of one drug goes from 14 to 750 a pill overnight. You will speak with the man behind the massive price spike. Later on, one analyst says that biotech stock could double. Well let you know which stock. Lots more do. Power lunch rolls on right after this short break. under loud music this is the place. Their beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing, you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. Welcome back to power lunch. Lets get you caught up on some of the stock headlines on the radar. Pandora enjoying a nice pop after receiving what some are calling a favorable ruling from the copyright office. Shares are up more than 5 . Apple shares moving higher. You heard reports the company is stepping up efforts to build an electric car. Apple saying more than 50 of you a apple devices are already running the du operating system ios 9. A handful of stocks hitting new 52week lows in todays session. Thank you. This is no doubt one of the most disturbing corporate story this is a long time. Volkswagen admitting to placing secret software in nearly half a million of its diesel cars in america that would reduce emissions when hooked up to a testing machine but then go back to spewing nearly 40 times the legal emission once the car wars on the road. It was a way to get past emissions rules. The company could face fiennes as much as 18 billion. That is the topic of todays cnbc vote. We are asking would a possible 18 billion fine be to harsh of a penalty for volkswagen. Here now to talk about that is paul argenti. Listen, im not going to necessarily just pick on vw, although this very egregious and they admitted to it. You had the gm ignition issue, the toyota unintended acceleration. Years ago you had ford and rollover issues with tires. Why does it seem like trust and the Car Companies is simply broken . Yeah. I mean i think if you put it that way, it does look that way but these are very, very different incidents. We need to separate them out and look at them separately. So in this case no one has died nor will anyone die, so im hoping your poll comes out that 18 billion is probably a little bit harsh. On the other hand what we know is that when trust is broken, thats not going to be a good thing in terms of how customers will view the company. So i think whats happening here is something very, very different from what we saw at gm and toyota and the first thing is probably a good idea just to separate these as different events. You know, its interesting too because right now paul our poll is bouncing around. Its a live poll, about 70 of the people saying 18 billion not harsh enough. Although that may also go to the idea now that, you know, monetary penalties seem to be the norm every day in the United States and weve kind of grown immune to it. You have to factor probably a little bit of that variance in there. But youve got this story here and ill give volkswagen a little credit in saying, yeah, we did it. Theres not some multiyear investigation and billions of dollars spent in lawyers. Volkswagen raised their hand and said we got caught, we did it. Does that matter at all from an ethics perspective . It matters a lot. It matters a lot. And i think, you know, to respond to your first point, i mean, gm only paid 980 million and several hundred people died. So, you know, how people feel about it and what happens are two different things. But in this case i think they did exactly what i probably recommended here gm should do, which is admit your mistake up front. They didnt say they were guilty, they just said, yeah, something happened. They dont really know what ts and were responsible for it which is the right thing to do and it was the ceo who made the comment. The way theyre handling it so far is great, and my guess is they probably dont even know what happened. I have written a case about a similar emissions problem in a company in japan, and, you know, this is a problem that comes about for any number of reasons. It could be someone trying to make the numbers and, you know, no one in management knew anything about it. It could have been an honest mistake. Theres any number of reasons why things like this happen. Until we know whats that, i think we should reserve judgment about whether to trust them or not. Theres any number of reasons why this could have happened. Paul, do you think that this will actually have an implication on volkswagen sales . Gm had, as you know, all of those recalls and people didnt stop buying gm cars and this is a breach of trust between volkswagen and the u. S. Government and perhaps the German Government depending what their investigation finds and not necessarily volkswagen and the consumer. Yeah. You know, melissa, i wish that i could say these things do have an effect on consumers, but, you know, im on audi driver. I think most people may knotts even know that theyre owned byv w. In terms of sales, i think it will have an effect. I think there will be some people that will look at it and say i dont trust the company anymore but when you think about how many vehicles have been recalled in the last five or six years, the numbers are staggering. More cars recalled from gm than they made. I think people to the eyes glaze over after a while and they wont be able to keep track of who did what. The real crux of this is did th they do something completely wrong and how many people knew about it . My guess is it doesnt go up to the ceo. Once thats resolved, they can move beyond it. It was a good discussion. We appreciate it. Thank you very much. Our vote is locked in. We asked if a possible 18 billion fine, which is the max, would it be too harsh . 60 of you said it was not harsh enough. Thats the most it can go. So 40 said its too harsh, and i remind you bp was fined just under 14 for their incident. We have another vote on the other side of this break. We have talking about that 5,000 plus surprise spike for one bill. Should the government better control drug prices . A new vote. Dont confuse this with the vw vote. Head to cnbc. Com vote to weigh in. Later on, we are digging in on the big battle to control the cloud. The yoep ceo of dropbox will join us. Ceo of dropbox will joi. Ceo of dropbox will joi. My name is watson. Im helping doctors keep people healthy. Take ted here. Im pulling together data he shared from his wearables, Health Records and family history, so we can analyze it. Hes doing everything right. For the most part. No pain, no gain. You are a beast, ted. My name is watson. How can i help you . Ive got a nice long life ahead. 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Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive imagine for a moment popping a pill before bed that costs about 13. 50. Now imagine waking up the next morning to find that the price of the exact same pill jumped to 750 overnight. That is just what happened to one drug. Meg terrell is joining us with that story and the man who is behind that price spike. Martin shkreli joining us, the founder of turing pharmaceuticals. You said you increased the price to do the research and development. I got off the phone with a doctor who said they dont need a better version of the drug. What are you doing here . Thats not true. Theres a recent paper that suggests two patients died due to autoimmune encephalitis. There are a lot of people who die every year and this field needs new ways to treat. The current drugs target the folate receptor. Were working hard on trying it find new ways. What a lot of companies do is raise Venture Capital funding when they see an important market for a drug rather than raising the price on the current patients who need it to survive and who have no other choice but to take it and pay the high price. Why wouldnt you go that route . We raised over 90 million. We also feel this is the more appropriate price for daraprim. At this price its still on the low end of what orphan drugs cost and were certainly not the First Company to raise drug prices. Hillary clinton comes out today citing the story about you guys in the New York Times causing quite a stir in the biotech industry. Do you not expect a 5,000 increase would result in that kind of attention . Maybe, maybe not. It really depends on how focused people want to be on the industry. At the end of the day there have been much larger drug price increases by much bigger Drug Companies that actually you would argue large multibillion Dollar Companies with lots of cash dont need to do Something Like this. Turing is a Small Company and were not a profitage company. For us to exist and maintain a profit is reasonable. Most Biotech Companies dont maintain a profit for decades until they get drugs onto the market. Why are you guys different . I think of us as a pharmaceutical company, not a biotechnology company. I think that distinct is not exactly clear either way. But i think profits are a great thing to sustain your prompt existence. Martin, you mentioned youre a Small Company and youre going to use the price increase, the difference, to do r d. What kind of r d staff do you have . What amount of money do you plan on devoting to research and development . Sure. So we have about 25 people in r d and open positions for another 25. We do medicinal chemistry. I help the team out quite a bit so im really excited to develop new drugs. Were going to contribute the majority of our revenue to doing that. Were taking the revenue from daraprim and trying to come up with better, more effective version of it. And you awere a Hedge Fund Manager before. You probably could have guessed this was going to cause a stir. We saw the index go down 5 on hillary tweet. Are you in any way invested in biotech through a short either personally or through another fund . I have a small portfolio, but i dont really watch the stakt on a daytoday basis. So does that mean do you have any position in biotech stocks . Very, very small. Are you short any of them . I am short a few but i am also long a few biotech stocks. Martin, i have to ask you, doctors have come out saying that you guys need to revise your Pricing Strategy because patients cant get access to these drugs. This hiv doc said theyre trying to hoard it to provide it. Do you feel badly about whats happening . No, were increasing access to patients. Were dramatically increasing the access to daraprim, lowering copays, giving more drug away from free. Half of the drug we give away is for 1 so im not sure what youre talking about. Martin, when you bought the company, this was a 1 pill before core labs bought it, then 13. 13. 50. Now you bought it. Now it goes to over 750. When you bought this company, did you buy it because you knew that you could raise the price . We definitely planned on raising the price. Thats for sure. We paid a very, very large amount to buy an unprofitable medicine. We cant continue to lose money on the drug at that price. We took it to a price where we can make a comfortable profit but not any ridiculous profit but i assume you are a free markets gentleman, are you not . Sure. Okay. So why do you think the drug was priced at 13. 50 before . Somebody thought that was the right price for this drug. The market said 13. 50 worked. If you look at drugs like si valdy, dash ra prim is less expensive. If you think about free markets and fair price, its pretty clear that dir ra prim yas not priced appropriately. Does daraprim cure toxow plas mow sis . It does. Its a short Treatment Administration which makes it even less expensive than most orphan drugs which you have to take for years. Can you imagine taking a drug for 500,000 for the rest of your life. By comparison a cure treatment is about 50,000, about half the price of hep c cure regimens. In response to all of this attention and doctors and patient groups saying they cant access this drug, are you going to change the price . No. Okay. Thank you for joining us. Thank you. Well, as weve been mentioning, the story got Hillary Clinton fired up. She tweeted price gouging like this in the Specialty Drug market is outrageous. Tomorrow ill lay out a plan to take it on. That tweet sent biotechs tumbling. You can see it fall off the cliff before 11 00 a. M. Just when clinton sent that tweet. The ibb is now down almost 5 . Want to know what you think. Should the government control drug prices . Head to cnbc. Com vote to weigh in. Lets bring in michael yi. Great to have you with us. Obviously daraprim representing the concern that a lot of people have about high priced drugs in general, whether it be this one or whether it be hep c treatments or this new class of cholesterol lowering treatments. Do you think the headwinds have been raised when it comes do high priced drugs in the Biotech Sector . Weve been talking about this for years and years. It goes all the way back to for a decade weve been talking about this. It continually comes up. You have to remember hillary has been talking about drug pricing for a long time. Shes going to bring it up again during her run for the president ial campaign, and, you know, from an investor standpoint we view this as an creased noise to what i think she really could do. Im sure well find out whether any of that is implementable given the Republicans Control Congress and this is pretty far down the list for the priorities for congress. When gilead first got that letter from the congressman regarding the high price of its hep c treatment it created a headwind on gilead. It was a headwind that persisted for a long time. Is it a possibility this time around or are investors so inured to this sort of noise about grousing about high priced drugs theyre going to look through this . I think that theyre likely to look through this and i think that this is going to be dependent on how much actually gets implemented, whether a bill gets created. So real identifiize youre expe senator waxman said this a year ago we learned nothing actually happened. It goes back to the same situation and its a reason for biotech investors to take profit given all of the noise thats been going on recently. Im sorry, michael. Just back it up for a second. You said this is another reason for investors to take profit . Well, its another reason for today for bu yout youre not saying bh investors take profit, are you . Were saying this is a buying opportunity. Once again weve seen this in the past and Going Forward were going to continue to see some of this, what we call noise given that this isnt really actually going to happen and nothing is likely to be implemented. Play hypothetical for a moment. Lets Say Something forms, which companies would you think would be most at risk . Would it be an amgen and regeneron with the pcsk9 drugs . I think whats likely is that, and this has been proposed before, is whether medicare has the ability to negotiate price. Medicare with part d drugs, cancer drugs, et cetera, medicare is obviously one of the biggest purchaser of cancer drugs. Some of the Cancer Companies are more likely to be at risk theoretically, but i would suspect that all of these larger cap by yes tech and Pharma Companies could see some increased pressure. The orphan drugs and we just had on this segment about orphan drugs, these are small parts of the Overall Health care spend. So i think whats more likely is a discussion about medicare drug pricing and whether they can negotiate, and that really has to do with Cancer Companies. Michael, great to speak with you. Thank you for your time. Lets lock in our vote here. We asked you guys out there if the government should control drug pricing. Take a look at the votes. 46 of you, the majority said never. Free market capitalism i guess wins in this poll. 42 said always. And the small minority of you out there said to a degree. Fascinating results, brian. I wouldnt have guessed that. Well, its free Market Audience i suppose. I guess so. Let the market price it. Up next a biotech stock that could double from here. Were headed to the nymex coming up. Im sue hererahere is your cnbc news update this hour. Chinas president arrives in the u. S. Tomorrow for his first state visit. President xi will tour boeing factory on wednesday and join president obama at the white house on thursday. Michelle carusocabrera will be following his visit on cnbc. There may be twice as much trash dumped into landfills as the government estimates. A Yale University study found 262 million tons of waste was disposed of in 2012. Thats an increase of 115 over what the government originally estimated. Japans Elderly Population has reached a new record 33. 8 Million People are aged 65 or older. Thats nearly 27 of that countrys population. Japans aging population has increased the risk of economic problems such as a shrinking workforce and rising costs of Social Security programs. And finally, in colorado they take their tree climbing very seriously. This weekend they crowned a new north american tree climbing champion. More than 40 professional arborists took part. Certainly not for the feint of hea fabt of heart and not for me. I wish one of them was named sam because that would be yosemite sam and that would be fantastic. That would be good. Hed be the winner if he could get up one of those. He absolutely would. Thank you very much. See ya. Lets go to Jackie Deangelis at the nymex for the closing trades on oil. Hi, brian. Kicking off the week on a bullish note here. 46. 45 is where october wti settled. That will go off the board tomorrow. It was a near 2 pop on the day. Opec making some comments to spur this rally and get traders more excited about crude. Opec saying that it expects crude prices to rebound to 80 by 2020, so over the course of the next five years we should see fi 5 or 6 every year. The cartel also think this is 2016 we will see significant production declines because of the glut thats been created this year. If opec is right, oil prices could be headed higher. I do know we had a stronger dollar today but having said that traders still believe the dollar will remain weaker longer as a result of fed inaction. Back to you. All right. Jackie, thank you very much. Its time for street talk. The run down of stock recommendations you need to know. Stock number one Goldman Sachs. Upgraded to an outperform. The analyst had been on the sidelines for a couple years because of concerns around trading. They note the stock has underperformed most big banks and the bank index. He actually compared Goldman Sachs to a bumblebee because people say bumblebees should not be able to fly but they do. Compares that with a weird metaphor to quogoldmans tradin business. The target 236 is share, 28 return. I thought that was some sort of muhammad ali reference. Take a look at the feds inaction. Flat yield curve. Really a primary concern of investors. Stock number two, greenbriar companies, cutting it to a market perform. The analyst slashing eps estimates to below consensus. The reasons have been known for a while. Lower oil prices and it shows in the stock. The stock is down over 53 in the past 12 months. And the average target of the analysts that cover it is 61. I dont know what theyre thinking. Vanguard and Merrill Lynch are moving 15 of this country. Next stock lululemon. Morgan stanley upgrading to an overweight. Says customers are returning to the brand. Says their analysis suggests lu lu to return to 20 eps growth. With the stock down 30 over the past three years, a return to this kind of eps growth if they get it should support the stocks outperformance. It implies a 23 return. Its 68 a lu lu lieu shashare. Stock is down 16 since the second quarter. Theres a lot of catchup here in the stock to do. Fourth stock, cyber arc software. Upgraded to a buy. The call comes after the ceo and the cfo presented at the deutsche tech conversation last week. The stock had been down 36 in the three months prior to those speeches. The analyst says hes impressed with fundamentals such as 70 revenue growth. Theyre bullish. I looked up jm p securities, even more bullish, 72 security. A lot of analysts love this name. The final stock is therapeutics md. About a 100yearold Company Based in florida. They specialize in treatments for women like prenatal vitamins and hormone preplareplacements. Basically a double. I never heard of the company before now, but people are wildly bullish on the name. Theres a conference at the end of the month, a menopause conversation in las vegas. They could be making comments worth watching. With that we wrap up street talk. Time for trading nation. Andrew berkeley with oppenheimer, craig john with piper jaffray. We have over three months to go, but why do you think the markets have so wildly underperformed where most people thought they would be this year . Really comes back to the most f fundamental of an lalysis, whic is earnings estimates. Right now were tracking about 120. So you really have to look no further than the energy and commodity areas to see the big shortfall. If you took energy and commodities out, earnings would be better but you have to include them if youre going to make a forecast. Even the most bearish forecast, if you will, nobody really had a down forecast this year, but the most conservative really was not on an earnings shortfall but most of kind of the slightly less bullish. Were looking for multiples to compress because the fed would be raising rates. So its interesting. We didnt get the fed rate hike. We have got an little bit of multiple compression but it was on the earnings miss is where most strategists missed the mark. From a technical perspective or fundamental, you pick which one you want to look at, what are you seeing for the market . Any signed of a rebound in the final three months . When i look at the overall sentiment towards the market at this point in time, put buying is still very, very expensive out there. We still have a lot of good downside support. We support at 1,905 and then support at 1820. Ill tell you right now the consensus on this market is that were going to see a bigger drop and ultimately a retest of the lows we have seen just a few weeks ago. I suspect that at this point in time that could be the case, but the breadth of the market is so washed out at this point in time i think were setting ourselves up for a pretty strong finish into year end. Still think we can get back to the highs we have seen last may and, again, still think theres some upside from here to year end because everybody is so negative and that is consensus. You like the negativity. Youre taking the contrarian view then. Absolutely. At this point in time were completely taking the contrarian point of view because we have good support beneath us, valuation has been set and corrected right back to the median post 1946, and i think were finally at a spot where were going to find this market, get a strong push up. Okay. Craig and andrew, it was a good discussion, guys. Thank you very much. A lot of strategists looking for some redemption. Theres two additional segments at tradingnation. Cnbc. Com. Coming up, a big interview with the ceo of dropbox. The company you go to when you need to store thousands of pictures from your vacation. Take a look at how the markets are doing right now. We have the dow and the s p 500 in the green. The nasdaq turning to the downside, down about one point right now. Biotech blues, the ibb is down 5 . Much more power lunch right after this break. Technology empowers us to achieve more. It pushes us to go further. Special olympics has almost five million athletes in 170 countries. The microsoft cloud allows us to immediately be able to access information, wherever we are. Information for an athletes medical care, or information to track their personal best. With microsoft cloud, we save millions of man hours, and thats time that we can invest in our athletes and changing the world. Some of the biggest names in Technology Getting together in San Francisco today. Julia boorstin is there joined by the ceo of dropbox, a company that was number six on the cnbc disrupter list. Julia . Thanks so much, melissa. Drew houston, thank you so much for joining us. You just came off the stage. Now, drew, you guys have been growing fast despite the fact that all the giants ever getting into your space, amazon, apple, google, every tech giant seems to be interested in this cloud space. How do you compete . Well, it just means were solving an important problem and weve had competition since the beginning, but what people love about dropbox and why we lead in the space, its simple, its easy to use. Youre free to use whatever tools you want. Its a powerful and scalable model. We crossed 400 million users on dropbox. So, yes, we have competition but if we didnt, we wouldnt be diagnose something that matters. Theres a lot of talk about how Cloud Storage is something commoditized. I think maybe in the beginning what we were building was literally storage because we were like, hey, everyone pretty soon everybody is going to need a home on the cloud for their stuff. Now the problem is i have 100 homes on the cloud for my stuff. My companys knowledge lives in 1,000 different places. How can i find what im looking for . How can i work with other people . Our focus is on building this platform for collaboration where everyone in the world, any gr group, can be using any technology and things just work. Our focus has been evolving over the past two years from storage to collaboration. When youre pitching to get some Big Companies on board, which i know youre really focused on right now, is it hard to explain that . Do people get its not really about storage anymore . Its a little bit of a different conversation than the typical kind of b to b sale. Usually when we have a bigger customer, they have thousands and thousands of people already using dropbox. People have voted with their feet. Dropbox is the tool that makes them productive and the request he is how do we get the other 10,000 people in the company running. You have been growing fast. Your valuation is 10 billion, but your private rival, its valuation is 1. 5 billion. How do you explain that . Its a big market. Second, our model is really powerful. So we have a lot more of efficient and scalable sales model because people start using dropbox as individuals. They bring in the larger companies. We can grow a lot faster with a much smaller sales force. Is this an issue of a private market valuation bubble . Is that what there is here . I dont think so. I think the markets that companies are going after, that startups are going after, is much bigger than it was even when we started. What are your plans to go public . We dont have any plans right now. Were enjoying the flexibility of building the team and working on our products. With the market the way ts do you feel pressure to sell rather than ipo . No, our investors new were going after a huge problem and its super early. We look forward to continue to talking to you more as you continue to grow the company. Thank you very much. Question, how do you know if youve become a victim of credit card fraud . Answer, you have a credit card. All right. We say that a bit tongue in cheek, but the problem is getting near will that serious. We have more coming up, and the growing fight over go pro stock. Stick around. Hi my name is tom. Im raph. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here, were here, and weve got your back. Legalzoom. Legal help is here. I was out for a bike ride. I didnt think id have a heart attack. But i did. Im mike, and im very much alive. Now my doctor recommends a bayer aspirin regimen to help prevent another heart attack. Be sure to talk to your doctor before you begin an aspirin regimen. Awe believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. Market check. The dow back up triple digits but off session highs of 194, up 194. The nasdaq is coming back to the flat line. We should note the two dow winners, ibm and microsoft. Major changes are coming to credit cards and debit cards which will change who is responsible when you get hacked. You may have already got an new credit card with an embedded chip. Mary thompson has that story for us. That embedded chip is virtually impossible to duplicate these cards should cut the number of counterfeit cards being used but only the retailer has a point of sale system that it can read that chip. If they do julie conroy sees these cards making a big dent in the 37 of fraud committed with fake cards while forcing criminals to turn their attention to other schemes. These are organized crime rings behind all of these attacks and they are not going to sit back and take a hit to their p l, they will shift their tactics. Conroy expects criminals to focus on online fraud. Here criminals will use data stolen from the mag stripes in order to steal online. As a result the eight group sees this card not present fraud end nothing 2018 to of 74 billion. The Network Operator visa says improvements to online retailer security should prevent some of this new activity. Now the move to the chip embedded cards is being driven by an upcoming october 1st deadline, thats when retailers will be assuming the liability for a fraudulent transaction made with a chip embedded card not the issuer provide that had retailer has the technology to read those cards. Back to you. Let us brick in penny crossman, she covers the Bank Technology sector for american banker. I made a semihalfhearted joke about how do you know if youve gotten hacked because everybody i know certainly has. My Biggest Surprise is not that actually fraud occurs its that the Credit Card Companies dont give to give a you know what. Theyre like well pay you back. Are you going to go after them . Its not worth t how big of a problem is this . Well, i think there was about a 16 billion worth of card fraught in 2014. I believe card fraud who was at about 3 of total transaction size. So its not an insignificant problem, but banks have been writing off this the cost of fraud for many years and theyve kind of gotten used to it. Its not that anybody wants fraud to happen, but for card issuers their number one priority is that people be actually able to use their cards and use them easily and quickly and not have any friction, not have glitches, not have declines because cards are a hugely profitable business. Okay. So call it 110 million adults or people with credit cards im making that number up but i get the point, 16 billion so 150, 200 bucks a person i guess i just did the math completely, could be imp completely wrong. Yes, its not td end. World but its the left side not nothing. Why doesnt anybody seem to care . Well, i think people do care and i think the problem has just been kind of beyond anybodys grasp so far. I mean, the amount of cards skimming that goes on is tremendous, you know, people just put card swimmers on atms and collect card information that way. There were a billion customer records stolen in 2014 through the target breach and other card data breaches. So theres a tremendous amount of data out there on the black market to be bought very cheaply. Card data could be bought for about 60 cents for a regular standard visa card up to 25 for a very high end amex card. Its just been a very tempting target for hammers and its been you know, frankly the technology that retailers have been using, the card swipe terminals, have not been very secure, the retailers databases have not been secure as weve seen from all these data breaches so its been hard. Banks do everything they can on their end but they only have so much control. I do wonder, every single one of my credit cards has been pinged in the last year, true story and ive gone back to using more quash when i can, unfortunately its not that easy, maybe tomorrow we will have a live poll are people going back to cash. Pen yeerks thank you very much. Dont look now but october already right around the corner. Should the guls and dpob lynns of the market scare you away from stocks next month . October phobia, whatever that is, coming up. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Can a a subconscious. Mind . A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . The great beauty of owning a property is that you can create wealth through capital appreciation, and this has been denied to many South Africans for generations. This is an opportunity to right that wrong. The idea was to bring capital into the Affordable Housing space in south africa, with a fund that offers families of modest income safe and good accommodation. Citi got involved very early on and showed an enormous commitment. And that gave other investors confidence. Citis really unique, because they bring deep understanding of whats happening in africa. I really believe we only live once, and so you need to take an idea that you have and go for it. You have the opportunity to say, ive been part of the creation of over 27,000 units of housing, and to replicate this across the entire african continent. Take a look at shares of gopro down a little over 8 . Big barons the story calling it a one product wonder saying the stock could fall to 25 bucks a share. It is worth noting, too, take a look at amberella shares, that stock is down 6 . Is certainly is a hot stock. August and september have been a scary month for stocks. Will october be more frightening or less . Take a look at this, guys. If you take a look at the s p 500 over the past month its just about flat, again, over that time frame here, just a little bit to the down side. If you take a look at the year to day basis, we are just a stones throw away from those record highs. Yes, its a big move. If you take a look at what Jeffrey Hersh said, he takes a look at his seasonality aspects. Our friends over at cnbc pro asked him which sectors hes focused on most, he said technology is one of them. He likes the seasonality of those tech stocks down into october. He says perhaps its a good time to buy. He is also looking at Technology Stocks given those comments and what not. Ibb year to date up 12 . So if you take a look at some of these overall our friends over at cnbc pro also asked our data partners to take a look at the overall markets in october. Over the past ten years the dow up 2 10 of 1 . The s p 500 up just about flat here, positive 60 of the time, nasdaq up half a percent positive 60 of the time as well. Thats the last ten years. Those points are skewed by one very bad, very bad october, of course, in 2008. Solt numbers are skewed. If you take away and just look at the last five years the numbers here become a lot better, between 3 and 4 gains for the month. Melissa, brian, it depends on what time frame you want to look at over the shorter term this tends to be a decent month for stocks. We will see if that plays out this time around, guys. Back over to you. I think its important to note also, dom, when it comes to the point about seasonality in the tech sector a name like gopro, 40 of its revenue come in the Fourth Quarter but obviously the suppliers their seasonality is in the Third Quarter just depends on where you are in the supply chain. Absolutely. The other thing is remember over the broader scope of things if you look over the long, longterm people have made a lot of points about this idea that the Fourth Quarter seasonably is a strong time for stocks. Its hard to determine whether or not there is one true right or wrong answer. Dom, thank you very much. Melissa, whats on the show tonight . Take a look at shares of apple right now, brian, pretty much at session highs on that report that is developing an electric vehicle. How does this impact tesla . We will look forward to that. Thank you. And thank you all for watching. Closing bell starts right now. Hi, everybody, welcome to the closing bell im kelly evans at the New York Stock Exchange. Happy monday. It is for bulls by the way, im bill griffeth. Biotech has been a big story today. That sector getting crushed on the back of a New York Times story on drug price gouging, one company in particular was highlighted in that. Then president ial candidate Hillary Clinton tweeted out saying that she has a plan to take on the drug price gouging that she sees out there. We have much more on this coming up in a little bit. You see the index is down over 4 right now. Honing in on apple because a